By Theresa Sheehan, Econoday Economist
August 15, 2022
The August 15 week has reports related to the housing market that will be important, but it’s the numbers on July retail and food services sales on Wednesday at 8:30 ET that are likely to attract the most interest.
After negative GDP growth in the first two quarters of 2022, data for July and early August will be critical in shaping expectations for the third quarter. Consumer spending will play a huge part in this. It is only the first month of the quarter, but July retail numbers could indicate if consumers are willing to open their wallets, especially if there is moderation in prices that leaves more discretionary income available.
The dollar value of spending at service stations in July will reflect sharp declines in the price of gasoline, offset at least in part by greater volumes due to vacation travel. For motor vehicles, unit sales were up a bit in July and should contribute to the dollar value of that component. Dealers don’t have inventories to clear out in advance of the new model year, and instead are offering incentives to order a new vehicle now. There are also signs that retailers have little summer merchandise to clean off shelves and are filling empty spaces with fall items. But very hot weather in much of the country could hurt demand for fall goods at the start of the back-to-school shopping period. On the other hand, shoppers could be stocking up now in anticipation of a lack of inventory later.
Data for the housing market in the week include the NAHB/Wells Fargo housing market index for August at 10:00 ET on Monday, housing starts and permits for July posted on Tuesday at 8:30 ET by the government, and existing home sales at 10:00 ET on Thursday posted by the National Association of Realtors. Back in the July report, the NAHB index was already pointing to a sharp pullback in new home construction. July’s data on starts should be in line with slower homebuilding though permits may indicate that consumers have not yet deserted the new home market. Home resales are likely to soften further in July, although a plateau in mortgage rate hikes and a more abundant supply of homes could keep them from falling too much.
The Fed will release the minutes of the July 26-27 FOMC meeting at 14:00 ET on Wednesday. There may be less-than-usual interest for the markets here. The minutes will be three weeks old and could be outdated in terms of economic developments – the strong July employment report and moderation in the CPI data come to mind – and speeches by Fed policymakers have left little doubt that FOMC voters are leaning to the hawkish side for further rate hikes and perhaps sizeable ones. Looking out to August, Chair Jerome Powell is scheduled to give the opening speech at the annual Kansas City Fed Jackson Hole Forum (August 25-27). It is not at all unusual for a Fed Chair to use this opportunity to set expectations for monetary policy.