Weekly Indicators for June 20 - 24 at XE.com

 - by New Deal democrat

My Weekly Indicators piece is Up at XE.com.  No major changes from last week.

New Home Sales stall, but no downturn

 - by New Deal democrat

Well, the May new home sales report is out.  The good news is, it did not confirm last week's negative reports in housing permits and starts.

This post is up at XE.com.

The post-hike flattening yield curve

 - by New Deal democrat

An inversion of the yield curve has always signaled at very least a steep slowdown, and usually an oncoming recession. With the Fed hiking short term rates, where do we cut and now?

Below are two graphs, using the Dynamic yield curve tool from Stockcharts.com. In both cases the dark red line is the yield curve as of several days ago (post-hike). The light red line is the previous yield curve from the beginning of this year (first graph) and from last month (second graph):

Note that the curve is pivoting around a point between the 2 and 5 year yields, at about 1.5%. 

At this point, the yield curve is still positive, but if the trend continues, another two rate hikes should be enough to invert at least part of the curve.

Existing home sales: positive, but contain your enthusiasm

 - by New Deal democrat

It's a slow economic news week, but while we are waiting for new home sales Friday, we did get existing home sales today.

It was a good report. Not only was there an increase month over month, but it was the 3rd highest number for this entire expansion:

Even better, the three month moving average made a new high for this expansion.

But contain you enthusiasm, because even though existing home sales are about 90% of the market, they are the least economically important (because of all the activity that goes into building a new house).

The bad news is that prices made a new all time high, and inventory remains very constrained.

Absent housing, consumer inflation is running at only a little over 1%. The Fed raising rates is not going to bring on new inventory, and only make the inventory that does exist more expensive for mortgage borrowers.

So now we wait for Friday.

A further look at the housing slowdown

 - by New Deal democrat

As promised, I have a further look at last week's poor housing permits and starts numbers, and especially in the context of interest rates.

This is up at XE.com.