Economic Data Tracker – 
The end (of summer) is nigh

Trend watch

With evening temperatures beginning to slip and earlier sunsets, the seasons are changing. As the old saying goes, “the only thing that is undefeated is time.” Thus, with shorter days and the kids back in school, overall activity continues to ramp down in a fairly typical seasonal pattern (slides 5 and 6). Yet, right on cue, other activities are restarting. For instance, college and professional football seasons have begun, as have high school games (aka Friday night lights).

One notable exception is freight, which continues to run well-ahead of seasonal patterns. For example, container traffic through 7 top U.S. ports are up 14.4% year to date. There may be multiple reasons, including getting ahead of a potential longshoreman’s strike at select ports, or frontrunning potential higher tariffs depending on the outcome of the U.S. presidential election. 

What’s new this week

• Purchasing managers index (PMI): Mixed view continues (slide 7).
• Job openings continued to slide in July but hiring up, while quit rate hovers near prior trend (slide 8).
• Retail sales improving compared to 2023, but trading down for bargains has continued for some consumers (slide 9).
• Consumers: Fewer utilities customers in arrears over the past two years (slide 10). 

Our take

The incoming economic data – from retail sales and personal incomes to durable goods orders and the activity-based indicators – continue to reflect a U.S. economy that’s doing just fine. We even highlight the tick down in customers falling behind on their utility bills. Similarly, most consumers remain current on their payments – to the tune of 96.8% as a percentage of total balances. In other words, the vast majority of consumers don’t appear to be struggling financially.

Additionally, inflation readings have continued to taper lower, meaning that most Americans will have a little more breathing room going forward. With inflation cooperating, the Federal Reserve (Fed) no longer must fret about inflation and can do what it needs to do to support growth.

Contrary to the prevailing narrative, we believe there's a high bar for anything other than a rate cut of a quarter point (0.25%) at the September Fed meeting in two weeks. In our view, there's a ton of data pointing towards "the economy is cooling but not weak."

Our analytical mantra is to consider a broad set of data, not just one series or a few months. This weight of the evidence approach has served us well.

To be clear, we’re not saying that the Fed won't do a half point (0.50%) rate cut this cycle -- just that a supersized rate cut is unlikely in September. In fact, they very well might follow up a September quarter point cut with a half point cut in November.

Bottom line

We maintain our view that the U.S. economy is cooling but not weak, especially when compared to pre-pandemic figures. However, it’s steadily becoming more apparent that interest rates are overly restrictive to the point of hampering growth. The Federal Reserve is on track for a quarter point (0.25%) rate cut in September.