5/18: EconUpdate by P. Duffy

EconUpdate by P. Duffy

May builder confidence remains steady at 83 despite increasing concerns over supply chains

What does this mean?  While continued strong demand and low interest rates still provide some pricing elasticity for home prices, availability of building supplies is also becoming an issue.

Builder confidence held stable in May at 83, despite growing concerns over the price and availability of most building materials, including lumber.  The HMI index gauging current sales conditions held steady at 88, and the gauge charting sales expectations in the next six months rose one point to 81. The component measuring traffic of prospective buyers fell one point to 73.


April retail sales flat from March, but up 51.2 percent year-on-year

What does this mean?  Additional stimulus payments sent out in March boosted that month’s retail spending by nearly 11 percent, but consumers retained some caution moving into April.

Advance estimates of U.S. retail and food services sales for April 2021 were $619.9 billion, virtually unchanged from the previous month, and up 51.2 percent from April 2020. Total sales for the February 2021 through April 2021 period were up 27.1 percent from the same period a year ago.  Food services and drinking places were up 3.0 percent from March and 116.8 percent year-on-year.


Consumer sentiment index tumbles 6.2 percent in early May as higher inflation becomes a concern

What does this mean?  A potentially self-fulfilling prophecy of higher inflation could lead to higher costs and wages, but the economy is still set to expand due to pent-up demand and savings.

Consumer sentiment in early May tumbled 6.2 percent to 82.8 due to higher inflation–the highest expected year-ahead inflation rate as well as the highest long term inflation rate in the past decade. Importantly, consumer spending will still advance despite higher prices due to pent-up demand and record saving balances.  It should be no surprise that consumers anticipate a booming economy over the next year or so, including rapid job gains as well as increases in the inflation rate and interest rates.