US recession fears ease: surprisingly strong data on housing, consumer confidence, labor market

Fed Chair Jerome Powell already warned he “may” have two more planned Fed rate increases in the making. Even a Fed comment is enough to stymie a housing market increase.

US recession fears ease: surprisingly strong data on housing, consumer confidence, labor market, Financial Review, Vince Golle and Reade Pickert

President Joe Biden told donors he thinks the US will avoid a potential recession that economists and banks have long been predicting, following a flurry of data this week that showed surprising strength in several corners of the economy.

Purchases of new homes climbed to the fastest annual rate in more than a year, durable goods orders topped estimates and consumer confidence reached the highest level since the start of 2022, according to reports on Tuesday (Wednesday AEST).

Another release showed housing prices in the US rose for a third-straight month, all of which paints a picture of resilience and further delaying any likelihood of recession.

“It’s been coming for 11 months, well guess what? I don’t think it is going to come.”

Mr. Biden said, during a fundraiser in the Maryland suburbs outside Washington, also citing a still strong labor market and his efforts to tamp down on inflation.

While the data does not reject the possibility of a recession in the coming year, it does not give reason to believe a downturn isn’t right around the corner, let alone a foregone conclusion. The latest reports on retail sales, inflation-adjusted consumer spending and the job market also support that notion.

“The consensus view continues to stubbornly call for a recession starting in a few months, but the economic data are telling a far different story right now.”

Stephen Stanley, chief economist at Santander US Capital Markets, said in a note.

“Resilience remains the watchword.”

Treasuries declined after Tuesday’s reports, girding speculation that the Federal Reserve will resume raising interest rates after this month’s pause. Chair Jerome Powell may reinforce that tilt on Wednesday as he and other central bankers convene at a forum in Europe.

A rebound in housing demand, despite high mortgage rates, suggests that the economy is so far withstanding higher borrowing costs. While homeowners are reluctant to move and take on a greater mortgage, prospective buyers have adjusted to the shift and are increasingly seeking out new construction instead.

Purchases of new single-family homes increased 12.2 per cent to an annualized 763,000 pace last month, 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.

While consumers in June reported less appetite to buy a home and other major purchases like cars and appliances, confidence surged in the month, according to the Conference Board’s index. The advance was driven by greater optimism about the labor market and the economic expansion.

Even though the group’s measure of expectations – which reflects consumers’ six-month outlook – rose to the highest level this year, it still signaled “consumers anticipating a recession at some point over the next six- to 12-months,” said Dana Peterson, the chief economist at the Conference Board.

The robust confidence and home-buying data are rooted in what is still a strong labor market. Unemployment is historically low, and job openings are plentiful, though both metrics have been softening in recent months.

Tuesday’s figures are also positive signals for economic growth. Orders placed with US factories for business equipment rose in May for a second month, indicating companies continue to make longer-term investments despite high borrowing costs and economic uncertainty.

Shipments of non-defense capital goods, which are a proxy for actual spending, jumped 3.4 per cent, the biggest increase since the end of 2020. That bodes well for gross domestic product this quarter, said Jennifer Lee, senior economist at BMO Capital Markets.

“Delayed (not a bad thing, until it is) US recession chatter has gained more followers over the past few weeks,” Ms. Lee said in a note on Tuesday. “The latest round of economic releases was resoundingly solid.”

Real retail sales continue to suggest recession, decelerating employment gains, Angry Bear, New Deal democrat