Fed Chair Powell has said it again. Second-quarter economic data including last week’s consumer price report “do add somewhat” to confidence that inflation is heading down to the central bank’s 2 percent goal at an Economic Club of Washington interview— a condition for rate cuts, report various media. He repeated that labor markets are now in a “better balance,” and an unexpected weakening in labor markets would also be a reason to adjust rates.
That is already happening with the latest revisions to unemployment data and the unemployment rate now up to 4.1 percent. It ticked up to 4.1 percent in June from 3.8 percent in March. The sudden rise in the unemployment rate in the middle of the work year should alarm Fed officials.
Further evidence of slowing job growth is that average hourly wage growth fell to 3.9 percent. It makes up to two-thirds of production costs for most businesses and is now the main driver of inflation.
1another reason a rate cut seems more likely is that retail sales were unchanged in June once again. It actually fell when inflation is factored. It’s now been flat for three consecutive months.
Advance of U.S. retail and food services sales for June 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $704.3 billion, virtually unchanged (±0.5 percent)* from the previous month, but up 2.3 percent (±0.5 percent) above June 2023. Total sales for the April 2024 through June 2024 period were up 2.5 percent (±0.5 percent) from the same period a year ago.
Housing is another reason a rate cut is needed sooner. Though for sale inventories are up to a 3.7-month supply, according to Realtors, builders have been slashing prices because of the sky-high mortgage rates.
Nearly one third of home sellers in Sun Belt cities are slashing their asking prices as the number of properties for sale in those markets surges.
The share of home listings with a price cut was the highest in metropolitan areas across the South as homeowners competed to entice buyers, according to June monthly data from real-estate company Realtor.com. The report includes data for home listings in the 50 largest U.S. metropolitan areas going back to 2016, said the NAR.
Total existing-home sales1 – completed transactions that include single-family homes, townhomes, condominiums and co-ops – retreated 0.7% from April to a seasonally adjusted annual rate of 4.11 million in May. Year-over-year, sales were down from 4.23 million in May 2023.
"Eventually, more inventory will help boost home sales and tame home price gains in the upcoming months," said NAR Chief Economist Lawrence Yun. "Increased housing supply spells good news for consumers who want to see more properties before making purchasing decisions."
It is also putting more affordable housing on the market. In the NAR’s June report, as in the previous four months, the growth in homes particularly priced in the $200,000 to $350,000 range outpaced all other price categories, as home inventory in this range grew by 50.0 percent compared with last year, surpassing even last month’s high 45.1 percent growth rate. This increase is again primarily fueled by a greater availability of smaller and more affordable homes in the South.
Total housing inventory2 registered at the end of May was 1.28 million units, up 6.7 percent from April and 18.5 percent from one year ago (1.08 million). The 3.7-month supply at the current sales pace is up from 3.5 months in April and 3.1 months in May 2023.
All the discounting won’t cure the housing shortage but it will create more affordable housing.
Consumer spending itself has now slowed for three consecutive months because of too high interest rates, as has the job market, which has now taken a dangerous downturn.
So why wait for a September rate cut, as many are predicting? The Fed’s FOMC meets next in July.
Harlan Green © 2024
Follow Harlan Green on Twitter: https://twitter.com/HarlanGreen
.
No comments:
Post a Comment