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This past week, economic news was mixed along with corporate news. Markets continued to speculate on what the Fed might announce about tapering bond purchases in coming months at its September policy meeting. Increasingly, markets believe that there will be guidance of at least slight and gradual tapering.
 Equities declined this past week largely on concerns of Fed tapering later this year in bond purchases—perhaps as soon as September. Stocks started the week mixed with no notable economic indicators. Traders continued to digest the prior Friday’s disappointing jobs report. Fed Bank of Dallas President Richard Fisher stated that quantitative easing might be cut back soon. These comments more than offset better-than-expected a non-manufacturing ISM report. Stocks dropped significantly Tuesday on FedSpeak. Atlanta Fed’s Dennis Lockhart told Market News International in an interview that the Fed could begin trimming the size of the stimulus program as soon as September, but might wait longer if the expected economic growth in the year's second half fails to materialize. Later in the day, Chicago Fed President Charles Evans said the Fed will probably decrease its massive bond buying stimulus program later this year—and depending on the economic data—could do so as early as next month.
 Stocks dipped further Wednesday—again based on FedSpeak and concern that the Fed may be cutting back on bond purchases in coming months. Cleveland Fed President Sandra Pianalto said the Fed would be prepared to scale back asset purchases if the labor market remains on the stronger path followed since last fall.
On Thursday, equities got some lift from better than expected jobless claims—up 5,000 and less than expected after a 17,000 drop the prior week. For the day, good news was good news. Stocks declined again Friday on no notable economic news. The key concern was potential Fed tapering.
Equities were down this past week. The Dow was down 1.5 percent; the S&P 500, down 1.1 percent; the Nasdaq, down 0.8 percent; the Russell 2000, down 1.1 percent; and the Wilshire 5000, down 1.0 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 17.7 percent; the S&P 500, up 18.6 percent; the Nasdaq, up 21.2 percent; the Russell 2000, up 23.4 percent; and the Wilshire 5000, up 19.8 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 The bond market has been more subdued than stocks. Daily swings in rates this past week were marginal, in contrast to equities.
Rates rose modestly Monday on a stronger-than-expected ISM report on non-manufacturing. After essentially no change Tuesday, yields eased Wednesday essentially on rates being attractive and a favorable 10-year bond auction. There was little movement on Thursday and Friday. Bond traders appear to have gotten over the issue of eventual Fed tapering.
For this past week Treasury rates were mixed and slightly changed as follows but with the long end down: 3-month T-bill, up 2 basis points; the 2-year note, unchanged; the 5-year note, unchanged; the 7-year note, down 2 basis points; the 10-year note, down 3 basis points; and the 30-year bond, down 5 basis points.
 Crude oil prices were net little changed this past week although there were notable daily swings. After little change Monday, the spot price of WTI dipped about a dollar a barrel on Tuesday on speculation that the Fed will cut back on quantitative easing. These concerns continued with a more than dollar decline Wednesday.
After a marginal decrease Thursday, spot WIT jumped over $2 per barrel on a report of a spike in Chinese industrial output.
Net for the week, the spot price for West Texas Intermediate eased 67 cents per barrel to settle at $106.09.
Limited economic news points to a still soft labor market. Other data were mixed.
 Job openings in June were flat based on the June JOLTS (BLS’s Job Openings and Turnover Survey) report where openings rose but only very slightly to 3.936 million versus a revised 3.907 million in May. The job openings rate was unchanged at 2.8 percent.
There were somewhat positive readings including the separations rate, down 2 tenths to 3.0 percent, and the layoff rate, also down 2 tenths to 1.1 percent. The quit rate was unchanged at 1.6 percent. On the negative side was the hiring rate, down 2 tenths to 3.1 percent.
The take from the Bureau of Labor Statistics, which compiles this report, is that conditions are little changed, an assessment that will not ease job-market concerns among doves at the Federal Reserve.
 The consumer sector is still cautious despite improved sentiment. May was a busy month for credit card companies but not June which held down consumer credit growth to $13.8 billion versus May's revised $17.5 billion. Revolving credit, which had jumped a revised $6.4 billion in May, contracted $2.7 billion. Revolving credit has been up and down for the whole recovery, reflecting consumer caution and tight lending standards.
Credit growth has instead been fueled by non-revolving credit which jumped $16.5 billion in the month for one of the largest gains of the recovery and one of the largest in the 70-year history of the series. The gain reflects strong car sales but also continued growth in student loans. Note that growth in student loans reflects ongoing government acquisition of student loans from private lenders and does not necessarily reflect current student borrowing.
Excluding autos, June was a weak month for retail sales as reflected in the revolving credit component of this report.
 Data on the economy have been mixed and sluggish recently. But the latest ISM report on non-manufacturing was more upbeat.
June's slowdown in new orders and business activity proved a one-month outlier as the ISM's non-manufacturing report showed a surge for both in July that drove the composite index up a very substantial 3.8 points to 56.0 for the best reading since February. New orders, the key component in the report, rose nearly 7 points to 57.7 for its best reading since December. Business activity really took off, up more than 7-1/2 points to 60.4, also the best reading since December.
But some other readings are mixed as the rise in business activity, which is equivalent to a production index on the manufacturing side, made for a draw down in backlog orders which dipped more than 5 points to 46.5. Employment growth slowed a little bit, confirming the latest slowing in payroll growth.
 A drop in imports together with a rise in exports made for a surprisingly narrow trade gap in June, at minus $34.2 billion versus a revised minus $44.1 billion in May. This is the lowest trade gap in more than 4 years. Importantly, about two thirds of the improvement comes from non-oil goods.
The improvement in the trade gap was primarily due to the nonpetroleum goods deficit which shrank to $34.4 billion in June from $41.3 billion the prior month. The petroleum deficit narrowed to $17.4 billion from $20.8 billion in May. The services surplus improved to $18.9 billion from $18.8 billion.
Though the drop in imports may be good for the trade balance, it does pose a negative signal for domestic demand. Imports of consumer goods show the steepest drop followed by industrial supplies.
But the rise in exports is a clearly positive signal, led by gains for industrial supplies and including strong gains for capital goods, boosted by aircraft, and also gains for consumer goods.
The latest report is a strong positive for the second-quarter GDP revision as the Commerce Department's assumption for the June deficit was $42.3 billion.
Though the latest data were limited, they indicate that the recovery continues and may be regaining some moderate strength in the third quarter. However, the labor market remains questionable—a key focus of Fed policy and what may affect the timing of tapering.
This week is jam packed and indicators might actually outweigh FedSpeak. For the consumer, June retail sales were disappointing so the July numbers will get extra attention—especially at the core level. Industrial production looked good in June but the forerunner numbers for July are mixed. Manufacturing has been oscillating and the July production number may be on the soft side—but the forecast data are mixed. Housing starts are likely to be higher based on homebuilder sentiment—but wet weather on the east coast may still be an issue.
The U.S. Treasury monthly budget report for June showed notable improvement. The Treasury posted a surplus of $116.5 billion versus a May deficit of $138.7 billion. However, more than half of the improvement reflected rescue repayments by government agencies Fannie Mae and Freddie Mac. Looking ahead, the month of July typically shows a moderate deficit for the month. Over the past 10 years, the average deficit for the month of July has been $89.4 billion and $129.5 billion over the past 5 years. The July 2012 deficit came in at $69.9 billion.
Treasury Statement Consensus Forecast for July 13: -$96.0 billion
Range: -$96.0 billion to -$90.0 billion.
The NFIB Small Business Optimism Index after two months of improvement slipped nearly 1 point in June to 93.5. Most components were negative in the month including the outlook for sales. However, financing and capital outlay plans were solid. Earnings and wages were weak and job creation was flat.
NFIB Small Business Optimism Index Consensus Forecast for July 13: 94.5
Range: 94.0 to 95.0
Retail sales disappointed in June. Retail sales gained 0.4 percent, in June following an increase of 0.5 percent in May. The latest boost got a lot of lift from autos and gasoline. Motor vehicles rose 1.8 percent after a 1.4 percent advance in May. Ex-auto sales were flat after rising 0.3 percent in May. Weakness was despite a rise in gasoline sales which increased 0.7 percent, following a 0.4 percent gain the month before. Excluding both autos and gasoline components, sales declined 0.1 percent after gaining 0.3 percent in May. Looking ahead, the numbers are mixed with weekly sales up and gasoline prices up. But unit new vehicle sales slipped in July, down 1.8 percent but at still a very strong annual rate of 15.7 million.
Retail sales Consensus Forecast for July 13: +0.3 percent
Range: +0.1 to +1.0 percent
Retail sales excluding motor vehicles Consensus Forecast for July 13: +0.4 percent
Range: +0.2 to +1.0 percent
Less motor vehicles & gasoline Consensus Forecast for July 13: +0.4 percent
Range: +0.3 to +1.0 percent
Import prices fell 0.2 percent in June. This was the fourth straight negative reading though it is less severe than declines of 0.7 percent and 0.6 percent in May and April. Prices of petroleum imports, up 0.2 percent, limited the overall decline and are likely to have a similar effect in the July report given the recently sharp price increases for oil. When excluding petroleum products, import prices fell 0.3 percent for a second straight month. The ex-petroleum year-on-year reading was at minus 0.5 percent which is the fourth straight month in the negative column.
Total export prices slipped 0.1 percent which was a fourth straight decline.
Import prices Consensus Forecast for July 13: +0.9 percent
Range: -0.1 to +1.1 percent
Export prices Consensus Forecast for July 13: +0.2 percent
Range: 0.0 to +0.3 percent
Business inventories inched 0.1 percent higher in May following a 0.2 percent revised gain in April. But relative to sales, as measured by the inventory-to-sales ratio, inventories were down, to 1.29 versus 1.30 in both the prior two months. More recently, factory orders gained 0.1 percent in June and wholesale inventories dipped 0.2 percent.
Business inventories Consensus Forecast for June 13: +0.2 percent
Range: -0.1 to +0.3 percent
The producer price index in June jumped 0.8 percent, following a 0.5 percent boost in May. The core rate, which excludes both food and energy, firmed to 0.2 percent after rising 0.1 percent the month before. Food prices moderated to a 0.2 percent rise, following a rebound of 0.6 percent in May. Energy spiked 2.9 percent in June after a 1.3 percent boost in May. Gasoline prices surged 7.2 percent, following a 1.5 percent rise in May. Turning to the core, a major contributor to the June increase was prices for passenger cars, which rose 0.8 percent. An advance in the index for light motor trucks also was a factor in higher finished core prices.
PPI Consensus Forecast for July 13: +0.3 percent
Range: +0.1 to +0.6 percent
PPI ex food & energy Consensus Forecast for July 13: +0.2 percent
Range: +0.1 to +0.4 percent
The consumer price index for June surged 0.5 percent, following a modest rebound of 0.1 percent in May. The core CPI—excluding food and energy—increased 0.2 percent, matching the pace in May. By major components outside the core, energy spiked 3.4 percent, following a partial rebound of 0.4 percent in May. Gasoline surged 6.3 after no change in May. The food component rebounded 0.2 percent, following a dip of 0.1 percent in May. For the core measure, advances in the indexes for shelter, medical care, and apparel accounted for most of the rise, with increases in the indexes for new vehicles and household furnishings and operations also contributing.
CPI Consensus Forecast for July 13 +0.2 percent
Range: +0.2 to +0.6 percent
CPI ex food & energy Consensus Forecast for July 13: +0.2 percent
Range: +0.1 to +0.3 percent
Initial jobless claims for the August 3 week rose by 5,000 to 333,000 after dropping 17,00 the week before. The four week average of claims declined to the lowest level since 2007. But overall, the jobs market is slowly improving, auto-retooling adjustments are fading in importance, and most readings are at or near recovery lows. At a new recovery low is the 4-week average, down 6,250 to 335,500. Continuing claims for the July 27 week were at 3.018 million which was up a bit from the prior week's recovery low of 2.951 million. But the 4-week average was down slightly, to 3.024 million.
Jobless Claims Consensus Forecast for 8/10/13: 330,000
Range: 320,000 to 335,000
The Empire State manufacturing index in July rose to a moderately strong 9.46 from 7.84 in June and minus 1.43 in May. However, details showed less strength than the headline index with new orders showing a much softer rate of monthly growth at 3.77 which, however, was substantially improved from the June reading of minus 6.69. Shipments, at 8.96, showed strong growth while delivery times slowed which indicates a little bit of congestion in the supply chain which is consistent with rising activity.
Empire State Manufacturing Survey Consensus Forecast for August 13: 10.00
Range: 1.00 to 12.00
Industrial production regained some momentum in June after weak numbers in April and May. Overall industrial production rose 0.3 percent, following no change in May and a 0.3 percent decline in April. The manufacturing component gained 0.3 percent after a 0.2 percent rise in May. Excluding motor vehicles, manufacturing posted a 0.2 percent advance, matching the pace in May. Strength was seen in both durable and nondurables although the highlight was vehicles. Light motor vehicle assemblies hit a recovery high in June at an annualized pace of 10.98 million units, compared to 10.78 million in May and the recession low of 3.56 million in January 2009. June’s pace is the highest since June 2007. Capacity utilization for total industry improved to 77.8 percent in June from 77.7 percent the month before. Looking ahead, the manufacturing component of industrial production may decline as production worker hours in manufacturing decreased 0.5 percent in July. But the auto component is always a wild card.
Industrial production Consensus Forecast for July 13: +0.3 percent
Range: 0.0 to +0.9 percent
Manufacturing production component Consensus Forecast for July 13: +0.3 percent
Range: +0.1 to +0.7 percent
Capacity utilization Consensus Forecast for July 13: 77.9 percent
Range: 77.7 to 78.2 percent
The NAHB housing market index for July rose another 6 points to 57 for the highest level since the bubble days of 2006. Since just April, this index is up 16 points. Future sales were the strongest component in the report, at 67, with present sales also very strong at 60 for a 5 point gain that points to strength for new home sales. Traffic is on the rise but continues to lag at 45.
NAHB housing market index Consensus Forecast for August 13: 56
Range: 50 to 59
The general business conditions index of the Philadelphia Fed's Business Outlook jumped 7.3 points in July to 19.8, posting the strongest rate of monthly growth in the Mid-Atlantic manufacturing economy since March 2011. Details mostly confirmed the strength at the headline level. These included shipments, at 14.3 versus 4.1 in June, and employment at 7.7 versus minus 5.4 the month before. New orders, at a solid 10.2, were in positive growth territory but to a lesser degree than June's 16.6 reading.
Philadelphia Fed survey Consensus Forecast for August 13: 15.0
Range: 7.5 to 22.7
Housing starts retrenched sharply in June on a downswing in the volatile multifamily component. And atypically wet weather likely weighed on starts. Housing starts in June fell back 9.9 percent, following an 8.9 percent surge in May. The June starts annualized level of 0.836 million units was up 10.4 percent on a year-ago basis. June’s starts level was the lowest since August 2012. The decrease in starts was led by a monthly 26.2 percent drop in the multifamily component after a 28.2 percent jump in May. The single-family component slipped 0.8 percent, following a 0.5 percent rise in May. Permits also dropped sharply on a plunge in the multifamily component. Permits fell 7.5 percent in June after dipping 2.0 percent the prior month. June’s annualized pace of 0.911 million units was up 16.1 percent on a year-ago basis.
Housing starts Consensus Forecast for July 13: 0.900 million-unit rate
Range: 0.829 million to 0.945 million-unit rate
Housing permits Consensus Forecast for July 13: 0.935 million-unit rate
Range: 0.900 million to 0.995 million-unit rate
Nonfarm business productivity for the first quarter was revised down to a rise of 0.5 percent versus the initial estimate of a gain at an annualized 0.7 percent. Unit labor costs were revised down sharply to minus 4.3 percent in the first quarter instead of an increase of 0.5 percent as originally estimated. However, the fourth quarter also was revised sharply to an 11.8 percent surge, compared to the prior estimate of a 4.4 percent jump in the fourth quarter.
Nonfarm Business Productivity Consensus Forecast for initial Q2 13: +0.6 percent annual rate
Range: -0.4 to +2.3 percent annual rate
Unit Labor Costs Consensus Forecast for initial Q2 13: +1.0 percent annual rate
Range: +0.2 to +2.5 percent annual rate
The Reuter's/University of Michigan's consumer sentiment index ended July at 85.1 which was the best reading since July 2007. And the implied reading for the last two weeks of the month was even higher, around the 86 area based on the difference between the final reading and the mid-month reading which was at 83.9.
Consumer sentiment Consensus Forecast for preliminary August 13: 85.5
Range: 82.5 to 87.0
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books.
Econoday Senior Writer Mark Pender contributed to this article.
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