Stocks enjoyed a favorable week of returns, with the major benchmark stock indexes posting solid gains. The Dow and the S&P 500 notched their third straight week of gains. Inflation continued to cool in June, with the smallest 12-month rate increase since March 2021 (see below). So far, corporate earnings for the second quarter have been generally favorable, with some large tech companies beating expectations. Long-term bond prices fell, sending yields higher. Crude oil prices advanced, with global oil prices gaining more than 16.0% since late June. Rising oil prices have spurred an increase in gasoline prices. The dollar slipped lower last week, while gold prices climbed higher.
Last Week’s Economic News
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The Federal Reserve hiked the federal funds rate 25.0 basis points to 5.25%-5.50%. The statement released by the Fed contained virtually the same information as from its previous statement. Job gains have been robust, the economy has been expanding at a moderate pace, and inflation remains elevated. The Fed does not meet again until September.
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The economy accelerated at an annualized rate of 2.4% in the second quarter, according to the second estimate of gross domestic product. GDP increased 2.0% in the first quarter. The personal consumption expenditures price index increased 2.6%, down from the 4.1% increase in the first quarter. Consumer spending rose 1.6% in the second quarter, following an increase of 4.2% in the first quarter.
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Consumer prices, as measured by the personal consumption expenditures price index, rose 0.2% in June. Prices less food and energy also increased 0,2% from May. Since June 2022, consumer prices are up 3.0%, the lowest yearly price increase since March 2021, when the advance was 2.5%. The PCE price index, the preferred measure of inflation for the Federal Reserve, is clearly ebbing but has yet to reach the 2.0% target rate of the Fed. Personal income and disposable personal income rose 0.3% last month. Consumer spending increased 0.5% in June.
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Durable goods orders rose 4.7% in June, marking the fourth straight month of increases.
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Sales of new single-family homes declined in June for the first time since February. According to the Census Bureau, new home sales dipped 2.5% last month, but were up 23.8% over June 2022. Inventory for new single-family homes for sale sat at a 7.4-month supply, based on the current pace of sales.
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The advance report on the international trade in goods deficit was $87.8 billion in June, down $4.0 billion, or 4.4%, from May. Over the last 12 months, exports are down 9.3%, and imports have dropped 9.9%.
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The national average retail price for regular gasoline was $3.596 per gallon on July 24, $0.037 per gallon higher than the prior week’s price but $0.734 less than a year ago.
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For the week ended July 22, there were 221,000 new claims for unemployment insurance, a decrease of 7,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended July 15 was 1.1%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended July 15 was 1,690,000, a decrease of 59,000 from the previous week’s level.
Eye on the Week Ahead
Manufacturing and labor are the focus of this week’s economic data. The manufacturing sector slowed in June for the second straight month, while services expanded. Employment remained relatively strong in June, although the number of new hires (209,000) was well below the 2023 monthly average of 273,000.
Have a nice week!
Sincerely,
Robert G. Carpenter