| Fed officials keep a close eye on inflation, and the PCE price index is their favored indicator. In July, Core PCE was 2.9% higher than a year ago, up from an annual rate of increase of 2.8% last month and the highest level since February. Progress toward the 2.0% target of the Fed has not been easy, and this desired level has not been achieved since February 2021. The big question remains how large an impact higher tariffs will have on future inflation levels.
Like the existing home sales data released last week, sales of new homes displayed solid performance in July, exceeding the consensus forecast. However, they still were 8% lower than a year ago. The median new-home price of $403,800 was down 6% from last year at this time. In contrast to existing homes, the supply of new homes remains near the highest level since 2009. Existing home sales measure actual closing during the month, while new home sales are based on contracts signed, making them a leading indicator of future housing market activity.
The Department of Labor releases the total number of new claims for unemployment insurance each week. The latest reading was just 229,000, very close to the consensus forecast. Bigger picture, this was far below the inflated figures seen during the early months of the pandemic, and in line with the levels which were typical during 2019. Weekly jobless claims are important because they are one of the timeliest indicators of labor market trends. While other recent economic reports suggest that companies may be scaling back on hiring new employees, this report indicates that they remain reluctant to lay off workers. |
| Looking ahead, investors will continue to watch for additional information about tariffs and monitor comments from Fed officials for hints about monetary policy later in the year. For economic reports, the ISM national manufacturing sector index will be released on Tuesday and the services sector index on Thursday. The key Employment report will be released on Friday, and these figures on the number of jobs, the unemployment rate, and wage inflation are always closely watched. Mortgage markets will be closed on Monday for Labor Day. |
