While the most significant economic data was stronger than expected this week, investors remained more focused on the concerning spread of the coronavirus in many areas. Mortgage rates dropped slightly to fresh record low levels.
Due to the shutdown of much of the economy to combat the pandemic, consumer spending dropped sharply in March and April. A swift rebound has been taking place, however, as the latest results again far exceeded expectations. In June, retail sales jumped 7.5% from May, and strength was seen in a wide range of areas. Since consumer spending accounts for about 70% of all economic activity in the US, the retail sales data is a key indicator of current financial conditions.
The housing market also has been recovering more quickly than expected. In June, housing starts surged 17% from May, while building permits, a leading indicator of future construction, rose modestly from May. The NAHB housing index showed that home builder confidence shot up from 58 to 72, which was far above the consensus forecast. Several large home building companies have commented that they are hiring back workers and restoring disrupted supply chains for materials as quickly as possible to help meet the unexpectedly large demand for homes. Since a lack of inventory has been holding back home sales in many regions, this news was very encouraging.
Thursday’s European Central Bank (ECB) meeting revealed no policy changes or significant surprises. ECB officials expect rates to remain at their “present or lower” levels until they see the outlook for inflation rise to their target level of 2.0%, and they project that European economic growth will decline by 8% to 10% this year.
Looking ahead, investors will continue watching for news about medical advances, Fed actions, government fiscal stimulus programs, and plans for reopening the economy. Beyond that, the housing data will be the focus during a light week for economic data. Existing Home Sales will be released on Wednesday and New Home Sales on Friday.
|Wed||7/22||Existing Home Sales|
|Fri||7/24||New Home Sales|
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