3 Numbers: US confidence returns, house sales sizzle
- Will ISM Non-Manufacturing Index data confirm a strong US Services PMI?
- Economists project gain for US new home sales now at an eight-year high
- A modest setback is expected for the US Consumer Confidence Index in July
By James Picerno
Tuesday's a busy day for US economic news, which may influence tomorrow's Federal Open Market Committee policy statement from the Federal Reserve.
Meantime, today's updates include the flash July data for Markit’s US Services PMI. We’ll also see the monthly numbers for new home sales in June and the Conference Board’s release of the Consumer Confidence Index for July.
US: Services PMI (1345 GMT) Two competing measures of the US services sector are dispensing sharply different perspectives at the moment on the state of this crucial slice of the economy. Perhaps today’s flash July data for Markit’s Services PMI will clear up the conflict.
Meantime, the ISM Manufacturing Index posted a strong increase in June. The headline benchmark last month jumped to a seven-month high of 56.5, a dramatic rise from 52.9 in the previous month.
From the perspective of the ISM figures, growth in the services sector accelerated last month to a degree that implies that US output overall is due for an upgrade in the months ahead.
Sounds good, but Markit’s PMI numbers for June throw cold water on the ISM’s rosy outlook. The index was effectively flat last month at 51.4, which is only modestly above the neutral 50 mark that separates growth from contraction.
“Rebound, what rebound?” Markit’s chief economist asked earlier this month. “The final PMI numbers [for June] confirm the earlier flash PMI signal that the pace of US economic growth remained subdued in the second quarter.”
The question is whether the PMI data for July will revive in line with the brighter profile via the ISM results?
“Homes are selling more quickly this year than last in 27 of the nation’s 35 largest metro housing markets – in some cases, much more quickly,” according to Zillow’s quarterly real estate report, which was published last week.
For example, the median number of days that a home stayed on the market fell last month fell to 78 - eight days below the same period a year ago. “It all adds up to a very competitive market for buyers, and a fast-moving (and potentially very lucrative) market for sellers,” Zillow advised.
Note that existing home sales for June jumped to a nine-year high in last week’s update. Some analysts wonder if the market is overheating. Perhaps, but for the moment it’s clear that demand is accelerating.
Today’s monthly update for newly built home sales is expected to provide more evidence that transactions are trending higher. Econoday.com’s consensus forecast sees sales rising to a seasonally adjusted annual rate of 562,000 for June — moderately above the previous month’s 551,000.
If the forecast is right, the gain will push sales for this corner of the market to the second-highest level since the recession ended.
“Prior to the Brexit vote, virtually no consumer thought the issue would have the slightest impact on the US economy,” noted the chief economist for UoM’s consumer survey earlier this month. “Following the Brexit vote, it was mentioned by record numbers of consumers, especially high-income consumers.”
But the initial worries surrounding Brexit have faded in the US, or so it appears via the recent run of record closes in the stock market following last month’s UK referendum. Is that a clue for thinking that US consumer sentiment will rebound?
Economists are looking for modest decline in today’s July report for the Consumer Confidence Index, which is published by the Conference Board.
But the expected dip to 96 from 98 in June via Econoday.com is a mild dip. If the prediction holds, the news will still support the view that the early worries about Brexit in terms of US fallout were a false alarm.
There’s still plenty to worry about with regards to the US macro outlook. But unless today’s update tells us otherwise, Brexit-related blowback is probably a minor event in the grand scheme of potential trouble spots for the world’s biggest economy.
James Picerno is a macro analyst/editor at CapitalSpectator.com. Follow James or post your comment below to engage with Saxo Bank's social trading platform.