Retail sales, housing data and debt ceiling drama will dominate the market narrative in the US this week.
Talks between White House officials and GOP staff aimed at averting a self-made catastrophe were proceeding, according to Joe Biden. “There’s real discussion about some changes we all could make,” he said, over the weekend. “But we’re not there yet.”
This goes without saying, but they need to get “there” pretty soon. If not, the US will “have to default on some obligation, whether it’s Treasurys or payments to Social Security recipients,” Janet Yellen helpfully reminded lawmakers, during remarks to Bloomberg late last week.
I’m not sure there’s much else to say about the D.C. stalemate other than to reiterate how absurd it is. In a democracy, you get the leaders you deserve, and in that context, I suppose this prospective calamity has a karmic quality. But not for the rest of the world, which would suffer if the US decided to “do a default,” as the self-declared “king of debt” put it recently.
On Tuesday, markets anxious for clues about the health of the US consumer in the face of tighter credit conditions and still-elevated inflation will get a look at retail sales for April. Consensus expects nominal spending rose 0.8%.
That’d snap a two-month streak of declines, but to the extent it’s driven (no pun intended) by autos, it could be looked over as immaterial, particularly given what an abysmal read on University of Michigan sentiment seemed to say about consumer psychology at the beginning of May.
A bevy of US housing figures will ostensibly provide something like insight into what NAR chief economist Lawrence Yun last month described as a “unique” market. Home prices are still very high even as the YoY rate of appreciation flatlined. In some regions, particularly in the Southeast, prices are still rising at a fairly brisk pace.
Although builders are offering incentives, solid demand could mean price hikes, particularly given the extent to which an acute dearth of resale supply is driving buyers into new construction. That dearth of supply might’ve contributed to another decline for existing home sales in April. Consensus expects a 3.3% drop from the NAR update, due Thursday.
Recall that prior to a huge jump in February, sales of previously-owned homes fell a dozen months in a row. Macro watchers will get starts and permits the day before, and a fresh look at builder sentiment on Tuesday.
There are too many Fed speakers to enumerate, but I’ll enumerate them anyway: Barr, Bostic, Bowman, Cook, Goolsbee, Jefferson, Logan, Mester, Williams and Powell, who’ll speak Friday at an event with Ben Bernanke.
Oh, and I mentioned this in the weekly+, but the recent jump in jobless claims was a bit of a false optic. According to local officials, a sharp increase in Massachusetts was due to fraudulent applications.
So, upcoming claims data will be scrutinized for evidence of increases that aren’t attributable to fraud.
Finally, watch for activity data out of China. Markets are now skeptical of the re-opening narrative in the world’s second largest economy after disappointing reads on manufacturing, imports and credit growth, as well as CPI and PPI figures which suggested demand is very soft.
Beijing will release the industrial output / retail sales/ fixed investment trio on Tuesday. Those readings will be distorted by the Shanghai lockdown comp, complicating the already difficult task of interpreting the Party’s macro smoke signals. It is, as I wrote last week, a “vexingly convoluted” situation+.
