Succinct Summation of the Week's Events

Succinct Summation of the Week’s Events:

Positives,

1)The final June UoM consumer confidence was 68.2, down from 69.1 in May and the lowest since November but a bit better than the initial June print of 65.6 so we’ll put it on the positive side, though still weak. The components were mixed as Current Conditions fell m/o/m while Expectations were up a touch. One yr inflation expectations came in at 3% vs 3.3% in May and 3.3% in the preliminary June read. It was 3.2% in April, 2.9% in March and 3% in February. The 5-10 yr inflation guess remained at 3% vs April and May. The employment component improved m/o/m but income fell. Spending intentions dropped for both homes and cars and were unchanged for a major appliance. The bottom line from the UoM on the 7 month low in confidence, “While consumers exhibited confidence that inflation will continue to moderate, many expressed concerns about the effect of high prices and weakening incomes on their personal finances. These trends offset the improvements in the short and long run outlook for business conditions stemming in part from expectations for softening interest rates.” While inflation expectations fell, “the share of consumers mentioning the negative impact of high prices on their personal finances has remained stubbornly high; the 46% reading this month barely budged from the 49% seen in mid-2022.”

2)The May PCE inflation stats were as expected. The headline gain was flat m/o/m with a core rate up by one tenth. Versus last year, both were higher by 2.6% vs 2.7% and 2.8% headline and core respectively in April. The drop of .1% y/o/y in goods prices kept the lid on overall inflation as service prices grew by 3.9% y/o/y. Versus April, goods prices fell .4% m/o/m while service prices were up by .2%.

3)Personal Income gains in May were a bit better than anticipated with a .5% m/o/m rise vs the estimate of up .4%. The private sector wage and salary increase was 4.5% y/o/y, the best in 5 months and still well above the pre Covid trend. Combining this with the spending data puts the savings rate at 3.9% vs 3.7% in April and 3.5% in March which was the lowest since December 2022. 

4)This is encouraging for someone wanting to buy a home for the first time. Redfin reported that "the typical home is selling for less than list price, the first time that has happened in late spring since start of pandemic." In their press release, "The typical US home that sold during the four weeks ending June 23 sold for .3% less than its asking price...The typical home sold for exactly its list price one year ago, and roughly 2% above its list price two years ago."

5)Apartment List said NEW (not renewals) lease rents rose for a 5th straight month, up by .4% m/o/m but said again that seasonally it increases in the first half of the year, particularly in the spring and versus last year they are still down .7%. The vacancy rate stood at 6.7% which is the highest since August 2020.

6)New home sales in May totaled 619k. That was 24k less than expected but April was revised up by 64k to 698k which was the most since July 2023. Months’ supply hit 9.3 from 8.1 in April as the number of homes for sale are at the highest level since January 2008. Smoothing out the monthly volatility in this data point has the 3 month average at 667k vs the 6 month average at 660k and the 12 month average at 663k. For perspective, this averaged 685k in 2019.