Judging solely by the housing market, July did not look like a good month for the U.S. economy.
The Commerce Department said last week that new-home sales were 9.4 percent lower, at a seasonally adjusted annual rate of 571,000, than the June rate of 630,000, and 8.9 percent lower than the July 2016 estimate of 627,000.
"Sales of new homes fell year over year in July, the first annual decline in more than a year and a disappointing bump in the road in what has otherwise been a good, not great, year for new-home sales," Aaron Terrazas, a senior economist at the real estate hub Zillow, wrote in a research note in remarks that U.S. News & World Report cited in a story about the results. "The decline was driven by annual drops in home sales activity in every region except the booming West."
Terrazas also said the sales data should be "read with caution" because they could be revised at a later date. He was optimistic about the current sales trend.
"Looking at construction activity, new-home starts have been slowly but steadily rising, reflecting strong overall fundamentals and a sound economy that's in better shape than at any point in the past decade," he said. "The scars of the housing bust are still fresh in the minds of many home builders, so it is not surprising that many are taking a cautious approach to ramping up production."
The day after the new-home sales report, the National Association of Realtors said existing-home sales also fell in July, to their lowest level since August of 2016 — a seasonally adjusted annual rate of 5.44 million, down 1.3 percent from the downwardly revised June pace of 5.51 million.
Bloomberg said the housing market’s greatest difficulty is that there are a limited number of properties for sale. That is keeping gains in home prices above the pace of pay increases, so buyers have fewer options.
“Buyer interest in most of the country has held up strongly this summer and homes are selling fast, but the negative effect of not enough inventory to choose from and its pressure on overall affordability put the brakes on what should’ve been a higher sales pace,” Lawrence Yun, the NAR’s chief economist, said in a statement. “Contract activity has mostly trended downward since February and ultimately put a large dent on closings last month.”
Economy watchers know, however, that the housing reports were among few indicators that suggested the U.S. economy did not perform well in July. For example, retail sales rose 0.6 percent for the month and The Conference Board said its Leading Economic Index rose 0.3 percent in July after an increase of 0.6 percent in June and an 0.3 percent increase in May.
So far in August, a key gauge of consumer confidence is on the upswing. The University of Michigan’s Consumer Sentiment Index rose at mid-month to 97.6 from a closing July reading of 93.4 and the index was at its highest level since January.
Richard Curtin, chief economist for the university’s Surveys of Consumers, attributed the increase in optimism to “a more positive outlook for the overall economy, as well as more favorable personal financial prospects.”
MarketWatch reported that a reading of the nation’s manufacturing sector slipped in August, but an index of the services sector climbed. The IHS Markit flash manufacturing purchasing managers index fell to a two-month low of 52.5 from 53.3 in July; the services PMI rose to a 28-month high of 56.9, up from 54.7 in July.
Because both readings were above 50, they indicated growth, although the gains were slower in manufacturing. Indeed, the IHS Markit US Composite PMI Output Index rose to 56 in August 2017 from 54.6 in July.
Chris Williamson, chief business economist at IHS Markit, said in remarks that Fox Business quoted in a story that the boost in the overall economy "suggests that GDP growth is still gaining momentum during the third quarter."
This week is an important one in the economy, topped by the August jobs report, which is due Friday. The median forecast of economists is that the U.S. added 180,000 jobs during the month and that the unemployment rate remained at 4.3 percent.
On Thursday, economy watchers will see July reports on personal income, consumer spending and core inflation.
Today The Conference Board will release its Consumer Confidence Index for August. The forecast is for a strong reading of 121.0 after a 121.1 result last month.
Continuing improvement in the mood of American consumers would give the business community reason to believe the economy will show meaningful growth during the second half of the year.