Week in Review: May 23-27

If you think about it, it’s a wonderful week if the economic news dominates. Unfortunately, for the last few weeks, violence has dominated the headlines. I dream of a world in which we can focus on things like P/E ratios, unemployment, Treasury yield spreads, and corporate profits all the time.

Monday

Chicago Fed National Activity Index

This punishingly intricate index (it’s a weighted average of 85 different monthly indicators) apparently tells us about national economic activity. Specifically, it told us that economic activity picked up in April. That’s probably true, but I don’t put much value in this indicator since it’s a) so opaque; and b) doesn’t reflect all the craziness ushered forth by the dreary month of May.

Tuesday

New Home Sales

There were 591,000 new homes sold in April. That’s 16.6% fewer than in March and a miss of about 150,000 relative to consensus forecasts (that’s a big miss). The average sales price of a new home was $570,300 in April, up 9.1% month over month and 31.2% year over year. Price increases have a lot to do with compositional effects. Wealthier purchasers are likely to be less sensitive to mortgage rate increases than others. Moreover, homebuilders are striving to recover their elevated costs, and therefore have to sell at elevated prices. With mortgage rates at their highest level in more than a decade and home prices up so precipitously, home sales have nowhere to go but down. They are falling rapidly, and eventually, that will translate into lower sales prices, too.

S&P Global PMI Indices

This indicator is comprised of three indices: services, manufacturing, and an all-encompassing composite category. The U.S. economy grew in May, but at a slower pace than in April. The same is true for both services and manufacturing activity. The only surprise in this release is that business confidence actually ticked higher in May. “Firms were buoyed by ongoing sales growth and investment in local supply chains which it is hoped will ease bottlenecks.”

Wednesday

Mortgage Applications