Inflation, home sales and GDP top the list of week’s economic data at the end of a lousy second quarter | Economy


Few things say summer in America better than the 4th of July weekend.

And, as June draws to a close this week, investors and economists will offer good riddance to a second quarter that saw inflation rage and markets slump.

But, before that can happen, the week starting Monday will offer some final reminders of how the economy has fared as the calendar turns to the second half of what has so far been a year. difficult and volatile.

First, the good news: After breaking the $5-per-gallon mark, gasoline prices have recently risen above their highs, averaging $4.90 nationally on Sunday, according to AAA. That bodes well for a weekend where motorists historically scour the roads in search of family barbecues, baseball games and fireworks.

“It’s going to be the most expensive 4th of July we’ve ever seen, but prices are about 8 1/2 cents a gallon lower than they were a few weeks ago,” said Patrick De Haan, head of petroleum analysis at Gas Buddy. a video on the company’s website.

The good news, he said, is that prices should continue to fall “by 10 cents to maybe as much as 20 cents by July 4.”

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Rising energy costs, which were exacerbated by Russia’s invasion of Ukraine, were a key driver of the consumer price index reaching levels not seen 40 years ago. The CPI in May was 8.6% annualized.

Friday will bring another reading on inflation, the so-called Personal Consumption Expenditure Index, a measure the Federal Reserve is watching closely.

According to consensus estimates, the PCE rose at an annual rate of 6.4% in May, compared to 6.3% in April. But the core index, excluding energy and food costs, is expected to dip to 4.8% from 4.9% a month earlier.

Any positive news will be welcomed by markets, which staged a rally at the weekend after a few weeks of selling. Markets appear to be grappling with the Fed’s aggressive series of interest rate hikes and the possibility of a mild recession over the next 12 or so months.

“Our current assessment is that an economic downturn occurring at some point over the next two years is more likely than not,” Wells Fargo economists wrote on Friday. “Even if the Fed has not tightened policy aggressively, inflation continues at a rate not seen in 40 years, and consumers and businesses will eventually react to the higher cost environment by a period tightening of the belt.”

Already, consumer sentiment is at historic lows, as measured by the University of Michigan Consumer Survey. Tuesday will bring another view of consumer sentiment, when the Conference Board releases its survey for June. Estimates predict that it will fall from the 106.4 level in May, possibly even below the 100 mark.

As the week wraps up the quarter, Wall Street faces heightened volatility as portfolio managers juggle their holdings to meet asset allocation targets. And the week will also feature a meeting of OPEC oil nations where decisions will be made on production levels for August.

One area analysts will be watching closely is the housing market, with pending home sales for May being announced on Monday. In April, contract signings fell 3.9% for the sixth consecutive month and are now at the lowest level in nearly a decade.

“In mid-2022, real estate markets reflect an economy reaching its post-pandemic reality,” George Ratiu, head of economic research for Realtor.com, said Sunday.

“The frantic rush to find a home and lock in historically low interest rates seen over the past two-plus years has been relegated to the history books,” he added. “With inflation weighing more heavily on consumers’ paychecks every month and the Federal Reserve working hard to ease price pressures, Americans’ ability to borrow is sharply reduced. The result is a slowing housing demand, which comes as many homeowners embrace the new normal and put their homes up for sale.”

This has caused a shift in the market, with more homes staying on the market longer and sellers resorting to price cuts, Ratiu said. “The return of these historic patterns is a welcome development for home buyers who have been waiting for the window of buying opportunities to open wider,” he added.

Also available next week is a final reading of gross domestic product for the first quarter, with expectations that it will be unchanged from the 1.5% annual decline recorded in the previous estimate.

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