Weekly Recap: Strong Housing Construction, Mortgage Applications Rise, Jobless Claims Drop

US Housing Construction Surges, Beating Forecasts

The US Census Bureau's report on Tuesday, June 20th, revealed an impressive surge in new residential construction during May. The annualized number of new residential buildings that began construction reached 1.631 million, surpassing expectations of 1.4 million. This substantial increase indicates a strong momentum in the housing market, signaling a potentially robust recovery. The higher-than-anticipated figure suggests increased housing demand and positive growth in the construction sector, which bodes well for the overall economy.

Mortgage Applications Maintain Growth Trajectory

The Mortgage Bankers Association's report on Wednesday, June 21st, demonstrated modest growth in mortgage applications. Following a 7.2% increase in the previous week, applications rose by an additional 0.5% over the prior week. This recent growth in mortgage applications may signify a recovering demand for housing amidst the backdrop of higher rates and reflect consumer confidence in the market. Home prices continue to remain buoyed by a lack of supply in the market which continues to haunt first time homebuyers struggling with affordability.

Jobless Claims Decline, Indicating Labor Market Improvement

On Thursday, June 22nd, the U.S. Department of Labor released news regarding jobless claims. Continuing jobless claims fell to 1,759K, down from the previous week's figure of 1,772K. This decline in jobless claims suggests a still relatively buoyant labor market as more individuals return to the work force. Positive results on jobless claims can be seen as a double edge sword of late, with lower unemployment numbers comes the risk of further aggressive interest rate policy.

Federal Reserve Chairman Advocates Monetary Policy Tightening

During his testimony before Congress, Federal Reserve Chairman Jerome Powell emphasized the need for additional tightening of monetary policy. He reiterated his stance, suggesting that two more interest rate hikes would be necessary to maintain a balanced economic environment and return to it’s goal of maintaining 2% annualized inflation. Powell's remarks indicate the Fed's commitment to proactive measures to manage inflationary pressures and ensure economic stability. As the economy steams along and inflationary concerns persist, the Federal Reserve aims to strike the right balance through prudent policy adjustments. In their most recent meeting the FOMC voted to hold the federal funds rate steady at a range of 5.00-5.25% so as to assess the impacts of recent rate increases, acknowledging that a lag between policy decisions and market impacts is a variable which they are still working to understand.

Looking at the Week Ahead

As we look ahead to the coming week, several economic data releases and events are worth noting:

Tuesday, June 27th:

Durable goods orders data will be released. Durable goods orders are a crucial economic indicator as they reflect the demand for long-lasting goods, such as machinery and equipment. These data can help inform monetary policy decisions and provide insights into the health of the manufacturing sector.

Wednesday, June 28th:

The Federal Reserve will release the results of its recent bank stress tests at 4:30 pm. These stress tests assess the ability of banks to withstand adverse economic conditions. Given Jerome Powell's emphasis of impending higher capital requirements for banks, the results will be closely watched for their potential impact on the banking sector and monetary policy considerations.

Thursday, June 29th, and Friday, June 30th:

These days will be particularly active for the market, with several important releases:

Final GDP for 2023 Q1: The release of the final GDP (Gross Domestic Product) figures for the first quarter of 2023 will provide insights into the overall growth and performance of the economy. The ultimate indicator to gauge the pace of economic growth, the GDP report will provide and insight on the potential areas of strength or weakness in the economy.

Weekly jobless claims: The weekly jobless claims data will offer real-time information on the labor market's health and provide an indication of ongoing unemployment trends. A decline in jobless claims would signal continued strength in the job market, while an increase could suggest challenges in employment.

Core PCE Prices: Updates on Core PCE (Personal Consumption Expenditures) Prices, a key inflation measure closely monitored by the Federal Reserve, will be released. The Fed uses Core PCE as a guide to shape interest rate policies. The Fed's target is for Core PCE prices to fall to 3.9% by the end of the year. Any unexpected upward surprises in Core PCE prices could potentially impact market sentiment and lead to higher interest rates and more volatile markets.

Keeping an eye on these economic indicators and events will provide valuable insights into the ongoing status of the economy and potential implications for monetary policy decisions in the near future.

(Note: The information provided in this article is for informational purposes only and should not be considered as financial or investment advice. Readers are encouraged to conduct their own research and consult with professionals for specific financial decisions.)

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