10 Things You Need To Know: August 30, 2022
Key data releases this week include: FHFA House Price Index (Tue), consumer confidence (Tue), JOLTS Jobs Openings (Tue), nonfarm productivity (Thu), ISM Manufacturing (Thu), factory orders (Fri), and nonfarm payrolls (Fri).
Haver
August 24, 2022
The Pending Home Sales Index fell 1.0% m/m (-19.9% y/y) to 89.8 in July after an 8.9% drop in June (-8.6% initially) and a 0.4% increase in May, according to the National Association of Realtors (NAR). The July m/m fall was the eighth in nine months to the lowest index level since April 2020’s 71.6. Pending home sales have fallen 26.6% since the October 2021 peak.
Haver
August 25, 2022
The initially reported 0.9% q/q saar decline in U.S. real GDP for Q2 was revised to a slightly stronger 0.6% q/q fall. The Action Economics Forecast Survey had looked for a smaller upward revision to a 0.8% quarterly decrease. Real personal consumption expenditure growth was revised up to 1.5% q/q from 1.0%. The slowdown in inventory investment, the major subtractor in Q2 was revised slightly smaller, thereby reducing its subtraction to 1.8%-points from 2.0%-points initially reported.
Barron’s
August 29, 2022
“Fed Chair Jerome Powell’s speech at the Fed’s Jackson Hole conference was short and hawkish,” writes Ed Yardeni, chief investment strategist at Yardeni Research. “He quashed any lingering expectations that the Fed would pause its tightening and might lower interest rates next year.”
Barron’s
August 29, 2022
The latest indications of cooling prices came Friday, when the personal consumption expenditure index declined from its level a month earlier, slipping to a 6.3% year-over-year pace from 6.8% in June. From a year earlier, the core PCE fell to 4.6% from 4.8%, still well above the 2% target. The University of Michigan revised its latest gauges of inflation expectations slightly lower, to 4.8% for the next year and 2.9% over the next five to 10 years.
Barron’s
August 29, 2022
During the last two periods of sustained Fed tightening, gold prices actually rose strongly, countering the conventional wisdom that higher rates hurt gold investment because they raise the opportunity cost of investing in it. For example, during the two years from June 2004 to July 2006, when the Fed raised rates 17 times, gold went up by 42%.
Barron’s
August 29, 2022
Global dividends hit a record in the second quarter, rising 11.3% globally to $545 billion, according to the Janus Henderson Global Dividend Index. It tracks dividends paid by 1,200 companies around the world. Dividends paid by U.S. companies in the second quarter also set a quarterly record of $144.4 billion, surpassing a record set in the prior quarter.
Financial Times, CNBC, The Wall Street Journal
August 24, 2022
President Joe Biden has announced the cancellation of $10,000 worth of student debt repayments for those earning less than $125,000 per year, and a $20,000 cancellation for recipients of a Pell Grant, which is awarded in cases of financial need. In addition, the existing payment moratorium will be extended from Aug. 31 to year-end.
Capital Economics
August 26, 2022
In a hawkish Jackson Hole speech, Fed Chair Jerome Powell argued that “restoring price stability will likely require maintaining a restrictive policy stance for some time. The historical record cautions strongly against prematurely loosening policy.” Nevertheless, we still anticipate that a faster drop back in inflation (including core) over the next 12 months will persuade the Fed to begin lowering interest rates again before the end of next year. The pivot is still on.
Bloomberg, The Wall Street Journal
August 25, 2022, August 28, 2022
US gross domestic product has fallen for two quarters, suggesting the economy is entering a recession, but another benchmark, gross domestic income, is up 1.6%. The reading suggests the economy may be stagnating rather than contracting.