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.


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.


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%.


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.