by Calculated Risk on 4/10/2025 08:54:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned two years ago when services less rent of shelter was up around 8% year-over-year.  This declined and is now up 3.3% YoY.

Click on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through March 2025.

Services were up 3.7% YoY as of March 2025, down from 4.1% YoY in February.

Services less rent of shelter was up 3.3% YoY in March, down from 3.8% YoY in February.

The second graph shows that goods prices started to increase year-over-year (YoY) in 2020 and accelerated in 2021 due to both strong demand and supply chain disruptions.

Durables were at -1.0% YoY as of March 2025, up from -1.2% YoY in February.

Commodities less food and energy commodities were at 0.0% YoY in March, unchanged from 0.0% YoY in February.

Here is a graph of the year-over-year change in shelter from the CPI report (through March) and housing from the PCE report (through February)

Shelter was up 4.0% year-over-year in March, down from 4.2% in February. Housing (PCE) was up 4.3% YoY in February, down from 4.5% in January.

This is still catching up with private new lease data.

Core CPI ex-shelter was up 1.8% YoY in March.

Weekly Schedule

by Calculated Risk on 4/10/2025 08:36:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) decreased 0.1 percent on a seasonally adjusted basis in March, after rising 0.2 percent in February, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.4 percent before seasonal adjustment.

The index for energy fell 2.4 percent in March, as a 6.3-percent decline in the index for gasoline more than offset increases in the indexes for electricity and natural gas. The food index, in contrast, rose 0.4 percent in March as the food at home index increased 0.5 percent and the food away from home index rose 0.4 percent over the month.

The index for all items less food and energy rose 0.1 percent in March, following a 0.2-percent increase in February. Indexes that increased over the month include personal care, medical care, education, apparel, and new vehicles. The indexes for airline fares, motor vehicle insurance, used cars and trucks, and recreation were among the major indexes that decreased in March.

The all items index rose 2.4 percent for the 12 months ending March, after rising 2.8 percent over the 12 months ending February. The all items less food and energy index rose 2.8 percent over the last 12 months, the smallest 12-month increase since March 2021. The energy index decreased 3.3 percent for the 12 months ending March. The food index increased 3.0 percent over the last year.
emphasis added

The change in CPI was below expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 4/10/2025 08:30:00 AM

The DOL reported:

In the week ending April 5, the advance figure for seasonally adjusted initial claims was 223,000, an increase of 4,000 from the previous week's unrevised level of 219,000. The 4-week moving average was 223,000, unchanged from the previous week's unrevised average of 223,000.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims was unchanged at 223,000.

The previous week was unchanged.

Weekly claims were close to the consensus forecast.

by Calculated Risk on 4/09/2025 08:14:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 225 initial claims up from 219 thousand last week.

• Also at 8:30 AM, The Consumer Price Index for March from the BLS. The consensus is for 0.1% increase in CPI (up 2.6% YoY) and a 0.3% increase in core CPI (up 3.0% YoY).

by Calculated Risk on 4/09/2025 05:01:00 PM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for February 2025. Over the past three months, the indexes increased in 45 states, decreased in three states, and remained stable in two, for a three-month diffusion index of 84. Additionally, in the past month, the indexes increased in 38 states, decreased in six states, and remained stable in six, for a one-month diffusion index of 64. For comparison purposes, the Philadelphia Fed has also developed a similar coincident index for the entire United States. The Philadelphia Fed’s U.S. index increased 0.8 percent over the past three months and 0.1 percent in February.
emphasis added

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on map for larger image.

Here is a map of the three-month change in the Philly Fed state coincident indicators. This map was all red during the worst of the Pandemic and also at the worst of the Great Recession.

The map is mostly positive on a three-month basis.

Source: Philly Fed.

And here is a graph is of the number of states with one month increasing activity according to the Philly Fed. 

This graph includes states with minor increases (the Philly Fed lists as unchanged).

In February, 41 states had increasing activity including minor increases.

by Calculated Risk on 4/09/2025 02:06:00 PM

From the Fed: Minutes of the Federal Open Market Committee, March 18–19, 2025. Excerpt:

With regard to the outlook for inflation, participants judged that inflation was likely to be boosted this year by the effects of higher tariffs, although significant uncertainty surrounded the magnitude and persistence of such effects. Several participants noted that the announced or planned tariff increases were larger and broader than many of their business contacts had expected. Several participants also noted that their contacts were already reporting increases in costs, possibly in anticipation of rising tariffs, or that their contacts had indicated willingness to pass on to consumers higher input costs that would arise from potential tariff increases. A couple of participants highlighted factors that might limit the inflationary effects of tariffs, noting that many households had depleted the excess savings they had accumulated during the pandemic and were less likely to accept additional price increases, or that stricter immigration policies might reduce demand for rental and affordable housing and alleviate upward pressures on housing inflation. A couple of participants noted that the continued balance in the labor market suggested that labor market conditions were unlikely to be a source of inflationary pressure. A couple of participants noted that, in the period ahead, it could be especially difficult to distinguish between relatively persistent changes in inflation and more temporary changes that might be associated with the introduction of tariffs. Participants commented on a range of factors that could influence the persistence of tariff effects, including the extent to which tariffs are imposed on intermediate goods and thus affect input costs at various stages of production, the extent to which complex supply chains need to be restructured, the actions of trading partners in responding with retaliatory increases in tariffs, and the stability of longer-term inflation expectations.
emphasis added

by Calculated Risk on 4/09/2025 02:00:00 PM

Just minutes after Goldman Sachs put out a note forecasting a recession, Mr. Trump lowered all tariffs to 10% (except China).

First, from Goldman Sachs economists:

Moving to a Recession Baseline We now expect the US’s effective tariff rate to rise by at least 20pp and are forecasting a recession with a 12-month probability of 65%. We think the White House is unlikely to quickly reverse most of the new tariffs, but our probability of recession would decline if it does.

We now forecast GDP growth of -1% this year on a Q4/Q4 basis (or +0.7% on an annual average basis) and a 1.5pp increase in the unemployment rate to 5.7%. This would be less severe than most past US recessions, in part because we do not see major financial imbalances that need to unwind, private sector balance sheets remain strong, and we see some room for trade deals to eventually lower tariff rates somewhat.
emphasis added

And just minutes later from CNBC: Trump temporarily drops tariffs to 10% for most countries, hits China harder with 125%

President Donald Trump on Wednesday dropped tariffs under his new trade plan to 10% on imports from most countries, as he announced a 90-day pause for stiffer, so-called reciprocal tariffs that took effect this week.

Trump also said in a social media post that he was raising the tariffs imposed on imports from China to 125% “effective immediately” due to the “lack of respect that China has shown to the World’s Markets.”

It is impossible to forecast with rapidly changing policy.

by Calculated Risk on 4/09/2025 11:14:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Part 1: Current State of the Housing Market; Overview for mid-April 2025

A brief excerpt:

This 2-part overview for mid-April provides a snapshot of the current housing market.

At this moment, we can’t talk housing without mentioning the overall economy.

Just over two weeks ago, I revised down my outlook for housing this year, see Policy and 2025 Housing Outlook. Since then, policy and the outlook have taken a turn for the worse. One point I made in March was:

And another factor is the recent stock market volatility. Ten percent corrections are common, a further sell-off will have a negative wealth effect for potential home buyers.

Stock markets are now down around 20% (with crazy volatility). And it is likely this will negatively impact home sales.

On my blog, I went on Recession Watch over the weekend (not predicting a recession yet because the U.S. economy is very resilient, was on solid footing at the beginning of the year, and the tariffs might be lowered or reversed). And I discussed some of the data I’ll be watching in Recession Watch Metrics.

And on housing: Inventory, inventory, inventory! Inventory is increasing sharply, and inventory usually tells the tale.
...
Since both inventory and sales have fallen significantly, a key for house prices is to watch months-of-supply. The following graph shows months-of-supply since 2017. The following graph shows months-of-supply since 2017. Note that months-of-supply is higher than 6 of the last 8 years, and at the same level as in 2017.

Months-of-supply was at 3.5 months in February compared to 3.6 months in February 2019. It appears national months-of-supply will be above pre-pandemic levels this summer, and likely above 5.0 months (putting some pressure on prices).

Inventory would probably have to increase to 5 1/2 to 6 months of supply to see national price declines again.

There is much more in the article.

by Calculated Risk on 4/09/2025 07:00:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 20.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 4, 2025.

The Market Composite Index, a measure of mortgage loan application volume, increased 20.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 20 percent compared with the previous week. The Refinance Index increased 35 percent from the previous week and was 93 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 9 percent from one week earlier. The unadjusted Purchase Index increased 10 percent compared with the previous week and was 24 percent higher than the same week one year ago.

“Mortgage applications increased by 20 percent to its highest level since September 2024, driven by purchase and refinance applications picking up in a volatile week where economic uncertainty caused rates to drop across the board. The 30-year fixed mortgage rate was 6.61 percent, the lowest rate since October 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Both homebuyers and refinance borrowers were quick to take advantage of this dip in rates, driving the purchase index 24 percent higher than a year ago to the strongest pace since January 2024. Refinance applications rose by 35 percent to the highest level in six months, as borrowers with larger loan sizes tend to be more sensitive to rate changes. The average refinance loan size jumped to its second highest in the survey at $399,600.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.61 percent from 6.70 percent, with points increasing to 0.63 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 24% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is up about 38% from the lows in late October 2023 and is 14% above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index increased but remained very low.

by Calculated Risk on 4/08/2025 07:19:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 2:00 PM, FOMC Minutes, Meeting of March 18-19