July Economic Review: Declines Continue, Ongoing Recession Risks, And Stocks Gain

Kevin Canterbury Redstone Capital Management

From the leading economic indicators keeping the long list of declines going to the ever-rising risks of recession to the slowed retail sales, July wasn’t a wholly positive month for the US economy. However, it wasn’t all doom and gloom — stocks and energy saw gains, somewhat battling the weaker industrial metal prices. 

According to Kevin Canterbury, founder of Redstone Capital Management, a decline of 0.7% occurred this month, following the 0.6% decline the previous month. As such, it continues the stretch of 15 consecutive negative reports, a feat that hasn’t happened since the 2007/08 crisis. 

Retail Sales Failed to Meet Expectations

While economists predicted retail sales to rise by 0.5%, the sector only managed 0.2% overall. However, subtracting the volatile elements from the equation (e.g., building materials, autos, and gas) flips that percentage on its head; the core measure gained 0.6%.

The most positive influences here came from online retail, electronics, furnishings, and miscellaneous stores, whereas food and beverage sales fell, hurting the overall gain. Experts attribute this decline to the expiration of pandemic food stamp benefits. 

Despite the unfortunate state of the sector, core sales remain up almost 5% year-over-year when negating the downward commodity pressures.

The Empire State Manufacturing Index Fell

July saw the Empire State Manufacturing Index fall by 5.5 points, retaining a positive level of 1.1. Unlike retail sales, this exceeds expectations of declining to -3.5.

While employment transferred to expansion and new orders moved slightly further into expansion, shipments fell. Although, it did keep its solid expansion status, giving experts a dim light at the end of a relatively long tunnel. 

Prices paid reduced by more than five points, but it wasn’t enough to knock the category from expansion — albeit an incredibly slow expansion (the slowest in three years). 

Kevin Canterbury Redstone Capital Management1

Home Sales Declined Below Forecasted Percentages

Existing home sales dropped by 3.3% to an adjusted annualized rate of 4.16 million units. On the surface, this may not seem diabolical, but experts forecasted a 2.3% decline, so both the single- and multi-family categories failed to meet predictions. 

They’re down by 18% over the past 12 months. However, the median sales prices rose slightly to $410,200, exhibiting a decrease of 1% on a year-over-year basis but remaining one of the highest prices since 1999, according to the NAR.

As for the supply inventory, it measured in at 3.1 months, roughly half the long-term average. And even though July is prime summer selling time, only two months over the last 22 years have shown fewer new listing.

A Mixed Bag for US Stocks

There’s optimism in the stocks world as investors’ positive sentiments continue following better inflation and potential recession avoidance. Disappointingly, such results are stock-specific. 

Growth sectors finished the month in the negative, contrasting recent strength, while value names showed a 2% gain. Small cap stocks performed better than large caps, making up some of their lost ground early in the year. However, communications and consumer discretionary fell by 2% and 3%, respectively.

Kevin Canterbury
Kevin Canterbury