Decent Dose of Economic Data This Week
Now that Jackson Hole is in the rearview mirror, and it looks like the Fed will be delivering a 25bps cut in September, investors can return to data this week to determine if the U.S. economy will continue to defy the rest of the world and exhibit strength. While trade and geo-political headlines can and will erupt at any moment, investors this week will get a decent dose of economic data. July durable goods were released this morning and orders ex-aircraft and shipments were disappointing. Tomorrow Consumer Confidence will be released providing a gauge of how consumers are reacting to the swirl of events with some modest downturn in confidence expected. July personal income and spending is due Friday with spending expected to increase which is what we saw in the retail sales report. Pending home sales round out the top-tier releases with a sequential drop for the month expected.
|Treasury Curve||Today||Week Change|
|3 Mo LIBOR||2.14%|
|6 Mo LIBOR||2.08%|
|12 Mo LIBOR||2.03%|
|Date||Statistic||For||Briefing Forecast||Market Expects||Prior|
|Aug 26||Durable Goods Orders||Jul P||1.2%||2.1% actual||1.8%|
|Aug 26||Durable Goods Ex-Transport||Jul P||0.2%||-0.4% actual||0.8%|
|Aug 27||FHFA House Price Index||Jun||0.1%||0.2%||0.1%|
|Aug 27||S&P CoreLogic CS 20-City HPA||Jun||2.30%||2.30%||3.43%|
|Aug 27||Conf. Board Consumer Confidence||Aug||130.0||129.0||135.7|
|Aug 29||Second Quarter GDP QoQ||2Q S||2.0%||2.0%||2.1%|
|Aug 29||Pending Home Sales MoM||Jul||0.0%||0.0%||2.8%|
|Aug 30||Personal Income||Jul||0.3%||0.3%||0.4%|
|Aug 30||Personal Spending||Jul||0.5%||0.5%||0.3%|
Top 5 Events for the Week
Aug. 26 - 30, 2019
1. Global Slowing/Trade-Related Fallout – All Week
2. August Consumer Confidence - Tuesday
3. July Personal Income &Spending – Friday
4. July Durable Goods – Monday
5. July Pending Home Sales –Thursday
1. Global Slowing/Trade-Related Fallout —All Week
Trade and geopolitical headlines will continue to have an outsized impact on market direction and tone this week in the wake of the Jackson Hole central bank meetings and the presidential tweet storm last Friday. While the consensus take from Jackson Hole was that central bankers are ready, willing and able to deploy the remaining monetary policy arsenal, the overarching risk of global slowing remains a front and center concern. The reaction to the Friday tweets is also a reminder that market-moving events can erupt at any moment and that’s not to mention other weighty ongoing issues like the Hong Kong protests, the dissolution of the Italian government, and the coming Brexit train wreck. All of those have supported Treasury prices in flight-to-safety trades and in the hunt for positive-yielding sovereign debt. As we mentioned last week, we think the global slowdown story has more legs to it and thus the trading rubric will remain one of a slow grind to lower yields interrupted by limited pullbacks.
2. August Consumer Confidence -Tuesday
If second quarter GDP taught us anything it’s that the consumer is carrying the ball right now. Given the outsized increase in consumer consumption during the quarter measuring the confidence of the consumer is critical to gauging their predilection to continue spending. In that regard the Consumer Board’s Consumer Confidence report tomorrow is expected to post a modest sequential decline which is not unexpected given the increased market volatility in early August. Expectations are for the August print to be 129.0 versus 135.7 in July. The index posted a high of 137.9 last October and even though the current expectation is for a sequentially lower level it still points to continued healthy spending by the consumer.
3. July Personal Income and Spending —Friday
Given the strength in consumer consumption noted in the second quarter GDP, the July income and spending numbers will be watched closely for continued strength. For the month, income is expected to have increased 0.3% versus 0.4% in June. Meanwhile, spending is expected to have increased 0.5% versus 0.3% in June. The Fed’s preferred inflation measure, core PCE, is expected to have increased 0.2% for the month and 1.6% year-over-year, both identical to the June figures and indicating inflation is likely to remain firmly below the 2% target.
4. July Durable Goods Order–Monday
While the consumer has held up the economy in the second quarter, one sector that hasn’t done well has been the manufacturing sector which has been weak under the impact of tariff concerns and global slowing. Durable goods are one component in the manufacturing sector so the preliminary orders for July will be watched for any additional weakness. The report was released this morning and overall orders increased 2.1.% versus 1.8% June and 1.2% expected. Orders ex-transportation were down -0.4% versus 0.8% in June and missed the 0.0% expectation. Shipments of capital goods non-defense ex-air were off as well down –0.7% versus 0.0% in June and 0.1% expected. Thus, slowing in the sector looks to have continued in July.
The week has a smattering of real estate activity and probably the most current data point will be July pending home sales due on Thursday. The sales are based on contract signings so they are more current than other releases that depend on closings which take longer to complete. Sales are expected be flat on the month versus an increase of 2.8% in June, so little sign is expected that housing activity is breaking to a higher level despite lower mortgage rates and slowing home price appreciation.
Investment Yield Ranges Over Last Year
Thomas R. Fitzgerald
Director, Strategy & Research