Retail sales were flat in April as consumers cut spending

Kashkari says the Fed still needs to 'figure out’ inflation

24 minutes ago

Minneapolis Fed President Neel Kashkari said the Federal Reserve is committed to keeping inflation under its 2% target, which means keeping interest rates at current levels for the long term.

„It may take at least a higher rate environment to achieve that,” Kashkari said today at the Williston Basin Petroleum Conference. „Basically we should be here for a while until we figure out where inflation is.”

At the event, Kashkari did not comment on today’s consumer price index inflation, which came in cooler than expected. The biggest uncertainty in the current economy, he said, is how much downward pressure interest rates put on economic activity.

„It looks like there is a lot more resilience in the economy than I expected,” Kashkari said, adding that the current interest rate level „will only serve to put one foot on the brake, not two.”

In his remarks, Kashkari said he would focus on the impact of inflation on the housing market, which has been hit by „stalled” demand due to housing shortages. However, while some economists point to the so-called „lock-in” effect of high interest and mortgage rates, Kashkari said the issue has attracted more attention because it affects both sides of the „housing equation.”

„This idea that people aren’t selling — and I agree, you’re right — these guys aren’t buying either,” Kashkari said. „So it takes supply out of the market, but it also takes demand out of the market.”

— Terry Lane

Homebuilders are losing confidence amid rising mortgage rates

4 hours 9 minutes ago

Homebuilders lost confidence in sales prospects in early May, the first decline in six months, as rising mortgage rates worsened the outlook for buyers.

The National Association of Home Builders/Wells Fargo Housing Market Index fell to 45 in May from 51 in April, the association said Wednesday. Notably, it fell below the „breakeven” point of 50, the lowest level since January, based on surveys of homebuilders.

A major factor in the decline is mortgage rates, which have risen in the first few months of the year and are up 7% since mid-April, according to Freddie Mac. Those rates are tied to investor concerns about inflation, which soured after worse-than-expected monthly data on consumer prices in early 2024.

„Long-term interest rates rose in the first quarter due to a lack of progress in reducing inflation, which is dragging on builder sentiment,” NAHB Chief Economist Robert Dietz said in a commentary.

High mortgage rates have a complex effect on the market for newly constructed homes. They have made home buying cheaper, but have prompted some buyers to consider new homes instead of existing ones. Existing homes are limited for sale because many homeowners are reluctant to pay the very low mortgage rates they received during the pandemic or earlier for today’s high-end homes.

Mortgage demand rides interest rate waves again

5 hours 38 minutes ago

Demand for mortgages picked up again last week, according to data from the Mortgage Bankers Association (MBA).

In the week ending May 10, applications for mortgages rose 0.5% from the previous week. The drop comes as the 30-year, fixed-rate mortgage fell to its lowest in more than a month at 7.08%, according to MBA.

Low interest rates on home loans helped boost refinancing activity, while home-buying applications were subdued this week.

„While the downward movement in rates benefits prospective homebuyers, mortgage rates are still higher than they were a year ago, while for-sale inventory remains tight,” said Joel Kahn, MBA vice president and deputy chief economist.

— Terry Lane

Retail sales were flat in April as consumers slowed spending

6 hours and 10 minutes ago

Consumer spending appeared to slow in April, coming in relatively unchanged from March’s downwardly revised levels and economists’ forecast.

April retail sales were $705.2 billion, slightly higher than the adjusted March total, the Census Bureau said. Economists had expected sales to rise 0.4% this month. The decline is a significant shift in consumer spending trends, as several retail sales reports over the past year have delivered better-than-expected results.

The lower retail sales numbers were fueled by a slowdown in car buying, as auto dealers reported sales down 0.8%.

E-commerce businesses lost ground this month as non-store retail sales fell 1.2%, despite higher online sales compared to April last year. Gas station sales rose more than 3% as the index was not adjusted for inflation, while clothing, electronics and appliance stores also increased sales in April.

— Terry Lane

Inflation takes a step back in April

6 hours 27 minutes ago

The cost of living, as measured by the consumer price index, rose 3.4% in April, up from 3.5% in March, according to data from the Bureau of Labor Statistics on Wednesday. This matched economists’ forecasts and was the first time this year that price growth came in as expected. In the first three months of the year, inflation came in surprisingly hotter than expected.

On a monthly basis, the index rose 0.3%, lower than the 0.4% monthly increase in the previous month, driven by rising energy prices.

It’s a step back in the right direction as the Federal Reserve waits for confidence that inflation is moving steadily toward its 2% annual target.

High inflation has been hard on household budgets, not only because of steep prices for things like gas and groceries, but also because the Federal Reserve has been forced to delay its benchmark interest rate hike. Decades of high interest rates have made borrowing through loans like mortgages and credit cards more expensive.

Read more about today’s inflation report here.