Here is the executive summary of the U.S. macroeconomic indicators and trending topics for August 2023.
US Macroeconomic Indicators
Federal Reserve Interest Rate – Fed officials are divided, but holding rates steady in September
U.S. Labor Market Shows Resilience With Strong May Hiring
The U.S. Bureau of Labor Statistics reported that total nonfarm payroll employment increased by 187,000 in August, and the unemployment rate rose to 3.8 percent. Employment increased
in health care, leisure and hospitality, social assistance, and construction. Employment in
transportation and warehousing declined.
Employment showed little change over the month in other major industries, including mining,
quarrying, and oil and gas extraction; manufacturing; wholesale trade; retail trade; financial
activities; other services; and government.
Employment in professional and business services changed little in August (+19,000) and has shown no net change since May. Professional, scientific, and technical services employment increased over the month (+21,000).
US services sector picked up in August, along with prices
In August, the U.S. services sector gained momentum for the eighth consecutive month, with new orders firming and businesses paying higher prices for inputs — signs of pressure due to elevated inflation.
According to the latest Services ISM® Report On Business from the Institute for Supply Management (ISM), its non-manufacturing PMI rose to 54.5, the highest since February and 1.8 percentage points higher than July’s reading of 52.7 percent.
A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy.
Thirteen industries reported growth in August — listed in order are – Real Estate, Rental and leasing; Accommodation and Food Services; Other Services; Arts, Entertainment and recreation; Utilities; Retail Trade; Public Administration; Information; Educational Services; Construction; Finance & Insurance; Transportation & Warehousing; and Professional, Scientific & Technical Services.
The five industries reporting a decrease in August are – Agriculture, Forestry, Fishing and hunting, Mining, Wholesale Trade, Health Care and Social Assistance, and Management of Companies and Support Services.
Tenth Consecutive Month of Contraction for U.S. Manufacturing: PMI Registers at 47.6%
According to the Manufacturing ISM® Report On Business®, the August Manufacturing PMI registered 47.6 percent, 1.2 percentage points higher than the 46.4 percent recorded in July. Economic activity in the manufacturing sector contracted in August for the 10th consecutive month after 30 months of expansion.
Three of the six biggest manufacturing industries — Transportation Equipment, Food, Beverage and Tobacco Products, and Petroleum and Coal Products — registered growth in August.
Demand remains soft, but production execution is consistent with new, reduced output levels. Sixty-two percent of manufacturing gross domestic product (GDP) contracted in August, down from 92 percent in July, a positive trend for the economy.
August CPI Report Shows Inflation Gauge Rose 3.2%, Less than Expected.
The Consumer Price Index for All Urban Consumers rose 0.2 percent in August on a seasonally
adjusted basis, slightly more than the 3.0-percent increase for the 12 months ending in June, the U.S. Bureau of Labor Statistics reported.
The food and energy index rose 4.7 percent over the last 12 months. The energy index decreased 12.5 percent for the 12 months ending July, and the food index increased 4.9 percent over the last year.
Note– The Consumer Price Index (CPI) measures the change in prices consumers pay for goods and services.
US Economic, Housing, and Mortgage Market Outlook – August 2023
Despite inflation coming down a little, the average 30-year fixed mortgage rate continued to be near a high of 7% throughout July. Experts don’t expect that to change by much in August.
Freddie Mac’s “Economic, Housing, and Mortgage Market Outlook” for August 2023 predicts mortgage originations to remain flat through December 2023 (due in part to a decimated refinance market), muted home sales for the rest of 2023, home prices will grow slightly over the next 12 months and a softening labor market.
Key observations from the report:
- U.S. economic growth remains firm, with strong consumption spending and a tight labor market.
- Although housing market activity has slowed, a demand/supply imbalance in the U.S. is causing a rebound in home prices.
- Refinance origination activity in the first half of 2023 is the lowest in almost 30 years, mainly limited to those cashing out home equity.
- An analysis of the Intellizence Layoff Dataset indicates companies across the globe continue to lay off thousands of employees in August 2023.
- Over 442 companies announced terminations in August. Major layoff announcements were – Disney (4000), Tyson Foods (3000), and more.
Strong US retail sales underscore the economy’s resilience.
As inflation slowed, consumer spending increased well in July, with retail sales turning in a stronger-than-expected showing for the month, the Commerce Department reported Tuesday.
The advanced retail sales report showed a seasonally adjusted increase of 0.7% for the month, better than the 0.4% Dow Jones estimate. Excluding autos, sales rose a robust 1% against a 0.4% forecast. Both readings were the best monthly gains since January.
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