The Weekly Economic & Real Estate Forecast – 09/17/18 to 09/21/18

What I Saw Last Week

Total outstanding Consumer Credit rose by $16.6 billion in July – beating my forecast for an increase of $14.5 billion – following a downwardly revised $8.5 billion (from $10.2 billion) in June.

cc

Non-revolving credit increased by $15.4 billion to $2.88 trillion and revolving credit rose by $1.2 billion to $1.04 trillion.

Consumer credit rose at a seasonally adjusted annual rate of 5.0% in July, with revolving credit increasing at an annual rate of 1.5% and non-revolving credit increasing at an annual rate of 6.5%.

The takeaway from this report is that the credit expansion in July was driven almost entirely by non-revolving credit possibly suggesting some caution from consumers when it comes to credit card use.

Inflation, as measured by the Consumer Price Index, matched my forecast for an increase of 0.2% with the core rate up by 0.1%.

cpi

The bump in total CPI in August was driven by the indexes for shelter (+0.3%) and energy (+1.9%), while Core CPI was pushed up primarily by the shelter index, but a 1.6% drop in the apparel index and a 0.2% decline in the medical care index helped hold things in check.

On a year-over-year basis, total CPI was up 2.7%, versus 2.9% in July, and core CPI was up 2.2% versus 2.4% in July, which is the largest 12-month increase since September of 2008.

The takeaway from this report is that there was a moderation in the year-over-year growth rates for total CPI and core CPI. I do not believe that the report will alter the prevailing view that the Federal Reserve is likely to raise rates two more times this year, yet the moderation is apt to be seen as a data point that could keep the Federal Reserve from tightening rates too rapidly.

U.S. Retail Sales in August were a disappointment with total sales up by a paltry 0.1% – I had forecast 0.4% –  following an upwardly revised 0.7% (from 0.5%) in July and the core rate (which excludes auto sales) up by 0.3% following an upwardly revised 0.9% (from 0.6%) in July – I had forecast a 0.5% increase.

rs

Total retail sales were weighed down by a 0.8% decline in motor vehicle and parts dealers sales, as well as a 1.7% decline in clothing and clothing accessories stores sales.

The upward revisions to the prior month did help mitigate some of the headline disappointment for August, yet the takeaway from the report is that consumer spending is up and should continue to support real GDP growth in the third quarter.

The early September Consumer Sentiment figure came in at 100.8 (I had forecast a smaller increase to 97.0) from the final August figure of 96.2. Notably, it now stands at the second highest level seen since 2004.

cs

The Index of Consumer Expectations rose to 91.1 from 87.1 in August, hitting its highest level since July 2004 and the Current Economic Conditions Index increased to 116.1 from 110.3.

The takeaway from the report is that the pickup in sentiment was widespread across all major socioeconomic groups, which is a good underpinning for solid consumer spending activity.

What to Watch for This Week

The NAHB Housing Market Index for September is likely to show a small drop from 67 to 66 as builders continue to worry about material and land costs.

U.S. Building Permits were running at an annual rate of 1.311 million units in July and I expect the August number to come in at around 1.3 million.

U.S. Housing Starts were measured at 1.168 million units in July and I hope to see August numbers at around 1.2 million units.

U.S. Existing Home Sales in July came in at an annual rate of 5.34 million sales and the August figure should show a very modest increase to 5.35 million.

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The Weekly Economic & Real Estate Forecast – 09/10/18 to 09/14/18

What I Saw Last Week

U.S. Construction Spending rose 0.1% in July – I had forecast 0.5% – following an upwardly revised 0.8% decline (from -1.1%) in June.

CS

Total private construction spending dropped 0.1%, as a 1.0% decline in non-residential spending offset a 0.6% increase in residential spending.  Total public construction spending rose by 0.7%, led by a 0.7% uptick in non-residential spending, which was driven by a 2.1% increase in educational spending and a 0.4% increase in highway and street spending.

On a year-over-year basis, total construction spending is up 5.8%, with private construction spending up 5.1% and public construction spending up 8.3%.

The takeaway from the report is that weakness in non-residential private construction spending was the primary reason for the tepid growth overall.

August Non-Farm Payrolls rose by 201,000 (I had forecast 187,000) and there were substantial downward revisions to the June and July figures with June employment up by 208,000 from 248,000 and July numbers revised down to 153,000 from 170,000.

Payrolls

The biggest surprise from the data was that average hourly wages rose by 0.4% pushing the year-over-year rate to a very solid 2.9%.

The takeaway here is that wage growth should be regarded as good news, yet the key takeaway for the market is that it will keep the Fed in a tightening gear, which most likely includes two more rate hikes before the year is done. Additionally, downward revisions to the June and July employment numbers certainly take some of the “sparkle” off the report.

The U.S. Unemployment Rate in August matched my forecast for it to remain at 3.9%.

URate

In August, the number of unemployed persons dropped by 46,000 while the number of persons employed full-time declined by 444,000. Moreover, the decrease in the numbers of individuals in the labor force (-469,000) and the increase in those not in the labor force (+692,000) contributed to the drop in the labor force participation rate in August to 62.7% from 62.9%.

What to Watch for This Week

Consumer Credit rose by $10.2B in June and the July number is likely to show credit up by a further $14.5B.

Inflation, as measured by the Consumer Price Index, rose by 0.2% in July and was up by 2.9% year-over-year.  The August number should come in at 0.2%.

U.S. Retail Sales rose by 0,5% in July and I am looking for a further increase of 0.4% with the core rate (which excludes auto sales) up by 0.5%.

The early September Consumer Sentiment figure should come in at 97.0 – up from the final August figure of 96.2.

 

The Weekly Economic & Real Estate Forecast – 09/03/18 to 09/07/18

What I Saw Last Week

Case Shiller Index data for June showed the 20-City Index up by 6.3% – marginally below my forecast for 6.4% year-over-year growth.

CS

Sales of both new and existing homes have been roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some markets, and rising inventories have had a dampening effect on prices. Moreover, rising mortgage rates are also starting to suppress home price growth with the rate for 30-year fixed mortgages rising from around 4% at the start of the year to just over 4.6% now which directly affects housing affordability and, therefore, home prices.

That said, home price gains remain quite strong in the West – where supplies are leanest – but those gains are also showing signs of slowing. Las Vegas, Seattle and San Francisco continue to lead the pack in price rises with Las Vegas leading the way with a 13% year-over-year price increase, followed by Seattle which is up by 12.8%, and San Francisco saw a 10.7% increase.

Six of the 20 cities in the Index reported greater price increases in the year ending in June 2018 versus the same period in 2017.

The takeaway from this report is that I expect we will continue to see price growth taper through the rest of this year and into 2019.

Consumer Confidence in August climbed to 133.4 – I had forecast a drop 126.5 – from an upwardly revised 127.9 (from 127.4) in July.

CC

The Present Situation Index increased from 166.1 to 172.2 while the Expectations Index rose from 102.4 to 107.6.

Interestingly, the percentage of consumers expecting an improvement in their short-term income prospects rose from 20.4% to 25.5%, while the proportion expecting a decrease declined from 9.4% to 7.0%.

The takeaway from the report is that surprisingly high confidence levels should support solid consumer spending in the near term, particularly since consumers have a better outlook for their short-term income prospects than I had expected.

The second estimate for GDP in the second quarter showed the economy expanding at 4.2% versus the advance estimate of 4.1% – I had forecast a drop to 4.0%.

GDP

The increase was driven by real final sales of domestic products, which rose by 5.3% versus the 5.1% initial estimate; gross private domestic investment increased 0.4% versus declining 0.5% in the advance estimate; and government spending which increased 2.3% versus 2.1% in the advance estimate.

The takeaway from the report is that it included a downward revision to personal spending growth (from 4.0% to 3.8%) that was offset by a higher estimate for non-residential investment growth, government spending, and a downward revision to imports (which are a subtraction in the calculation of GDP).

I still fully expect growth to slow in Q-3 as the second quarter was substantially boosted by export activity ahead of the implementation of Chinese tariffs.

The NAR Pending Home Sales Index for July fell 0.7% to 106.2 – I had forecast a drop to 106.3. The index is down 2.3% year-over-year and is the 7th straight month of annual declines.

PHS

It is evident that, in recent months, many of the most overheated real estate markets – especially those in the Western States – are starting to see modest declines in home sales and this also translates into slower price growth.

The reason sales are falling is relatively straightforward in that we saw multiple years of inadequate supply in markets with strong job growth which drove home prices to a point where an increasing number of prospective buyers are simply unable to afford to buy.

Regionally, pending home sales in the Northeast rose 1.0% for the month but were 2.3% lower compared with a year ago. In the Midwest, sales were up 0.3% monthly but 1.5% lower annually. In the South, sales declined 1.7% monthly and 0.9% annually while in the West, sales fell 0.9% monthly and 5.8% annually.

Sales are weakest in the West because that is where affordability is worst. Homebuilders are most active in both the South and West, but mostly not at the lower end of the market, where demand is strongest.

Some major markets in the West, including Denver and Seattle, which have been incredibly hot and competitive, are starting to see more supply come on the market. I believe that this will cool prices slightly and bring more would be buyers back into the market.

Income & Spending data for July showed incomes up by 0.3% (I had forecast 0.4%) and spending (PCE) matching my forecast for a 0.4% increase.

I&S

The growth in income in July was led by a 0.4% increase in wages and salaries, a 0.7% increase in rental income, and a 0.6% increase in personal dividend income. On a year-over-year basis, real PCE (Personal Consumption Expenditures) was up 2.8%, versus 2.7% in June, while real disposable personal income was up 2.9%, versus 3.0% in June. Notably, the 2.3% year-over-year increase in the PCE Price Index is the highest since March 2012.

The takeaway from the report is twofold; firstly, the spending increase puts Q-3 GDP on a solid growth track and secondly, the year-over-year increase in the PCE Price Index (+2.3% vs. +2.2% prior) and the core PCE Price Index (+2.0% vs. +1.9% prior) will keep the Federal Reserve on its tightening track in September.

The final Consumer Sentiment number for August showed a decline from 97.9 to 95.3 – I had forecast it to come in at 95.5 and is now at its lowest point since September of 2017. The Current Economic Conditions Index declined to 107.8 from 114.4 in the final July reading and the Index of Consumer Expectations held at 87.3.

CSI

A less favorable view of buying conditions due to prices was largely responsible for the pullback with the biggest decline recorded among households in the lower third of the income distribution curve.

Also of note was that vehicle buying conditions were viewed less favorably than at any time during the last four years while home buying conditions were viewed less favorably than at any time in the past ten years.

The takeaway from the report is that the overall decline was driven by concerns about the prices of large household durables.

What to Watch for This Week

U.S. Construction Spending dropped by 1.1% in July and I am looking for a turnaround with total spending up by 0.5%.

Non-Farm Payrolls rose by 157,000 in July and the August figure should show that the country added 187,000 new jobs in the month.

The U.S. Unemployment Rate should hold steady at 3.9%.

The Weekly Economic & Real Estate Forecast – 08/27/18 to 08/31/18

What I Saw Last Week

U.S. Existing Home Sales in July fell 0.7% month-over-month to a seasonally adjusted annual rate of 5.34M units – I had forecast 5.4M.  Notably, the median existing home price for all housing types rose 4.5% to $269,600, making for the 77th straight month of year-over-year gains. The median existing single-family home price came in at $272,300, up 4.6% from a year ago.

EHS

Regionally, sales rose in the West (+4.4%) but fell in the Northeast (-1.5%), Midwest (-1.6%), and South (-0.4%).

Single-family home sales declined 0.2% to a seasonally adjusted annual rate of 4.75M and were 1.2% below the year-ago pace.

The inventory of homes for sale at the end of July dropped 0.5% to 1.92M and was unchanged from a year ago.  Unsold inventory remained at a 4.3-month supply, again unchanged from last July. This is below the 6.0-month supply typically associated with a more balanced market. 55% of homes sold in July were on the market less than a month, compared to 58% in June.

The takeaway from the report is that supply constraints continue acting as a drag on overall sales. The lower inventory — and high prices on available inventory — is crimping affordability, especially for first-time buyers. All prospective buyers are facing affordability pressures resulting from home prices increasing at a faster pace than income. Moreover, it is also possible that buyers may be postponing their home search until more homes in their price range come onto the market.

U.S. New Home Sales dropped 1.7% month-over-month in July to a seasonally adjusted annual rate of 627,000 units – I had forecast 645,000 – from an upwardly revised 638,000 (from 631,000) in June.

NHS

The July estimate was the lowest annual pace since August 2017, a reminder that builders must manage costs as affordability concerns rise. While affordability conditions remain positive and the labor market sees low unemployment, prospective home buyers face increased uncertainties as interest rates trend higher and trade war concerns continue to grow.

Despite the disappointing July estimate, total sales for the first seven months of 2018 (401,000) were 7.2% higher than the comparable total for 2017 (374,000). I continue to expect that the volume of new home sales will continue to expand at its current modest pace, subject to monthly volatility and supply-side cost concerns.

Inventory levels rose in July to 309,000 single-family homes and, at current sales pace, there is a healthy level of 5.9 months of inventory.  Given tight existing home inventory, i believe that more new homes can be absorbed by the market.

The median sales price of a new home rose to $328,700 in July . I continue to contend that managing rising construction costs in the months ahead will be a key challenge for housing affordability, as input costs increase, although recent declines in lumber prices should help.

At a regional grain, for the first seven months of 2018 (relative to the first seven months of 2017), new home sales were up 14.2% in the Midwest, 8.6% in the South, 6.5% in the West, and down 14.5% in the Northeast, due to some tax reform related effects and affordability.

What to Watch for This Week

Case Shiller Index numbers for June will likely show the 20-City Index up by 6.4% year-over-year – marginally below the 6.5% annual rate seen in May.

Consumer Confidence in August is likely to drop from 127.4 to 126.5.

The second revision for GDP in the second quarter should show the economy grew by 4.0% – down from the initial figure of 4.2%.

The NAR Pending Home Sales Index for July is likely to disappoint with the Index level dropping from 106.9 to 106.3.

Income & Spending both rose by 0.4% in June and I expect to see the July data match the prior month with both up by 0.4%.

The final Consumer Sentiment number for August should be modestly higher. I’m looking for an increase to 95.5 from the initial figure of 95.3.

The Weekly Economic & Real Estate Forecast – 08/20/18 to 08/24/18

Well, I am back from my adventure up north and already digging into the data that was released in my absence so here goes…

What I Saw Last Week

U.S. Retail Sales rose 0.5% in July following a downwardly revised 0.2% increase (from 0.5%) in June.  Excluding auto sales, core retail sales rose by 0.6% after rising by a downwardly revised 0.2% (from 0.4%) the prior month.

Retail

The takeaway from the report is that the downward revisions to June mitigated the July headline surprise. That point notwithstanding, core retail sales were up 0.5%, which will be a positive input for Q-3 GDP forecasts.

Builder confidence in the market for newly-built single-family homes dipped by one point to a 67 reading in August according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI).

HMI

The HMI component measuring current sales conditions dipped by one point to 73 while the component gauging expectations in the next six months took a single point drop to 72 and the metric tracking buyer traffic fell two points to 49.  Looking at the three-month moving averages for regional HMI scores, the South and West each held steady at 70 and 75, respectively, while the Northeast and Midwest each fell three points to 54 and 62, respectively.

The current economic expansion and firm job market should continue to spur demand for new single-family homes in the months ahead. That said, builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, specifically lumber. These cost increases, in concert with rising interest rates, put upward pressure on home prices and continue to contribute to growing affordability challenges in many parts of the country.

U.S. Housing Starts rose 0.9% in July to a seasonally adjusted annual rate of 1.168M units following a downwardly revised 1.158M (from 1.173M) in June.  The number of units under construction at the end of the period totaled 1.122M units. That was a smidge below the Q-2 average of 1.123M, which points to a slight drag for Q-3 GDP forecasts.

Starts

The takeaway from the report is the recognition that single-family starts rose just 0.9% to 862,000, which is a modest pace that, as attested to above, likely reflects the headwinds builders are facing with higher costs for materials, labor, and land.

U.S. Building Permits increased 1.5% to a seasonally adjusted annual rate of 1.311M units from an upwardly revised 1.292M (from 1.273M) in June.

permits

Residential permits are up by 4.2% when compared to the same month in 2017.

The increase in permits does point to some easing of the inventory pressure in housing and is a welcome sign as a strong economy with continuing job and income growth, millennials aging into homeownership, and baby boomers living longer and more independently than ever will likely continue to drive demand and keep the pressure up on the housing market.

Consumer Sentiment in early August dropped to 95.3 from 97.9 in July.  The drop pushes the index back to a level last seen in September of 2017. The Current Economic Conditions Index declined to 107.8 from 114.4 in the final July reading and the Index of Consumer Expectations remained at 87.3.

Sentiment

In reading the data, a less favorable view of buying conditions due to prices was largely responsible for the pullback with the biggest decline recorded among households in the lower third of the income distribution curve.

Vehicle buying conditions were also viewed less favorably than at any time during the last four years, while home buying conditions were viewed less favorably than at any time in the past ten years!!  (I would suggest this was driven by affordability issues in concert with rising mortgage rates).

What to Watch for This Week

Data on U.S. Existing Home Sales in July is released on Wednesday and I am looking for very modest improvement from the annualized rate of 5.38M units seen in June to 5.40M units.

U.S. New Home Sales numbers are released on Thursday and I expect to see sales up to an annual rate of 645,000 units from 631,000 seen in June.

The Weekly Economic & Real Estate Forecast – 08/06/18 to 08/10/18

What I Saw Last Week

Following the May increase in existing inventory, the NAR Pending Home Sales Index rose 0.9% in June to 106.9 – I had forecast a more modest increase of 0.2%.

PHS

The PHSI increased slightly in all four regions, ranging from 1.4% in the Northeast to 0.5% in the Midwest. Year-over-year, the PHSI remained down, ranging from 0.3% in the South to 5.6% in the West.

Based on the June increase in the inventory of homes for sale, NAR suggested the possibility that the worst of the supply crunch has passed. Despite the 5.3% decline in new home sales in June, builder confidence stayed at a healthy level in July. The accelerating economic growth in the second quarter of 2018 fueled the job market, and the demand for new residential construction will continue to grow.

Income & Spending data for June showed both rising with incomes matching my forecast for a 0.4% increase and spending also rising by 0.4% which was a little weaker than my forecast for a 0.5% increase.

I&S

The uptick in personal income in June was fueled by a 0.4% increase in wages and salaries and a 1.2% jump in personal dividend income.

This report contained comprehensive revisions, which included a marked upward adjustment in the personal savings rate for the years 2013-2017. The personal savings rate as a percentage of disposable income in June held steady at 6.8%.

The key takeaway from the report is that it didn’t produce any real surprises. That means it is the type of report that should keep the Federal Reserve inclined to think that it can continue to raise interest rates.

The Case Shiller Index for May showed the 20-City Index exactly matching my forecast for an annual increase of 6.5%.

CS

In May, the annual growth rates of the 20 metro areas ranged from 3.1% to 13.6%. Among the 20 metro areas, Seattle, Las Vegas and San Francisco reported the highest annual growth rates with Seattle leading the way with a 13.6% increase, followed by Las Vegas with a 12.6% increase and San Francisco up 10.9%. Nine of the 20 metro areas exceeded the 20-City average of 6.5% in May.

Home prices continue to rack up gains two to three times greater than the inflation rate with the year-over-year increases in the 20-City Index above 5% every month since August 2015.

Unlike the boom-bust period surrounding the financial crisis, price gains are consistent across the 20 cities tracked in the release; currently, the range of the largest to smallest price change is 10 percentage points compared to a 20 percentage point range since 2001, and a 25 percentage point range between 2006 and 2009. Not only are prices rising consistently, they are doing so across the country.

Consumer Confidence in July came in at 127.4 – I had forecast 126.6 – on the heels of an upwardly revised 127.1 print (from 126.4) for June.

CC

The Present Situation Index improved from 161.7 to 165.9 while the Expectations Index dropped from 104.0 to 101.7.

The takeaway from the report is the Conference Board’s indication that a back-to-back decline in the Expectations Index suggests consumers do not anticipate growth accelerating.

U.S. Construction Spending dropped 1.1% in June – I had forecast an expansion of 0.2% – following an upwardly revised 1.3% increase (from 0.4%) in May.

CSpend

The June report featured a 0.4% decline in total private construction spending and a 3.5% drop in total public construction spending.

The drop in private construction spending was led by a 0.5% decline in residential construction spending and a 0.3% decline in non-residential construction spending. New single-family construction dropped 0.4% while new multifamily construction fell 2.8%.

On a year-over-year basis, total construction spending was up 6.1% with public construction spending up 4.9% and private construction spending up 6.5%.

The takeaway from the report is that the upward revision to spending in May mitigated most of the headline disappointment for June, which actually implies the June downturn is not as bad as it appears at first blush.

Non-Farm Payrolls missed my forecast for an increase of 190,000 new jobs but this was offset by upward revisions to payroll gains in May and June.

Companies added 157,000 jobs in July with May numbers revised up to 268,000 from 254,000 and June figures revised from 213,000 to 248,000. Over the past 3-months the country has added an average of 224,000 jobs per month.

The Unemployment Rate matched my forecast for a drop to 3.9%.

The takeaway from this report is that it matched the “Goldilocks” report seen in June. Not too hot, not too cold, but just right.

What to Watch for This Week

Consumer Credit in June is likely to have expanded by $15.5 billion following the $24.6 billion increase seen in May.

Inflation, as measured by the Consumer Price Index, should show the headline and core rates both up by 0.2% in July.

On a separate note, I am off on my annual kayaking adventure in Canada so will not be preparing a forecast next week.  I will be back with my next weekly forecast on August 13.

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The Weekly Economic & Real Estate Forecast – 07/30/18 to 08/03/18

What I Saw Last Week

U.S. Existing Home Sales dropped 0.6% month-over-month to a seasonally adjusted annual rate of 5.38 million units in June – I had forecast a modest increase to 5.43 million.

EHS

The number was clearly a disappointment, but not all markets saw a contraction in sales.  As the Northeast of the country saw sales rise by 5.9% and the Midwest eked out a 0.8% increase. The total number fell due to a 2.2% drop in the South and a 2.6% drop in the West.

The median existing home price for all housing types increased 5.2% to an all-time high of $276,900, which was the 76th straight month of year-over-year gains. The median existing single-family home price was $279,300, up 5.2% from a year ago.

Median home prices by region: Northeast (+3.3% to $305,900); Midwest (+3.5% to $218,800); South (+2.7% to $237,500); and West (+10.2% to $417,400).

The inventory of homes for sale at the end of June rose 4.3% to 1.95 million units, yet inventory was up 0.5% from a year ago. That said, it represents the first year-over-year increase since June of 2015.

Unsold inventory is at a 4.3-month supply at the current sales pace, versus 4.2 months a year ago and the 6.0-month supply typically associated with a more balanced market.

The takeaway from the report remains the same: notable supply constraints continue to act as a drag on overall sales. The limited inventory — and the high prices on available inventory — is crimping affordability, particularly for first-time buyers; moreover, all prospective buyers are feeling affordability pressures from home prices rising faster than income.

U.S. New Home Sales dropped 5.3% month-over-month in June to a seasonally adjusted annual rate of 631,000 units – I had forecast a far smaller drop to 670,000 units.

NHS

The median sale price dropped 4.2% year-over-year to $302,100 while the average sale price dropped 2.0% to $363,300.  Based on the current sales pace, the inventory of new homes for sale increased to a 5.7-months’ supply, versus 5.3 months in May and 5.3 months in June of 2017.

The takeaway from the new homes report is that the June decline represented the largest monthly drop since December, and it took place despite a decline in median and average selling prices.  That said, and Despite the disappointing June estimate, total sales for the first half of 2018 (349,000) were 6.9% higher than the comparable total for 2017 (327,000). I expect the volume of new home sales to continue to expand along the current modest pace, subject to monthly volatility and supply-side cost concerns.

The first estimate for GDP in Q-2 exactly matched my forecast for economic growth of 4.1% and Q-1 growth was revised up to 2.2% (from 2.0%).

The rate of growth was the fastest seen since the 3rd quarter of 2014 and the third-best growth rate since the Great Recession.

GDP

In addition to the rise in consumer and business spending, increases in exports and government spending also helped. Personal consumption expenditures rose 4% while business investment grew 7.3% and federal government outlays increased by 3.5%.

In as much as the number was very good, and the administration should be given credit, I do not see how the country can continue to expand at this rate. My belief is that business investment was boosted by corporate tax breaks and is unlikely to continue.  Additionally, exports (up by 9.3%) rose as farmers rushed to get soybeans (sales up over 9,400%) to China ahead of expected retaliatory tariffs to take effect in the coming days.

Ultimately, tariffs and last year’s massive tax cut were key factors in the growth.

The final Consumer Sentiment number for July came in at 97.9 (I had forecast 97.1) up from the preliminary reading of 97.1.

CS

The Current Economic Conditions Index was revised to 114.4 from 113.9 while the Index of Consumer Expectations was revised to 87.3 from 86.4.

The takeaway from the report is that confidence remained at high levels due to favorable job and income prospects, offsetting growing concerns it seems about the potential impact of tariffs on the domestic economy.

What to Watch for This Week

The NAR Pending Home Sales Index for June should show very modest improvement from the 0.5% contraction seen in May.  I am hoping to see an increase of 0.2%.

Income & Spending for June will be positive with incomes up by 0.4% and spending 0.5% higher.

Case Shiller Index numbers for May should show the 20-City Index up by 6.5%, just below the 6.6% seen in April.

Consumer Confidence in June was measured at 126.4 and the July number should come in at 126.6.

U.S. Construction Spending rose by 0.4% in May and the June number is likely to show an expansion of 0.2%.

The jobs report for July comes out on Friday and I expect to see Non-Farm Payrolls up by 190.000, down from the 123,000 jobs that were added in June, and the Unemployment Rate is likely to drop from 4.0% to 3.9%.

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