GDP, Inflation, & A Rate Hike
Week in Review: July 24-28
On Wednesday, I wrote about how and why the economy has shrugged off higher borrowing costs, and sure enough, this week’s data—GDP, some housing stats, inflation, spending, saving, and more—broadly suggest the risk of recession is falling. Yes, that’s encouraging for society, but it’s concerning for those of us predicting a downturn this year. Come on, people; my professional reputation is at stake here.
S&P Flash Composite Readings
The economy expanded in July (albeit at its slowest rate since February) according to this measure that’s based on a survey of business managers. Service sector activity expanded, as did manufacturing sector output. Manufacturing operating conditions deteriorated for the third straight month, but at a slower pace.
Gas prices increased for a third consecutive week and are as high as they’ve been since the beginning of May.
TSA Checkpoint Travel Numbers
The number of people passing through TSA security during the week ending July 25th was up about 1.2% compared to the same week in 2019. That’s close to as large of an increase over 2019 as we’ve seen as summer travel stays hot.
Home prices fell over the past year according to the S&P Corelogic Case-Shiller National Home Price Index, down 0.5% from May 2022 to May 2023. That said, prices increased 0.7% for the month and have now risen 2% since reaching a cyclical low in January. If you’re interested in market-specific prices, S&P has measures for 20 individual metro areas.
Another measure of home prices, the FHFA home price index, also indicated prices rising 0.7% in May. Unlike the S&P measure, though, the FHFA index shows prices increased 2.8% over the past year.
Conference Board Consumer Confidence Index
Consumer confidence improved significantly in July, rising to its highest level since July 2021. The Expectations index, which measures how people feel about future conditions, rose above 80—readings below this threshold typically signal recession within a year—for the first time in months. Despite consumers being less convinced about recession, Conference Board (and me) still “anticipate one likely before yearend.”
Economic sentiment has been unreasonably bad over the past year or so, and it’s nice to see it finally start to improve.
Fed Interest Rate Decision
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