Tom Moeller

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Job creation continued to slow considerably last month, according to the ADP National Employment Report. Nonfarm private sector payrolls increased 128,000 (4.2% y/y) during May after a 202,000 April increase, revised from 247,000 reported initially. It was the weakest gain since a decline in April 2020. A 306,000 May rise had been expected in the Action Economics Forecast Survey.

Small-sized payrolls weakened 91,000 (1.6% y/y) last month after a 123,000 April falloff, revised from -120,000. It wa the third decline in the last four months. Large-sized payrolls rose 122,000 (5.3% y/y) after increasing 278,000 in April, revised from 321,000. Medium-sized payrolls increased 97,000 (4.9% y/y) after rising an unrevised 46,000 in April.

Within industry sectors, weakness in payroll growth was widespread. Private services employment rose 104,000 last month (4.3% y/y) after increasing 171,000 during April, revised from 202,000. Leisure & hospitality jobs increased 17,000 (12.4% y/y) after gaining 47,000 in April. It compared to a 237,000 rise this past December. The number of education & health services jobs rose 46,000 (3.0% y/y) after a 60,000 April increase. Professional & business services jobs increased 23,000 (3.8% y/y) following a 41,000 rise. The number of trade, transportation & utilities jobs grew 8,000 in May (2.8% y/y) after a 15,000 April rise. Employment in financial services rose 10,000 in May (1.7% y/y) after rising 7,000 in April. The number of information sector jobs fell 2,000 (+1.7% y/y) in May, the third consecutive month of decline.

Employment in the goods-producing sector improved 24,000 in May (3.9% y/y) following a 31,000 increase. It was the smallest increase since last July. The number of factory sector jobs rose 22,000 (3.3% y/y) following a 15,000 April gain. Construction sector payrolls eased 2,000 (4.5% y/y) after gaining 12,000 in April. Employment in the natural resource & mining sector improved 5,000 (8.5% y/y) after a 4,000 increase.

The Automatic Data Processing Research Institute survey covers 411,000 companies and includes about one-fifth of U.S. private payroll employment. The data are processed by Moody's Analytics Inc., then calibrated and aligned with the BLS establishment survey data. The ADP data cover private sector employment only.

The ADP National Employment Report data can be found in Haver's **USECON** database. Historical figures date back to 2001 for private employment and the industry breakdown and 2005 for the business size breakout. The expectation figure is available in Haver's **AS1REPNA** database.

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Europe

- Overall gain is weakest since 2020 recession.
- Services bare brunt of slowdown.
- Small business hiring declines.

U.S. ADP Nonfarm Private Payroll Growth Slows Unexpectedly in May

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Manufacturers' new orders rose 0.3% (14.0% y/y) during April following a 1.8% March rise, revised from a 2.2% increase reported initially. A 0.6% rise had been expected in the Action Economics Forecast Survey. Orders excluding transportation increased 0.3% (12.4% y/y) after strengthening 2.2% in March.

Durable goods orders rose 0.5% in April (12.2% y/y), revised from 0.4% in the advance report. The gain followed a 0.7% March rise. Machinery orders increased 1.0% (9.9% y/y) after rising 0.6% in March. Orders for computers and electronic equipment rose 0.1% (4.3% y/y) after rising 1.8% in March while electrical equipment & appliance orders fell 0.2% (+11.6% y/y) after a 2.6% rise.

New orders for nondurable goods, which equal shipments, improved 0.2% (15.8% y/y) in April following a 2.9% March increase. Shipments from petroleum refineries eased 0.5% (+63.4% y/y) despite higher prices. Apparel shipments gained 0.3% (5.3% y/y) after rising 2.3% in March. Shipments of basic chemicals fell 0.3% (+7.8% y/y) after five months of modest increase.

Total shipments edged 0.2% higher (14.0% y/y) in April after a 2.2% March rise. Shipments excluding transportation rose 0.2% (13.8% y/y) after improving roughly 1.5% in each of the prior three months. Durable goods shipments rose 0.1% (12.2% y/y) after a 1.4% gain. Transportation equipment shipments held steady (15.3% y/y) after they rose 2.6% In March. Machinery shipments increased 0.3% last month (14.2% y/y) after rising 0.9%. Shipments of computers & electronic products improved 0.5% (3.9% y/y) after easing 0.3% in March.

Unfilled orders increased 0.5% in April (7.8% y/y) after a 0.5% rise in March. Excluding transportation, unfilled orders gained 0.4% (9.3% y/y) following a 0.3% rise in March. Transportation backlogs increased 0.7% (6.8% y/y) while unfilled orders of machinery rose 0.6% (12.4% y/y).

Inventories of manufactured goods rose 0.6% in April (10.7% y/y). Transportation equipment inventories rose 0.7% (4.8% y/y) while excluding transportation, inventories gained 0.5% (12.2% y/y) after a 1.5% March rise.

The factory sector data are available in Haver's **USECON** database. The Action Economics Forecast Survey is in the **AS1REPNA** database.

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- Durable & nondurable goods orders are mixed.
- Shipments increase slows.
- Unfilled orders & inventories continue to rise.

U.S. Factory Orders & Shipments Rise Modestly in April

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The Institute for Supply Management (ISM) reported that its Composite Index of Manufacturing Sector Activity rose to 56.1 during May after falling to 55.4 in April. A decline to 54.5 had been expected in the Action Economics Forecast Survey. Despite the rise, the index remained down from the high of 63.7 last March. During the last 15 years, there has been a 42% correlation between the composite index and the quarterly change in real GDP.

Leading the improvement in the component series was the inventory index which surged to 55.9 from 51.6. It was the highest level in six months. An increase in the new orders index followed with a rise to 55.1 after falling to 53.5 in April. Twenty-eight percent (NSA) of respondents reported higher new orders versus 25.1% during April, but 13.3% reported a decline versus 10.9% a month earlier. Rounding out the gains, the production index edged higher to 54.2 last month after falling to 53.6 in April. It remained below the March 2021 high of 66.4.

Countering these increases, the employment index declined from 50.9 in April to 49.6 in May. Below the break-even level of 50, it was the lowest level since November 2020. An increased 22.8% (NSA) of respondents reported a decline in jobs in May versus 17.1% in April, while 21.8% reported more hiring versus 21.0% in April.

Also falling was the supplier delivery series. It fell to 65.7 after rising to 67.2 in April. It thus suggested quicker product delivery speeds.

The prices paid index declined to 82.2 last month after falling to 84.6 in April. It was below the high of 92.1 in June 2021. Seventy percent (NSA) of respondents reported higher prices versus 73.5% in April, while 5.6% reported price declines compared to 4.4% in April.

In other ISM series not included in the composite, the new export measure was little-changed at 52.9. It reached a recent high of 57.1 in February. The imports index fell to 48.7 from 51.4 in April. It was down from a high of 55.4 in February.

The ISM figures are based on responses from over 400 manufacturing purchasing executives from 20 industries, which correspond to their contribution to GDP in 50 states. These data are diffusion indexes where a reading above 50 indicates expansion. The figures from the Institute for Supply Management can be found in Haver's **USECON** database; further detail is found in the **SURVEYS** database. The expectations number is available in Haver's **AS1REPNA** database.

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- Index level rebounds after two straight months of decline.
- Component movement is mixed.
- Prices paid index falls for a second month.

U.S. Manufacturing Activity Improves Unexpectedly in May

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The Mortgage Bankers Association's Loan Applications Index weakened 2.3% (-53.7% y/y) in the week ended May 27 after declining 1.2% in the prior week. Applications to refinance an existing loan continued to lead the decline with 5.4% drop (-75.1% y/y) after falling 3.9% in the week earlier. Applications for purchase eased 0.6% (-14.3% y/y) after rising 0.2% in the prior week.

The share of applications for refinancing fell to 31.5% in the week ended May 27, half the percentage in December 2021 and nearly the lowest reading since December 2000. The percentage that were ARMs fell to 8.7%

Applications for fixed-rate loans fell 1.5% (-56.1% y/y) in the week ended May 27. Meanwhile, applications for adjustable-rate mortgages fell 10.1% (+8.0% y/y).

The effective rate on 30-year fixed-rate loans fell to 5.48% last from 5.64% in the prior week. It remained near the highest reading since June 2009. The rate for 15-year fixed mortgages slipped to 4.75% and for 30-year Jumbos slipped to 5.05%. The rate on 5-year ARMs was little-changed w/w at 4.71%, up from 2.57% at the end of last year.

The average loan size of $385,600 was down sharply from $401,900 at the beginning of the month. The average size of a purchase loan rose slightly to $433,200. The average refinancing loan size was $282,100.

This survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100.

These figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYS** database.

- Loan refinancing continues to fall sharply.
- Purchase applications slip.
- Interest rates ease.

U.S. Mortgage Applications Decline Further

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The Autodata Corporation reported that light vehicle sales during May declined 12.2% to 12.81 million units (SAAR). Sales were off by roughly one-quarter y/y and were one-third below the April 2021 peak. Vehicle sales comprise roughly four percent of real consumer expenditures.

Sales of light trucks led last month’s decline by falling 12.4% (-23.0% y/y) to the lowest level this year. Purchases of domestically-produced light trucks weakened 11.0% last month (-19.7% y/y) to 7.95 million units. Sales of imported light trucks declined 17.4% to 2.09 million units and were off by one-third y/y.

Trucks' share of the light vehicle market was little-changed at 78.4% in May but down from the 80.4% share six months earlier.

Auto sales weakened 11.5%, off by one third y/y, to 2.77 million units. Purchases of domestically-made autos fell 13.2% in May to 1.90 million units, off by one-quarter y/y. Sales of imported autos fell 6.5% (-41.6% y/y) to 0.87 million units.

Imports' total share of the U.S. vehicle market eased m/m to 23.1% and remained below February's 25.4% share. Imports' share of the passenger car market rose to nearly one-third, but remained down from the September 2021 high of 38.1%. Imports' share of the light truck market eased to 20.8%.

U.S. vehicle sales figures can be found in Haver's **USECON** database. Additional detail by manufacturer is in the **INDUSTRY** database.

The Fed's latest **Beige Book** covering regional economic conditions is available [here](https://www.federalreserve.gov/monetarypolicy/files/BeigeBook%5F20220601.pdf).

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- Both auto & light truck sales weaken.
- Sales remain constrained as parts shortages limit dealer inventory.
- Imports' share eases to six-month low.

U.S. Light Vehicle Sales Fall Sharply in May

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The Conference Board's Consumer Confidence Index during May fell 2.0% (-11.3% y/y) to 106.4 following a 0.9% April rise, revised from -0.3%. A reading of 103.9 had been expected in the Action Economics Forecast Survey.

Consumers' views of both current and future economic conditions dimmed this month. The Present Situation Index fell 2.2% this month (+0.6% y/y) to 149.6 after falling 0.6% during April to 152.9. The Consumer Expectations index weakened 1.9% in May (-23.2% y/y) to 77.5, following a 3.0% April increase.

Labor market readings also eroded. The jobs gap, representing the difference between respondents indicating that jobs are plentiful and those saying jobs are hard to get, declined to 39.3% from the near-record 44.7% in April. Calculated by Haver Analytics, this series has had a 69% correlation with the unemployment rate over the last ten years. The jobs plentiful measure fell this month to 51.8%, a twelve-month low and down from the record 56.7% in March. The jobs hard-to-get measure rose sharply to 12.5% of respondents, up from an expansion low of 9.6% in March.

Current business conditions were perceived as good by a slightly increased 21.1% of respondents in May. Expectations that business conditions would improve in six months fell sharply 17.7% of respondents, down from 42.5% in April 2020. More jobs were expected in six months by a 18.5% of respondents, roughly half the percentage in March of last year. The percentage expecting rising income improved notably to 19.0% of respondents, a ten-month high.

Inflation expectations eased, but pricing power will remain high. The expected inflation rate in twelve months slipped to 7.4%, down from the March peak of 7.9%. It remained up, however, from a 4.4% low in January of 2020. More than two-thirds of respondents expected that interest rates would rise over the next twelve months, the most in three years. The share of respondents planning to buy a home within six months eased to 5.9% and remained below a July 2020 high of 7.7%. Those planning to buy a major appliance fell sharply m/m to 45.2% of respondents, a 12-month low and below the 53.9% high registered in July 2021.

The Consumer Confidence data are available in Haver's **CBDB** database. The total indexes, which are indexed to 1985=100, appear in **USECON**, and market expectations are in **AS1REPNA**.

**Responding to High Inflation, with Some Thoughts on a Soft Landing** from Governor Christopher J. Waller is available [here](https://www.federalreserve.gov/newsevents/speech/waller20220530a.htm).

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- Present situation & expectation readings decline.
- Expectations for employment diminish.
- Inflation expectations ease.

U.S. Consumer Confidence Weakens in May

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The Federal Housing Finance Agency (FHFA) House Price Index increased 1.5% during March (19.0% y/y) following a 1.9% February increase, revised from 2.1%. The FHFA indicated, "Strong demand coupled with tight supply have kept prices climbing. Through the end of March, higher mortgage rates have not yet translated into slower price gains." The home price series dates back to January 1991.

Pricing increases were most pronounced in the Mountain (24.7% y/y), South Atlantic (22.9% y/y), East South Central (21.4% y/y) and Pacific (19.7% y/y) regions.

Strength also was seen in the West South Central (18.6% y/y), New England (16.9% y/y), East North Central (15.4% y/y), Middle Atlantic (15.2% y/y) and West North Central (14.9%) regions.

The FHFA house price index is a weighted purchase-only index that measures average price changes in repeat sales of the same property. An associated quarterly index includes refinancings on the same kinds of properties. The indexes are based on transactions involving conforming conventional mortgages purchased or securitized by Fannie Mae or Freddie Mac. Only mortgage transactions on single-family properties are included.

The FHFA data are available in Haver's **USECON** database.

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- House prices rise to another record level.
- Strength is broad-based regionally.

U.S. FHFA House Price Index Shows Continued Strength in March

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U.S. real GDP fell 1.5%, SAAR (+3.5% y/y) last quarter, revised from the 1.4% decline reported initially. Following a 6.9% rise during Q4'21, it was the only quarter of negative growth since the end of the recession in Q2'20. The Action Economics Forecast Survey expected a 1.3% decline.

Reported for the first time, after-tax corporate profits rose 1.5% (15.7% y/y) in Q1'22 after easing 0.8% in Q4'21. Profits before tax declined 2.3% (+12.5% y/y). Nonfinancial sector earnings eased 1.1% (+14.8% y/y), the first decline in five quarters. Financial sector profits fell 5.2% (+7.6% y/y) and earnings from abroad weakened 3.2% (+9.6% y/y).

Deterioration in the foreign trade balance subtracted an unchanged, near-record 3.2 percentage points from growth last quarter as exports fell 5.4% (+4.2% y/y) and imports jumped 18.3% (11.8% y/y). Inventory liquidation also reduced growth by 1.1 percentage points, revised from 0.8 percentage points.

Growth in final demand to domestic purchasers improved last quarter. The 2.7% increase (3.4% y/y) was revised from 2.6% and followed a 1.7% gain in Q4'21. Personal consumption rose 3.1% (4.8% y/y), revised from 2.7%. Motor vehicle expenditures rose an increased 16.5% (-10.5% y/y) and spending on recreational goods & vehicles increased a little-changed 6.9% (6.0% y/y). Furniture & appliance purchases fell a lessened 3.9% (-4.9% y/y). ln the nondurable goods sector, apparel spending declined a lessened 4.9% (+6.2% y/y) while gasoline expenditures fell 14.4% (+7.1% y/y). In the services area, recreation expenditures rose an increased 6.1% (21.6% y/y) while restaurant & hotel spending rose a little-changed 5.1% (19.5% y/y). Health care expenditures increased a lessened 2.3% (5.2% y/y) while outlays on housing & utilities firmed a little-changed 3.4% (1.3% y/y).

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In the business investment sector, spending rose an unchanged 9.2% (5.7% y/y) but structures investment declined 3.6% (-4.8% y/y), revised from -0.9%. Equipment investment strengthened 13.2% (6.2% y/y), revised from 15.4%. Investment in computers strengthened a little-changed 24.9% (10.0% y/y) and industrial equipment investment rose 12.8% (16.2% y/y), revised from 23.8%. Transportation equipment investment fell a little-changed 9.5% (-7.2% y/y). Investment in intellectual property products increased 11.6% (10.5% y/y), revised from 8.1%.

Residential investment edged 0.4% higher (-4.4% y/y) last quarter, revised from 2.1%. This improvement followed two straight quarters of sharp decline.

In the government sector, spending declined an unchanged 2.7% (-1.6% y/y). Federal government outlays fell a minimally-changed 6.0% (-5.2% y/y) as defense spending declined an unchanged 8.5% (-4.4% y/y). State & local government outlays eased 0.6% (+0.7% y/y).

Pricing power continued to strengthen last quarter. The 8.1% increase (6.8% y/y) in the chain-type price index compared to 8.0% reported last month. It compared to expectations for an 8.0% rise. It was the largest increase since Q1'81, paced by an 18.1% (15.0% y/y) surge in the cost of residential investment. Overall consumer prices rose an unchanged 7.0% (6.3% y/y). The nondurable consumer goods price index rose an unchanged 14.9% (8.8% y/y) with the surge in gasoline prices. The durable consumer goods price index rose a little-changed 6.6% (10.9% y/y) and the consumer services price index gained a little-changed 4.5% both q/q and y/y. Outside of food & energy, the PCE price index increased 5.1% (5.2% y/y). The business investment price index increased 7.2% (5.0% y/y), revised from 6.8%. The government sector price index increased 9.7% (7.4% y/y), revised from 9.1%.

The GDP figures can be found in Haver's **USECON** and **USNA** databases. **USNA** contains virtually all of the Bureau of Economic Analysis' detail in the national accounts. Both databases include tables of the newly published not seasonally adjusted data. The Action Economics consensus estimates can be found in **AS1REPNA**.

The latest Congressional Budget Office **Budget & Economic Outlook** can be found [here](https://www.cbo.gov/system/files/2022-05/57950-Outlook.pdf).

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- Int'l trade deficit deepening subtracts near-record from GDP growth.
- Inventory decumulation continues.
- Domestic demand picks up.

U.S. GDP Decline is Little-Revised in Q1'22; Corporate Profits Fall

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Income & spending growth remains solid in the consumer sector of the economy. Personal consumption expenditures increased 0.9% (9.2% y/y) during April following a 1.4% March gain, revised from 1.1%. A 0.6% rise had been expected in the Action Economics Forecast Survey. Adjusted for price inflation, spending increased 0.7% last month (2.8% y/y) after rising 0.5% in March.

Real spending on durable goods surged 2.3% in April (-6.5% y/y) following a 0.7% increase. Labor market strength prompted a 3.9% surge (-18.3% y/y) in real outlays on motor vehicles & parts after a revised 2.5% March increase, initially reported as a 2.0% drop. Real outlays on recreational goods & vehicles improved 2.1% (3.7% y/y) after easing 0.1% in March. Real spending on home furnishings & appliances improved 0.5% (-7.8% y/y) after declining in the prior two months. Real nondurable goods buying rose 0.2% in April (-0.5% y/y) after a 0.1% easing. Adjusted for inflation, clothing outlays surged 1.9% (0.3% y/y) after a 0.6% March rise. Real food & beverage expenditures fell 1.0% (-3.7% y/y), down in five of the last six months. Real spending on gasoline & other energy products eased 0.1% (+1.2% y/y) after falling 1.9% in March.

Real outlays on services improved 0.5% (5.9% y/y) last month following three months of similar increase. Real outlays on recreation services surged 1.5% (17.3% y/y) after gains of 1.9% and 2.0% in the prior two months. Real spending at hotels & restaurants jumped 1.3% last month (10.9% y/y), the third straight month of strong increase. Financial services outlays rose 0.4% in April (5.1% y/y) after increasing 0.7% while housing & utilities spending improved 0.2% (1.7% y/y) after holding steady during the prior month.

Pricing power eased last month. The PCE chain price index rose 0.2% in April (6.3% y/y) following a 0.9% March increase. The price index excluding food and energy rose 0.3% (4.9% y/y) for the third straight month. These monthly increases are below the gains in each of the prior four months. Durable goods prices edged 0.1% higher (8.4% y/y) after two straight 0.2% declines prompted by lower motor vehicle prices. The nondurables goods price index eased 0.3% last month (+10.1% y/y) after rising 2.8% in March. Gasoline & oil costs fell 5.2% (+42.9% y/y) after surging 18.0% in March. Despite the decline, energy product prices remain near record levels. The services price index rose 0.5% (4.6% y/y) for the second straight month. Hotel & restaurant prices rose 0.7% (7.5% y/y) for the second straight month while housing & utilities prices rose 0.6% (5.5% y/y), also for the second consecutive month.

Personal income rose 0.4% (2.6% y/y) during April following a 0.5% rise. A 0.6% increase had been expected. Wages & salaries increased 0.6% last month (11.7% y/y) after a 0.7% increase in March. Rental income jumped 1.3% (5.4% y/y) following three months of minimal increase while proprietors' income fell 0.5% (+3.1% y/y) after a 0.9% rise. Transfer receipts eased slightly (-17.4% y/y) after rising 0.2% in March.

Disposable personal income increased 0.3% (-0.3% y/y) in April after rising 0.4% in March. Adjusted for price inflation, disposable income held steady (-6.2% y/y) after a 0.5% decline.

The personal savings rate fell to 4.4% in April from 5.0% in March. It was the lowest level since September 2008, down from a high of 33.8% in April of 2020. The level of personal savings fell 11.6% last month and has fallen by roughly two-thirds during the last twelve months.

The personal income and consumption figures are available in Haver's **USECON** database with detail in the **USNA** database. The Action Economics figures are in the **AS1REPNA** database.

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- Spending gain led by broad-based durable goods strength.
- Core price inflation moderates.
- Wage & salary growth remains firm.

U.S. Personal Spending Is Unexpectedly Strong in April; Inflation Moderates

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Manufacturers' new orders for durable goods increased 0.4% during April (12.2% y/y) after improving 0.6% in March, revised from 0.8%. A 0.6% increase had been expected in the Action Economics Forecast Survey.

Within a key measure of activity in the capital goods sector, new orders for nondefense capital goods excluding aircraft increased 0.3% in April (7.5% y/y) after rising 1.1% during March.

Transportation equipment orders overall edged 0.6% higher (23.0% y/y) last month following a 0.3 % decline. Motor vehicle & parts orders fell 0.2% (+19.7% y/y), but defense aircraft orders rose 1.0% (2.9% y/y).

Excluding transportation, orders rose 0.3% last month (7.6% y/y) following an unrevised 1.1% March increase. Machinery orders rose 1.0% (9.9% y/y) after a 0.6% rise. Electrical equipment & appliance orders eased 0.1% (+11.7% y/y) after increasing 2.5% in March and 3.1% in February. Computer & electronic product orders improved 0.1% (4.3% y/y) after gaining 1.8% in March. Primary metals orders increased 0.6% (17.4% y/y) but fabricated metals bookings eased 0.1% (+2.8% y/y).

Shipments of durable goods improved 0.1% last month (12.2% y/y) after rising 1.4% in March, revised from 1.2%. Transportation shipments held steady (15.3% y/y) following a 2.6% rise. Excluding transportation, shipments improved 0.2% during April after a 0.9% gain. Machinery shipments rose 0.2% (14.1% y/y) while shipments of computers and electronic products gained 0.5% (3.9% y/y). Shipments of electrical equipment and appliances fell 0.6% (+11.3% y/y) while primary metals shipments gained 0.9% (20.6% y/y).

The advance reading on shipments of nondurable goods indicated a 0.1% rise during April (15.7% y/y) following strong gains in each of the prior three months. Shipments from all manufacturing industries edged 0.1% higher (13.9% y/y) in April after a 2.1% March gain. Capital goods shipments excluding defense and aircraft increased 0.8% (11.4% y/y) in April after a 0.2% gain.

Unfilled orders for durable goods rose 0.5% last month (7.8% y/y) following a 0.5% gain. Unfilled orders are not calculated for nondurable goods.

Durable goods inventories increased 0.8% (10.2% y/y) following a 0.9% March gain. Nondurable goods inventories rose 0.1% (11.2% y/y) after strong gains during each of the prior three months.

The durable goods and nondurable goods data are available in Haver's **USECON** database. The Action Economics consensus forecast figure is in the **AS1REPNA** database.

The minutes to the latest **FOMC** meeting can be found [here](https://www.federalreserve.gov/monetarypolicy/files/fomcminutes20220504.pdf).

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- Core capital goods orders edge higher.
- Shipments strengthen.
- Order backlogs & inventories rise moderately.

U.S. Durable Goods Orders Increase Modestly in April

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The Mortgage Bankers Association's Loan Applications Index fell 1.2% (-54.5% y/y) in the week ended May 20 after declining 11.0% in the prior week. Applications to refinance an existing loan continued to lead the decline with 3.9% drop (-74.9% y/y) after falling 9.5% in the week earlier. Applications for purchase improved 0.2% (-16.4% y/y) after falling 11.9% in the prior week.

The share of applications for refinancing fell to 32.3% in the week ended May 20. That as half the percentage this past December and nearly the lowest reading since December 2000. The percentage that were ARMs fell to 9.4%

Applications for fixed-rate loans eased 0.3% (-57.1% y/y) in the week ended May 20. Meanwhile, applications for adjustable-rate mortgages fell 9.6% (+6.1% y/y).

The effective rate on 30-year fixed-rate loans slipped to 5.64% in the latest week from 5.70% in the prior week. It remained near the highest reading since June 2009. The rate for 15-year fixed mortgages slipped to 4.89% and for 30-year jumbos it eased to 5.14%. The rate on 5-year ARMs rose to 4.77%, up from 2.57% at the end of last year.

The average loan size of $383,000 as down sharply from $401,900 at the beginning of the month. The average size of a purchase loan fell to $432,000 from a high of $460,000 in the third week of March. The average refinancing loan size as $280,100, down from $302,000 at the beginning of the month.

This survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100.

These figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYS** database.

- Loan refinancing declines sharply.
- Purchase applications ease.
- Interest rates edge lower.

U.S. Mortgage Applications Continue to Weaken

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The new home sales market is unraveling. New single-family home sales during April fell 16.6% (-26.9% y/y) to 591,000 units (SAAR). It was the lowest level of sales since the end of the recession two years earlier. This fourth consecutive monthly decline in sales occurred from 709,000 units in March, revised from 763,000. Earlier figures also were revised. The Action Economics Forecast Survey expected 750,000 sales in April. The data is generated by the U.S. Census Bureau.

Sales declined last month across the country. Sales in the South weakened 19.8% (-36.6% y/y) to 307,000, the lowest level since December 2016. Sales in the Midwest dropped 15.1% (-25.5% y/y) to 73,000, a five-month low. Sales in the West fell 13.8% (-12.4% y/y) to 163,000, the fourth consecutive monthly decline. Sales in the Northeast weakened 5.9% (+17.1% y/y) to 48,000 following two consecutive monthly increases.

The median price of a new home in April strengthened 3.6% (NSA, 19.6% y/y) to a record $450,600 following a 1.8% March increase. The average sales price of a new home increased 9.1% (31.2% y/y) to a record $570,300. These sales price data are not seasonally adjusted.

The decline in sales left the market for new homes flooded in April. The number of unsold new homes jumped 8.3% (40.1% y/y) to 444,000, the most since May 2008.

The seasonally adjusted supply of new homes for sale rose to 9.0 months in April, up from 5.6 months in December. The record low was 3.3 months in August 2020. The median number of months a new home stayed on the market fell to 2.8. The record low was 2.5 months in October of last year. These figures date back to January 1975.

New home sales activity and prices are available in Haver's **USECON** database. The consensus expectation figure from Action Economics is available in the **AS1REPNA** database.

**Untangling Persistent versus Transitory Shocks to Inflation** from the Federal Reserve Bank of San Francisco is available [here](https://www.frbsf.org/wp-content/uploads/sites/4/el2022-13.pdf).

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- Sales fall to lowest level in two years.
- Decline spreads throughout the country.
- Median sales price continues to increase.

U.S. New Home Sales Plunge in April as Prices Jump

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