Weekly Economic Review | July 24th, 2023 | Stephens

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Weekly Economic Review | July 24th, 2023

Jul 24, 2023

Economic Review

The Labor Department reported that initial jobless claims decreased last week to its lowest level in two months. The low level of jobless claims reflect a resilient labor market as businesses hold onto employees. Claims in regular state programs fell 9,000 to 228,000 from the prior week’s reported 237,000 for the week ending July 15th. The four-week moving average fell to 237,500 from 246,750 the prior week. Continuing claims, which include people who have received unemployment benefits for a week or more, climbed 33,000 to 1.754 million for the week ending July 8th.

The New York Federal Reserve reported the Empire State Manufacturing Index, which is one of the first signals for factory sector activity, edged higher in July. The index reported that orders climbed higher and inflationary pressures eased. The index recorded a positive 1.1 in July after a positive 6.6 reading in June. New orders recorded a positive 3.3 in July after a positive 3.1 reading in June and shipments declined to 13.4 after a positive 22.0 reading last month. Readings above zero signal expansion in New York, northern New Jersey, and southern Connecticut.

The Commerce Department reported that retail sales softened in June with weakness in building materials, food and department stores. Retail sales climbed 0.2% in June after gaining 0.5% the prior month. In recent months, retail sales have been very choppy and have been subject to significant revisions. Sales surged in January in response to the Social Security COLA, then sales slowed significantly in February and March. Sales in the second quarter started off looking strong, but the tone has been more mixed in subsequent releases. Retail sales ex autos and gas climbed 0.3% in June. Retail sales represent roughly half of total consumption, while the other half captures spending on services. The numbers in this report are not adjusted for inflation.

The Federal Reserve reported industrial production, which includes factory production, mines and utilities, declined in June for the second straight month. The report indicates manufacturers are avoiding producing excess inventory in anticipation of declining consumer demand. Production at factories, which make up 74.3% of output, fell 0.3% in June after decreasing 0.2% the previous month. Utilities declined 2.6% in June after falling 1.5% in May and mining declined 0.2% in June after falling 1.4% in May. Capacity utilization, which measures the amount of a plant that is in use, fell to 78.9% from a downwardly revised 79.4% in May.

The Commerce Department reported business inventories increased 0.2% in May after climbing 0.1% in April. Business sales climbed 0.2% in May after falling 0.1% the prior month. The ratio of business inventories to sales remained unchanged at 1.40 in May.

The National Association of Home Builders/Wells Fargo reported builders housing sentiment rose in July to the highest level in 13 months. Home buyers are opting for new construction amid a tight supply of houses, even as mortgage rates climb. The improvement so far in 2023 comes after a year-long rout in 2022. The index of builder sentiment climbed to 56 in July from 55 in June. The index recorded an 84 in December of 2021.

The Commerce Department reported that housing starts pulled back in June after spiking to lofty levels in May. Housing starts declined 8.0% in June to a 1,434,000 annualized rate following May’s 1,559,000 pace, the fastest pace of starts since April 2022. Single-family starts fell 7.0% in June with multi-family starts down 9.9%. Demand has been resilient and construction activity is bouncing back to meet this demand even as high mortgage rates, high wages for construction workers and high cost for materials push up costs. Building permits, a gauge of future construction, declined 3.7% in June to a 1,440,000 pace.

The National Association of Realtors reported that existing home sales declined 3.3% in June to a selling rate of 4.16 million, a five-month low. The lack of inventory in the resale market remains a key constraint with housing inventories at historic lows. Many homeowners with low locked in mortgage rates are choosing not to sell their homes. Contract closings usually occur a month or two after a contract is signed. The median selling price increased to $410,200 from $396,400 in May, but is down 0.9% from June of 2023.

The Conference Board reported the index of leading economic indicators declined 0.7% in June, the sixteenth straight drop. The loss was led by a decline in consumer expectations, ISM New Orders, the interest rate spread and jobless claims. The biggest positive contributor to the leading index was stock prices. The index of U.S. leading indicators is a gauge of the economic outlook for the next three to six months. The coincident index, a gauge of current economic activity, remained unchanged in June.

The Mortgage Bankers Association reported the MBA index of mortgage applications edged higher last week, as mortgage rates pulled back from lofty levels. The index rose 1.1% for the week ending July 14th. Refinancing applications gained 7.3% to 446.4 from 416.0 the prior week. Home purchase mortgage applications decreased 1.3% to 163.2. Refinancing made up 28.4% of applications with an average loan size of $257,900, while purchases average loan size was $418,600. The average contract rate on a 30-year fixed-rate mortgage decreased to 6.87% from 7.07% last week.


Rates climbed last week and the yield curve steepened as the Fed indicated it will likely continue to raise rates. Friday’s yields for the 2-, 5-, 10- & 30-year Treasury benchmarks securities were 4.84%, 4.09%, 3.83% and 3.90%. The 2yr/5yr, 5yr/10yr, 10yr/30yr and 2yr/30yr spreads closed at -75, -26, 7, and -94 basis points respectively.

Economic/Events Calendar


July 24

Jun Chicago Fed Nat Activity Index (-0.16)

7:30 Central


July 25

May FHFA House Price Index (0.6%)

8:00 Central

May S&P CoreLogic CS 20-City Index (0.70%)

8:00 Central

Jul Conf Board Consumer Confidence (112.0)

9:00 Central


July 26

Jul 21st MBA Mortgage Applications

6:00 Central

Jun New Home Sales (725k)

9:00 Central

FOMC Rate Decision (5.25%-5.50%)

13:00 Central

Interest on Reserve Balances Rate (5.40%)

13:00 Central


July 27

Jul 22nd Initial Jobless Claims (235k)

7:30 Central

2nd Qtr Annual Gross Domestic Product (1.8%)

7:30 Central

2nd Qtr Annual GDP Price Index (3.1%)

7:30 Central

2nd Qtr Annual Personal Consumption (1.2%)

7:30 Central

Jun Durable Goods Orders (1.0%)

7:30 Central

Jun Durables Ex Transportation (0.1%)

7:30 Central

Jun Cap Goods Orders Nondef Ex Air (-0.2%)

7:30 Central

Jun Goods Trade Balance (-$91.9b)

7:30 Central

Jun Wholesale Inventories (-0.1%)

7:30 Central

Jun Retail Inventories

7:30 Central

Jun Pending Home Sales (-0.5%)

9:00 Central


July 28

2nd Qtr Employment Cost Index (1.1%)

7:30 Central

Jun Personal Income (0.5%)

7:30 Central

Jun Personal Spending (0.4%)

7:30 Central

Jun PCE Deflator-YOY (3.0%)

7:30 Central

Jul University of Michigan Sentiment (72.6)

9:00 Central

About the Expert

Troy Clark

Senior Vice President, Fixed Income Strategist, Fixed Income Sales & Trading

Mr. Clark has been in investment banking since 1983. He is a Chartered Financial Analyst. He has been a fixed income strategist at Stephens Inc. since 1996, developing investment strategies, policies and procedures for institutions consistent with overall asset/liability management.

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Source: Bloomberg L.P.
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