Comerica Economic Weekly

Economic releases this week shed some light on residential real estate markets and the manufactur-ing sector. Existing home sales for June ticked down slightly by 1.2 percent, while new home sales roared ahead by 8.3 percent. New orders for durable goods jumped by 4.2 percent on aircraft orders. “Core” orders, for nondefense capital goods excluding aircraft, gained a calmer 0.7 percent.

Next week is an important one for economic da-ta. We will see the first estimate of Q2 real GDP growth which is expected to be weak in the vicinity of 1.2 per-cent annualized. Along with the GDP release there will be a revision to historical data and some changes to GDP accounting.

The Federal Open Market Committee meets next Tuesday and Wednesday. We expect to see no changes to monetary policy as a result of this meeting. The press release on Wednesday, around 1pm central time, will be scrutinized for hints that the Fed may begin to dial down asset purchases as early as September 18th. Because the Fed has tightly linked monetary poli-cy to labor market conditions, every data point between now and mid-September is potentially market moving. The economic calendar for next week concludes with employment and income/spending data on Friday. Payroll job growth over the second quarter averaged a better-than-expected 196,000 jobs per month. Esti-mates for July payrolls are stepping down, ours includ-ed. We expect job growth to ease to about 185,000 jobs in July and the unemployment rate to tick down to 7.5 percent. Reasonably strong job growth through the second quarter looks disconnected from weak GDP growth for the quarter. Those two data streams will re-align in third quarter, as real GDP steps up to about 2.3 percent and job growth eases a bit.

Momentum in job creation through Q2 should support moderate income growth in June. We already know that consumer spending on durable goods will be strong, boosted by the break-out auto sales rate of 15.9 million units for June. It is the imputation for consumer spending on services that will likely keep overall spend-ing gains moderate in June. Consumer sentiment in-creased in July according to the University of Michigan. This is a nice tailwind heading into back-to-school sales.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly072613.

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