Week in Review: April 25-29

Some week, huh? Let’s do this.

Monday

Chicago Fed National Activity Index (CFNAI)

The CFNAI is a composite index that uses a weighted average of 85 monthly indicators to measure whether growth is above or below trend (with any positive value showing above trend growth). The CFNAI slowed in March but remains positive, which suggests the economy is growing faster than normal, albeit slower than in February (hold on, we’ll break down the GDP data in a page or two).

Historically, a CFNAI of +0.7 or higher indicates an increasing likelihood of sustained inflation (i.e., an overheated economy), and so March’s reading of +0.44 seems to be right in the Goldilocks zone. I’m not overly familiar with this index, and I’m always a little skeptical of extremely complex composite indicators. That said, moderately above trend growth seems to be about right, even given that shocking GDP report that came out on Thursday.

Tuesday

Conference Board Consumer Confidence

Consumer confidence fell modestly in April according to this indicator. Consumers feel a little worse about the present situation but a little better about the short-term outlook. Still, consumers regard the current situation more positively than the future. That’s been the case since 2015, so probably best not to put too much weight on that. Overall, this release is right in line with expectations and doesn’t change my own personal outlook.

S&P CoreLogic Case-Shiller Home Price Index

According to this index, national home prices were up 19.8% year over year as of February 2022. With mortgage rates soaring, mortgage applications plummeting, and more new homes under construction, home prices will presumably come back to earth over the next several months. Speaking of…

New Home Sales

New residential sales fell pretty sharply in March, down 8.6% from February and 12.6% from March 2021. With mortgage rates soaring and the average new home sales price at $523,900, a lot of would-be buyers are simply priced out of the market or have strategically decided to wait to transact. Sales may remain subdued until prices adjust to this new equilibrium.

Durable Goods Orders

New orders for durable goods ticked higher in March (+0.8%) and have now risen during five of the past six months. Shipments of manufactured goods increased 1.2%, which is hopefully a sign that supply chains are smoothing out a bit despite Russia’s vicious assault on humanity and recent decisions to deny shipments of natural gas to Poland and Bulgaria. The upshot is that demand for U.S. factory output remains robust despite rising interest rates. All things considered, the demand side of the U.S. economy is still strong, though much of that demand is for imports, and federal government spending has become a drag.

Wednesday