Walking A Fine Line Here – Weekly Market Outlook

In retrospect, last week’s bounce wasn’t have been a total surprise.  Most of the market’s major indices were approaching major support levels, as we’ve previously discussed.  Will the momentum continue or will the bearish volatility return? 

We’ll look into that, right after a quick look at all of last week’s and this week’s economic numbers.

Economic Data

Last week’s economic news didn’t get us started on the right foot.  The moderate expectations for retail sales growth report ended up being too high, chart below. 

Retail Sales, YOY Growth Chart

Source: Thomson Reuters Xenith

We didn’t hear any other significant news until Friday, when we got a double dose of announcements. 

First we heard about July’s producer price inflation rate.  Although this figure isn’t the more important consumer price inflation data due this week, the PPI data can be something of an omen of what’s to come on the consumer front. It doesn’t appear we have much to worry about, however. As of last month, the annualized producer price inflation rate stands at 1.7%. We may once again want to be more worried about deflation.

Consumer and Producer Inflation Rates Chart

Source:  Bureau of Labor Statistics

Finally – and definitely most importantly – on Friday we heard about the nation’s capacity utilization rate and its industrial productivity.  Both were up in July.  Capacity utilization ramped up from 79.1% to 79.2%, while productivity grew by 0.4%.  As long as these two data sets are rising, the country remains in a state of economic expansion.  That’s good for the long-term market, even if it doesn’t smooth out all the short-term bumps.

Industrial Production & Capacity Utilization Chart

Source: U.S. Federal Reserve

Everything else is on the grid.

Economic Calendar

Source:  Briefing.com

The coming week isn’t going to be a terribly busy one either, but it’s going to be an important one for the housing and construction market, kicking off a two-week stretch of data regarding the sector.  That party gets started on Tuesday with July’s housing starts and building permits figures.  The pros currently see a little growth in the cards for both…. some much-needed growth.  On Thursday we’ll hear about last month’s existing home sales, which are expected to slide a little lower from June’s levels, though bear in mind June was a pretty strong month for sales of existing homes.  Our chart of all the real estate trends tell the mixed tale.