“Do More of What Works and Less of What Doesn’t”

1. US New-Home Sales Unexpectedly Jump Over 20% in Broad Advance — New-home sales in the US unexpectedly surged in August to the fastest pace since early 2022, likely lifted by builders’ rampant price cuts and sales incentives. The surge in demand helped put a significant dent in what’s been a vast oversupply of new homes on the market. Last month, the inventory of new homes for sale decreased to 490,000 units, the lowest this year.
2. US Economy Grows at Fastest Pace in Nearly Two Years on Consumer Spending — Inflation-adjusted gross domestic product, which measures the value of goods and services produced in the US, increased at a revised 3.8% annualized pace, a Bureau of Economic Analysis report showed Thursday. That was stronger than the previously reported 3.3% advance and followed an outright contraction in the first quarter.
The BEA also issued its annual update of the national economic accounts, which showed real GDP still increased at an average annual pace of 2.4% from 2019 to 2024. The revisions paint a picture of an economy that quickly rebounded from the initial shock of the pandemic and has since transitioned to period of steadier, trend growth with lingering inflation.
3. PCE Inflation Report: Numbers Come in as Expected, Paving Way for Rate Cut — Consumer spending, adjusted for changes in prices, increased 0.4% last month, according to Bureau of Economic Analysis data out Friday. The consecutive strong gains in consumer spending add to evidence of a solid economy in the current quarter, building upon even greater growth in the prior period than previously thought. However, maintaining such momentum hinges in large part on the labor market, which has shown signs of faltering with slower hiring and more moderate wage gains. Spending on merchandise climbed 0.7%, reflecting discretionary purchases like furnishings, clothing and recreational goods. Outlays for services advanced at a more tempered pace.
4. Daly Says More Rate Cuts Likely But Fed Should Move Cautiously — Policymakers last week lowered interest rates for the first time since December, cutting their benchmark by a quarter percentage point. Daly said she “fully supported” the decision as growth, consumer spending and the labor market have slowed. She added that inflation has accelerated less than she and her colleagues expected, and that price pressures have mainly been confined to parts of the economy directly impacted by tariffs. Before this month’s rate reduction, Fed officials had left rates on hold this year to assess how new policies, including those on trade, would affect the economy.

The week ahead — Economic data from Econoday.com: