Trend watch and what’s new this week
New U.S. COVID-19 cases and death rates are slipping (slide 6). For the second time in three weeks, new cases fell in three of the four U.S. regions. The percentage of hospitalized COVID-19 patients is also slipping, though the rate of hospitalizations has held steady.
The activity-based data (slides 5 and 7) remained fairly solid this past week. Restaurant bookings and staffing both slipped for a second straight week, but freight gauges rebounded sharply following the Memorial Day holiday.
Summer travel upswing
Despite spiking gasoline prices and air fares, summer vacation appear to be in full swing. Air passenger counts jumped to 15.9 million for the week, the highest since the last week of December 2019. Hotel occupancy jumped to 70.6% nationally this past week (slide 8). Also, travel bookings surged 30% in May to the highest level since 2014 (slide 9).
Consumer still appears solid, though more cracks in housing
On slide 10, we show retail & food sales, which dipped in May. However, sales hit a fresh all-time high excluding autos (still down due to supply chain issues) and gasoline sales (up big). We also show an index view on slide 11, which illustrates the strength of this recovery compared to the prior two recessions.
On slide 12, we show that higher mortgage rates have continued to cool new housing activity. Additionally, the Index of Leading Economic Indicators weakened for the third straight month (slide 13).
Finally, on slide 14, the Federal Reserve hiked its target interest rate by three-quarters of a point (0.75%), the most since 1994. There has been a dramatic increase in interest rates in the first half of 2022.
The cross currents within the economic data—whereby some data is strong and others soft—have certainly continued. These cross currents make it difficult to get a “clean” read on the health of the U.S. economy, which will likely persist for some time.
While we continue to see a solid economy, the recent cooling trends give us pause. As we have noted in recent weeks, economic data has been surprising to the downside.
Meanwhile, inflation trends have heated up in recent months. Most of it is related to energy, primarily spiking crude oil prices, which feeds into most goods and services either directly or indirectly. Unfortunately, the outlook for crude oil prices is getting worse rather than better.
At least one segment of the U.S. economy is seeing demand cool in response to higher interest rates – housing. Nearly every housing-related metric has rolled over in the past few months from construction and mortgage indicators to prospective buyer traffic. The exception has been home prices, which have largely continued to climb due to tight supply. Here, too, inventories have started to rise, and price should begin to soften in the coming months.
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