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Home Price Index up, Inflation pressures contained in April, Small Business and Consumer Confidence

May 30, 2017

The March S&P Case-Shiller 20-city Home Price Index came in at +5.9% year-over-year. The 5.9% matched February’s reading and is the biggest gain since July 2014. From February to March, prices were up 0.9%. Lean inventories of homes for sales are the catalyst behind the rise. The national index increased 5.9%. “If mortgage rates, currently near 4%, rise further, this could deter more people from selling and keep pressure on inventories and prices. While prices cannot rise indefinitely, there is no way to tell when rising prices and mortgage rates will force a slowdown in housing,” said David Blitzer, managing Director and Chairman of the Index Committee at S&P Dow Jones Indices.

Inflation pressures remained contained in April as reported by the Bureau of Economic Analysis. Year-over-year Core PCE edged lower to 1.5% from 1.6% in March and has been moving lower from the Fed’s target range of 2%. The Core reading strips out volatile food and energy and is the Fed’s favorite measure of inflation. From March to April Core PCE rose 0.2% versus the 0.1% expected. Personal Income and Spending both were up 0.4% last month, in line with estimates. Spending rose the most since December.

The Paychex – IHS Markit Small Business Employment Watch showed a continued decline in small business growth in May. However, national hourly earnings in May were $25.76, +2.87% ($0.72) year-over-year. In addition, Consumer Confidence in May edged lower from April as consumers were somewhat less upbeat in may from April. The Consumer Confidence Index fell to 117.7 in May from 120.3 in April. However, consumers “remain optimistic that the economy will continue expanding into the summer months.” said Lynn Franco of the Conference Board.