{"id":1581,"date":"2019-08-16T13:55:09","date_gmt":"2019-08-16T17:55:09","guid":{"rendered":"https:\/\/naroffeconomics.com\/?p=1581"},"modified":"2019-08-16T13:55:09","modified_gmt":"2019-08-16T17:55:09","slug":"july-housing-starts-and-mid-august-consumer-sentiment","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=1581","title":{"rendered":"July Housing Starts and Mid-August Consumer Sentiment"},"content":{"rendered":"\n

KEY DATA:<\/strong> Starts: -4%; 1-Family:\n+1.3%; Permits: +8.4%; 1-Family: +1.8%\/ Sentiment: -6.3 points<\/p>\n\n\n\n

IN A\nNUTSHELL:<\/strong>  \u201cWith housing going nowhere and consumer\nconfidence faltering, it is not a major surprise that investors are worried\nabout the economy.\u201d<\/em><\/strong><\/p>\n\n\n\n

WHAT IT\nMEANS:<\/strong>  The yo-yo markets have every reason to be\nbouncing around like crazy.  One day the\npresident is General Lee sending General Pickett and his trade war troops\nstraight up the hill and the next he is in retreat. It cannot be ruled out that\nTrump\u2019s assault on China may end as ignominiously.  <\/p>\n\n\n\n

The next year will determine if Trump and Lee have\nsomething in common.  For now, all we can\ndo is look at the data.  Today, the numbers\nare housing starts and consumer sentiment. \nStarts dropped in July and the decline was in three of the four\nregions.  Only the West posted a rise and\nthat was relatively modest.  However, to\nconfuse matters, permit requests surged. \nFor the three months ending July, permits are 4.6% above starts and that\npoints to a rebound in construction over the next few months. <\/em><\/strong> That said, it looks as if home construction\nhas largely stabilized and with sales pretty much flatlined as well, there is\nlittle reason to expect starts will jump either.  <\/p>\n\n\n\n

Meanwhile, the consumer is beginning to get a little\nantsy about the trade war.  The\nUniversity of Michigan\u2019s Consumer Sentiment index tanked in the first half of\nAugust and the biggest reason given was the trade situation<\/em><\/strong>.  According to the report, \u201cConsumers strongly reacted to the proposed\nSeptember increase in tariffs on Chinese imports, spontaneously cited by 33% of\nall consumers in early August, barely below the recent peak of 37%.\u201d  Both\nthe current conditions and expectations indices declined.<\/strong><\/em>MARKETS AND FED POLICY IMPLICATIONS:<\/strong>  The next\nFOMC meeting is September 17-18 and there is lots of new data that may \u2013 or may\nnot \u2013 provide some clarity on where the economy is headed.  The Fed, regardless of what it says, is no\nlonger data dependent.  At least not data\nthat have to do with the U.S. economy, which may be moderating but is not\nfaltering.<\/em><\/strong>Instead, it is being tossed\naround in the same way as investors by the president\u2019s tweets.<\/em><\/strong>  The trade war is what concerns most Fed members;\nat least I think that is the case.  We\nhaven\u2019t heard a lot from them lately.  The\nFed has to guess what the president is actually going to do, when he will do it\nand what those decisions, whatever they are, will mean for the U.S. and world\ngrowth.  In other words, the Fed is\nflying blind. <\/em><\/strong>What\nit has going for it is an economy that is still in pretty good shape.  What it has to worry about is a faltering\nChinese economy that is starting to impact other countries around the world and\na potential all out trade war.<\/em><\/strong> \nThe longer this goes, the less the Chinese have reason to settle before\nthe 2020 election.  President Xi has to\nweigh further economic pain over the next fifteen months against a possible\nTrump re-election and uncertain policies afterward.  As President for Life, he has some\nflexibility to take the pain for potential long-term gain.  If that happens, the Fed is in a total\nbind.  It would have to cut rates\nsignificantly to have any chance of improving the economy and even then it is\nnot clear if aggressive action would do much. \n<\/em><\/strong>If Chair Powell continues on his race back to zero, what does he\ndo then?  For several years now, I and many\nother economists have warned that the Fed needs to get rates back up to more\nnormal levels so it has the ability to fight the next war\/recession.  Does anyone believe they succeeded in doing\nthat?  With such great uncertainty over\nwhat Trump will do next, it should surprise no one if we continue to see wild\nswings in the stock and bond markets.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: Starts: -4%; 1-Family: +1.3%; Permits: +8.4%; 1-Family: +1.8%\/ Sentiment: -6.3 points IN A NUTSHELL:  \u201cWith housing going nowhere and consumer confidence faltering, it is not a major surprise that investors are worried about the economy.\u201d WHAT IT MEANS:  The yo-yo markets have every reason to be bouncing around like crazy.  One day the … Continue reading July Housing Starts and Mid-August Consumer Sentiment<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1581","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1581","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1581"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1581\/revisions"}],"predecessor-version":[{"id":1582,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/1581\/revisions\/1582"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1581"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=1581"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=1581"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}