Last Week's Economic News in Review
August 4th, 2021
Sales of new homes took a downward turn, while incomes and spending both increased, and consumer confidence hovered at high levels.
New Home Sales
Sales of new, single-family homes dropped to an annual rate of 676,000 in June, which was 6.6 percent down from May's revised pace of 724,000, the Census Bureau and the Department of Housing and Urban Development reported last week.
June's sales were below economists' expectations of an increase to an annual rate of 795,000 for the month and marked the lowest sales pace of the year. Also, when compared to the same period a year ago, June's sales were 19.4 percent below June 2020's pace of 839,000.
All told, June's sales hit their lowest mark since the start of the pandemic, a big turnaround for an economic indicator that fared well during COVID-19. Many economists chalked up the downturn a variety of coalescing factors: home prices finally going too high for buyers, building materials remaining at high prices, and other consumer and home-builder price increases.
"We also know there are shortages of appliances, labor and affordable lots," Peter Boockvar, chief investment officer at the Bleakley Advisory Group, told MarketWatch. "The moderation in home sales is likely a combination of sticker shock and the slowdown in the ability of builders to finish homes because of a variety of delays."
Looking at pricing, the median price for new single-family homes sold in June was $361,800, which was 6.06 percent higher than June 2020's median price of $341,100.
In terms of inventory, the estimated number of new homes for sale at the end of June totaled 353,000, representing a 6.3-month supply at June's sales rate.
Personal Incomes and Spending
Personal incomes notched up by $26.1 billion, or 0.1 percent, in June, according to last week’s report from the Bureau of Economic Analysis. Disposable personal income (DPI; income after taxes) ticked down by $2.6 billion, or less than 0.1 percent.
At the same time, personal consumption expenditures (PCE) increased $155.4 billion, a 1 percent gain, in June. Notably, the PCE price index also increased 0.5 percent in June after increasing 0.5 percent in May, while the core PCE price index (the PCE prince index minus volatile food and energy prices) slowed to 0.4 percent growth, its second slowdown in a month.
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Of June’s spending, consumers spent roughly $126 billion on services, especially restaurants and hospitality.
"As services spending rises further in coming months, it will fuel rapid job gains, and further increases in personal income and spending power," said PNC senior economist Bill Adams told CNN Business.
Consumer Confidence
After five months of gains, the Consumer Confidence Index saw little change in July, according to recently released data from The Conference Board. The Index ticked up very slightly to 129.1 in July from 128.9 in June (a baseline of 100 was set in 1985).
The Present Situation Index, which measures consumers' feelings on current incomes, business conditions and the job market, rose from 159.6 in June to 160.3 in July. The Expectations Index, which gauges consumers' views on short-term prospects for incomes, business conditions, and the job market, was essentially unchanged at 108.4 in July from 108.5 in June.
That said, consumer confidence remains at its highest level since February 2020, noted Lynn Franco, Senior Director of Economic Indicators at The Conference Board.
"Consumers' appraisal of present-day conditions held steady, suggesting economic growth in Q3 is off to a strong start," she said. "Consumers' optimism about the short-term outlook didn't waver, and they continued to expect that business conditions, jobs, and personal financial prospects will improve."
This week, we can expect:
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