This Week's State Of The Economy - What Is Ahead? - 18 August 2023

By: Taro Chellaram /Wells Fargo Economics & Financial Report/Aug 23, 2023

This Week's State Of The Economy - What Is Ahead? - 18 August 2023

Last week, consumer and producer price indices showed inflation pressures continuing to gradually ease in July. Inflation's descent has occurred alongside a streak of stronger-than-expected economic data, and this week was no exception. Retail sales surprised to the upside in July, rising 0.7% over the month. Growth was fairly broad-based, with nine of the 13 retailer categories reporting increased sales (chart). Control group sales, which feeds into the Bureau of Economic Analysis' calculation of real personal consumption expenditures, rose an even stronger 1.0%. The outturn presents some upside risk to our 2.0% (annualized) call for real GDP in the third quarter; the Atlanta Fed's GDPNow model estimate for Q3 jumped nearly a full percentage point to 5.0% on the sales data.

The renewed strength in retail sales, if sustained, could lend some support to the factory sector in the coming months. Industrial production rose an above-consensus 1.0% in July, bolstered by a surge in utilities output and motor vehicle & parts manufacturing. While headline production came in better than expected, growth in manufacturing activity has been choppy this year—the overall level of manufacturing output stands just 0.2% above where it started 2023. Manufacturers remain broadly cautious of not overproducing and careful not to take on too much inventory in this tight credit environment.

Borrowing costs continue to rise. Freddie Mac's average 30-year fixed mortgage rate crested a 21-year high this week (see Credit Market Insights), driven in large part by the recent ascent in longer-dated Treasury yields (see Interest Rate Watch). Higher mortgage rates crimped the housing market for the better part of 2022. Still, home buying demand has found firmer footing this year, especially in the new home market where builders are offering price cuts, rate buy-downs and other incentives to move on their inventory. The trend improvement in new home sales has put some wind in the sails of residential construction (chart). Single-family building permits rose for the sixth straight month in July and are running at a 930,000-unit annual pace. Permits typically lead housing starts by one to two months, and the recent acceleration suggests that single-family home construction will continue to recover this year.

In short, activity data show the U.S. economy expanding at a solid rate. The underlying resilience has led many economists, us included, to upgrade their outlooks. The minutes from the July FOMC meeting rang with a similar tune, as the Committee noted "the economy had been showing considerable momentum." At the same time, the FOMC stressed that "inflation remained unacceptably high" and appeared resolute in holding its benchmark rate higher for longer to ensure price growth is sustainably brought down toward its 2% objective. The participants also cited upside risks to inflation that, if realized, would necessitate further policy tightening. The hawkish stance underpins our expectation that restrictive monetary policy, even in the face of strong activity, will tip the U.S. economy into a mild recession in early 2024.




This Week's State Of The Economy - What Is Ahead? - 02 June 2023

This week, Congress and the president prevented what would have been the first default in U.S. history by agreeing to suspend the debt ceiling through the end of 2024.

This Week's State Of The Economy - What Is Ahead? - 01 April 2022

The key factor that will drive interest rates is the Fed’s belated effort to rein-in inflation.

This Week's State Of The Economy - What Is Ahead? - 24 September 2021

While fears of an Evergrande default in China were rattling financial markets, for those of us in Southeast Texas who have survived the typically very hot months of July, August and September, this week brought the very welcome first early fall-like

May 2020 Economy at a Glance

The U.S. is in a severe recession caused by the sudden shutdown due to the COVID-19 pandemic. Since the lock down began, the nation has lost 21.4 million jobs.

June 2020 Economy At A Glance

The Fed expects to hold interest rates near zero through the end of this year, perhaps well into next year, and maybe even into ’22.

This Week's State Of The Economy - What Is Ahead? - 05 August 2022

The Bureau of Labor Statistics reported this morning that nonfarm payrolls increased 528,000 for the month of July, easily topping estimates, lowering the unemployment rate to 3.5%.

This Week's State Of The Economy - What Is Ahead? - 23 July 2021

In the biggest financial news this week not connected to college football conference realignment, July\'s NAHB Housing Market Index slipped one point to 80.

This Week's State Of The Economy - What Is Ahead? - 03 March 2023

Looking at Q4 GDP, Australia\'s economy grew by less than expected, GDP was flat for the quarter in both Canada and Switzerland, and Sweden\'s economy contracted in the final quarter of last year.

This Week's State Of The Economy - What Is Ahead? - 09 December 2022

Various price metrics released this week showed some continued signs of inflation cooling, but gradually rather than rapidly.

This Week's State Of The Economy - What Is Ahead? - 04 August 2023

Employment growth was broad-based, though reliant on a 87K gain in health care & social assistance. Modest gains from construction, financial activities and hospitality also contributed to private sector job growth.


Instagram

@ tcgcrealestate

Subscribe Now! IT's Free

Stay up to date with all news coming straight in your mailbox.

Copyright © 2024 TC Global Commercial. All rights reserved.