Next week, the U.S. economic data calendar is light, allowing markets to digest the Federal Reserve's initial interest rate hike in three years. Inflation pressures are on the rise, prompting attention toward regional Fed surveys from Philadelphia, Richmond, and Kansas City, as well as the S&P PMIs. These surveys may provide early insights into inflation trends and the impact of rising energy costs on the broader economy. Two additional rate hikes from the Fed are anticipated by year-end due to persistent inflation concerns.
Read More
The housing market is expected to remain under strain from increasing rates. On Thursday, new home sales data is anticipated to confirm this trend, remaining low at an expected 588,000 units as elevated mortgage rates hinder affordability. Furthermore, the new construction pipeline indicates a downward trend, with August building permits declining to near cycle lows, influenced by weak demand, high input costs, and increased borrowing expenses. A housing rebound does not appear likely, as residential investment has detracted from GDP growth in seven of the last ten quarters and is expected to do so in the near future.
The durable goods report will be important for assessing momentum in AI-related investments. In contrast to the housing sector, nonresidential investment has consistently contributed positively to GDP since 2020, primarily driven by structural investments and equipment spending linked to AI development. This sector has added nearly one percentage point to GDP growth since early 2025, suggesting that without the AI investment boost, growth would have been below 1% in the first half of 2026. Currently, the U.S. GDP growth is predominantly fueled by consumer spending and AI-related capital expenditures, making a slowdown in either area concerning.
Additionally, several state and local measures aimed at restricting data center development—particularly in New York, Texas, Pennsylvania, Oregon, Massachusetts, and New Jersey—could impede AI capital expenditure growth. Analysts are monitoring durable goods orders for early signs of a slowdown, yet no indications are expected in the upcoming data. A 0.2% increase in headline durable goods orders month-over-month is forecasted, despite a decline in Boeing orders. Excluding transportation, core orders are projected to rise by 0.7% month-over-month, primarily driven by computer and electrical equipment amidst the ongoing AI expansion.