06/30/2022 | Press release | Distributed by Public on 06/30/2022 13:20
Key Takeaways:
Price increases again outpaced wage gains in May, but we expect the largest impact to our forecast will be the downward revisions to real consumption over the past three months and the outright decline in May. After months of extremely negative consumer surveys failing to align with actual consumer behavior, it appears now that waning consumer confidence is finally impacting consumption. We now expect Q2 consumption expenditures will be significantly lower than our June forecast of a 4.2 percent annualized rate. We do not think it's likely the economy is currently in a recession, due in part to a robust labor market and strong industrial production numbers.
Capital goods orders and shipments surprised to the upside, especially given recent survey and manufacturing data pointing to a relatively sharp slowdown. At first look, the data appear to be consistent with higher Q2 business fixed investment than our current forecast, but we are unlikely to revise our forecast based on this report due to some important caveats. First, producer prices continued to rise in recent months, so real orders grew at a slower rate. Second, recent export data has shown strength in capital goods equipment, suggesting a portion of these orders will not be counted toward equipment investment (though they will support net exports), and finally, other indicators for business investment have weakened recently.
In housing, May pending home sales were above our expectations and are consistent with a modestly higher June existing sales number than our Q2 forecast currently implies. However, this figure is somewhat at odds with other near-term indicators showing lower buyer demand and increasing inventories of homes for sale. On balance, we may modestly upgrade our near-term existing home sales forecast based on this data, but we still believe existing sales will continue to decline through the rest of the year as higher mortgage rates continue to weigh on affordability.
Nathaniel Drake
Economic and Strategic Research Group
June 30, 2022
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae's Economic and Strategic Research (ESR) Group included in these materials should not be construed as indicating Fannie Mae's business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. How this information affects Fannie Mae will depend on many factors. Although the ESR group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the ESR group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.