US Housing data, Core PCE inflation

The slowing US housing market is making alive some memories from the 200—2009 great recession but there is some confusion about whether it’s a red flag for the economy these days. New home sales have been trending downwards so far this year and the August reading is expected to mark a new low at 500k from 511k previously, the lowest in six years. Pending home sales due today could show a steeper contraction of -1.4% from -1.0% previously, remaining negative for the third consecutive month.

A stabilization in the red-hot rent market in August, perhaps on the back of state limits in some regions, was probably a catalyst to a softer house demand too. However, more than half of the renters are still facing elevated prices year-on-year and given the inflation in construction materials as well as the tight supply of houses, there is little prospect for a significant slowdown in the market.

The strength in the labor market is also a tailwind for the real estate sector, delaying any defaults in loan payments. Personal income and consumption figures and together the core PCE inflation on Friday could provide some updates on that front. Although expectations are for a minor monthly pickup to 0.3% and 0.2% respectively, the indicators may not rise any concerns if they stay within normal levels. A potential mild increase in the core PCE inflation to 4.7% y/y would not be something new either after similar pace in the core CPI inflation reading.

Unless a significant negative deviation from forecasts takes place, this wek’s dataset may not have the power to shake the dollar. It’s obvious that monetary policy is the main player in town in global markets, therefore investors may appear more sensitive to speeches from Fed policymakers in the rest of the week, especially if comments shed more light on how big size of future rate hikes will be. Chairman Jerome Powell, as well as Charles Evans and James Bullard will be commenting at events today, while James Bullard, Loretta Mester and John Willams will follow next later in the week.