This week’s data revealed a mixed report for the United States economy, indicating resilience amidst escalated inflation plus signals of woes ahead. Consumers are still spending, but with less passion. Meanwhile, unemployment benefits applications stay historically low.
The once-exploding housing market deteriorates quickly, whereas the manufacturing sector loses momentum, though not as swift as feared. An example of the conflicting forces at the moment was the Fed Bank survey of manufacturers within the Philadelphia region. Nearly 26% of producers confirmed surged activity, whereas 20% witnessed a slump. Let us analyze the economic status.
Consumers
A substantial decline in gas prices over July enhanced sentiment, freeing up money from consumers to utilize elsewhere. Retail sales baring motor vehicles and gasoline increased by a better-than-anticipated 0.7% last month. Outlays soared in various merchants, including online retailers, appliances & electronics stores, and building materials outlets.
The data indicated that the economy’s backbone remained steady amidst the highest inflation in decades. Nevertheless, the spending mix seems to have shifted to more essential items, with investors paying more to acquire basic goods amidst heightened inflation. Moreover, individuals are paying more for services such as traveling.
Leading retailers such as Target Corp. and Walmart Inc. are readying for impressive shopping during fall after drastically reducing prices on items such as kitchen appliances and apparel (recently). That indicated a sudden shift in consumer preference.
Housing
Meanwhile, the housing market stretched its swift slump as waning demand and high borrowing charges restricted homebuilding & sales. Construction starts plunged last month to a record slow pace since Jan 2021.
That saw existing-home sales, which account for the highest market share, decline for a 6th consecutive month, hitting the lowest mark in two years. Meanwhile, more buyers terminated home-buy deals, fueling the sector’s woes.
Manufacturing
Unlike housing, the manufacturing stance remains unclear. Early this week saw New York state factory’s activity gauge plunging by the 2nd-most figure since 2002, following sharp dips in shipments & orders. However, the figure for the Philadelphia region expanded unexpectedly on Thursday – after three months.
Other week’s data, which analyzed July activity indicated that factory production further complicated the outlook, following increases after three months. Next week’s S&P Global U.S manufacturing metric will offer clarity on nationwide factories healthy.