Vital Statistics:
Stocks are lower this morning after further tariff threats on Saturday. Bonds and MBS are down.
The week ahead will be dominated by the consumer price index on Tuesday and the Producer Price Index on Wednesday. We have a lot of Fed speakers as well. Other important releases include retail sales on Thursday, and builder confidence. We get housing starts on Friday.
Earnings season kicks off Tuesday with the big banks reporting.
The Street sees the headline and core CPI rates rising from 0.1% to 0.3% on a month-over-month basis. The annual rate for headline CPI is expected to increase from 2.4% to 2.7% and the core rate is expected to increase from 2.8% to 3.0%.
Pending Home Sales rose 1.8% in May, according to NAR. “Consistent job gains and rising wages are modestly helping the housing market,” said NAR Chief Economist Lawrence Yun. “Hourly wages are increasing faster than home prices. However, mortgage rate fluctuations are the primary driver of homebuying decisions and impact housing affordability more than wage gains.”
Regarding regional differences, Yun added, “The Northeast’s housing shortage is boosting home prices, with more than a quarter of homes selling above list price. Conversely, more inventory in the South gives home buyers greater negotiation power. Price declines in the South should be considered temporary given the region’s strong job creation.”
Economic forecasters are taking down their recession bets and seeing stronger economic growth. They also have been lowering their estimates for inflation, taking it down from 3.6% to 3.0%. This is still higher than the 2.7% they expected in January, but sentiment is becoming more and more sanguine.
The labor market may appear tight according to the unemployment rate, but that has been supported via people leaving the workforce. The people leaving the workforce are the long-term unemployed. When someone is unemployed for over 6 months, they are no longer counted in the unemployment rate.
The consumer seems to be weakening as well, at least according to the National Retail Federation. They estimate June sales declined 0.3%, although they were up 3.2% on an annual basis. Since this number is not adjusted for inflation, sales were probably flat on a YOY basis.
“June’s numbers indicate that prolonged uncertainty surrounding the economy, tariffs, and trade policy could be pushing consumers to adopt a ‘wait-and-see’ approach with their household budgets,” stated NRF CEO Matthew Shay. “This was the first monthly decline since February, and spending was down across almost all sectors. Economic fundamentals haven’t been disrupted yet, and shoppers still have the ability to spend on priorities, but the economy is gradually slowing and there has been an impact on the psyche of consumers. While passage of the ‘Big Beautiful Bill’ is clearly supportive of economic growth, unresolved and restrictive trade policies remain a significant headwind.”
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