It’s always good when people or reports are better than you think. It’s like that for my baseball team right now. If only they had started better. We’ve also had some good surprises coming in terms of jobs numbers lately, leaving me with similar mixed feelings. Let’s get right into it!
As always, this report is made possible in part with the help of analysis from our friends at Econoday.
Consumer Price Index (CPI)
Inflation is here. The question is now how high and for how long. Overall inflation was up 0.6% in May and 5% since the same time a year ago. When food and energy were removed from the equation, inflation was up 0.7%, with prices rising 3.8% since last year. The year-over-year increase in inflation was the highest since August 2008.
Food prices were up 0.4% in May, matching the increase in April. Overall, they’re up 2.2% in the last year. On the energy side, prices were flat. However, they’ve risen 28.5% higher than they were at this time last year. It’s worth noting that much of the world wasn’t really driving anywhere last May, but still.
Producer Price Index (PPI)
On the production side, prices were up 0.8% in May and 6.6% on the year. This would lead you to believe that prices on the consumer side have more room to go up in coming months because cost increases are often at least partially passed on. This is the largest overall monthly increase since November 2010.
Retail sales were down in May, but that doesn’t tell the whole story. Although they fell 1.3%, April numbers were revised way up, from flat initially to an increase of 0.9%. Stimulus checks being distributed and then stopping at various times throughout the year have contributed to ups and downs in this number and last month is no exception.
Now this is good news! Production was up 0.8% overall in May with a 0.9% surge in manufacturing. Meanwhile, capacity utilization in factories was up 0.2% to 75.2%. On the downside, industrial production in April was revised way down to 0.1% and manufacturing was down 0.1%.
Housing Market Index
In June, the housing market index was down slightly, falling 2 points to 81. This means that builder confidence wasn’t quite as high in June, although the number is still overwhelmingly positive.
New Residential Construction
Housing completions were down 4.1% at a seasonally adjusted annual rate of 1.368 million. This is 16.1% higher than last year, but not much construction was happening at the time. Meanwhile, single-family completions were down 2.6% at 1.004 million. Multifamily completions, those with five units or more, came in at 387,000.
Still, there are signs that help for a housing supply may be on the way. Starts were up 3.6% at 1.572 million, up 50.3% from May of last year. Single-family starts rose 4.2% to 1.054 million, while there were 465,000 multifamily starts.
Existing Home Sales
Existing home sales were down 0.9% in May to 5.8 million on a seasonally adjusted basis. They were up 44.6% compared to last May. It’s important to note that this particular time frame for the year ago comparison would have been after things kind of slowed for the pandemic and before they picked up, as there was increased demand from people who weren’t as into their current homes after prolonged exposure.
New Home Sales
New home sales were down 5.9% in May to an annual rate of 769,000. This is the lowest rate since May of last year, in the throes of the pandemic. The median sale price is up 18.1% for the year at $374,400 after rising 2.5% in May. Supply is up to 4.8 months at the current pace of sales with 330,000 new homes being added to the market, up 14,000 from April.
Durable Goods Orders
New orders of durable goods were up 2.3% in May, after falling 0.8% in April. The good news for the April numbers is that they were revised higher. When transportation was taken out, orders were up 0.3% following a 1.7% increase in this category in April. On the downside, core capital goods were down 0.1%, but this is after rising 2.7% last month.
Gross Domestic Product (GDP)
The economy grew at a rate of 6.4% in the final reading of the first quarter. Additionally, the share of that tied to personal consumption expenditures was up to 11.4%, which added 7.42% in terms of the consumer contribution to GDP.
Personal Income And Outlays
Personal incomes were down 2% in May. Rather than having to do with wages, there were no stimulus checks and unemployment compensation related to the pandemic was down. Personal expenditures were flat. This is despite them being up 0.9% in May.
Case-Shiller Home Price Index
This index looks at 20 major metropolitan cities and is based on a rolling 3-month average, looking at the sales of all homes in the areas. On an adjusted basis, prices were up 1.6% in April and 2.1% overall. Since last year, prices are up 14.9%. The record for annual gains is 17.1%, set during the housing bubble in 2004.
Federal Housing Finance Agency (FHFA) House Price Index
The FHFA reported that home prices were up 1.8% in April and have risen 15.7% on the year, a new record. This index is based on monthly changes as opposed to a rolling average. It also only looks at home sales backed by conventional mortgages from Fannie Mae and Freddie Mac.
Consumer confidence was up a sizable 7.3 points to 127.3 in June in the best reading since the beginning of the pandemic. For comparison, the reading in February 2020 was 132.6. Additionally, May was revised up 2.8 points at 120.
Pending Home Sales Index
Homes under contract for sale in May increased by 8% to an index level of 114.7. This is a good sign for June and July sales of existing homes as this is a leading indicator.
ISM Manufacturing Index
This manufacturing index was down 0.6 points in June to 60.6. While slightly slower, this still indicates strong growth in the sector. New orders were at 66 compared to 67 in May. Backlog orders were up 6.1 points to 70.6.
Nonfarm payrolls were up 850,000 in June, well above expectations for a number just above 700,000. The bad news is the unemployment rate increased from 5.6% to 5.9%. Although this might normally mean an increase in labor force participation, that number remained steady at 61.6% of the population.
There were 662,000 jobs added in the private sector while 188,000 jobs were added to government payrolls. Looking at individual sectors, 15,000 jobs were added in manufacturing, 7,000 jobs were eliminated in construction, and there were 642,000 service jobs added.
The U.S. trade deficit increased by $2.1 billion in May to come in at $71.2 billion. Exports were up 0.6%, with services exports up 1.5% along with agricultural exports. On the downside for exports, capital goods and vehicles were down.
According to Freddie Mac, the average rate for a 30-year fixed mortgage with 20% down and 0.6 points paid in fees fell 4 basis points to 2.98%, this is down from 3.07% a year ago.
Meanwhile, the average rate on a 15-year fixed mortgage with 0.7 points paid in fees was down 8 basis points to 2.26%. This has fallen from 2.56% last year.
Finally, the average rate on a 5-year treasury-indexed, hybrid adjustable-rate mortgage was up a single basis point with 0.3 points paid to 2.54%. This is down from 3% last year at this time.
The Dow Jones Industrial Average was up 152.2 points Friday to close at 34,786.35 points, up 0.45% over the last 30 days ending Friday. Meanwhile, the S&P 500 was up 2.98% of the same period, after rising 32.4 points Friday to finish at 4,352.34. Finally, the Nasdaq finished Friday at 14,639.33, up 116.95 points on the day and 5.46% on the month.
If all of these numbers aren’t your thing, we’ve got plenty more to share with you. Here’s an excellent article on DIY porch screening. Have a great month!
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