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TGIF DATA: UMICH, HOUSING STARTS/BUILDING PERMITS

Investors began their Friday with a double-dip of disparate data, both of which showed modest economic improvements, but not nearly enough to prompt a change in Powell & Co's "wait and see" mantra.

The mood of the American consumer, who carries the burden of about 70% of the U.S. economy, has ticked a bit higher this month.

The University of Michigan's (UMich) preliminary take on July Consumer Sentiment USUMSP=ECI rose to 61.8, a 1.8% improvement and a smidgeon higher than the 61.5 economists predicted.

Survey participants' assessment of current conditions improved by 3.1%, while near-term expectations rose 0.9%.

Still, the metric continues to wallow well below its historical average.

"Consumers are unlikely to regain their confidence in the economy unless they feel assured that inflation is unlikely to worsen, for example if trade policy stabilizes for the foreseeable future," says Joanne Hsu, Director of Consumer Surveys at UMich. "At this time, the interviews reveal little evidence that other policy developments, including the recent passage of the tax and spending bill, moved the needle much on consumer sentiment."

Near- and long-term inflation expectations are drifting back to earth as uncertainties regarding the Trump tariffs' economic effects began to fade, with respondents seeing annual inflation at 4.4%, 12 months from now, 0.6 percentage points cooler than June's final reading, and down 1.5 percentage points from May's final reading, but 2.3 percentage points hotter than 2.8%, or Wednesday's core CPI reading, but 1.5 percentage points hotter than this week's core CPI print.

Five-year inflation expectations shaved off 0.4 ppts to 3.6%.

"Both readings are the lowest since February 2025 but remain above December 2024, indicating that consumers still perceive substantial risk that inflation will increase in the future," Hsu adds.

While consumer inflation expectations are not reliable predictors of the future path of price growth, Powell & Co. pay attention to it because it can affect behavior, prompting consumers to push purchases forward to avoid price hikes, unintentionally boosting demand and becoming a self-fulfilling prophecy.

Turning to the housing market, groundbreaking on new American homes USHST=ECI slid by 4.6% in June to 1.321 million units at a seasonally adjusted, annualized rate (SAAR), according to the Commerce Department.

That's 1.6% stronger than the 1.300 million units SAAR analysts were expecting and marks a partial rebound from May's 9.7% drop.

Peeking under the hood, however, single-family projects - which account for the lion's share of the total - actually fell by 4.6%, while the starts in the volatile multiple-unit segment offset that drop by surging an impressive 30.0%.

Building permits USBPE=ECI - considered one of the housing market's more forward-looking indicators - essentially moved sideways, inching a meager 0.2% higher to 1.397 million units SAAR, beating consensus by an unremarkable 0.5%.

Here again, a 3.7% drop in permits for single-family projects was more than compensated by multiple-unit permits rising 7.3%.

"The slow rise in inventory of existing homes for sale continues to pressure the market for new homes," says Daniel Vielhaber, economist at Nationwide. "Affordability also remains a primary concern for buyers with mortgage rates hovering between 6.6-6.9%."

"Tariff-related cost increases for construction materials and related uncertainty are likely also affecting builder decisions," Vielhaber adds.

(Stephen Culp)

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