Tom Moeller

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&bull; Consumer spending, business &amp; residential investment are strengthened.
&bull; Foreign trade subtraction is increased.
&bull; Corporate profit improvement is raised.

Real GDP surged 6.4% (SAAR) during Q1'21 (0.4% y/y),
unrevised from last month's estimate, following a 4.3% rise during the Q4'20.
The gain matched expectations in the Action Economics Forecast Survey.

Corporate profits after tax w/o IVA &amp; CCA adjustments
increased 7.0% last quarter (28.1% y/y), revised from 4.6%. That followed a 1.7%
decline in Q4'20. Before tax profits with IVA &amp; CCA rose 2.4% (15.5% y/y),
revised from no change. Nonfinancial sector earnings improved 5.3% (27.8% y/y),
revised from 0.9%, while foreign sector profits fell a little-changed 2.4% (-10.5% y/y).

International trade deficit deterioration reduced GDP growth
by an increased 1.5 percentage points, revised from 1.2 points. Exports fell a
lessened 2.1% (-9.2% y/y) while imports rose a strengthened 9.5% (6.0% y/y)
following two quarters of even stronger gain.

Domestic final sales growth was revised up to 10.5% (2.2%
y/y) from 10.3%. Consumer spending growth was revised to 11.4% (1.8% y/y) from 11.3%,
following a 2.3% Q4 rise. Consumer durable goods spending rose 49.2% (27.6%
y/y), revised from 48.7%. Spending on nondurable goods rose 15.2% (6.0% y/y),
revised from 14.0%. Services spending improved 4.2% (-3.3% y/y), revised from 4.6%.

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Business fixed investment strengthened 11.7% (3.1% y/y),
revised from 10.8%. It was the third straight quarter of strong growth.

Residential investment surged 13.0% (12.9% y/y), revised from
12.7%, to the highest level since the first quarter of 2007.

Government spending was unrevised at 5.7% (0.6% y/y). It was
the strongest increase since Q2 2009.

Inventory decumulation reduced GDP growth by 2.7 percentage
points, revised from 2.8 points, following two quarters of accumulation.

GDP price data were strengthened. The chain-weighted GDP
price index rose 4.3% (2.0% y/y), revised from 4.1% and was the strongest gain
since Q1'07. The PCE price measure advanced 3.7% (1.8% y/y), revised from 3.5%,
while the business fixed investment price index rose 0.6% (0.4% y/y), revised
from 0.5%. The residential investment price index surged 12.3% (7.2% y/y),
revised from 11.4%, while the public sector price index strengthened a lessened
6.1% (2.4% y/y).

The GDP figures can be found in Haver's USECON and USNA
database. 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.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Chained 2012 $ (%, AR)</th>
 <th>Q1'21 (Third Estimate)</th>
 <th>Q1'21 (Second Estimate)</th>
 <th>Q1'21 (Advance Estimate)</th>
 <th>Q4'20</th>
 <th>Q3'20</th>
 <th>Q1'21 Y/Y</th>
 <th>2020</th>
 <th>2019</th>
 <th>2018</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Gross Domestic Product</td>
 <td>6.4</td>
 <td>6.4</td>
 <td>6.4</td>
 <td>4.3</td>
 <td>33.4</td>
 <td>0.4</td>
 <td>-3.5</td>
 <td>2.2</td>
 <td>3.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Inventory Effect (% point)</td>
 <td>-2.7</td>
 <td>-2.8</td>
 <td>-2.6</td>
 <td>1.4</td>
 <td>6.6</td>
 <td>0.1</td>
 <td>-0.6</td>
 <td>0.0</td>
 <td>0.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Final Sales</td>
 <td>9.2</td>
 <td>9.4</td>
 <td>9.2</td>
 <td>2.9</td>
 <td>25.9</td>
 <td>0.3</td>
 <td>-2.9</td>
 <td>2.2</td>
 <td>2.8</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Foreign Trade Effect (% point)</td>
 <td>-1.5</td>
 <td>-1.2</td>
 <td>-0.9</td>
 <td>-1.5</td>
 <td>-3.2</td>
 <td>-1.9</td>
 <td>-0.1</td>
 <td>-0.2</td>
 <td>-0.3</td>
 </tr>
 <tr>
 <td class="firstcol" >Domestic Final Sales</td>
 <td>10.5</td>
 <td>10.3</td>
 <td>9.8</td>
 <td>4.4</td>
 <td>29.8</td>
 <td>2.2</td>
 <td>-2.7</td>
 <td>2.3</td>
 <td>3.0</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" colSpan="10" width="1709">Demand Components</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Personal Consumption Expenditure</td>
 <td>11.4</td>
 <td>11.3</td>
 <td>10.7</td>
 <td>2.3</td>
 <td>41.0</td>
 <td>1.8</td>
 <td>-3.9</td>
 <td>2.4</td>
 <td>2.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Nonresidential Fixed Investment</td>
 <td>11.7</td>
 <td>10.8</td>
 <td>9.9</td>
 <td>13.1</td>
 <td>22.9</td>
 <td>3.1</td>
 <td>-4.0</td>
 <td>2.9</td>
 <td>6.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Residential Investment</td>
 <td>13.0</td>
 <td>12.7</td>
 <td>10.8</td>
 <td>36.6</td>
 <td>63.0</td>
 <td>12.9</td>
 <td>6.1</td>
 <td>-1.7</td>
 <td>-0.6</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Government Spending</td>
 <td>5.7</td>
 <td>5.7</td>
 <td>6.3</td>
 <td>-0.8</td>
 <td>-4.8</td>
 <td>0.6</td>
 <td>1.1</td>
 <td>2.3</td>
 <td>1.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Chain-Type Price Index</td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 <td></td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp; GDP</td>
 <td>4.3</td>
 <td>4.1</td>
 <td>4.1</td>
 <td>2.0</td>
 <td>3.5</td>
 <td>2.0</td>
 <td>1.2</td>
 <td>1.8</td>
 <td>2.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Personal Consumption
 Expenditure</td>
 <td>3.7</td>
 <td>3.5</td>
 <td>3.5</td>
 <td>1.5</td>
 <td>3.7</td>
 <td>1.8</td>
 <td>1.2</td>
 <td>1.5</td>
 <td>2.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Less
 Food &amp; Energy</td>
 <td>2.5</td>
 <td>2.3</td>
 <td>2.3</td>
 <td>1.3</td>
 <td>3.4</td>
 <td>1.6</td>
 <td>1.4</td>
 <td>1.7</td>
 <td>2.0</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nonresidential
 Investment</td>
 <td>0.6</td>
 <td>0.5</td>
 <td>0.5</td>
 <td>0.2</td>
 <td>0.1</td>
 <td>0.4</td>
 <td>0.5</td>
 <td>1.3</td>
 <td>0.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Residential Investment</td>
 <td>12.3</td>
 <td>11.4</td>
 <td>11.4</td>
 <td>6.5</td>
 <td>9.5</td>
 <td>7.2</td>
 <td>3.3</td>
 <td>2.8</td>
 <td>5.6</td>
 </tr>
 </tbody>
 </table>
 
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• Consumer spending, business & residential investment are strengthened. • Foreign trade subtraction is increased. • Corporate profit improvement is raised. Real GDP surged 6.4% (SAAR) during Q1'21 (0.4% y/y), unrevised from last [...]

U.S. GDP Growth is Unrevised in Q1'21; Corporate Profit Estimate Strengthened

Sandy Batten

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&bull; Exports fell while imports rose.
&bull; Still, foreign trade on course to contribute to overall GDP growth in Q2.

The advance estimate of the U.S. trade deficit in goods widened to $88.1 billion in May from $85.7 billion in April. The May deficit was nearly exactly the $88.0 billion shortfall anticipated by the Action Economics Forecast Survey. Exports fell 0.3% m/m (+58.6% y/y) in May following a 1.1% m/m gain in April. By contrast, imports increased 0.8% m/m (+39.2% y/y) in May after a 1.9% m/m decline in April. Even with the widening of the deficit in May, the April-May figures put the deficit on course in Q2 to be narrower than in Q1. Net exports subtracted 1.5%-points from Q1 GDP growth. The April-May figures point to net exports contributing to overall GDP growth in Q2 for the first time in four quarters.

By end-use category, exports of nonfood consumer goods excluding autos jumped 5.6% m/m in May after a 1.5% m/m decline in April. Exports of foods, feeds and beverages increased 0.7% m/m, their third consecutive monthly gain. Auto exports slumped 4.7% m/m, their fifth monthly decline in the past seven months. Capital goods ex auto exports fell 1.3% m/m after having increased 13.9% in March and April. Exports of industrial supplies slipped 0.9%, their first monthly decline since last May.

The May rise in imports was concentrated in foods, feeds, beverages (+5.7% m/m) and industrial supplies (+4.5% m/m). Imports of capital goods ex autos slumped 2.0% m/m and auto imports declined 0.6% m/m. Nonfood consumer goods imports ex autos were little changed in May (+0.1% m/m).

The advance international trade data can be found in Haver's USECON database.
The expectation figure is from the Action Economics Forecast Survey, which is in AS1REPNA.

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<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th height="25" class="firstcol" scope="col" >Advance U.S.
 Foreign Trade in Goods (Customs Value $)</th>
 <th>May</th>
 <th>Apr</th>
 <th>Mar</th>
 <th>May Y/Y</th>
 <th>2020</th>
 <th>2019</th>
 <th>2018</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >U.S. Trade Balance ($ bil.)</td>
<td >-88.11</td>
<td >-85.73</td>
<td >-91.92</td>
 <td>-75.95 (5/20)</td>
<td >-911.06</td>
<td >-850.92</td>
<td >-870.36</td>
 </tr>
 <tr>
 <td class="firstcol" >Exports (% Chg)</td>
<td >-0.3</td>
<td >1.1</td>
<td >10.1</td>
<td >58.6</td>
<td >-13.3</td>
<td >-1.4</td>
<td >7.7</td>
 </tr>
 <tr class="odd">
 <td height="34" class="firstcol" >Imports (% Chg)</td>
<td >0.8</td>
<td >-1.9</td>
<td >7.7</td>
<td >39.2</td>
<td >-6.3</td>
<td >-1.7</td>
<td >8.4</td>
 </tr>
 </tbody>
 </table>
 Note: Current month is based on Advance Trade data; Previous months reflect revised data from International Trade release.
 


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• Exports fell while imports rose. • Still, foreign trade on course to contribute to overall GDP growth in Q2. The advance estimate of the U.S. trade deficit in goods widened to $88.1 billion in May from $85.7 billion in April. The [...]

U.S. Goods Trade Deficit Widened in May

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&bull; Transportation orders surge, while ex-transportation improves further.
&bull; Core capital goods orders ease following earlier strength.
&bull; Shipments rise along with order backlogs &amp; inventories.

The factory sector remains on a firm footing. Manufacturers'
orders for durable goods jumped 2.3% (41.6% y/y) during May following a 0.8%
April decline, revised from -1.3%. A 3.0% rise had been expected in the Action
Economics Forecast Survey.

Strength in transportation equipment
orders propelled last month's increase with a 7.6% jump, more than doubling y/y.
The gain was driven by a surge in nondefense aircraft orders as well as a 2.1%
increase (95.6% y/y) in orders for motor vehicles &amp; parts. Excluding
transportation, orders improved 0.3% (25.2% y/y) following a 1.7% rise in
April, revised from 1.0%.

Orders for nondefense capital goods orders excluding aircraft
eased 0.1% (22.7% y/y) following a 2.7% April gain, revised from 2.3%. Elsewhere
in the report, orders were mixed. Orders for primary
metals rose 2.2% (46.9% y/y) but orders for fabricated metal products fell 1.1%
(+34.1% y/y). Electrical equipment orders surged 1.3% (23.8% y/y) but machinery
orders eased 0.4% (+23.8% y/y). Computer &amp; electronic product orders slipped
0.3% (+8.9% y/y).

Durable goods shipments rose 0.4% in May (31.6% y/y) after
easing marginally in April, revised from +0.6%. Shipments of nondefense capital
goods excluding aircraft rose 0.9% (20.4% y/y). Shipments of transportation
products overall eased 0.4% (+69.0% y/y), while shipments excluding
transportation products rose 0.7% (20.9% y/y).

Unfilled orders for durable goods rose 0.8% (-1.4% y/y).
Order backlogs excluding transportation rose 1.6% (11.9% y/y).

Inventories of durable goods rose 0.7% (3.3% y/y) in May for
the second consecutive month. Excluding transportation, inventories surged 1.0%
(2.8% y/y), up from inventory decumulation last spring &amp; summer.

The durable goods figures are available in Haver's USECON
database. The Action Economics consensus forecast figure is in the AS1REPNA
database.

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	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >Durable Goods NAICS
 Classification</th>
 <th>May</th>
 <th>Apr</th>
 <th>Mar</th>
 <th>May Y/Y %</th>
 <th>2020</th>
 <th>2019</th>
 <th>2018</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >New Orders (SA, % chg)</td>
 <td>2.3</td>
 <td>-0.8</td>
 <td>1.3</td>
 <td>41.6</td>
 <td>-13.6</td>
 <td>3.5</td>
 <td>5.1</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Transportation</td>
 <td>7.6</td>
 <td>-6.6</td>
 <td>-3.1</td>
 <td>106.4</td>
 <td>-35.5</td>
 <td>13.2</td>
 <td>1.7</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp;&nbsp;Total Excluding
 Transportation</td>
 <td>0.3</td>
 <td>1.7</td>
 <td>3.3</td>
 <td>25.2</td>
 <td>-1.2</td>
 <td>-1.3</td>
 <td>6.9</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nondefense Capital
 Goods Excl. Aircraft</td>
 <td>-0.1</td>
 <td>2.7</td>
 <td>1.6</td>
 <td>22.7</td>
 <td>1.0</td>
 <td>-0.1</td>
 <td>5.9</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Shipments</td>
 <td>0.4</td>
 <td>-0.0</td>
 <td>2.7</td>
 <td>31.6</td>
 <td>-6.3</td>
 <td>-1.4</td>
 <td>5.7</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp;&nbsp;&nbsp; Nondefense Capital
 Goods Excl. Aircraft</td>
 <td>0.9</td>
 <td>1.0</td>
 <td>1.6</td>
 <td>20.4</td>
 <td>-0.3</td>
 <td>0.7</td>
 <td>6.3</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Unfilled Orders</td>
 <td>0.8</td>
 <td>0.4</td>
 <td>0.5</td>
 <td>-1.4</td>
 <td>-8.2</td>
 <td>10.2</td>
 <td>-1.6</td>
 </tr>
 <tr>
 <td class="firstcol" >Inventories</td>
 <td>0.7</td>
 <td>0.7</td>
 <td>1.1</td>
 <td>3.3</td>
 <td>0.5</td>
 <td>5.9</td>
 <td>4.4</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

• Transportation orders surge, while ex-transportation improves further. • Core capital goods orders ease following earlier strength. • Shipments rise along with order backlogs & inventories. The factory sector remains on a firm [...]

U.S. Durable Goods Orders Rebound in May

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&bull; Modest decline from upwardly revised previous week.
&bull; Continuing state claims fell to new pandemic low.
&bull; PUA claims rose for second consecutive week.

Initial claims for unemployment insurance fell 7,000 in the week ended June 19 to 411,000 from an upwardly revised 418.000 in the previous week (initially (412,000). The Action Economics Forecast Survey panel expected new claims to decline to 380,000. The 4-week moving average edged up to 397,750 last week from 396,250 the previous week, a pandemic low.

Initial claims for the federal Pandemic Unemployment Assistance (PUA) program rose for the second consecutive week, increasing to 104,682 in the week ended June 19 from a downwardly revised 97,762 in the previous week (initially 118,025). The PUA program provides benefits to individuals who are not eligible for regular state unemployment insurance benefits, such as the self-employed. Given the brief history of this program, these and other COVID-related series are not seasonally adjusted.

Continuing claims for regular state unemployment insurance fell 144,000 to a new pandemic low of 3.390 million in the week ended June 12. The insured rate of unemployment slipped 0.1%-point to 2.4%, also a new pandemic low. This rate reached a high of 15.9% in the week of May 9, 2020.

Continuing claims for PUA fell to 5.950 million in the week ended June 5, the lowest since the week ended April 25, 2020, from 6.126 in the previous week. By contrast, continuing PEUC claims rose to 5.273 million in the week ended June 5 from 5.165 million in the previous week. The Pandemic Emergency Unemployment Compensation (PEUC) program covers people who have exhausted their state unemployment insurance benefits.

The total number of all state, federal, and PUA and PEUC continuing claims was 14.845 million in the week ended June 5, an increase in 3,756 from the previous week. The level of total continuing claims in the week ended May 29 was the lowest since early April 2020. These figures are not seasonally adjusted.

The state insured rates of unemployment in regular programs continued to vary widely. In the week ending May 29, the highest insured unemployment rates were in Rhode Island (4.83%), Nevada (4.46%), California (3.93%), Connecticut (3.91%) and Alaska (3.68%). The lowest rates were in South Dakota (0.48%), Alabama (0.69%), Utah (0.70%), Kansas (0.72%), and Nebraska (0.78%). Insured unemployment rates in other large states included New York (3.55%), Illinois (3.61%), Texas (1.64%) and Florida (1.31%). These state rates are not seasonally adjusted.


Data on weekly unemployment claims going back to 1967 are
contained in Haver's WEEKLY database, and they are summarized monthly in USECON.
Data for individual states are in REGIONW. The expectations figure is
from the Action Economics Forecast Survey, carried in the AS1REPNA database.

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 <th class="firstcol" >Unemployment Insurance (SA,
 000s)</th>
 <th>06/19/21</th>
 <th>06/12/21</th>
 <th>06/05/21</th>
 <th>Y/Y %</th>
 <th>2020</th>
 <th>2019</th>
 <th>2018</th>
 </tr>
 </thead>
 <tbody>
 <tr class="odd">
 <td class="firstcol" >Initial Claims</td>
<td >411</td>
<td >418</td>
<td >374</td>
<td >-71.8</td>
<td >1,352</td>
<td >218</td>
<td >220</td>
 </tr>
 <tr>
 <td class="firstcol" >Initial Claims (NSA)</td>
<td >393</td>
<td >408</td>
<td >365</td>
<td >-72.8</td>
<td >1,353</td>
<td >218</td>
<td >221</td>
 </tr>
 <tr>
 <td class="firstcol" >Initial Claims Pandemic
 Unemployment Assistance (NSA)</td>
<td >105</td>
<td >98</td>
<td >71</td>
<td >-88.0</td>
 <td>--</td>
 <td>--</td>
 <td>--</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Continuing Claims</td>
 <td>--</td>
<td >3,390</td>
<td >3,534</td>
<td >-81.2</td>
<td >10,380</td>
<td >1,699</td>
<td >1,754</td>
 </tr>
 <tr>
 <td class="firstcol" >Continuing Claims (NSA)</td>
 <td>--</td>
<td >3,210</td>
<td >3,304</td>
<td >-82.0</td>
<td >10,370</td>
<td >1,704</td>
<td >1,763</td>
 </tr>
 <tr>
 <td class="firstcol" >Continuing Claims Pandemic
 Unemployment Assistance (NSA)</td>
 <td>--</td>
 <td>--</td>
<td >5,950</td>
<td >-48.1</td>
 <td>--</td>
 <td>--</td>
 <td>--</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Insured Unemployment Rate (%)</td>
 <td>--</td>
<td >2.4</td>
<td >2.5</td>
 <td>
 12.2 
 (June 2020)
 </td>
 <td>7.1</td>
 <td>1.2</td>
 <td>1.2</td>
 </tr>
 </tbody>
 </table>
 
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• Modest decline from upwardly revised previous week. • Continuing state claims fell to new pandemic low. • PUA claims rose for second consecutive week. Initial claims for unemployment insurance fell 7,000 in the week ended June 19 to [...]

U.S. Initial Unemployment Insurance Claims Edged Down

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• Goods trade deficit widens sharply.
• Services trade surplus shrinks to least since 2012.
The U.S. current account deficit deepened to $195.7 last
quarter from $175.1 billion in Q4'20, revised from $188.5 billion. The Action
Economics Forecast Survey anticipated a $207.0 billion deficit. As a percent of
GDP, the deficit grew to 3.6%, it's deepest since Q4'08. During all of 2020, the
current account deficit deepened to $616.1 billion, revised from $647.2 billion.
The deficit in goods trade deteriorated to a record $268.5
billion as exports grew 6.4% (2.6% y/y) in Q1. Industrial supplies &amp;
materials exports rose 12.8% (4.0% y/y). Food, feeds &amp; beverage exports
increased 4.5% (21.9% y/y and capital goods exports rose 4.2% (-7.0% y/y).
Falling by 2.5% (-1.0% y/y) were auto, parts &amp; engines exports while nonauto
consumer goods exports declined 1.1% (3.0% y/y). Imports of goods rose 6.3% (13.1%
y/y) in Q1. The gain reflected a 19.1% rise (12.2% y/y) in industrial supplies
&amp; materials imports as oil prices rose. Nonauto consumer goods imports
gained 7.4% (24.8% y/y). Capital goods imports strengthened 5.8% (13.2% y/y)
while foods, feeds &amp; beverage imports rose 2.9% (6.8% y/y). Falling 6.2%
(2.6% y/y) were auto &amp; parts imports.
The surplus on services trade narrowed to $55.7 billion in Q1.
Services exports rose 0.6% (-11.7% y/y) as travel exports strengthened 12.2% (-63.1%
y/y). Export charges for the use of intellectual property weakened 7.1% (+1.7%
y/y). Imports of services improved 1.5% (-9.8% y/y), reflecting a 5.1% rise (-64.2%
y/y) in travel imports in Q4. Imports of charges for the use of intellectual
property increased 4.2% (14.8% y/y).
The surplus on primary income fell to $50.3 billion after
increasing sharply in Q4'20. Investment income receipts rose 3.8% (3.3% y/y)
while investment income payments increased 6.9% (4.8% y/y). The deficit on
secondary income grew to $33.3 billion.
Balance of Payments data are in Haver's USINT
database, with summaries available in USECON. The expectations figure is
in the AS1REPNA database.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="947">U.S. Balance of Payments
 SA</th>
 <th scope="col" width="153">Q1'21</th>
 <th scope="col" width="153">Q4'20</th>
 <th scope="col" width="153">Q3'20</th>
 <th scope="col" width="153">2020</th>
 <th scope="col" width="154">2019</th>
 <th scope="col" width="154">2018</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="947">Current Account Balance ($ Billion7</td>
 <td align="center" width="153">-195.7</td>
 <td align="center" width="153">-175.1</td>
 <td align="center" width="153">-172.4</td>
 <td align="center" width="153">-616.1</td>
 <td align="center" width="154">-472.1</td>
 <td align="center" width="154">-438.2</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="947">&nbsp;&nbsp;As % of GDP</td>
 <td align="center" width="153">-3.6</td>
 <td align="center" width="153">-3.3</td>
 <td align="center" width="153">-3.3</td>
 <td align="center" width="153">-2.9</td>
 <td align="center" width="154">-2.2</td>
 <td align="center" width="154">-2.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="947">&nbsp;Balance on Goods ($ Billion)</td>
 <td align="center" width="153">-268.5</td>
 <td align="center" width="153">-253.1</td>
 <td align="center" width="153">-245.4</td>
 <td align="center" width="153">-922.0</td>
 <td align="center" width="154">-861.5</td>
 <td align="center" width="154">-878.8</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="947">&nbsp;&nbsp;Exports (% Chg)</td>
 <td align="center" width="153">6.4</td>
 <td align="center" width="153">7.6</td>
 <td align="center" width="153">23.1</td>
 <td align="center" width="153">-13.5</td>
 <td align="center" width="154">-1.5</td>
 <td align="center" width="154">7.7</td>
 </tr>
 <tr>
 <td class="firstcol" width="947">&nbsp;&nbsp;Imports (% Chg)</td>
 <td align="center" width="153">6.3</td>
 <td align="center" width="153">5.8</td>
 <td align="center" width="153">17.4</td>
 <td align="center" width="153">-6.5</td>
 <td align="center" width="154">-1.6</td>
 <td align="center" width="154">8.5</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="947">&nbsp;Balance on Services ($ Billion)</td>
 <td align="center" width="153">55.7</td>
 <td align="center" width="153">56.3</td>
 <td align="center" width="153">58.3</td>
 <td align="center" width="153">245.3</td>
 <td align="center" width="154">285.2</td>
 <td align="center" width="154">297.8</td>
 </tr>
 <tr>
 <td class="firstcol" width="947">&nbsp;&nbsp;Exports (% Chg)</td>
 <td align="center" width="153">0.6</td>
 <td align="center" width="153">5.0</td>
 <td align="center" width="153">0.7</td>
 <td align="center" width="153">-19.5</td>
 <td align="center" width="154">1.7</td>
 <td align="center" width="154">3.4</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="947">&nbsp;&nbsp;Imports (% Chg)</td>
 <td align="center" width="153">1.5</td>
 <td align="center" width="153">9.5</td>
 <td align="center" width="153">7.6</td>
 <td align="center" width="153">-22.1</td>
 <td align="center" width="154">4.8</td>
 <td align="center" width="154">3.1</td>
 </tr>
 <tr>
 <td class="firstcol" width="947">&nbsp;Balance on Primary Income ($
 Billion)</td>
 <td align="center" width="153">50.3</td>
 <td align="center" width="153">54.2</td>
 <td align="center" width="153">48.3</td>
 <td align="center" width="153">188.5</td>
 <td align="center" width="154">231.9</td>
 <td align="center" width="154">259.1</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="947">&nbsp;Balance on Secondary Income ($
 Billion)</td>
 <td align="center" width="153">-33.3</td>
 <td align="center" width="153">-32.5</td>
 <td align="center" width="153">-33.5</td>
 <td align="center" width="153">-127.9</td>
 <td align="center" width="154">-127.7</td>
 <td align="center" width="154">-116.4</td>
 </tr>
 </tbody>
</table>

&nbsp;
U.S. New Home Sales Fall Sharply in April 
by <a href="http://www.haver.com/comment/Moeller.html">Tom
Moeller</a>&nbsp;&nbsp;June 23, 2021
• Sales decline reverses March increase.
• Declines occur throughout most of country.
• Median home prices near-record high.
Sales of new single-family homes declined 5.9% (+48.3% y/y)
during April to 863,000 units (SAAR) following a 7.4% increase to 917,000 in
March, revised from 1.021 million. The Action Economics Forecast Survey expected
970,000 sales in April.
Sales in the South fell 8.2% (+61.2% y/y) to 545,000 units
after increasing 24.0% to 594,000 in March, revised from 694,000. In the
Midwest, sales weakened 8.3% last month (+46.7% y/y) to 110,000 units following
a 6.2% March rise to 120,000, revised from 132,000. Sales in Northeast weakened
13.7% to 44,000 units (+100.0% y/y) after a roughly one-third March rise.
Increasing by 7.9% (11.6% y/y) were sales in the West to 164,000 units following
a 31.8% decline during March.
The median price of a new home rose 11.4% (20.1% y/y) in
April to $372,400 following two months of roughly 5.5% decline. Working 8.7%
higher (20.8% y/y) to $435,400 was the average price of a new home, following a
0.5% easing in March. These prices are not seasonally adjusted.
The supply of new homes for sale rose to 4.4 months in April,
the most since May of last year. The median number of months a new home stayed
on the market was 3.8, after surging to 4.6 months in March.
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.
<table width="1871" class="centered" border="0" cellSpacing="0">
 <thead>
 <tr>
 <th class="firstcol" scope="col" width="866">U.S. New Single-Family
 Home Sales (SAAR, 000s)</th>
 <th width="143">May</th>
 <th width="143">Apr</th>
 <th width="143">Mar</th>
 <th width="143">May Y/Y %</th>
 <th width="143">2020</th>
 <th width="143">2019</th>
 <th width="143">2018</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" width="866">Total</td>
 <td align="center" width="143"></td>
 <td align="center" width="143">863</td>
 <td align="center" width="143">917</td>
 <td align="center" width="143">48.3</td>
 <td align="center" width="143">828</td>
 <td align="center" width="143">683</td>
 <td align="center" width="143">614</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="866">&nbsp; Northeast</td>
 <td align="center" width="143"></td>
 <td align="center" width="143">44</td>
 <td align="center" width="143">51</td>
 <td align="center" width="143">100.0</td>
 <td align="center" width="143">37</td>
 <td align="center" width="143">30</td>
 <td align="center" width="143">32</td>
 </tr>
 <tr>
 <td class="firstcol" width="866">&nbsp; Midwest</td>
 <td align="center" width="143"></td>
 <td align="center" width="143">110</td>
 <td align="center" width="143">120</td>
 <td align="center" width="143">46.7</td>
 <td align="center" width="143">94</td>
 <td align="center" width="143">72</td>
 <td align="center" width="143">75</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="866">&nbsp; South</td>
 <td align="center" width="143"></td>
 <td align="center" width="143">545</td>
 <td align="center" width="143">594</td>
 <td align="center" width="143">61.2</td>
 <td align="center" width="143">476</td>
 <td align="center" width="143">399</td>
 <td align="center" width="143">347</td>
 </tr>
 <tr>
 <td class="firstcol" width="866">&nbsp; West</td>
 <td align="center" width="143"></td>
 <td align="center" width="143">164</td>
 <td align="center" width="143">152</td>
 <td align="center" width="143">11.6</td>
 <td align="center" width="143">221</td>
 <td align="center" width="143">182</td>
 <td align="center" width="143">159</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" width="866">Median Price (NSA, $)</td>
 <td align="center" width="143"></td>
 <td align="center" width="143">372,400</td>
 <td align="center" width="143">334,200</td>
 <td align="center" width="143">20.1</td>
 <td align="center" width="143">334,992</td>
 <td align="center" width="143">319,267</td>
 <td align="center" width="143">323,125</td>
 </tr>
 </tbody>
</table>


</body>

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• Goods trade deficit widens sharply. • Services trade surplus shrinks to least since 2012. The U.S. current account deficit deepened to $195.7 last quarter from $175.1 billion in Q4'20, revised from $188.5 billion. The Action [...]

U.S. Current Account Deficit Sets Record in Q1'21

Joseph G. Carson

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What many are missing about price cycles is that they create sustainability of their own. Higher prices generate revenue and income, creating more demand and more revenue and income. Price cycles don't die out; they spread and develop momentum and sustainability. And once they gain a foothold, it takes more than a bit of nudging from monetary policy to break the cycle.

Inflation 2021 Style 

Through the first five months of 2021, consumer prices have increased at an annual rate of 5% and the core inflation even more, up 5.5%. There is no so-called base effect in those figures; consumer prices started to rise at the end of 2020.

While it is true that some components of the consumer price index directly linked to sectors re-opening experienced sharp price increases, it is wrong to say the rise was there and nowhere else.

For example, the Bureau of Labor Statistics estimated that in May, core CPI less used car and truck prices and shelter rose 0.6%, the same as the overall core figure. Since the start of 2021, this measure has advanced an annualized rate of 4.6%, the highest rate in several decades.

Yet, the significance of price cycles is that it generates higher revenue and income and more demand. For example, the recent jump in airline fares reflects the sharp increase in travel. Higher airline fares result in more revenue for airline firms, generating greater demand for workers and more income. Delta recently announced the hiring of 1000 pilots to help them meet the increase in demand. There will also be spillover price effects in other sectors---hotels, restaurants, and various forms of recreation---because as the mobility of the consumer increases, so does spending.

Higher prices for materials and products are also generating more revenue and profits for manufacturing companies. That cycle of higher revenue and profits causes the need for more workers, creating more income and demand that will spill over to other parts of the economy. But the problem for manufacturing firms and services firms as well, there is a shortage of workers, so a strong wage cycle is developing, creating more income and demand.

The history of inflation cycles shows that while higher prices may today be in travel-related industries and housing, tomorrow will be somewhere else. Price cycles gain momentum and spread, and as they do, they create the expectations of higher prices. The failure of policymakers to recognize the built-in sustainability of price cycles raises the odds it will live longer as easy money will help fuel it.


Viewpoint commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
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What many are missing about price cycles is that they create sustainability of their own. Higher prices generate revenue and income, creating more demand and more revenue and income. Price cycles don't die out; they spread and develop [...]

Inflation Cycles Create Their Own Sustainability

Robert Brusca

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<a href="/comment/210623e.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/210623e.png" align="left"></a>
Of the six entries in the table, the June manufacturing PMIs stepped back in two of them (France & Japan) and are unchanged in another (EMU). The services gauge stepped back only in the U.K. After this month's data, the service sector percentile standings are equal to or above the standings of the manufacturing sector that has led this revival in three of six reporting entities (EU, Germany and tied in the U.K.). In the U.S., the services sector trails the red hot manufacturing sector by less than two percentile points in their rank standing. The raw diffusion score is greater for the services sector than for manufacturing only in the U.S. where that has been true for five months running and where service sector job growth has been reviving.

Get back! 
Getting the services sector back on track is the most important goal to get the global economy back to normal. Services employ the bulk of the labor in developed countries. While having a manufacturing-led recovery was not a bad thing, as long as the virus kept people indoors mask-wearing and, for the most part, away from the services sector, the ability of a growing manufacturing sector to spread economic growth always was going to be severely limited. It has not been until vaccine use has stepped up and made it possible for people to mingle with a reduced risk of infection that the service sectors globally have been able to come to life. And in many places, vaccinations are not widespread enough to allow service sectors to revive fully.

Spare the vaccine, spoil the growth... 
Japan is an example of less vaccine use: it has only 8% of its population fully vaccinated and only 19% with at least one shot. These are very low metrics for a developed country and especially for a country with such an aged population (the U.S. has 45.8% of the population vaccinated, the U.K. 47.2%. However, Germany that is doing quite well has only 32.5% vaccinated). Japan has the lowest composite standing by far in this group (15.1 percentile!) which is the product of a 47.2 percentile standing in manufacturing versus an 18.9 percentile standing for services. Japan's manufacturing sector is doing much better than its service sector but with its low rank standing the manufacturing PMI is barely above breakeven (its raw diffusion score is 51.5) and that is not going pull very hard on its services sector where the diffusion standing still shows contraction at a 47.2 raw diffusion score.


<img border="0" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/210623.png" width="300 " height="370" align="left">
Double bests 
Only the EMU, Germany, the U.K. and the U.S. have top ten percentile queue standings (90th percentile standings) or above for both sectors as well as the composite. The EMU, Germany, France and the U.K. have top ten percentile standings for their high-low range percentiles. The U.S. just misses on this metric with its services sector at an 87.7 percentile for its high-low mark. That percentile pulls down the U.S. composite as well. Japan's sectors have high-low standings that cluster around the 80th percentile mark.

Context for PMI scores 
All of these are simply statistics to try to positon the current PMI readings for you in different historic perspective. Manufacturing is expanding and prospering in most places listed in the table. The services sector that usually expands is expanding everywhere except Japan where economic restrictions have been kept in place to try to reduce the base of infections and make the country safe for the incoming Olympic games. Japan also has a low incidence of vaccination.

Accommodation is still the name of the policy game 
Central banks in money center countries continue to pour on the monetary stimulus. Fiscal policy takes different forms in different regions, but policy continues to be highly accommodating. Several central banks on the monetary periphery have been raising their rates. There are no rate hikes from monetary center country central banks. The ECB has even ignored an overshoot of the headline HICP pace year-on-year. In the U.S., there is now a real debate about how much and when to cut its ongoing monthly securities purchases. Chair Powell continues to say that it is too early to even talk about talking about hiking rates. So while that eventuality may seem closer at hand as the Fed discusses changing security purchase practices, in Mr. Powell's view it is still way off in the distance.

Inflation is your friend or fiend? 
Meanwhile, inflation has flared particularly in the U.S. and EMU and central banks are sitting on their hands calling the spike temporary and reversible. The Fed's mention of tapering (the decision to talk about it), however, had a powerful impact on markets pushing the yields on the U.S. 10-year government note lower. We have also seen some commodity prices particularly lumber and copper backtrack recently. If inflation were bubbling to a head, we would not expect to see backtracking in commodity prices. Market participants are taking sides over the prospect for inflation. But markets reacted and were ‘reassured' just by the Fed's decision to take tapering off the ‘do not talk about' list.

A complicated outlook 
All of this simply paints a complex picture for central banks that remain frozen and perhaps even perplexed about how to act. No central bank wants to act too soon and cut off a recovery in progress. Yet, neither does one want to encourage inflation to accelerate and become established. There are arguments all over the place about this and about what to do. For now central banks remain largely watching events. We do not know what tolerances they have to act. But it is also clear that threats from the virus remain and policy cannot yet disregard the virus as a threat to growth. It is threat that is much diminished, but it is not gone. That is simply another aspect of difficulty for making any policy decision. Global policies seem to be on the cusp of some sort of a regime change. But it may be a change from a regime of heavy monetary and fiscal stimulus to a regime of an extended holding pattern for stimulus and less aggressive action. There is no telling how broad this ‘cusp' of policy tolerance may be. For now all central banks seem to be running the same policy of forbearance when it comes to viewing incipient inflation. We are all wondering how long forbearance will hold and if the incipient inflation will recede and unwind before forbearance wears thin and gets worn out.


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Of the six entries in the table, the June manufacturing PMIs stepped back in two of them (France & Japan) and are unchanged in another (EMU). The services gauge stepped back only in the U.K. After this month's data, the service sector [...]

Markit Flash PMIs Show Most Improvement in Services

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<a href="/comment/210623n.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/210623n.png"></a>
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&bull; Sales fall for second straight month.
&bull; Decline centers in the South.
&bull; Median home prices set new record.

Sales of new single-family homes declined 5.9% (+9.2% y/y)
during May to 769,000 units (SAAR) from 817,000 during April, revised from
863,000. It was the lowest level of sales in twelve months. March sales were
revised to 886,000 from 917,000. The Action Economics Forecast Survey expected 870,000
sales in May.

Sales in the South fell 14.5% (+3.1% y/y) to 432,000 units
after weakening 10.1% to 505,000 in April, revised from 545,000. It also was the
lowest level of sales in twelve months. Rising by one-third (57.6% y/y) to
52,000 were sales in the Northeast. April sales were revised to 39,000 from
44,000. Sales in the West rose 6.7% both m/m and y/y to 190,000 from 178,000 in
April, revised from 164,000. Sales in the Midwest held at 95,000 (28.4% y/y) but
April sales were revised from 110,000.

The median price of a new home rose 2.5% (18.1% y/y) to
$374,400, following a 4.9% April gain to $365,300, revised from $372,400.
Working 2.3% higher (16.8% y/y) to $430,600 was the average sales price. April's
average price was revised to $420,900 from $435,400. These prices are not
seasonally adjusted.

The supply of new homes for sale rose to 5.1 months in May,
the most in 12 months. The median number of months a new home stayed on the
market was 3.5, following 4.5 months in April and 5.0 months in March.

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.

<a href="/comment/210623p.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/210623p.png"></a>
 <a href="/comment/210623q.png" name="modal"><img class="small" src="https://haver-commentaries.s3.eu-west-1.amazonaws.com/comments/210623q.png"></a>

<table class="centered" width="100%" border="0" cellspacing="0">
	<colgroup><col><col><col><col><col><col><col><col></colgroup>

 <thead>
 <tr>
 <th class="firstcol" scope="col" >U.S. New Single-Family
 Home Sales (SAAR, 000s)</th>
 <th>May</th>
 <th>Apr</th>
 <th>Mar</th>
 <th>May Y/Y %</th>
 <th>2020</th>
 <th>2019</th>
 <th>2018</th>
 </tr>
 </thead>
 <tbody>
 <tr>
 <td class="firstcol" >Total</td>
 <td>769</td>
 <td>817</td>
 <td>886</td>
 <td>9.2</td>
 <td>828</td>
 <td>683</td>
 <td>614</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; Northeast</td>
 <td>52</td>
 <td>39</td>
 <td>51</td>
 <td>57.6</td>
 <td>37</td>
 <td>30</td>
 <td>32</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; Midwest</td>
 <td>95</td>
 <td>95</td>
 <td>113</td>
 <td>28.4</td>
 <td>94</td>
 <td>72</td>
 <td>75</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >&nbsp; South</td>
 <td>432</td>
 <td>505</td>
 <td>562</td>
 <td>3.1</td>
 <td>476</td>
 <td>399</td>
 <td>347</td>
 </tr>
 <tr>
 <td class="firstcol" >&nbsp; West</td>
 <td>190</td>
 <td>178</td>
 <td>160</td>
 <td>6.7</td>
 <td>221</td>
 <td>182</td>
 <td>159</td>
 </tr>
 <tr class="odd">
 <td class="firstcol" >Median Price (NSA, $)</td>
 <td>374,400</td>
 <td>365,300</td>
 <td>348,300</td>
 <td>18.1</td>
 <td>334,992</td>
 <td>319,267</td>
 <td>323,125</td>
 </tr>
 </tbody>
 </table>
 
</body></html>

• Sales fall for second straight month. • Decline centers in the South. • Median home prices set new record. Sales of new single-family homes declined 5.9% (+9.2% y/y) during May to 769,000 units (SAAR) from 817,000 during April, [...]

U.S. New Home Sales Decline Unexpectedly in May

Wage growth slowing in the US and Euro area; elevated and sticky in the UK

Stagflation-lite: Blue Chip forecasts below-trend growth and elevated inflation

US policy gyrations boosting policy uncertainty worldwide

Expected tariff hikes have boosted inflation expectations

US and Japan ended 2024 on solid ground in contrast to Europe

US economy expected to outperform other major economies in 2025

Only modest evidence of AI-related surge in US productivity growth

Previous Trump tariffs fading. A boost from new tariffs ahead?

Heavy US manufacturing states underperforming while Sun Belt states outperforming

Rising long-term yields a global phenomenon

US financial market concerns shifting from growth to inflation

Economic activity is picking up in the US but remains lackluster abroad

Policy uncertainty has surged since the US national elections.

Recent turnaround in US economic surprises leading to increases in rate-cut expectations

The outlook has brightened in the US, while it has dimmed for other major economies

Headline US PCE inflation elevated by sticky services prices

US and global equity prices have recently diverged

US leading global upturn in economic surprises

Blue Chip forecasters look for further significant monetary easing apart from Japan

Recent rise in global supply chain pressures could augur a pickup in global inflation pressures

Underperforming German economy generating increased policy uncertainty relative to Europe and the US

Resilient US economy is pushing up longer-term inflation expectations and interest rates

Positive US economic data surprises leading to upward adjustment of interest rate expectations

Recent aggressive policy easing in China has given a massive boost to equity prices

FOMC expects much more easing now than in June

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The Conference Board's Index of Consumer Confidence fell 7.2% (-9.9% y/y) to 92.9 after a 4.9% decline in February to 100.1, revised from down 6.6%. A reading of 94.0 had been expected in the Action Economics Forecast Survey. The March figure was 17.6% below its November high. Weakness in confidence is widespread amongst components in this latest report.

The Expectations Index slumped 12.8% (-11.9% y/y) to 65.2, after a 9.0% February weakening, revised from a 12.9% decline. This latest figure was the weakest since March 2013. The Present Situation index fell 2.6% (-8.4% y/y) to 134.5, after declining 1.3% in February, revised from down 2.4%, after a 2.8% January fall. The reading was the lowest in six months.

The percentage of respondents assessing business conditions as “good” fell to 17.7% this month after declining to 19.1% in February. The index hit a high of 22.0 in October. The percentage assessing conditions as “bad” rose to 16.6% after falling to 14.8% in February. The appraisal of labor market conditions held steady m/m in March as 33.6% of respondents thought jobs were plentiful, down from 41.7% one year earlier. Jobs were viewed as hard to get by 15.7% of respondents this month, down from 16.0% in February. This measure has risen from 11.0% in January 2024. The labor market differential calculated by Haver Analytics (the percentage of consumers who think jobs are plentiful minus the percentage who believe that jobs are currently hard to get) stood at 17.9% compared to 17.6% in February and remained below a high of 47.1% in March 2022. This series has a 60% correlation with the unemployment rate over the last ten years.

Expectations for business conditions deteriorated in March. A lessened 17.1% of respondents expect conditions to improve over the next six months, down from 20.8% in both February and January, while a higher 27.3% expect them to deteriorate, up from 25.5% in February. On employment, a lessened 16.7% expect the number of jobs to increase over the next six months. The percentage expecting the number of jobs to decline in the next six months rose to 28.5% after surging to 26.6% in February, and increasing to 21.0% in January. A lessened 16.3% expect income to increase in six months. That remained down from a high of 20.7% in November and compares to a higher 15.5% who expect income to decrease.

The expected rate of price inflation over the next twelve months rose to 6.2% in March after increasing to 5.8% in February from 5.2% in January. Interest rates are expected to rise this year by a higher 54.6% of respondents, up from 52.6% in February. The percentage of respondents expecting equity prices to increase over the next twelve months plummeted to 37.4% after dropping to 46.7% in February, while the percentage expecting a decline in stock prices jumped to 44.5% after rising to 34.0% in February.

The percentage of respondents planning to buy a home rose in March to 5.4% from 5.3% in February. Plans to purchase an automobile eased to 10.3% this month from a downwardly revised 10.7% in February.

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**.

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- Confidence weakens to lowest level since January 2021.
- Expectations reading plummets to twelve-year low; present situation reading weakens.
- Inflation and interest rate expectations rise further.

U.S. Consumer Confidence Tumbles in March; Inflation Expectations Strengthen

Michael J. Moran

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Sales of new homes rose 1.8% in February, a solid increase on a month-to-month basis, but one that had little influence on the recent trend. The ups and downs of the past two years have traced a sideways path, with the February total of 676 thousand homes (annual rate) nearly identical to the average of 675 thousand in the prior two years.

Results for new home sales in the past two years have been light relative to the burst triggered by low interest rates from mid-2020 to early 2022, and they are well shy of the exuberance seen in the years before the housing-related recession in 2008-09. Otherwise, sales compare favorably with historical norms.

While sales of new homes can be viewed as respectable, more might have been expected given conditions in the market for existing homes. Sales of existing homes have been light in the past two years because of the effects of high interest rates on potential sellers. Many households that might be interested in moving have remained on the sidelines rather than surrender a low-rate mortgage. With a lack of supply, sales of existing homes have been depressed.

The market for new homes is not supply constrained, as the months’ supply is in the upper portion of its historical range. One might expect potential buyers to shift to the new home market given the limited availability in the existing market. However, a slow pace of total sales (new + existing) suggests that the housing market overall is in the doldrums. High interest rates apparently have triggered affordability issues for many buyers.

Despite slow sales, housing prices have not done much to counter affordability issues. The average and median prices of new homes are now drifting lower, but the change has been modest relative to the surge in prices from 2020 to 2022. More notable, the median price of existing homes has continued to move higher, and various indexes of home prices continue to show upward pressure – lighter than it was two to four years ago, but still upward.

New home sales are recorded when the sales contract is signed. 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.

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- A Respectable pace of new home sales...
- ...but only a modest counter to soft sales in the existing home market.

New Home Sales: Range Bound Activity in February

Winnie Tapasanun

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U.S. house prices rose 0.2% m/m in January after rises of 0.5% in December (+0.4% initially) and 0.4% in November (unrevised), according to the Federal Housing Finance Agency (FHFA) House Price Index. The January reading was the 10th consecutive m/m gain but the smallest since June 2024. The January HPI at 436.52 was 12.9% above a low of 386.53 in August 2022 and 55.2% above a low of 281.32 in May 2020. The year-on-year rate of increase registered at 4.8% in January and December, the highest since July 2024; nevertheless, having remained lower than 6.7% in January 2024 and well below a high of 18.7% in February 2022.

House prices rose m/m in January (vs. December) in six of the nine census divisions. These included West North Central (1.0% vs. -0.2%), Middle Atlantic (0.7% vs. 0.7%), East North Central (0.5% vs. 0.6%), Pacific (0.5% vs. 0.3%), West South Central (0.4% vs. 0.2%), and East South Central (0.2% vs. 0.5%). To the downside, house prices fell m/m in two census divisions in January (vs. December): South Atlantic (-0.8% vs. 0.3%) and Mountain (-0.6% vs. 1.7%). Meanwhile, house prices in New England were virtually unchanged (+7.3% y/y) in January following six straight m/m increases.

Year-on-year house prices continued to gain in January, with the pace of advance accelerating (vs. December) in four of the nine census divisions. These were Middle Atlantic (8.2% vs. 7.2%), East North Central (6.9% vs. 6.4%), East South Central (4.8% vs. 4.0%), and Pacific (3.6% vs. 2.9%). Meanwhile, house price growth decelerated y/y in January (vs. December) in the following four census divisions: Mountain (3.7% vs. 5.1%), South Atlantic (3.9% vs. 4.4%), West North Central (5.0% vs. 5.2%), and New England (7.3% vs. 7.9%). House price growth in the West South Central region held steady at 2.4% y/y.

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 refinancing the same kind 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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- FHFA HPI +0.2% m/m (+4.8% y/y) in Jan.; +0.5% m/m (+4.8% y/y) in Dec.
- House prices up m/m in six of nine census divisions but down in South Atlantic and Mountain.
- House prices up y/y in all of the nine regions, w/ the highest rate in Middle Atlantic (8.2%).

U.S. FHFA House Price Growth Decelerates in January

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Retail gasoline prices for all grades rose to a four-week high last week and averaged $3.24 per gallon (-11.0% y/y) after falling to $3.18 in the week ending March 17. Prices have risen from a low of $3.13 in the week of December 9. The recent high was $3.79 in the week ending April 22, 2024. Its all-time high of $5.11 occurred in the week ending June 13, 2022. The retail price for on-highway diesel fuel improved to $3.57 per gallon (-11.6% y/y) in the week of March 24 after easing to $3.55 in the prior week. The latest diesel price remained well below a high of $4.63 in the week ending September 18, 2023 and a peak of $5.81 in the week ending June 20, 2022.

The price of West Texas Intermediate crude oil edged up to $67.64 per barrel (-17.9% y/y) in the week ended March 21, after rising to $66.74 per barrel in the prior week. Prices have fallen from a high of $78.50 where they were nine weeks ago, remaining below a high of $91.45 in the week of September 29, 2023. The cost of crude oil peaked at $120.46 in the week of June 10, 2022. Yesterday, the price was $69.11	 per barrel. The price of European Brent crude oil of $72.18 per barrel (-16.0% y/y) in the week of March 21 compared to $71.54 in the prior week and a high of $82.79 nine weeks ago. Prices remained below a recent high of $95.61 in the week of September 29, 2023 and below a peak of $127.40 in the week of June 10, 2022. Yesterday, the price was $73.96 per barrel.

Natural gas prices held last week at an average $4.14 per mmbtu (168.8% y/y) in the week ended March 21 after easing to $4.15/mmbtu in the prior week. Prices remained well above a low of $1.40/mmbtu in the week of March 15, 2024 but below their peak of $9.56 in the week of August 26, 2022. Yesterday, the price was $4.03 per mmbtu.

Gasoline demand held steady y/y in the four weeks ending March 14 after edging 0.1% higher in the prior four weeks. Demand for all petroleum products rose 2.5% y/y in the four weeks ending March 14 after a 3.9% y/y rise in the previous four-week period. Crude oil input to refineries rose 1.8% y/y in the four weeks ending March 14 after a 3.4% y/y increase in the prior four weeks.

Gasoline inventories rose 4.2% y/y in the week ending March 14 after a 3.0% y/y rise in the week ending March 7. Residual fuel oil inventories fell 21.3% y/y in the week of March 14, after an 17.1% y/y fall in the prior week. Crude oil inventories rose 3.2% y/y in the week of March 14 after a 2.8% y/y rise in the previous week.

Measured in days’ supply, gasoline inventories fell to 27.2 days in the week of March 14 from 27.8 days in the prior week. The recent low was 22.9 days in the week of November 8. The supply of crude oil was 28.0 days in the week of March 14 for the third straight week, but remained below a high of 31.9 days in the week of March 3, 2023.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price and supply/demand data can be found in Haver’s **WEEKLY** & **USENERGY** database.

- Gasoline costs rise.
- Crude oil prices move higher.
- Natural gas costs stabilize.

U.S. Gasoline Prices Strengthen Last Week

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Germany's all sector climate index improved in March to -19.8 from -24 in February. Still, the index only has a 13.9 percentile standing on data back to the early 1990s. The all-sector climate index, the current index and expectations all improve month-to-month with the scope of improvement for the all-sector climate and expectations indexes greater only about 10% of the time. These are sharp month-to-month improvements. However, the levels of the indexes are so weak that the rankings continue to scrape very low levels. Overall conditions in Germany have hardly changed despite the solid month-to-month improvement concentrated in climate and expectations.

**Climate**
The climate measure shows improvements for the all-sector reading, manufacturing, construction wholesaling, retailing, and services. The highest percentile standing for any sector is for construction at a below-median 41.5 percentile standing. The next highest standing is for retailing at a 24.5 percentile standing, the weakest reading is a standing of 10.3% in manufacturing, and the services sector is at a 13.2 percentile standing, not too much stronger than that. 

**Transition-Ho!**
While climate conditions are still in difficult straits, we find that current conditions standings are largely worse than for climate standings; expectations show uneven comparisons. We know there are big changes coming to Europe, particularly for Germany, because of the new shift to more defense spending. This, obviously, will create improvements in the defense sector but should also have broader multiplier effects for the economy, for the manufacturing sector, but also for the economy in general. We also expect these changes to spread across Europe with similar increases in military spending to be introduced in other countries, as the United States is looking for Europe to carry more of its own security burden. We should continue to see improvements in expectations and in climate in the coming months and those improvements should be translated gradually into improved current conditions as well.

**Current conditions-Manufacturing and Construction lead**
Current conditions in the index show improvement across all sectors with minuscule improvements being posted in wholesaling and in retailing in March. The percentile standing for the current indexes in March show the strongest reading in construction; it is the only sector above its median: above its 50th percentile at 61.6%, with retailing close to its 50th percentile mark at 48.2%. The weakest readings are for manufacturing at an 11.9 percentile standing and then services at a 16.9 percentile standing. But manufacturing has the largest month-to-month gain. The overall standing for current conditions is lower still at its 10.7 percentile standing, indicating a confluence of weakness across sectors, a result that has the overall index at a weaker standing than any for individual sector.

**Expectations – Manufacturing surges**
Expectations show broad improvement and for the most part fairly significant improvement across sectors. The headline improvement shows expectations at -16.1 in March compared to -20.5 in February, which leaves the index at a 16.9 percentile standing overall. Expectation standings are weak, however, with the strongest expectation standing in manufacturing at 21.1%, the second strongest for wholesaling at 19.8%; services rank third with the standing of 15.1%. Construction, the sector that has the strongest current and climate standings, has the weakest expectation-standing at the 8.2 percentile mark.

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**Summing up and looking ahead**
These readings begin to pick up some of the changes in progress with expectations showing still very weak current readings but substantial pickups month-to-month. However, most of this is simply expectations improving; it is not expectations built on actually better performance and jumping off from there, as we can see from the fact that the current indexes or the most part are not much changed month-to-month, with extremely little change in wholesaling and retailing. Still, both of those current/expectations reading are higher; manufacturing is also improved in the current reading but expectations are leading the way ahead, improving faster, not the other way around. German transactors are beginning to look to the future recognizing there is a change afoot on military spending that is going to permeate the economy and we're beginning to see that in different aspects of the IFO survey. Stay tuned and stay alert.

Economy in Brief: June 2021

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