Retail Sales are positive, but have slowed
Last Tuesday, we saw the release of Retail Sales information with the monthly growth rate of 0.19% and the annual growth rate at 1.49%. While the data is clearly positive, the growth rates have slowed with the year-over-year growth rate the lowest in last 12 months.
Industrial production numbers show overall decline
Next, the US industrial production numbers have declined both month-over-month and year-over-year. Production declined such that capacity utilization also fell. The decline in productivity is in agreement with the decline in ISM Manufacturing and shows ongoing weakness in the manufacturing side of the US economy.
Housing Starts are still slightly negative over last year
Housing Starts took a break from the strong reading last month and are a little higher than the beginning of the year. The average monthly growth rate over the last year is still slightly negative.
Existing home sales showed another decline in units, but an increase in median price as existing home owners who have lower mortgage rates than the prevailing rates (which are north of 7%) have a disincentive to sell. However, the median price continues to increase and the months of home supply are still tight by definition, but did increase slightly.
Mixed economic data continues to indicate an impending recession
The slowdown in growth on the services side combined with weakness in the manufacturing side, mixed results in housing, weakness in trade, and higher rates would generally indicate that we are headed towards a recession, in fact manufacturing is in a recession. It is only the services side of the economy that is maintaining growth.
The relative strength of the services side of the economy does push out the expectation of a recession into late 2023 or early 2024.
While a soft landing (low growth but not a recession) is possible, if inflation does not decline fast enough, then we might have a situation where the sense of “treading water” actually becomes a source of frustration for many workers.
In this last full week of July, we will get readings on GDP, inflation, new home sales, durable goods, and income. But perhaps the most watched piece of news will be the Federal Reserve meeting ending Wednesday, July 26. Markets are highly anticipating the Fed to raise rates another 25 bps, but the language of their news release will also be highly scrutinized.
Will the Fed continue to tighten? If so, when and by how much? Can they engineer a soft landing in which inflation falls and we still have economic growth? Is a 2% target really necessary, or can we live with a higher rate of inflation? These are the questions being asked by many market participants.
More Economic Insights
- Economic Update: Rate Cuts to Be Shelved by the FedWith recent numbers indicating a weakening of the economy—but nothing to indicate a recession—and positive job growth, it seems reasonable that the Fed will continue to focus on bringing down inflation through other means rather than by issuing rate cuts.
- Thoughts on Investing: Trust and ExpectationsThe investment advisors at REDW Wealth reflect on market performance in the first quarter of 2024 and the economic outlook for the year ahead.
- Angel Investing: Part of a Well-Rounded PortfolioDiversification is a well-known principle for investors. To help round out a portfolio, accredited investors should consider the risks and rewards of angel investing.
- Investment Intelligence: Decoding What Matters in Global MarketsA panel of Financial Planning professionals from REDW Wealth will share their insights on the global economy and the markets, past and present.
- Reducing Risks in Retirement Plan Management with Paul Madrid, CPA®, CFP®, AIFA®This episode, Wes Benally and Paul Madrid discuss the Tribal fiduciary role and reducing risk in the management of employer-sponsored retirement plans.
© 2023 REDW Wealth LLC. This publication is intended for general informational purposes only and should not be construed as investment, financial, tax, or legal advice. Information and instruction shared in the article above do not guarantee outcomes, performance, or quality of services provided to REDW Wealth Management clients by REDW Wealth Management or its employees. Adherence to our fiduciary duty is not a guarantee of client satisfaction or any particular outcome. Advisory, Assurance, and Tax is offered through REDW LLC. Wealth Management is offered through REDW Wealth LLC.
