The market is enjoying a bit of a relief rally this morning after yesterday’s disastrous session. Meanwhile, turmoil continues to brew in the underlying fundamentals of the economy. The ICSC reported retail sales were down 0.9% week over week and -0.6% year over year. This morning’s Redbook reading of -4.5% was also in-line with the very weak consumer trends.
In the housing front we could be seeing the first signs of seasonal deterioration. This would tend to rhyme with the recent downturn in consumer data. Econoday reports:
Homebuilding in July slipped from June’s gain but remained above recent lows. Also, the single-family component continued its uptrend. Housing starts in July decreased 1.0 percent, following a 6.5 percent boost the month before. The July pace of 0.581 million units annualized was down 37.7 percent year-on-year and was lower than the market expectation for 0.605 million units. The decline in July was led by the multifamily component which dropped 13.3 percent after plunging 26.1 percent the month before. However, the single-family component rose another 1.7 percent after gaining 17.8 percent in June. Single-family starts have risen five months in a row.
Continuing the onslaught of bad news is the PPI data which shows an uncomfortable level of deflation in a system that is supposedly in recovery mode. This morning’s reading was down 6.4% year over year and -0.1% month over month. Analysts were expecting a positive figure.
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.