Expectations for the September Empire Manufacturing index to decline to 22.0 from 25.6, previously. This would be in-line with the six month average of 21.9 and would continue to signal expanding manufacturing activity in the region, supportably by strong domestic demand. Meantime, the enacted tariff have not proven to materially slowdown activity in the sector. The biggest headwinds, for the time being, are supply constraints and rising transportation costs. However, if tariffs on the additional l$200bn worth of Chinese goods are enacted, activity would slow.
The NAHB housing index should hold steady at 67 in September, indicating continued general optimism from homebuilders. Since peaking at 74 in December of last year, the index has drifted lower likely owing to challenges finding skilled workers and rising building material costs. That said, homebuilders sentiment still remains elevated relative to history, supported by strong demand tailwinds like a healthier consumer and favorable demographics
Late cycle behavior from autos and homebuilders ‘rhyming’: –Normura
Housing Starts and Building Permits
Expectations for a rebound starts to 1.23mn saar in August, up from 1.17mn in July. New construction in the West may have been hampered recently by the wildfires that largely began in June and have continued through September in some areas. Considering this, it seems unlikely we’ll see a complete return back towards the strong construction trends witnessed earlier in the year, at least for now, but some improvement is reasonable. Thus, building permits to be reported unchanged at 1.31mn.
Current Account Balance
Expectations for 2Q current account deficit to narrow to -$108.5b from -$124.1b driven primarily by a narrowing in the trade deficit, which fell by $20.2b. Also, primary income surplus to is expected to fall by $4.5b as corporate profits receipts from the rest of the world declined by 0.7%QoQ saar, and primary income payments to increase due in part to rising interest rates and the increasing federal deficit.
Philadelphia Fed Manufacturing
After plunging by 13.8 pts in August to 11.9, expectations for the Philly Fed Index to rebound in September and increase to 15.0. The volatile new orders index dropped sharply last month, and a probable rebound this month supporting the case for an improving outlook for the headline index. Meantime, tariffs remain an underlying concern but have not yet appeared to affect activity as the future capex index continues to point towards increased investment over the next 6 months.
Existing Home Sales
Existing home sales have been on a 4-month downtrend and given the lack of new construction in the West due to wildfires that streak in expected to continue in August, with sales edging down further to 5.33msaar from 5.34m in July. The market continues to deal with extremely tight inventories, particularly at more affordable price points, and home prices continue to see solid growth putting more pressure on the market.
Initial Jobless Claims
Initial jobless claims are expected to to be 205k in the week ending September 15th following a similar reading in the prior week. A tight labor market has led to fewer involuntary layoffs and for employers to hire workers that may not have all the skills necessary for the job. Consequently, continuing claims are a t cyclical lows of 1.696m.
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