Macro Report

Week’s Takeaway: This week’s data broadly shows stability in the manufacturing sector, while housing disappointed. These mixed readings continue to highlight the uneven recovery on the industrial side of the economy.

Notes: The first of the June FED Manufacturing Surveys were released with mixed results. Empire (NY) came in at -6, above expectations of -10 as well as last months level of -15.6. Philly on the other hand printed at 1.3, below the expected 5, and under last months 4.5. Big picture, the combination of the two are slightly positive, with the upside beat in NY more significant that the downside miss for Philly, which remains slightly in expansion territory. Furthermore, the Industrial Production index came in up 0.9% MoM significantly above the expected 0.3% print – driven by Manufacturing Production which mirrored the topline index. Finally, the preliminary S&P Manufacturing PMI printed at 51.7, up above expectations of 51. This marks the 6th straight print in expansion territory for the index.

The first round of housing data for May disappointed this week. Housing starts and building permits came in down -5.5% vs expected 0.7%, and -3.8% vs. expected 0.7%, respectively. The readings for both are at their lowest levels in nearly 4 years. Existing home sales came in better than expectations but still showed a MoM decline, down 0.7% versus the expected -1%. 30yr mortgage rates above 7% continue to hamper the housing sector.

Turning to the higher frequency labor market data, we have recently seen jobless claims start to pick up. Continuing claims have now reached a “cycle peak” (although they remain historically subdued) at 1.83M, while the 5-week moving average of initial claims is at its highest level in 40 weeks. Taking a step back, neither of these readings are at levels which would be serious cause for concern, but they are telling us that the labor market might be cooling at a faster pace than before. The FED has referenced that a weak labor market would be a reason for them to start cutting interest rates earlier than the dots and FED commentary currently suggest.



Next Week’s Notes: Next week, significant data releases will offer insights into the outlook for various economic sectors. In the manufacturing sector, we anticipate three more June Fed Manufacturing Surveys. Those are the Dallas index, which is forecasted to improve to -15.8 from May’s -19.4, the Richmond index, which is expected to rise to 2 from last month’s 0, and the Kansas City index. Additionally for manufacturing, preliminary data for May’s Durable Goods Orders is projected to be flat at 0.0%, a decline from April’s 0.6% increase. Excluding Transportation is expected to see a slight 0.1% increase, down from a 0.4% rise in the previous month. These indicators suggest potential stabilization and a bit of recovery in manufacturing activity, though the modest projections for durable goods hint at underlying caution.

In the housing sector, forecasts show May’s New Home Sales rising to 650k from 634k, indicating continued demand despite the high interest rate environment. However, the April S&P CoreLogic CS 20-City YoY NSA is anticipated to drip slightly to 7.0% from 7.4%, suggesting a possible cooling in housing price growth. Additionally, May’s Pending Home Sales NSA YoY data will be released, providing further clarity on housing market trends.

On the macroeconomic front, a range of data will be issued, revealing the broader economic environment. The GDP Annualized QoQ for Q1 T is expected to show a slight increase to 1.4% from the previous reading of 1.3%, reflecting steady growth. The Fed will closely monitor May’s PCE data; the PCE Deflator YoY is forecasted to decrease to 2.6% from 2.7%, and the PCE Core Deflator YoY is anticipated to drop to 2.6% from 2.8%. Furthermore, the final results for June’s University of Michigan consumers surveys will be reported, alongside the weekly updates for Initial and Continuing Jobless Claims, with initial claims expected to rise to 240k from 238k. These forecasted figures signal market expectations of a stable but cautious environment.