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Weekly economic review & outlook
Housing surges; a new paradigm for the Fed; new infections down

AUG. 31, 2020

You Need to Know

Week in review

A significant change in the way the Fed will conduct monetary policy

Fed Chair Jerome Powell announced that the Fed will now follow an inflation averaging scheme – sometimes allowing inflation to move above its 2.0 percent goal.

Housing activity continued to surge for July

Spurred by low mortgage rates and a desire for “space,” new home sales soared to the highest level since 2006 while pending sales jumped to late-2005 levels.

Week Ahead

Forecasts

ISMs expected to rise again

A fourth consecutive month of increases for both manufacturing and services activity is expected this month.

Nonfarm payrolls should see another sizable gain

Another large increase in payroll employment for August is projected, albeit smaller than in recent months. The unemployment rate should finally drop into single digits.

Stable light vehicle sales

Given the magnitude of the recovery thus far, and still high unemployment rates, we expect sales gains to take a breather for August. We project the annualized pace of light vehicle sales in August was little changed at 14.5 million units.

There has been a decided downtrend in the new virus infection rate over the past month, which is starting to be reflected in improved high-frequency economic data. The housing market rounded out a very strong July with a further 13.9 percent jump in new sales. And after a nearly two-year review of its policy framework, the Federal Reserve announced a move to an average inflation strategy around its 2.0 percent long-term inflation goal.

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