New Home Sales Up From Last Year

Economist: Health Care Costs Likely to Drive up Core Inflation Measure

52 minutes ago

When the Personal Consumption Expenditures index on inflation is released on Thursday, expect it to show inflation continuing to cool, due mostly to falling energy prices, Comerica Bank Chief Economist Bill Adams wrote in a commentary. However, it may not exactly be the news that Federal Reserve officials are looking for, as the closely watched “core” PCE numbers could move higher.

“Core inflation is expected to have run hotter due to turn-of-year increases in health care service charges, as well as prices of other goods and services that change infrequently,” he said. 

The report will likely show a similar level of “sticky prices” featured in the recent Consumer Price Index inflation report.

In recent weeks, several Federal Reserve officials have said they need to see price pressures continue to ease up in upcoming inflation reports before they can support cutting interest rates from their current levels. Because it strips out volatile food and energy prices, Fed officials see core inflation as a more reliable indicator of inflation’s path. 

Additionally, Adams projected that the report is also likely to show personal income move higher, partly through cost-of-living adjustments to Social Security, Medicare and Medicaid.

-Terry Lane

Newly Built Home Sales Inched Up In January

2 hr 53 min ago

Sales of newly built single-family homes ticked up in January, the Census Bureau said Monday.

New homes sold at an annual rate of 661,000, a 1.5% increase from December, but below the 680,000 forecasters expected, according to a survey of economists by Dow Jones Newswires and the Wall Street Journal.

The rate was 1.8% higher than a year ago but was 3.5% lower than the average in 2019 pre-pandemic. Like the market for existing homes, sales of newly built houses have been bogged down by high mortgage rates that have put home purchases out of reach for many buyers.

A downtick in mortgage rates earlier this winter could help improve the situation going forward, Ryan Sweet, Chief U.S. economist at Oxford Economics, wrote in a commentary.

The average rate offered for a 30-year mortgage hovered in the high 6% range in January after hitting 7.79% in late October, according to Freddie Mac. Furthermore, the roaring job market has kept potential buyers in good financial shape.

“The outlook for new-home sales remains cautiously optimistic as the 30-year fixed mortgage rate is off its recent peak, job growth is strong, and inventories are not problematic for the new-home market,” he wrote.