10 Things You Need To Know: August 2, 2022
Key data releases this week include: ISM Manufacturing (Mon), JOLTS Jobs Openings (Tue), factory orders (Tue), ISM Services (Wed), and nonfarm payrolls (Fri).
Bloomsberg
August 1, 2022
US manufacturing activity continued to cool in July as more factories dialed back production in the face of shrinking orders and rising inventories. The Institute for Supply Management’s gauge of factory activity eased to 52.8, the lowest level since June 2020, from 53 a month earlier. The latest figure compared with a median projection of 52 in a survey of economists.
Haver
July 26, 2022
The Federal Housing Finance Agency (FHFA) House Price Index rose 1.4% in May following a 1.5% increase in April, revised from 1.6%. The year-to-year increase in May was 18.3%, down from 18.8% in April. While the annual rate of increase slowed, it continued to be historically quite elevated, down only slightly from the series high of 19.3% y/y reached in July 2021 and February 2022.
Haver
July 27, 2022
The Pending Home Sales Index fell 8.6% m/m (-20.0% y/y) to 91.0 in June after a 0.4% increase in May (+0.7% initially) and a 4.0% decline in April, according to the National Association of Realtors (NAR). The June m/m fall was the seventh in eight months to the lowest level since April 2020. Pending home sales have decreased 25.7% since the October 2021 peak.
Haver
July 28, 2022
U.S. real GDP fell 0.9% (AR, +1.6% y/y) during Q2’22 following a 1.6% decline in the first quarter. While the typical recession definition has been met (two straight quarters of decline), it would equal the mildest downturn in postwar history. The Action Economics Forecast Survey expected a 0.6% increase. Inventory liquidation reduced GDP growth by 2.0 percentage points last quarter. Partially offsetting this drag, improvement in the foreign trade deficit added 1.4 percentage points to growth.
Capital Economics
July 29, 2022
The chunky increase in euro-zone GDP in Q2 was due to the re-opening of the services sector which has masked a deterioration in most other parts of the economy. We expect a triple whammy of high inflation, tighter monetary conditions, and an energy crisis to push the economy into recession later this year.
Barron’s
August 1, 2022
With consumer sentiment at its lowest level on record, the rising concern among economists is that the overwhelmingly pessimistic national mood is having a tangible impact on economic activity—thereby boosting the chances of bringing about a downturn. Americans can, in effect, talk themselves into a recession. And they might be starting to do it.
CNBC, Bloomberg
July 31, 2022
Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said that the economy is “a long way away from” the 2% inflation target but that policymakers are committed to taming the rapid pace of price increases. “Whether we are technically in a recession or not doesn’t change my analysis,” Kashkari said.
Bloomberg
July 29, 2022
Former Treasury Secretary Lawrence Summers said he was concerned the Federal Reserve is still engaging in “wishful thinking” about how much it will take to bring inflation down from four-decade highs. “Jay Powell said things that, to be blunt, were analytically indefensible,” Summers said. “There is no conceivable way that a 2.5% interest rate, in an economy inflating like this, is anywhere near neutral.”
Capital Economics
July 29, 2022
The second-quarter decline in GDP was not quite as bad as it looked, and with the Fed sounding increasingly comfortable with continuing to raise interest rates through a period of weak economic growth, we still anticipate that rates will peak at 3.75-4.00% early next year, which is now someway above market expectations.