Monthly Economic Update July 2015
Challenges in Puerto Rico, Greece, and China remained contained in July, and capital markets delivered reasonable returns. The exceptions were emerging markets and commodities. Both categories were off materially on fears of slower growth in China. Dollar strength, most particularly against emerging market currencies, also weighed on commodities and emerging market returns.
Domestic economic releases ranged from benign to positive in July. The labor market continued to improve, with the unemployment rate hitting a new post-crisis low. Payroll growth was also favorable and weekly jobless claims hit the lowest level since 1973. Considering todayâ€™s labor force is 80% larger than that of the early 70s, this low is quite an achievement. The housing market continued to improve, with existing home sales reaching an eight year high. Year-over-year price gains have also been stable in the 4 – 5% range for about a year now.
Despite a reasonably positive backdrop, two areas bear watching. First, consumer confidence has tailed off since hitting a high in January, and retail sales growth has been choppy in recent months. Accounting for 68% of total GDP, the consumer is critical to the U.S. economy, and these trends are a concern. Second, capacity utilization has dropped rather dramatically in recent quarters. Such a decline is unusual at this point in the economic cycle and certainly not ideal as the Federal Reserve edges closer to an interest rate hike. On that note, most continue to believe the Fed will move in September.
Julyâ€™s Economic Releases
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