Economics Weekly July 1, 2024

U.S. GDP figures revised higher

Last week saw the Q1 U.S. GDP growth rate revised higher from 1.3% to 1.4% on a quarter-over-quarter annualized basis. This was driven by stronger figures for investment by businesses, and better than expected data on trade. The upwards revision was largely expected and in line with Wall Street forecasts. Separately, economic forecaster Oxford Economics predicted Q2 U.S. GDP growth would read at 2% annualized growth, which would mark an acceleration from Q1. Overall, the economy for the first half of 2024 looks on track to achieve mixed results. On the one hand, a slide into recession has been avoided; on the other hand, growth is slow. For the real estate market, continued growth is welcome and will help maintain leasing demand. However, what is lacking is a consistent run of good news for the economy that is compelling enough to improve sentiment in the investment market.

Focusing on the housing market, the National Association of Realtors’ Pending Home Sales Index decreased by -2.1% in May m-o-m and hit a record low of 70.8. While May’s rate of decline marked an improvement on the -7.7% fall recorded in in April, it was also well below Wall Street’s forecast of a rise of 0.5%. Compared to May 2023 the index was down by -6.6%, which shows market conditions remain challenging. The poor performance was attributed to falling demand and higher inventory. The South was the region that saw the greatest fall, followed by the Midwest; although activity increased in the Northeast and West. The figures point to slower growth for U.S. house prices in the coming months, particularly in the South.

This week sees important indicators released on the labor market, namely on job openings and payrolls. Given the Federal Reserve has been resolutely holding the Fed Funds Rate at 5.25%-5.5%, we are forecasting declines for both job openings and payrolls. Also, Fed chair, Jerome Powell, will give a speech at a conference for central bankers this week, which the financial markets will be monitoring for clues on when the Funds Rate may finally be cut.

Things to watch for this week

Tuesday, July 2

JOLTS Job Openings, May

Previous: 8.1m
Forecast: 7.9m  

Having peaked at 9.4 million in August 2023, job openings have been steadily declining in the face of high interest rates. We are predicting a fall to 7.9 million for May.

Friday, July 5

Non-Farm Payrolls, June

Previous: 272k
Forecast: 185k