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Look forward to August 12, 2019 week: Some early August data to light the outlook

The August 12 week has a fair amount of economic data on the calendar, but it may be challenging to assess in terms of recent developments. Some of it will have been collected and compiled before the White House announced new tariffs on goods out of China as of September 1 and the branding of China as a currency manipulator. The consequences of those actions can’t be fully assessed as yet and won’t be reflected in data collection that ended before or in close conjunction with events.

At present there are no Fed policymakers on the public speaking calendar and probably these will be few and far between until after the Labor Day weekend.

The NFIB Small Business Optimism Index for July at 6:00 ET on Tuesday will probably reflect anticipation of a Fed rate cut and move higher from the 103.3 in June. However, the survey may have closed before it was clear that trade negotiations with China were taking a turn for the worse and that the Trump Administration was going to impose fresh tariffs and that a possible currency war was on the horizon. If so, an increase in the index should be read with caution.

The preliminary University of Michigan Consumer Sentiment Index for August at 10:00 ET on Friday will probably reflect the shock of events in El Paso and Dayton as well as worries about the economy. A decline from the 98.4 in July probably doesn’t change the fundamentals of consumer confidence as long as the job market is strong and buying conditions favorable. Also, the preliminary index could well be revised higher as consumers move past the initial reaction to distressing events.

Consumers are expected to reflect relatively stable inflation expectations in early August in the University of Michigan Survey of Consumers. The 1-year reading of 2.6% for July and 2.5% for the 5-year measure probably won’t be much changed, although declines in gasoline prices may soften the near-term reading a bit. The Atlanta Fed’s Business Inflation Expectations for August at 10:00 ET on Wednesday is expected to reflect that inflation is anticipated to run about 2.0% as in the past two reports.


The Consumer Price Index for July at 8:30 ET on Tuesday should tell a similar story to that of the Final Demand PPI with tame month-over-month readings. However, year-over-year total inflation will be running below the core. There may be some mild increases for foods, but it is gasoline prices that should drive the headline. Excluding food and energy, shelter costs will remain the dominate source of upward price pressure.

The Import Price Index for July at 8:30 ET on Wednesday may get a nudge higher with a small increase in crude oil prices. However, there is little sign that prices for imported goods are doing more than treading water and will not contribute to wider inflation pressures.

The earliest surveys of conditions in the factory sector for August are the New York Fed’s Empire State Survey and Philadelphia Fed’s Manufacturing Business Outlook at 8:30 ET on Thursday. The surveys’ respective general business conditions index have been moving in similar directions in the past month with a revival of activity in July after a slowing in June. However, the August data has the potential to prove alarming if the lack of a trade agreement with China has stymied new orders and imposed fresh costs and delays in the supply chain.

Industrial production and capacity utilization for July at 9:15 ET on Thursday will probably reflect slow conditions for manufacturing and mining, but big demand for utilities during the heat wave that hit many parts of the US in the month.

The data on retail and food sales in July at 8:30 ET on Thursday could provide a hopeful start for consumer spending in the third quarter. Although sales of motor vehicles were softer, July is normally a slow sales month and may be accounted for by seasonal adjustment factors. Gasoline prices were on the decline during the month, but isolated higher gas taxes and an active travel season could make up for that in the dollar value of sales. Exceptionally warm weather in many areas could have sent consumers to stores for appliances like fans and air conditioners, and for summer clothing and sporting goods. Back-to-school shopping may have gotten off to an early start as well. Amazon’s Prime Day and similar promotions at its competitors could have boosted sales at nonstore retailers.

The NAHB/Wells Fargo Housing Market Index for August at 10:00 ET on Thursday will probably remain in line with the past few months with a reading in the mid-60’s. Mortgage interest rates are at lows not seen in almost three years and consumers are broadly in a better position to buy than they have been at any time since the end of the recession. Although more supply of existing units has come on to the market, builders are also seeing good demand from first-time buyers.

Starts of new homes in July at 8:30 ET on Friday will face the same sort of restraints they have for some time – lack of skilled labor and limited land to build on. However, demand for new single-family homes has been fairly consistent and consumers have been more willing to commit to purchasing units not yet under construction as builders have adapted to demand for smaller dwellings. The number of permits issued in August may not fully rebound from the dip in June. There are signs that in spite of low mortgage rates, the pool of potential homebuyers may be smaller after a busy couple of years.

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