Mixed Signals: August 15 – 19

Strength in retail and manufacturing counterbalanced weakness in the housing market, but other measures continued to wobble. Here are the five things we learned from U.S. economic data released during the week ending August 19. 


Forward-looking economic data look recessionary. The Conference Board’s Leading Economic Index (LEI) dropped 0.4 percent in July to a reading of 116.6 (2016=100). The LEI has fallen 1.6 percent over the past six months. Six of ten LEI components made positive contributions to the index, led by the interest spread and manufacturing hours worked. Among the items pulling down the LEI were consumer sentiment and jobless claims. The Coincident Index (CEI) grew 0.3 percent in July to 108.6 and has gained 0.8 percent over the past six months. All four CEI components made positive contributions. The Lagging Index (LAG) rose 0.4 percent to 114.4. The press release said the data suggest “recession risks are rising in the near term,” with the group suggesting that the U.S. “could tip into a short but mild recession by the end of the year or early 2023.”

Lower gas prices hide solid July retail sales. Census Bureau reports that retail and food services sales held steady in July at a seasonally adjusted $682.8 billion. The headline figure includes gas stations, which saw sales decline 1.8 percent as prices at the pump plummeted. Removing that and sales at motor vehicle/parts dealers (-1.6 percent versus June), core retail sales rose 0.7 percent during the month. Retail sales were 10.3 percent ahead of their year-ago pace, with core retail sales up 9.3 percent over the same period. Sales rose at retailers focused on building materials (+1.5 percent), health/personal care (+0.4 percent), electronics/appliances (+0.4 percent), furniture (+0.2 percent), and sporting goods. Restaurants/bars saw sales inch up 0.1 percent. Sales declined at apparel retailers (-0.6 percent) and department stores (-0.5 percent). 

Manufacturing production increased for the first time in three months in July. The Federal Reserve estimates manufacturing output increased 0.7 percent after having fallen 0.3 percent in both May and June. Production of durable and nondurable goods rose 1.3 percent and 0.1 percent, respectively. Notable was the 6.6 percent surge for motor vehicles/parts. Overall industrial production was up 0.6 percent after holding steady in June and slipping 0.1 percent in May. Mining output rose 0.7 percent in July, while that at utilities dropped 0.8 percent. Industrial production was up 3.9 percent from July 2021, with manufacturing production 3.2 percent ahead of year-ago levels.

Sales of previously owned homes fell for a sixth straight month. Existing home sales dropped 5.9 percent in July to a seasonally adjusted annualized rate 4.81 million, per the National Association of Realtors. Sales slumped 25.9 percent since January and were 20.2 percent under year-ago levels. Sales declined in all four Census regions on both a month-to-month and year-to-year basis. There were homes available for sale—inventories expanded 4.8 percent in July to 1.31 million units (matching year-ago levels and the equivalent to a still tight 3.3 months supply). The median sales price of $403,800 was up 10.8 percent from July 2021. NAR anticipates home sales may “stabilize” with the recent drop in mortgage interest rates. 

Housing starts have slowed by 20 percent since April. Starts of privately-owned homes declined 8.1 percent in July to a seasonally adjusted annualized rate (SAAR) of 1.446 million units. The same Census Bureau measure was at 1.805 million in April. Starts of single- and multi-family homes dropped -9.6 percent and -10.0 percent, respectively. Looking towards the future, the annualized count of issued building permits declined 1.3 percent to 1.674 million (+1.1 percent versus July 2021). Single-family home permits dropped 4.3 percent in July, while those for multi-family homes expanded 2.5 percent. Completions increased 1.1 percent during the month to 1.409 million units (+3.5 percent versus July 2021). 

Other U.S. economic data released over the past week:

  • Jobless Claims (Week ending August 13, 2022, First-Time Claims, seasonally adjusted): 250,000, -2,000 vs. the previous week, -155,000 vs. the same week a year earlier). 4-week moving average: 246,750 (-40.0% vs. the same week a year earlier). 
  • Housing Market Index (August 2022, Index: >50=More Homebuilders See Housing Market as “Good” Than See It as “Poor,” seasonally adjusted): 49 (vs. July 2022: 55; August 2021: 75).
  • Business Inventories (June 2022, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.420 trillion (+1.4% vs. May 2022; +18.5% vs. June 2021).
  • Treasury International Capital (June 2022, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$71.2 billion (vs. May 2022: +$132.5 billion; June 2021: +$72.6 billion).
  • FOMC Minutes

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

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