Inflation, GDP, & More

Week in Review: April 22-26

This week was loaded with economic news and data releases, including first quarter GDP, personal income, spending and saving, durable goods orders, new rules on noncompetes and airline refunds, and a whole lot more. By the way – taken together – the data suggest that the economy is beginning to move in the direction I’ve been saying it would. What’s not moving in a direction that anyone could have predicted are those Atlanta Falcons…What were they thinking with that 8^th pick in the first round?

Monday

TSA Checkpoint Travel Numbers

The number of passengers screened by TSA continues to trend about 6% above 2023 levels. So far, we’ve yet to see any meaningful slowdown in travel volumes. That’s true for consumer spending generally.

Tuesday

FTC Bans Noncompete Agreements

This new rule bans (many) noncompete clauses. The FTC estimates it will lead to more than 8,500 new businesses each year. Whether or not that estimate is accurate, this will surely lead to increased business formation—noncompetes effectively shrink the labor supply in an industry, making it more difficult for new firms to emerge. Sometimes, they prohibit the creation of a business in a certain geography altogether. This Betsey Stevenson thread discussed the economic arguments for the ban, and this Alex Tabarrok post makes a counterargument.

New Home Sales

New home sales increased sharply in March, rising about 9% from February levels. As you can see below, new home sales are almost the exact same as during the month prior to the pandemic. While that’s great, new homes currently account for just about 14% of total home sales (and historically account for a much smaller share of overall sales than that). Existing home sales remain extraordinarily subdued due to a lack of inventory, elevated prices, and elevated mortgage rates, especially by Millennial standards.

One interesting tidbit from this release: the number of completed new homes sold (as opposed to under construction or not yet started) was the highest since July 2020, while the number of not started homes sold was the lowest since December 2022. That strongly suggests that orders for new homes are in decline, an element of the lag effects associated with the prevalence of meaningfully higher interest rates for the better part of the past two years.

S&P Global Composite PMI

Business activity expanded for a 15^th consecutive month in April, according to this survey of managers. This was the slowest pace of expansion since December, however. Maybe the most interesting line in this release: “A number of survey respondents indicated that they had held off on backfilling positions following the departure of staff. As a result, employment decreased for the first time since June 2020.” We’ll see if that holds true—soft data has continually underestimated the economy over the past few years.

Gas Prices

Gas prices increased to $3.79/gallon last week. That’s the highest price since early October. Some experts think we’re nearing the seasonal peak in prices, but they could keep moving higher for the next month or so based on events elsewhere.

Diesel Prices

Diesel prices fell back below $4.00/gallon and remain well behaved.

Wednesday

New Rule on Automatic Airline Refunds