By Theresa Sheehan, Econoday Economist
July 11, 2022
The week will start slow for data reports. There will be a day or two to take a second and deeper look at the prior week’s June employment report which appeared to exceed most expectations. Then it is on to a few data reports that should finalize the outlook for both the advance report on second-quarter GDP on Thursday, July 28 at 8:30 ET and the outcome of the FOMC meeting set for Tuesday-Wednesday, July 26-27.
The week’s highlights include the CPI and Beige Book, both on Wednesday at 8:30 ET and 14:00 ET respectively, and retail and food services at 8:30 ET on Friday.
The CPI for June may look worse on the food and energy front, but other consumer price increases could be more moderate. In particular, gasoline prices hit record highs around mid-June, but are since declining. The FOMC will take this into account in its assessment of the inflation outlook. The headline for this report, however, isn’t going to be a comfortable one, at a 1.1 percent monthly surge according to Econoday’s consensus.
The Fed’s Beige Book will provide anecdotal evidence about economic conditions across the 12 district banks for the period of roughly mid-May through the end of June. The prior Beige Book pointed to a moderation in the expansion that is likely to continue be an issue. The contents should avoid signaling that the economy is about to enter a recession, although it could reflect unwelcome sluggishness as interest rates rise and inflation persists.
The week’s standout will probably be the June numbers for consumer spending in the retail report, which are expected to show a 0.9 percent rise in the month. High gas prices will elevate the service station component, while the small uptick seen in unit vehicle sales during June will likely prevent that component from holding down the total. Elsewhere, higher prices will lift many components like food and clothing. Spending associated with home repair and improvements may be softer with the slowdown in the housing sector.
After the employment data, the GDP nowcasts were revised higher from this time last week. The St. Louis Fed’s real GDP nowcast is up slightly to growth of 3.93 percent as of July 8 from 3.89 percent a week ago. The Atlanta Fed’s GDPNow saw a more substantial upward move to minus 1.20 percent after minus 2.10 percent about a week earlier. The two forecasts are still telling two different stories. An average of the two is at plus 1.4 percent. The Atlanta Fed measure has a better correlation (0.982) with the advance estimate at this point in the data cycle whereas the correlation with the St. Louis Fed forecast (0.760) is less predictive. However, the history for both series include some big misses and reliance on the forecasts should be cautious. The data on June retail sales probably won’t much change the gap between the two when those numbers are reported on Friday, July 15 at 8:30 ET. At this time, the outlook for the advance report is toward the lower range of estimates due to generally weak consumer spending in the available data.