The Line: The Fed’s Favorite Measure of Inflation Up 2.8% from a Year Ago

Today, we try to forget the Rangers' loss on Thursday by looking at the latest on inflation and pending home sales.

The Line: The Fed’s Favorite Measure of Inflation Up 2.8% from a Year Ago

The core personal consumption expenditures price index—better known as core PCE—rose 0.2% in April and was 2.8% higher than a year ago. Both these figures were in line with Wall Street’s expectations.

Basically, not the best inflation report but not the worst either. Inflation remains almost 1% higher than the Fed’s 2% target, but at least it’s not rising.

Some other highlights of the BEA’s report include:

• Personal income rose 0.3% last month, slightly higher than the 0.2% increase in core prices.

• Personal consumption expenditures—aka consumer spending—were up 2.6% from a year ago. Unlike retail sales, this data is adjusted for inflation so that’s a decent increase.

Pending Home Sales Down 7.7% in April

Pending home sales—which are based on signed contracts rather than closings—posted their steepest decline in three years, falling 7.7% in April according to the National Association of Realtors. Pending sales are now at their lowest level since April of 2020. Economists expected sales to be unchanged from the prior month, so this is much worse than expected data.

Why such a big decline in activity? High mortgage rates of course. Even as the number of homes for sale has risen 30% over the past year, persistently high mortgage rates have kept buyers away. And by the way, after three weeks of declines mortgage rates were back above 7% this week. Sorry, but I had to fit that in somewhere.

NAR’s chief economist Lawrence Yun was optimistic about the future however, saying:

“But the Federal Reserve’s anticipated rate cut later this year should lead to better conditions, with improved affordability and more supply.”

I’m not so sure about rate cuts this year, but who am I to dampen our hopes. One thing I will say is don’t expect prices to come down significantly this year, as even with a 30% jump in supply inventory levels are still very low in most parts of the country.