The three-month average of the Chicago Fed National Activity Index (CFNAI) is expected to rise fractionally in the July update that’s scheduled for tomorrow (Aug. 24), based on The Capital Spectator’s average point forecast for several econometric estimates. The projection for 0.04 is slightly above the -0.01 reading for June, which reflects a below-average pace of economic growth for the US relative to the historical trend. Only negative values below -0.70 indicate an “increasing likelihood” that a recession has started, according to guidelines from the Chicago Fed. Using today’s estimate for June as a guide, CFNAI’s three-month average is expected to reflect an expansion that’s close to the historical trend rate for growth and therefore well above the tipping point that marks the start of a new recession.
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The end of the summer is in sight. How’d that happen? Hmmm… maybe my calendar’s slow. Oh, well, no time to waste. Your editor’s playing hooky for rest of the week to cash in on the waning days of August. The daily grind resumes on Monday, August 24. Cheers!

Recession risk in the US remained low in the kick-off month for the third quarter, based on a broad set of economic and financial indicators. Although economic growth remains modest, the available data through July suggests that the broad macro trend was still firmly positive.
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● US housing starts near 8-year high in July
● Redbook: US retail sales higher in first half of August
● Oil’s bear market rolls on as Opec plans to keep pumping
● China’s equity market remains volatile after currency devaluation
● Eurozone current account in June rises for first time in 5 months
● Japan’s department-store spending in July rises for fourth straight month
● Japan’s trade deficit widens, exports slow in July

Housing Starts inched higher in July, reaching a new post-recession peak of 1.206 million units (seasonally adjusted annual terms). That’s encouraging, but the news is tempered by the sharp deceleration in the year-over-year trend. The net result: residential construction activity continues to increase, but it’s still not clear that we’ll see much more than modest growth at best in the near term.
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Federal Reserve Vice Chairman Stanley Fischer last week advised that “a large part of the current [low] inflation is temporary.” Speaking to Bloomberg TV, he explained that “these things will stabilize at some point, so we’re not going to be as low as we are forever.” Based on recent action in the Treasury market, however, the crowd’s still expecting low-flation to roll on for the near term.
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● US home builder confidence inches up in Aug, close to 10-year high
● NY Fed mfg. index crumbles in Aug–lowest since 2009
● Moody’s: global growth will be muted for next 2 years
● UK inflation perks up from zero
● China’s currency and Asian stocks fall on Tuesday

This morning’s monthly release on manufacturing activity in the New York Fed region offers an early peek at the macro profile for August. Unfortunately, the numbers are unusually ugly. Is this an early warning sign for the US business cycle? Maybe, but it’s too soon to know for sure. That won’t stop the usual suspects from jumping to defnitive conclusions. But in the wake of a recovery that’s now in its sixth year, an obvious question arises: could macro’s pessimists, after being wrong for so long, finally be right this time?
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Housing starts are expected to total 1.166 million units (seasonally adjusted annual rate) in tomorrow’s update for July, according to The Capital Spectator’s average point forecast for several econometric estimates. The projection represents a slightly lower level of residential construction activity vs. the previous month.
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US interest rates may be set to rise next month, at the Federal Reserve’s policy meeting, but the outlook for tighter monetary policy isn’t weighing on real estate investment trusts (REITs). Highly prized for relatively rich yields, REITs are said to be among the more interest-rate sensitive slices of the capital markets—not quite as vulnerable as bonds but considerably more so vs. stocks. But that theory looks a bit wobbly these days in the wake of a modest rally in securitized real estate securities.
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