Fed has its eye on an economy that’s watching right back

The Federal Reserve is holding its fifth meeting of the year today and Wednesday and, although Fed watchers don’t expect a rate increase, they’ll be scrutinizing the central bank’s statement to see whether the Fed is sending subtle signals about a move that could come in the fall.
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The Federal Reserve is holding its fifth meeting of the year today and Wednesday and, although Fed watchers don’t expect a rate increase, they’ll be scrutinizing the central bank’s statement to see whether the Fed is sending subtle signals about a move that could come in the fall.

“I could see very small tweaks to the language that could indicate that liftoff is on track for September,” Jonathan Wright, a professor at Johns Hopkins University in Baltimore and a former economist at the Fed’s Division of Monetary Affairs, told Bloomberg.

The central bank’s Federal Open Market Committee could send a signal by changing the way it characterizes the risks the economy faces, said Drew Matus, deputy chief U.S. economist for UBS Securities LLC in New York.

After its June meeting the FOMC said it continued to “see the risks to the outlook for economic activity and the labor market as nearly balanced.” If the FOMC shifts toward “being biased toward growth,” that would increase the chances of a rate increase at the Sept. 16-17 meeting without locking the policy-makers in, Matus told Bloomberg.

Meanwhile, earnings season continues apace, and marine industry investors will have their eyes on Marine Products Corp., which will issue its second-quarter report on Wednesday, and Brunswick Corp. and West Marine, which will issue their second-quarter reports on Thursday.

Last week MarineMax reported higher revenue and profits for its third quarter, which ended June 30. Revenue rose 8 percent, to $231.8 million, and profits climbed from $11.5 million in the year-earlier quarter to $14.9 million this year.

Companies in other industries that will issue earnings reports this week include Procter & Gamble Co. (fourth-quarter) and Colgate-Palmolive Co. (second-quarter), which will report on Thursday, and Exxon Mobil Corp. and Chevron Corp., which will issue second-quarter reports on Friday.

Several economic reports the Fed will want to watch are on the docket, some before and during the policy-makers’ meeting, and some afterward, including the Commerce Department’s report on second-quarter gross domestic product on Thursday and the University of Michigan’s consumer sentiment index for July on Friday.

On Monday, the Commerce Department said new durable goods orders rose by a seasonally adjusted 3.4 percent in June from a month earlier. Much of the gain was attributable to an increase in aircraft orders at the Paris air show in June.

Apart from the transportation sector, orders rose 0.8 percent. That was the largest monthly increase since August of last year.

The Conference Board will release its consumer confidence index for July today, and Business Insider said economists estimate that the index fell to 100 from 101.4 in June. The S&P Case-Shiller Home Price Index also will be out today, and economists estimate that home prices climbed 0.3 percent month-over-month in May, or 5.6 percent year-over-year.

Housing news was mixed last week. The National Association of Realtors reported Wednesday that home resales rose in June to their highest level in nearly 8-1/2 years, but the Commerce Department said Friday that new-home sales fell 6.8 percent in June from a month earlier, to a seasonally adjusted annual rate of 482,000, the lowest reading since last November.

“The volatility in the stock market last month, triggered by the Greek crisis, might well have persuaded people to hold back temporarily from signing contracts — the point when sales are captured — while waiting for the dust to settle,” Pantheon Macroeconomics Chief Economist Ian Shepherdson told the Wall Street Journal. “We have to expect a clear rebound in July, and further gains” in the second half of the year.

We’ll be watching.

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