Shiller price index

The economy & us: what an exceptionally busy week taught us

By Nicole Goodkind and Julia Horowitz, CNN Business

If you’re reading this, it means you survived the busiest week of summer. Congratulations.

The last week of July arrived with an overwhelming confluence of economic data, income reports, Federal Reserve announcements and spending agreements in Congress.

The impact of the past seven days will reverberate over the coming weeks. around the abandoned corridors of Wall Street and Washington DC as politicians and investors retreat to the Hamptons or Martha’s Vineyard or wherever they summer.

Are we in a recession? It’s hard to say, but hopefully by September, the insights we’ve gleaned over this perilous week will be fully absorbed and our understanding of the US economy will be clearer.

So what are we working with here? Let’s summarize.

  • The Federal Reserve raised interest rates an additional 75 basis points. The market was expecting this move, but it was still a historically significant rise. The Fed’s actions raised the rate banks charge themselves for overnight borrowing to a range between 2.25% and 2.50%, the highest since December 2018.
  • The main inflation indicators showed that prices remain high. The personal consumption expenditure price index rose 6.8% in June, the largest 12-month rise since January 1982.
  • Consumer spending was higher, which is usually a sign that the economy remains strong. This time, however, the increase is likely due to rising prices and not thickening wallets. Personal consumption expenditure rose 1.1% for the month, above the estimate of 0.9%.
  • The economy contracted for the second consecutive quarter. GDP contracted at an annual rate of 0.9%. This drop marks a key symbolic threshold for the most commonly used – albeit unofficial – definition of a recession as two consecutive quarters of negative economic growth.
  • Americans have become more pessimistic about the economy. The Conference Board’s consumer confidence index fell in July for the third consecutive month. About 43% of the 3,000 people polled said they thought there was a greater than 50% chance that the United States would fall into a recession in the next 12 months, while only 13% said so in april.
  • Home price growth slowed for the second month in a row. Prices in May were still robust, posting a 19.7% increase from the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index. But the market is cooling due to rising mortgage rates and concerns about inflation. In April, they increased by 20.6%.
  • Congress passed a $280 billion package to bolster the nation’s chipmaking industry. The bill will increase production of critical computer chips in the United States to avoid future supply chain issues and increase competition with China.
  • Senators Chuck Schumer and Joe Manchin reached a $700 billion deal on a sweeping climate, tax and health care bill. The plan includes $370 billion in energy and climate spending, about $300 billion in deficit reduction, subsidies for Affordable Care Act premiums and tax changes.
  • 170 companies released their second quarter results, including Microsoft, Alphabet, Meta Platforms, Apple and Amazon. Results were mixed, with many companies warning of inflation and slower growth in the future. Still, markets managed to end the week and month up.

It’s a lot to digest. Especially in a very persistent heat wave.

Unfortunately, we have another busy week of data before we take a break.

Revenue continues next week with reports from Starbucks, Uber and Airbnb.

We also anticipate the release of some important economic data: JOLT (job openings) unemployment rates and the PMI, a key indicator of US economic activity, are all heading our way.

So forgo swimwear and SPF for now. Or don’t, and bring the beach to your desk. Holidays are a state of mind, right?

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