Here is the executive summary of the US macroeconomic indicators and trending topics for July 2023.
US Macroeconomic Indicators
Federal Reserve Interest Rate Hikes Resume
The Federal Reserve has approved a much-anticipated interest rate hike that takes benchmark borrowing costs to their highest level in more than 22 years. The Fed raised rates by 25 basis points in July, continuing its tightening in hopes of slowing inflation. The central bank’s Federal Open Market Committee raised its funds rate to a target range of 5.25%-5.5%.
US Labor Market Shows Resilience With Strong May Hiring
The US Bureau of Labor Statistics reported that total nonfarm payroll employment rose by 187,000 in July, and the unemployment rate changed little to 3.5 percent. Job gains occurred in health care, social assistance, financial activities, and wholesale trade.
Both the unemployment rate, at 3.5 percent, and the number of unemployed persons, at 5.8 million, changed little in July. The unemployment rate has ranged from 3.4 percent to 3.7 percent since March 2022.
Services PMI at 52.7%; July 2023 Services ISM Report On Business
In July, the Services PMI® registered 52.7 percent, a 1.2-percentage point decrease compared to the June reading of 53.9 percent, according to the latest Services ISM® Report On Business®. A reading above 50 percent indicates the services sector economy is generally expanding; below 50 percent means it is normally contracting.
The 14 services industries reporting growth in July — listed in order — are Other Services; Construction; Accommodation & Food Services; Public Administration; Management of Companies & Support Services; Transportation & Warehousing; Utilities; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Health Care & Social Assistance; Educational Services; Retail Trade; Information; and Wholesale Trade. The four industries reporting a decrease in July are Mining, Agriculture, Forestry, Fishing & Hunting, Arts, Entertainment & Recreation, and Finance & Insurance.
Manufacturing PMI® at 46.4% – July 2023 Manufacturing ISM® Report
Economic activity in the manufacturing sector contracted in July for the ninth consecutive month following 28 months of growth, according to the Manufacturing ISM® Report On Business®—only one of the six biggest manufacturing industries — Petroleum & Coal Products — registered an increase in July.
Demand remains weak but marginally better compared to June; production slowed due to a lack of work, and suppliers continue to have capacity. There are signs of more employment reduction actions to match production output better.
Inflation Gauge Rose 3.2%, Less than Expected.
The Consumer Price Index for All Urban Consumers rose 0.2 percent in July on a seasonally adjusted basis, slightly more than the 3.0-percent increase for the 12 months ending in June, the US Bureau of Labor Statistics reported.
The items less food and energy index of all items has risen 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 – July 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.
According to Freddie Mac, the housing market has been impacted by high rates as millions of homeowners locked into previously low mortgage rates and are content to remain in their current homes, helping keep inventory low.
The divergence between existing and new home sales has grown wider recently.
- Existing home sales receded 20% from a year ago
- New home sales increased 20% from a year ago in May.
- Pending home sales declined during May, down 2.7% and 22.2% over the year.
- An analysis of the Intellizence Layoff Dataset indicates companies across the globe continue to lay off thousands of employees in July 2023.
- Over 373 companies announced terminations in July. Major layoff announcements were – Yellow Corporation (30000), Regina Miracle (8400), Amdocs (2000), Viaplay (1000), and Binance (1000).
US Retail Sales Increased by 0.7% in July
As inflation slowed, consumer spending increased much faster in July compared to earlier months, with retail sales turning in a stronger-than-expected showing for the month, the Commerce Department reported Tuesday.
This was due to strong demand among American consumers and higher prices because of elevated inflation. It was also the fourth straight month that retail sales increased.
The advanced retail sales report showed a seasonally adjusted increase of 0.7% for retail sales, 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.
Spending rose on nondurable items, such as clothing and sporting goods. Sales at restaurants and bars rose a robust 1.4% in July from June.
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