This week provided plenty of economic data for market participants to analyze. Inflation data, second quarter GDP growth, housing data, and consumer sentiment were all on the tape.
The U.S. economy bounced back from the first quarter contraction, according to the BEA on Thursday. Inflation adjusted Gross Domestic Product (GDP) grew at a 3.3% annual rate in the second quarter, up from the initial 3.0% estimate. Personal consumption expenditures and business investments led the upward revisions, marking the highest quarterly GDP result since the third quarter of 2023.
July’s inflation data delivered no surprises, with the Personal Consumption Expenditures (PCE) Index matching estimates. Headline PCE rose 0.2% from June and held at 2.6% year-over-year, while core PCE, the Federal Reserve’s preferred gauge, edged up to 2.9% from 2.8% year-over-year. Despite concerns over tariffs, inflation pressures have yet to emerge as durable goods prices declined and services costs drove the modest increase. Muted inflation pressures reinforce the Chandler team’s expectation for a quarter-point rate cut in the near term, followed by another later this year.
Home prices fell for a fourth straight month in June, with the S&P Cotality Case-Shiller 20-City Composite Home Price Index falling 0.25% from May, missing expectations. The decline pulled the annual gain down to 2.1%, the weakest pace since the market turned higher in mid-2023, adding to signs of cooling in the housing market.
Consumer confidence edged lower in August, holding near recent levels as Americans grew more cautious about the labor market. The Conference Board said both its present situation and expectations gauges weakened, with views on current job availability deteriorating for an eighth straight month. Better views of current business conditions helped cushion the decline but concerns about future employment and softer income expectations weighed on sentiment. Still, stronger outlooks for business conditions kept confidence from slipping further.
In other headlines this week, President Trump ordered the removal of Federal Reserve Governor Lisa Cook. The initial market reaction of this decision was muted as the outcome of this action will be determined by the courts.
The U.S. Treasury yield curve steepened this week as investors weighed the prospect of lower short-term rates, a softer dollar, and potential fiscal-policy-driven inflation. The two-year yield fell to 3.62%, while the five-year slipped to 3.69%. The 10-year declined less, ending at 4.22%, widening the 2yr/10yr spread to 60 basis points.