Will This Week's Inflation, GDP Data Move Markets?
This week will be eventful on the economic calendar with the release of several economic indicators.
On Tuesday, the National Association of Realtors will release data on existing home sales for June.
Economists expect that an annualized four million units were sold during the month, down 2.7% from May. Existing home sales have been hovering at about four million since November 2022, which is a significant drop from the roughly five to 5.5 million range they were in during the years prior to Covid, according to Statista data.
The housing market remains largely frozen due to the combination of high housing prices and mortgage rates, which is keeping both demand and inventory restrained.
Sales of new homes have helped close some of the gap between supply and demand. They are expected to have risen by 3.8% to 643,000 units annualized in June, aligning with the 10-year average. The new home sales data will publish on Wednesday.
The largest home builder ETFs, the $2.8 billion iShares U.S. Home Construction ETF (ITB) and the $2 billion SPDR S&P Homebuilders ETF (XHB), are up 13% and 18%, respectively, so far this year—both trading close to all-time highs.
GDP
The next big piece of data will hit on Thursday, when the Bureau of Economic Analysis releases its first look at second quarter GDP. Expectations are that the U.S. economy grew at a 1.9% annualized rate during the April through June quarter, which is better than the 1.4% growth during Q1.
GDP doesn’t tend to be a big market mover since there are so many moving parts that influence it. Nevertheless, it can give a sense about whether the economy continues to hum along or whether there is weakness that the investors, the Fed and other policymakers should be aware of.
PCE
The GDP numbers will be followed up by the latest PCE inflation figures for June on Friday. Investors expect more good news on the inflation front following the most recent, benign CPI report.
Forecasts call for the core PCE price index to have risen by 0.2% month-over-month in June, up from 0.1% in May, but still a healthy number.
On a year-over-year basis, the PCE is expected to have risen by 2.5%, down from 2.6% in May, and the lowest year-over-year reading since 2021.
Also on Friday, the University of Michigan will release its consumer sentiment survey for July. From a reading of 66, the gauge is expected to rise to 66.3—which is well below the 90 to 100 range it was in before Covid.
However, consumer sentiment hasn’t been a good indicator of consumer spending, so this data likely won’t be a market mover, although some may look at the accompanying inflation expectation figures to get a sense of whether consumers believe that inflation will remain contained.
The Fed would like to see those expectations remain “well anchored.”