A flurry of data released on Tuesday showed surprising strength in many corners of the US economy, painting a picture of resilience and further delaying the possibility of a recession.
New home purchases rose to their fastest annual rate in more than a year, durable-goods orders topped estimates and consumer confidence reached its highest level since the start of 2022, reports said. Another release showed U.S. home prices rose for a third consecutive month.
„Consensus is strongly calling for a recession starting in a few months, but the economic data is now telling a very different story,” Stephen Stanley, chief US economist at Santander US Capital Markets, said in a note. „Regression is the watchword.”
While the data models do not rule out the possibility of a recession in the coming year, they do give reason to believe that a recession is not exactly around the corner, let alone a foregone conclusion. Recent reports on retail sales, inflation-adjusted consumer spending and the job market also support that view.
Treasuries declined after the reports, capping speculation that the Federal Reserve would raise interest rates again after this month’s pause. Chairman Jerome Powell may reinforce that today when he and other central bankers gather at a forum in Europe.
Despite high mortgage rates, the rebound in housing demand suggests the economy is enduring higher borrowing costs so far. While homeowners are reluctant to take on more mortgages, prospective buyers are adjusting to the change and looking for new construction instead.
Purchases of new single-family homes rose 12.2% last month to an annual pace of 763,000, government data showed on Tuesday. The figure marked the third straight monthly advance and beat all but one estimate in a Bloomberg survey of economists.
Although consumers reported less appetite for home and other major purchases such as cars and appliances in June, confidence rose during the month, according to the Conference Board’s index. The improvement was driven by high optimism about the labor market and economic expansion.
While the group’s expectations gauge — which reflects consumers’ six-month outlook — rose to its highest level this year, „consumers expect a slowdown at some point in the next 6 to 12 months,” Dana Peterson said. , Chief Economist at the Conference Board.
Strong confidence and home buying data are rooted in an even stronger labor market. Unemployment is historically low and job openings are plentiful, though both metrics have softened in recent months.
Tuesday’s figures are also positive signals for economic growth. Orders placed by U.S. factories for business equipment rose for a second straight month in May, indicating that companies continued to make long-term investments despite higher borrowing costs and economic uncertainty.
Exports of non-secured capital goods, a proxy for real spending, rose 3.4%, the biggest increase since the end of 2020. That bodes well for GDP this quarter, said Jennifer Lee, senior economist at BMO Capital Markets.
„The late (not a bad thing, until) U.S. recession conversation has gained more followers over the past few weeks,” Lee said in a note on Tuesday. „The latest round of economic releases has been very solid.”
Information for this article was provided by Augusta Saraiva of Bloomberg News.
A „For Sale Pending” sign hangs outside a home in Morgan Hill, California, Tuesday, Oct. 4, 2022. U.S. home prices are now posting their biggest monthly decline since 2009. Credit: Photo by Bloomberg David Paul Morris
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