Chief Economist Scott Brown discusses the latest market data.
Minutes of the June 27-28 Federal Open Market Committee (FOMC) meeting showed senior Fed officials to be divided on the outlook for tapering the monthly pace of asset purchases, with most officials expecting to start the process later this year (provided the economy evolves as anticipated), but several officials want to see more substantial improvement in labor market conditions.
Retail sales fell 1.1% in July (+21.1% y/y) while figures for May and June were revised higher. Sales remain around 12% above the pre-pandemic trend (that’s a lot). Industrial production rose 0.9% in July (+6.6% y/y), partly reflecting a seasonal quirk in autos (seasonal plant closings were more limited this year). Single-family building permits fell 1.7% in July to a 1.048 million seasonally adjusted annual rate (+5.5%). Housing starts, which are erratic, fell 7.0% (+2.5% y/y). Homebuilder sentiment fell five points (to 75) in August, reflecting ongoing supply constraints and affordability issues.
Next week: Investors will be looking for further clues on tapering in Fed Chair Powell’s Jackson Hole speech, but any formal decision on the timing and pace of tapering will come later (most likely at the September 21-22 FOMC meeting). The economic data calendar includes two timely gauges on the impact of the delta surge. UM consumer sentiment had already tumbled in the mid-month assessment. The CARTS data will indicate retail sales for the first half of August.