New Home Sales Plunge to 2-Year Low

Sales of newly constructed homes plunged in April, marking the fewest for any month since the onset of the pandemic, a report showed Tuesday.

Here’s a quick look at the most significant economic indicators of the day and what they tell us.

New Home Sales  

• Fewer newly constructed homes sold in April than in any month since the onset of the pandemic. Sales fell 16.6% last month to an annualized rate of 591,000, according to data from the U.S. Census Bureau. That’s the least since April 2020 and significantly lower than the 750,000 economists were expecting. Rising mortgage rates are making it increasingly expensive to buy a home, and sales of existing homes have also been declining. 
• The lower sales mean more new homes on the market—the most for any month since 2008, in fact. But is that a good thing? It depends on the magnitude. A shortage of inventory has been one of the reasons sale prices have continued to rise, so more choices should help cool the frenetic seller’s market, economists said. 
• On the other hand, if the market swings too far in the other direction, it could make an economic recession more likely. “Rising interest rates in an environment of falling home prices are never a good combination for consumer sentiment and will add to the chances of a retrenchment and potential recession down the line," James Knightley, chief international economist at ING, wrote in a commentary.

S&P Global Flash US Composite Purchasing Managers Index

• U.S. business activity grew in May, but at the slowest pace in four months, the S&P Global Flash U.S. Composite Purchasing Managers Index showed. 
• Inflation, a deceleration in demand from consumers, and delivery delays all contributed to the slowdown, according to the preliminary report.  
• “The US economy is not falling apart, but the weakness it is experiencing is much worse than many expected,” Edward Moya, senior market analyst at OANDA, wrote in a commentary. The weakness was one reason the S&P 500 Index was down Tuesday, he said. 

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