Investors prepared to sail off into the weekend armed with economic news about consumers, housing, goods producers and import prices.
Starting with the most cheerful bit: the mood of the American consumer, who carries the burden of about 70% of the U.S. economy, has grown sunnier this month.
The University of Michigan's (UMich) preliminary take on May Consumer Sentiment USUMSP=ECI gained 4.9 points to land at 54.4, rosier than the 51.0 reading analysts foresaw.
Survey participants' assessment of current conditions jumped 15.1%, bouncing off the most dire reading in the survey's history.
Near-term expectations improved by 6.5%.
"Consumer sentiment climbed to its highest reading since February of this year on the basis of easing price pressures at the pump in recent weeks," writes Joanne Hsu, UMich's director of consumer surveys. "This month’s rise in sentiment was pervasive across the population, seen across groups by age, income, wealth, and political party."
"However, with prices remaining frustratingly high, consumers are hardly ebullient about the economy; sentiment is down 12% from a year ago," Hsu reminds us.
Respondents expect annual inflation of 4.2% a year from now, down from 4.6% in June but still 2 percentage points hotter than the most recent core CPI print.
Longer-term price growth expectations held firm at 3.3%.
Consumer inflation expectations can't seriously be considered an accurate predictor of actual price growth, as shown in the graphic below. Nevertheless, it's a metric that analysts watch, because they can affect consumer behavior in such a way that becomes a self-fulfilling prophecy.
Moving to the housing market, groundbreaking on new American homes USHST=ECI surged by 19.0% in June to 1.427 million units at a seasonally adjusted, annualized rate (SAAR), according to the Commerce Department.
That's 8.9% stronger than the 1.310 million units SAAR analysts were expecting, and marks a decisive bounce-back from May's 15.2% drop.
Excavating below the headline, single-family projects—which account for the lion's share of the total—actually eased by 0.2%. But a 76.2% jump in the volatile multiple-unit segment more than made up for that dip.
On the other hand, building permits USBPE=ECI—considered one of the housing market's more forward-looking indicators—dropped by 3.0% to 1.367 million units SAAR, falling 2.4% short of consensus.
Here again, permits for single-family projects dipped by 2.4% while the multiple-unit segment dropped 4.2%.
"We don’t see much upside for starts until interest rates move lower," says Nancy Vanden Houten, lead U.S. economist at Oxford Economics. "There is still a shortage of housing supply but builders of single-family homes – which account for more than two-thirds of starts – will need to work down more of their inventory before they boost construction."
Over to the Federal Reserve, industrial output USIP=ECI increased by a meager 0.1% last month, a repeat of May's increase and half the 0.2% pace predicted by economists.
Estimates called for a nominal 0.1% increase.
Manufacturing output was flat.
"Where is that boom in manufacturing after almost a year of tariff policies meant to bring industrial jobs back to the United States?" asks Carl Weinberg, chief economist at High Frequency Economics.
"Industrial production, just 1.1% higher than a year ago, is no home run!" Weinberg exclaims. "Reshoring of manufacturing is simply not evident in the hard output data. It is not evident in the employment reports, either."
Beneath the surface, a 0.7% increase in automobile production and a 0.5% growth in high-tech goods offset the 0.4% declines in business equipment and construction supplies. Mining and utilities both ramped up their output by 0.4%.
Capacity utilization USCAPU=ECI, a measure of economic slack, held steady at 76.1%.
Shifting gears, the cost of goods imported to the United States USIMP=ECI unexpectedly rose by 0.3% last month, per Labor Department data, defying the 0.7% cool-down economists predicted.
This follows the prior month's 1.7% spike as importers sought to front-load their orders to head off the price pressures of global shipping in reaction to the war-related closure of the Strait of Hormuz.
Digging deeper, a 0.7% dip in imported gasoline prices was cold comfort after May's 13.2% jump. Imported petroleum prices remain 45.4% higher than a year ago. Excluding gasoline, import prices rose 0.5%. The costs of industrial supplies and capital goods rose 0.5% and 0.4% respectively, while autos/parts edged 0.1% lower.
Year-over-year, import prices have shot up by 7.1%.
"Imported inflation pressures are expected to gradually ease over the second half of the year as the impact of earlier energy price increases fades," writes Vivien Chen, financial market economist at Nationwide. "However ... renewed tensions in the Middle East and the recent rebound in oil prices suggest it is too soon to safely say imported inflation pressures are fully behind us."
(Stephen Culp)
SPY•
