With retails sales showing ongoing strength and an uptick in industrial production and capacity utilization, there are, again, indications of a potential soft landing for the US economy. In this week’s economic update, we’ll discuss the latest economic indicators and their potential impact on the possibility of a recession.
Retail Sales, An Ongoing Source of Strength
Starting out the week of August 21st, retail sales show ongoing strength with an acceleration of both monthly and annual sales comparisons.
The relative strength of the retail sales number lends credence to the theory that a recession will either be delayed or avoided entirely.
Industrial Production & Capacity Utilization Show Signs of an Improving Situation
A second data point that supports the concept of a soft landing, is the Industrial Production and Capacity Utilization numbers. They both show an uptick, with Industrial Production increasing close to 1% month-over-month and Capacity Utilization increasing to 77.8%. While these numbers are generally weak, they do indicate an improving situation. If manufacturing recovers back into expansion and the services side keeps out of contraction, then a soft landing is possible.
A Potential Upward Trend in New Housing Starts
The third main economic release at the top of this week was new housing starts which also showed growth. Of course, housing tends to be volatile month-to-month, and it might be premature to declare a new upward trend in new housing, so we’ll stick with calling it “potential.”
Recap on Federal Reserve Minutes: Inflation & Interest Rates
The minutes from the July meeting of the Federal Reserve indicated that a majority of the Federal Open Market Committee (FOMC) are still very concerned about current levels of inflation, going against the narrative that the Fed is done raising interest rates. Therefore, it seems likely that as economic data comes out on the stronger side of things, and if inflation does not decline at a fast enough pace, the Fed will continue to raise rates.
China’s Unreleased Youth Unemployment Statistics Causes Concern
China stopped releasing its youth unemployment statistic, causing concern. Economic data out of China is usually suspect given the control of the Central Party, but now they just decided to not release any data. Obviously, it is worrisome that they would just decide to not release unemployment data, especially in light of other data points that would indicate relative weakness. As China announced opening up from COVID restrictions, it was widely expected that they would have solid economic growth and a robust economic recovery. These expectations have yet to materialize.
Previewing Economic Readings for the Week of August 21
This week, we will get readings on both existing and new home sales as well as durable goods. We welcome your questions on economic developments.
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