July Federal Reserve Meeting Shows Bankers Set on Raising Rates but More Cautious… The minutes included language that suggested the bankers were watchful of overshooting by raising rates too much, but nothing suggested that they would not raise rates again in September.
What it means— We’re in the game that we knew we would have to play, asking ourselves how high they will raise rates at the next meeting and if they will signal a pause if the economy shows weakness. It’s a horrible way to run monetary policy, but it’s the system we have. Today, investors are banking on a 50–basis point increase in September and a slowdown in the fall, which would signal no more rate hikes. That seems overly optimistic. The markets rebounded very fast this summer, and we haven’t seen the worst of the economic and inflation numbers in Europe, which we expect to get this fall. Be careful.
Housing Starts Fell 9.6% Last Month and 8.1% Over Last Year… Building permits fell just 1.3%.
What it means— Single-family home starts fell 10.1% and multi-family home starts fell 10%, showing that builders are playing their inventory close to the vest. That said, it is interesting that permits didn’t drop off of a cliff. Builders want the flexibility to ramp up construction if we get a sharp turnaround. Given that we still need millions of new units and the unemployment rate remains well below 4%, we might see buyers quickly return, although the crazy price gains of the past two years probably won’t return.
Existing Home Sales Fall for Sixth Straight Month in July… The move pulled sales down 20.2% over this time last year; this is the longest contraction since 2013.
What it means— There’s no question that sales have dropped dramatically, but prices haven’t followed. The National Association of Realtors reported that the median sales price remains near a record at $403,800, and units are still flying off the shelf. Properties remained on the market just 14 days in July, the same as in June, and 82% of homes sold last month were on the market for less than 30 days. That’s not exactly a deep freeze. In a bit of good news for buyers, a few more sellers appear to be testing the market, as inventory rose to 1.31 million units. That brings inventory up to 3.3 months at the current sales pace. As a reminder, six months of inventory is considered balanced, so we’d need more than one million more homes on the market, or many fewer sales, to make that happen.
Retail Sales Flat Last Month but up 0.7%, Excluding Gasoline and Auto Sales… Quickly falling gasoline prices gave consumers more money to spend on other items. Overall, retail sales were 10.2% higher than at this time last year.
What it means— People have money, they’re willing to spend it, and it’s tough to watch your standard of living go backward. A little less pain at the pump has been great, but let’s keep an eye out for the holidays. If Americans ring up a bunch of credit card debt this fall, we might be looking at a muted holiday season, which wouldn’t be good for earnings.
Snake Bites Two Year Old on Lip, who Then Bites Snake Until It Dies… Neighbors in Bingol, Turkey, heard a child screaming as she played in the yard. They found the girl suffering from snake bite wounds on the lip, and the snake suffering from bite wounds of its own as it hung in the girl’s mouth. Apparently, after the snake bit her, the toddler exacted her revenge. The girl was taken to the hospital for observation but suffered no lasting effects. While it must have been terrifying to see your daughter bitten by a snake, there must have been some gratification that she wouldn’t back down. The young boys in the village should take notes for later.
Data supplied by HS Dent Research
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