Week in Review: May 28, 2021

Economic data was mixed relative to expectations, helping to provide at least some temporary relief from ongoing concerns about higher inflation.

Housing market data was generally weaker-than-expected, reflecting ongoing pressures the sector faces with respect to limited supply, strong demand, and supply chain shortages affecting everything from lumber and drywall, to labor and appliances. New home sales in April declined nearly 6% after rising over 7% in March. Compared to a year ago, the median price for a new home jumped 20.1% to $372.4K. Pending home sales, a measure of contracts for existing homes fell by 4.4% in April, after rising nearly 2% in March.

The Fed’s preferred measure of inflation, Core PCE, rose 0.7% in April, slightly higher than the expected increase of 0.6%. Compared to a year ago, core PCE rose 3.1%, the highest level since 1992. With the increase being largely in line with expectations and generally consistent with other recent inflation data, markets seemed to take the news in stride.

At the headline level, durable goods orders missed expectations, falling 1.3% in April. However, a closely watched measure of business spending which excludes defense spending and civilian aircraft orders, jumped 2.3%, well above the expected 0.7% increase.

Consumer confidence was largely unchanged in May as a jump in consumer’s views on current business and labor market conditions was offset by concerns about rising inflation.