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Fannie Mae: Economy, Inflation Continue Hot Streak in January

Economy, Inflation Continue Hot Streak in January as New Home Sales Receive Boost from Temporarily Lower Mortgage Rates

Key Takeaways:
Gross domestic product (GDP), adjusted for inflation, increased at a 2.7 percent annualized rate in Q4 2022, according to the second estimate from the Bureau of Economic Analysis (BEA), a downgrade of two-tenths from the advance estimate. The update was due largely to a downward revision to consumer spending that was partially offset by an upward revision to business fixed investment.

Personal income, adjusted for inflation, was flat in January, according to the BEA. However, due to updated inflation-adjusted tax brackets at the beginning of the year causing a lower effective tax rate compared to December, real disposable personal income rose 1.4 percent. Real personal consumption expenditures were up 1.1 percent. The saving rate moved up two-tenths to 4.7 percent, its highest level in a year, though it remains suppressed compared to pre-COVID levels. The PCE price index rose 0.6 percent in January, a sharp acceleration from the upwardly revised 0.2 percent gain in December. Core PCE and core services less housing also increased 0.6 percent over the month and were up 4.7 percent and 4.6 percent over the year, respectively.

Existing home sales declined 0.7 percent in January to a seasonally Adjusted Annualized Rate (SAAR) of 4.0 million, the lowest level since 2010, according to the National Association of REALTORS®. The inventory of existing homes for sale rose 2.1 percent to 980,000. The months’ supply was flat at 2.9 and the median sales price of existing homes sold was up 0.7 percent from a year ago, the slowest annual growth rate since 2012.

New single-family home sales rose 7.2 percent to a Seasonally Adjusted Annualized rate of 670,000, the highest rate since March 2022, according to the Census Bureau. We believe the jump likely reflects the temporary decline in mortgage rates and general volatility in the series. New homes for sales dipped 2.9 percent to 439,000, though the number of new homes for sale that are completed rose slightly. The months’ supply declined eight-tenths to 7.9.

The minutes from the Federal Open Market Committee (FOMC) January 31-February 1 meeting showed that committee members viewed economic conditions as generally slowing, and inflationary pressures as moderating but remaining too high. As such, “almost all” participants supported slowing the pace of rate hikes to 25 basis points, though a few participants favored a larger rate hike.

Read the full research release at Fannie Mae

This post first appeared on Chaganomics, please read the originial post: here

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Fannie Mae: Economy, Inflation Continue Hot Streak in January


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