Overview: Over the past week, mortgage rates declined a bit further to the lowest levels in several years — and then reversed to end the week nearly unchanged. The U.S. economic data caused little reaction, and there was no significant news to alter the outlook for future monetary policy or the trade talks with China.
Consumer spending accounts for over two-thirds of all economic activity in the U.S., so the monthly retail sales data is a key indicator of growth. In July, retail sales jumped 0.7% from June, which was well above the consensus forecast for an increase of just 0.3%. The results were helped by Amazon Prime Day and competing sales events at other retailers. This marked the fifth straight month of healthy gains and eased concerns about a possible recession in the U.S.
The data from the housing sector released over the past week was mostly in line with the expected levels. In July, sales of previously owned (existing) homes rose 3% from June and were slightly higher than a year ago. The inventory of homes for sale was at a 4.2-month supply, still well below the 6.0-month supply which that is considered a healthy balance between buyers and sellers. Median existing-home prices were 4% higher than a year ago. Total housing starts dropped in July, but the decline was entirely due to multi-family units. Single-family starts were up from the prior month, which may help alleviate the shortage of inventory.
The minutes from the July 31 Federal Reserve meeting released on Wednesday contained no new guidance on future monetary policy and caused little market reaction. According to the minutes, Fed officials viewed the rate cut announced at the meeting as a “recalibration” as opposed to the start of a new cycle of reductions, and they wanted to retain the flexibility to base future decisions on incoming economic data.
Week Ahead
Friday, August 23 — Fed Chair Jerome Powell speaks
Chair Powell will address the Jackson Hole global economic summit.
Friday, August 23 — New Home Sales report
Monday, August 26 — Durable Goods report
Friday, August 30 — Core Personal Consumption Expenditures (PCE) Price Index
This is the inflation indicator favored by the Federal Reserve.