The Atlanta Fed kept the forecast for Q3 GDP at the same 4.3%

Outlook:

The data show the US economy in fine fettle, with only a few dark spots. Today we get the usual Thursday jobless claims and housing starts and permits, plus the Philly Fed. Housing starts are not usually a market mover, but last time they formed one of those dark spots. Starts fell 12.3% in June to a rate of 1.173 million, and spread across all regions and types of housing. This was five times the drop expected. Permits also fell in June by 2.2% from May when a gain was forecast.

Where is the “So What?” first, sentiment. It’s happy people who buy new houses. Second, affordability. With rates on the rise, you’d think buyers would be rushing to get in before costs go up. There’s something here we should be heeding but we are not sure quite what it will turn out to be.

Housing may not be a threat to the overall outlook. The Atlanta Fed kept the forecast for Q3 GDP at the same 4.3%. See the WSJ version of GDP incorporating the Atlanta Fed forecast.

The outlook has to remain the same—Fed hawkish, economy booming, dollar on the rise once this mini-correction ends.  But keep an eye on the far left field for stray balls.

Political Tidbits: Ripping and staining even more of the fabric of civilized public life in the US, Trump’s latest act is to remove the security clearance of those who criticize him, including former CIA and FBI directors. Retribution for solely political reasons is shameful banana republic stuff, especially from a draft dodger attacking those who devoted their lives to public service. Ex-CIA director Brennan spoke of Trump’s “failures” in meeting his responsibilities and says he will not relent. 

The event may have been an attempt to distract attention from two other cases that shed disgrace on Trump. Another of Trump’s utterly unqualified staffers was fired and she retaliated with a book cleverly titled “Unhinged.” On the publicity trail, she claims Trump knew about the hacked emails long before it became public, hinting he is complicit. She also says he used the N word and the audiotape proving it will be released ahead of the midterms. Alas, the Trump base will welcome it, and much of the other 70% is indifferent. A growing group is not indifferent, saying “It may be who we are, but it’s not who we want to be.” Shades of the civil rights ‘60’s, and we rather like it. We dread the moment when Trump proposes black Americans just go back to Africa.

On another front, the jury in the first trial of Trump’s campaign manager Manafort may deliver a verdict as early as today or tomorrow. The defense mounted no defense, saying the government failed to prove its case, despite documents piled to the ceiling overwhelmingly showing guilt. Nobody is taking any bets that Trump will not pardon him. A long nightmare, indeed.

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