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DATA DOWNPOUR: RETAIL SALES, JOBLESS CLAIMS, PENDING HOME SALES, ET AL

Economic data arrived by the boatload on Thursday, so there's nothing to do but dive right in.

Receipts at U.S. retailers USRSL=ECI increased by 0.2% in June, nailing consensus and marking a sharp deceleration from May's 1.0% jump.

Drilling down, the 5.5% drop at the gas pump reflects last month's deflation of crude prices amid progress in U.S.-Iran peace negotiations, while a 1.9% increase in autos/parts provided much of the upside muscle; excluding autos, retail sales dropped 0.2% last month. Sporting goods/hobbies enjoyed a 1.3% increase and non-store retail—which includes online shopping—posted a solid 1.9% increase.

The report shows that "consumers continue to spend at a solid pace as households’ purchasing power improved last month due to lower gasoline prices, and sales received a boost from auto-related purchases, the Amazon Prime Day and the World Cup tournament,” writes Kathy Bostjancic, chief economist at Nationwide.

The "control" figure, which excludes autos, gasoline, building supplies and food services—and is most closely correlated with the personal expenditures element of GDP—grew by 0.5%, hitting the expectations bull's-eye.

Switching to the labor market, 208,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI last week, 3.7% fewer than the week prior and 9,000 shy of economists' predictions.

Ironing out weekly volatility, the underlying trend—as expressed by the 4-week moving average—is sideways with a slight downward bias.

"Initial jobless claims fell to their lowest level since May, consistent with the low and stable layoff rate that has defined the labor market in recent months," says Matthew Martin, senior U.S. economist at Oxford Economics.

Ongoing jobless claims USJOBN=ECI, which are reported on a one-week lag, dipped 0.9% to 1.805 million, or 10,000 fewer than analysts expected.

Taken together, claims data are painting a picture of a low hire/low fire labor market. Combined with a steadily dropping labor market participation rate, the jobs picture starts looking a tad listless.

Turning to the housing market, signed contracts for the pending sales of pre-owned U.S. homes USNAR=ECI dropped by 5.4% last month, according to the National Association of Realtors (NAR), plunging past the more sedate 0.5% dip economists projected.

The number reverses May's downwardly revised 3.5% gain.

NAR's pending home sales index has been wallowing near the trough touched directly after mandated COVID shutdowns ever since 30-year fixed mortgage rates crept above 6% in September 2022.

"The highest mortgage rates in nearly a year and the record-high national median home price together are contributing to a tepid housing market that is especially difficult for first-time homebuyers,” writes Lawrence Yun, NAR chief economist.

Sticking with the housing theme, the mood among homebuilders has grown increasingly sullen this month.

The National Association of Home Builders' USNAHB=ECI housing market index (HMI) shed 2 points to 34, just shy of expectations.

The NAHB dividing line between optimism and pessimism in the sector is 50. The HMI has wallowed in pessimistic territory for more than two years now.

"Affordability remains the home building industry’s primary challenge, as elevated mortgage rates, costly land, rising material prices, and persistent skilled labor shortages continue to affect the market,” says Robert Dietz, NAHB's chief economist.

In addition to elevated borrowing costs, would-be buyers' uncertainties amid geopolitical turmoil and resurgent inflation are making it a tough time to be in the homebuilding game.

Homebuilding stocks .SPCOMHOME have inched just over 2% higher so far this year, compared with the S&P 500's more than 10% advance over the same timeframe.

Moving to manufacturing, the Philly Fed business index USPFDB=ECI has gone to the races this month, surging 31.1 points to print at 41.4, blasting past the 13.0 consensus and notching its highest reading since November 2021.

Far more respondents reported improving business activity than not, and new orders surged by 10 points to their highest level in 4-1/2 years.

Positive Philly Fed/Empire State numbers indicate monthly growth, while negative readings signify contraction.

Combined with Empire State's upside surprise on Wednesday, Atlantic region manufacturing shifted into overdrive in July.

And finally, a relic from ancient times shows business inventories USBINV=ECI grew by 0.3% in May, half the 0.6% increase in April, which was largely attributable to frontloading due to war-related supply concerns.

(Stephen Culp)

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