Not much in the way of Housing Market news this week but we received some positive inflation data last week in the CPI and PPI readings for March. The continued downward trend hasn’t boosted the confidence of small businesses as the NFIB Small Business Optimism Index reported its 15th straight month below the 49-year average. It seems that small businesses have known for a while what those in positions of authority are just starting to admit. The minutes from the Fed’s March meeting revealed that they’re expecting a “mild” recession to start later this year with recovery following over the next two years. Let’s tackle the inflation readings first.
The Consumer Price Index (CPI) rose by 0.1% in March but fell sharply by 1% annually to 5%. Keep in mind that inflation was 9.1% last June so we are making some progress. Also, increased shelter costs have accounted for over 60% of the increases in Core CPI, which removes volatile food and energy costs. Given that shelter costs have been declining, we should see some additional downward pressure on inflation.
The Producer Price Index (PPI) significantly improved both on a monthly and annual basis. PPI decreased by 0.5% in March and 1.2% year-over-year to 2.7%. That is a 9% decrease from its peak last March! This is the lowest level we’ve seen since early 2021.
The National Federation of Independent Business (NFIB) reported its Small Business Optimism Index and as mentioned above, it wasn’t great. The key takeaways are that a quarter of small businesses named inflation as their biggest problem, retail sales fell 1% in March, and hiring plans are at the lowest level since May 2020. It seems like small businesses are aware that we aren’t out of the woods yet, while the Fed just decided to admit that they're surrounded by trees.
Among the minutes from the Fed’s recent meeting in March, were signals of a coming recession announcement towards the latter part of the year as well as a peak in the Fed Funds Rate in May, meaning we will likely see one final rate hike at the May meeting. While a recession will come with its own challenges, the silver lining is that rates have traditionally decreased during a recession. Time will tell but you can bet we’ll be here to help you navigate the market.
This week we’ll be taking a look at some of the latest housing data for this month. Builder Confidence, Housing Starts, and Building Permits were reported earlier this week and the Existing Home Sales data will be released tomorrow. Stay tuned for next week’s breakdown!
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