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The Weekly Briefing – June 1st, 2021

In This Week’s Brief:

  • Economic Releases Showing Mixed Results for the Recovery

  • Surging Prices Slowing New Home Sales


Recent data points paint a mixed picture of the recovery as the economy transitions away from broad fiscal support toward starting to build more self-sustaining momentum. Personal income dropped sharply by 13.1% compared to the prior month as stimulus payments from the American Rescue Plan slowed. Notwithstanding a slowdown in job creation during April, income from wages and salaries rose 1.0%. which in line with month-over-month gains observed over the past several months.

Consumer spending also registered a modest monthly gain of 0.5% due to higher outlays for services. Spending on goods remains elevated and is up 19.3% since the onset of the pandemic—despite edging down slightly by 0.6% last month. Expenditures on services, which suffered a severe drop early in the pandemic, now stand 1.9% below pre-pandemic levels after a 0.6% gain last month.

As prices continue to rise across major categories, the Fed continues to maintain its position, holding interest rates. Two key indicators monitored by the Fed are increasing and will test the Fed’s average inflation targeting framework. The PCE deflator increased 0.6% during April and has now climbed to 3.6% YOY. Core PCE, which excludes food and energy, is up 3.1% YOY.

Consumers, however, appear to be taking the inflation figures in stride at this point. The Univ. of Michigan Consumer Sentiment Index added 2.1 points last month to reach the highest level since April 2020 as views on both current conditions and future expectations have risen steadily the start of the year.

Consumer Expenditures (Seasonally Adjusted Annual Rate) & Consumer Sentiment


U.S. home prices have continued to surge, accelerating by double-digits YOY for the fourth month in a row. According to S&P CoreLogic Case-Shiller National Home Price Index, prices rose 13.2% in March compared to a year ago, the most in over 15 years. However, buyers appear to be hitting the pause button amidst a rapid increase of housing prices, which is fueled by a combination of intense demand, supply constraints, and low mortgage rates.

New home sales, measured at contract signing, fell 5.9% in April to 863,000 units. Significant shortages, especially at the entry-level and escalating prices are constraining the ability to purchase a home. The declining sales pace allowed the inventory of new homes available for sale to rise to 4.4 months of supply, which is one-third lower than a year ago. Builders are faced with a combination of shortages in labor and land as well as price volatility in building materials, which are delaying construction. Lumber prices, for example, are up by roughly 300% in April YOY, and according to the National Association of Home Builders, has added $36,000 to the price of an average new single-family home. While the current rate of newly built homes was 48.3% higher than one year ago, these constraints may affect pipeline in key construction months.

S&P/Case-Shiller U.S. National Home Price Index, YOY Change



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