10 Things You Need To Know: August 6, 2024
Key data releases this week include: ISM Services (Mon), trade balance (Tue), and consumer credit (Wed).
Bloomberg
August 5, 2024
The US services sector expanded in July after contracting a month earlier by the most in four years, which may help allay fresh concerns about an abrupt downturn in the economy. The Institute for Supply Management’s index of services rose 2.6 points to 51.4. The July figure was slightly firmer than the median projection of economists.
Haver
July 30, 2024
U.S. house prices were essentially unchanged m/m in May, according to the Federal Housing Finance Agency (FHFA) House Price Index. The year-on-year rate of increase decelerated to 5.7% in May, the lowest since July 2023, from 6.5% in April.
Haver
August 1, 2024
The employment cost index (ECI) for civilian workers rose 0.9% during Q2’24 following a 1.2% Q1 increase, according to the Bureau of Labor Statistics. A 1.0% gain had been expected in the Action Economics Forecast Survey. U.S. nonfarm business productivity (output per hour) increased 2.3% q/q SAAR in Q2 after a 0.4% quarterly gain in Q1. The Action Economics Survey Forecast looked for a 1.7% increase in productivity.
Bloomberg
August 5, 2024
The Bank of Japan’s monetary policy tightening has triggered a wave of criticism after it helped set off a historic plunge in Japanese stocks and contributed to global market turmoil — likely putting any plans for further interest-rate hikes on ice. “The BOJ needs to be humble about economic data and the markets,” said Nobuyasu Atago, a former BOJ official. “The fact that the BOJ raised interest rates in the face of poor economic statistics shows that it did not pay attention to data.”
Barron’s
August 5, 2024
The changing nature of Americans’ spending is seen in a comparison of today’s expenditures with those of the Great Depression. From 1935-39, food represented 33.9% of an average household’s expenses; it accounts for just 13% today. Apparel ate up 11% of a Depression-era paycheck; it’s 2.6% today. Shelter costs, however, have risen from 33.7% to 36.1%; and medical care is up from 4% to 7.9%.
Barron’s
August 5, 2024
While passive investment undoubtedly optimizes average relative performance over the cycle, it does nothing to mitigate absolute risk, either over a cycle or at momentary extremes. With market concentration at all-time highs and valuation near all-time highs, investors need to focus on the risks of such a strategy.
Barron’s
August 5, 2024
Social Security’s retirement trust fund is projected to run dry in 2033, unless Congress passes legislation before then to shore up the program’s finances. Barring a fix, Social Security recipients will face an automatic benefit cut of 21%, according to the Trustees’ recent projections. (Incoming payroll taxes would continue to fund an estimated 79% of scheduled retirement benefits.)
Oxford Economics
August 5, 2024
Recent market moves suggest risk aversion triggered by US recession fears and a tech sell-off is displacing the risk of higher US rates. Our view is that recession fears are overdone since the increase in US unemployment was partly driven by an increase in labor force participation and temporary layoffs. We aren’t dismissing the entire upward creep in the unemployment rate, but the economy is not in recession.
Bloomberg
August 2, 2024
Former Federal Reserve economist Claudia Sahm said that while the US isn’t yet in a recession, it’s “uncomfortably close,” and predicted central bank policymakers may recalibrate their approach to take account of increasing risks. “If we look at all of what we know about the US economy right now, it is very unlikely that we are in a recession.”