top of page

In the News This Week

On the downside, retail sales rose at the slowest pace in five months in June, dragged down by a decline in auto sales. On a brighter note, the weakness in sales was confined to autos and home improvement stores, while sales rose for clothing, food, electronics, sporting goods and books.

Import prices barely rose in June, as a drop in food costs offset a rise in petroleum: imported petroleum prices rose 1.4% in June after rising 2.2% in May, while imported food prices fell 1.7% – the largest drop since February 2012.

Housing starts fell 9.3% in June to an annual pace of 893,000 units – a nine-month low. Building permits fell 4.2% to an annual rate of 963,000. The declines are in line with Fed Chair Janet Yellen’s recent comments that progress in the housing market has been “disappointing”.

In what seems to be a bit of a disconnect between housing data and home builders’ views of the market, a measure of home builders’ confidence rose to a six-month high. The reason: “An improving job market goes hand-in-hand with a rise in builder confidence. As employment increases and those with jobs feel more secure about their own economic situation, they are more likely to feel comfortable about buying a home”, according to the National Association of Home Builders.

On another positive note, foreclosure filings dropped to 107,194 properties in June – the lowest level since July 2006. However, there are still between 1.5 to 2 million seriously delinquent loans in the foreclosure pipeline.

The Congressional Budget Office released its latest long-term budget outlook, with a warning that the US risks a fiscal crisis if the federal debt isn’t reigned in. The federal debt held by the public amounts to 74% of the economy today, but by 2039 it will rise to 106% of economic growth. Spending on Social Security, Medicare and Medicaid will rise to 14% of economic growth by 2039 – that’s twice the average 7% over the past 40 years.

In testimony to the Senate Banking Committee, Fed Chair Janet Yellen said that the Fed may raise rates sooner than expected if the labor market continues to improve: “If the labor market continues to improve more quickly than anticipated by the Federal Open Market Committee, resulting in faster convergence toward our dual objectives, then increases in the federal funds rate target likely would occur sooner and be more rapid than currently envisioned”. But she also noted that the opposite could occur: “If economic performance is disappointing, then the future path of interest rates likely would be more accommodative than currently anticipated”. Yellen also cautioned that while the unemployment rate has fallen, “significant slack remains in the labor markets” and “although the economy continues to improve, the recovery is not yet complete”.

Comentarios


bottom of page