Category Archives: Finance & Economics

As the Iran conflict pushed up energy prices, the Personal Consumption Expenditures (PCE) Price Index—the Federal Reserve’s preferred inflation gauge—accelerated to a three-year high in May. While oil and gasoline prices have declined in recent weeks as planned Strait of Hormuz reopening reduced the risk of further energy price spikes, inflation may stay elevated in the coming months due to underlying price pressures. This could challenge the Fed’s recommitment to its price stability mandate. The headline PCE price index increased 4.1% in May from a year ago, following a 3.8% increase in April, according to the Commerce Department’s Bureau of Economic Analysis. That was the highest level since April 2023. The “core” PCE price index, which excludes food and energy, rose 3.4% over the past twelve months, the highest since May 2023.

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the first quarter of 2026 (January, February, and March), according to the third estimate released today by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2025, real GDP increased 0.5 percent. The increase in Q1 GDP primarily reflected increases in investment, exports, government spending, and consumer spending. Imports, which are a subtraction in the calculation of GDP, increased. Real GDP was revised up 0.5 percentage point from the second estimate, primarily reflecting a downward revision to imports, which are a subtraction in the calculation of GDP, that was partly offset by a downward revision to consumer spending.

A closely watched inflation report is set to reveal how much price growth picked up in May — and whether many American consumers remain mired in an affordability crunch. Wall Street forecasters expected the pace of personal consumption expenditures (PCE) to have quickened compared with April data amid higher oil prices and stronger consumer spending. The monthly PCE report is the Federal Reserve’s preferred inflation gauge. New Fed Chairman Kevin Warsh has said the central bank is committed to bringing inflation back to its 2% target — a level it has failed to reach for the past five years. Wall Street now anticipates the Fed will raise its key interest rate at least once by year’s end in a bid to counteract the stronger price growth.

US sawmill production fell in the first quarter, the second consecutive quarter of lower output. Sawmill output has remained largely flat since 2023, after increasing in the post-pandemic period. The utilization rate for sawmills and wood preservation industries was 71.8% on a four-quarter moving average, up from 71.2% in the fourth quarter of 2025. The sawmill utilization rate, a measure of actual production relative to potential full production moved upward over 2025 as capacity for sawmills fell. Sawmill production, based on a four-quarter moving average, was 0.4% lower in the first quarter of 2026 compared to the fourth quarter but remained higher than a year ago by 1.7%. US sawmills’ full production capacity, an estimation of what could have been produced if running at full production capability, was down 6.0% from a year ago. Lumber prices rose slightly in the first quarter. …Employment in sawmill and wood preservation industries continued to fall, dropping to roughly 82,800 workers in the first quarter. 

Elevated mortgage rates, rising inflation and economic uncertainty kept many buyers out of the market in May as consumers and builders continue to deal with challenging affordability conditions. While monthly sales activity softened, builders continue to operate in a market characterized by cautious buyers and persistent financing constraints. Sales of newly built single-family homes fell 7.3% month-over-month in May to a seasonally adjusted annual rate of 580,000 units, according to the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. This represented a 6.8% decline compared to a year earlier. New single-family home inventory totaled 496,000 units in May, up 2.3% from the prior month but down 1.4% from a year earlier. At the current sales pace, the months’ supply of new homes stood at an elevated 10.3 months, above the 9.7 months recorded one year ago.

The Federal Reserve’s primary price gauge rose at its highest level since 2023, reinforcing the central bank’s recent tough talk on inflation. Excluding food and energy, the personal consumption expenditures price index showed a 3.4% annual rate after rising 0.3% for the month. The annual core reading was the highest since October 2023. For the all-items reading, the PCE index showed inflation running at a seasonally adjusted 4.1% annual rate, the highest since April 2023, according to a Commerce Department report Thursday. …Traders continued to expect the Fed to approve a rate hike in September, though they lowered odds slightly. Energy again provided the largest source of price gains, with related goods and services prices up 4% for the month. Housing cost rose 0.3%, while financial services and insurance jumped 1.2%. …Even with the elevated inflation levels, consumer spending for the month came in stronger than expected. 

WASHINGTON —Associated Builders and Contractors reported that its Construction Backlog Indicator rose to 9.1 months in May, according to an ABC member survey conducted May 20 to June 3. The reading is up 0.3 months from April and 0.7 months from May 2025. Backlog for the month increased in every region except for the South. Despite the monthly movement, the South remains the region with the longest backlog and the largest year-over-year increase in backlog. …ABC’s Construction Confidence Index readings for sales, profit margins and staffing levels fell in May. The readings for all three components remain above the threshold of 50, indicating expectations for growth over the next six months. 

We appear to be seeing the impacts of the preliminary antidumping and countervailing duties on imports of hardwood plywood from China, Indonesia, and Vietnam. After spikes in recent years, there are significant declines in imports from these countries. However, we may also be starting to see the signs of transshipment through other Asian countries, including Malaysia, Cambodia, and Thailand. …The most recent data shows that U.S. imports of hardwood and decorative plywood are down by more than 36% in volume and 23% in value for the first four months of this year. Imports from Indonesia, Vietnam, and China declined by nearly 70%, 61%, and 66%, respectively. During the same period, imports from Malaysia and Cambodia surged by 175% and 650%.

With a new Fed Chair and plans for evolving operating strategies, the Federal Reserve maintained its target policy rate at the conclusion of the June Federal Open Market Committee (FOMC) meeting. For the fourth consecutive meeting, the FOMC maintained the short-term federal funds rate at a top rate of 3.75%. …Overall, the FOMC statement was short, indicating a new communication strategy. There were no dissenting votes. The two-year Treasury rate increased by more than 10 basis points after the FOMC announcement. It is worth noting that while the statement was short, the press conference revealed a number of new plans under Fed Chair Warsh. While holding rates constant, the Fed pivoted to a more hawkish tone in its policy statement. Among the items dropped from the current FOMC statement was its prior easing bias for monetary policy. …Looking forward, the Fed’s outlook for the economy and monetary policy reflects recent supply shocks.

A top US Customs and Border Protection (CBP) official told Court of International Trade (CIT) Judge Richard Eaton on 9 June that the agency is still creating a process for refunding tariffs that involve more complex entry types and that have been finally liquidated (i.e., are more than 90 days post-liquidation) in the Consolidated Administration and Processing of Entries portal. “We can’t do it all at once,” CBP Executive Assistant Commissioner Susan Thomas testified. ….The US Trade Representative (USTR) is proposing additional tariffs, at rates of 10% and 12.5%, on 60 economies after determining they failed to impose and/or enforce a prohibition on goods produced with forced labor, giving them advantages over US competition. USTR is seeking feedback on the proposals and called for written comments by 6 July, with hearings on the proposed actions scheduled for a day later. 

Construction activity on new single-family homes retreated in May alongside permits and completions in the face of economic uncertainty, high borrowing costs, and material rates, the U.S. Census Bureau reported Tuesday. Single-family housing starts last month were a seasonally adjusted annual rate of 882,000, down 1.9% from April. Total housing starts in May also experienced a significant pullback, plunging 15.4% month over month and 8.7% year over year to a seasonally adjusted annual rate of 1.17 million units. Municipalities across the U.S. issued 1.413 million permits for the construction of private housing in May, 0.7% below April’s rate of 1.42 million and 0.2% below May 2025’s 1.416 million. Single-family completions last month dipped 1.6% below April’s revised rate of 886,000 units, while total housing completions dropped 8.1% from April.

Related coverage by:

• Jessica Coacci in the WSJ: US Housing Starts Fell Sharply in May
• Andrew Ricci in Reuters: US single-family starts drop to 8-month low

Housing starts fell sharply in May, driven by a steep drop in multifamily construction, while single-family building also slipped amid high interest rates, rising construction costs and persistent labor shortages. Overall housing starts decreased 15.4% in May to a seasonally adjusted annual rate of 1.18 million units. …“The decline in housing starts aligns with NAHB’s latest builder survey, which showed builder sentiment weakening further in June,” said Bill Owens, chairman of the NAHB. “Elevated mortgage rates, affordability challenges and cautious buyers continue to weigh on demand for new homes.” …Overall permits decreased 0.7% to a 1.41-million-unit annualized rate in May. Single-family permits increased 0.6% to an 886,000-unit rate and are down 1.8% compared to May 2025. Multifamily permits decreased 2.8% to an annualized 527,000 pace and are up 2.5% compared to May 2025. The number of single-family homes under construction is at 587,000 units—5.9% lower than a year ago.

Builder sentiment remains subdued as rising material costs, elevated mortgage rates and ongoing affordability challenges continue to strain the housing market. Builder confidence in the market for newly built single-family homes fell two points to 35 in June, according to the NAHB/Wells Fargo Housing Market Index (HMI). This is the 14th straight month that sentiment has remained below 40, a streak not seen since 2011-2012 during the foreclosure crisis. Costly and inefficient regulatory policy is clearly impeding the ability of builders to increase the housing supply (according to a new NAHB study). …The latest HMI survey also revealed that 35% of builders cut prices in June, up from 32% in May. …The HMI index gauging current sales conditions fell two points to 38 in June, the index measuring future sales held steady at 45 and the index charting traffic of prospective buyers remained unchanged at 25.

This month, consumer sentiment ticked up about four index points, or 9%, with consumers experiencing some relief due to the early-month easing in gasoline prices. This measured improvement in sentiment was widespread, seen across age, education, and political party. Lower-income consumers exhibited a particularly strong sentiment increase, consistent with the fact that gasoline comprises a larger share of their budgets. Overall, assessments and expectations of personal finances and business conditions all rose this month. Even with June’s early gains, however, views of the economy are still relatively dour. Sentiment is currently 13% below January 2026 and 19% below a year ago, as consumers remain focused on kitchen table issues. They feel burdened by the recent escalation in inflation and worry that higher inflation could remain stubborn going forward, particularly in the short run. Interviews for this release were completed between May 19 and June 8.

Despite the leadership change at the Federal Reserve, the bond market is now projecting that it is more likely than not that the next monetary policy move by the central bank is a federal funds rate increase rather than a cut. The switch for market expectations from an easing cycle to tightening policy is due to macroeconomic conditions and risks, as well as fallout from current policy. …Higher interest rates have reduced housing activity. New single-family home sales declined 6.2% in April to a 622,000 annual rate and were down 11.3% from a year earlier, while inventory increased to 489,000 homes, equal to a 9.4 months’ supply. …Looking forward, 2026 looks to be the second year in a row of cooling single-family construction. Mortgage interest rates are likely to remain above 6%, with inflation expectations elevated due to higher oil and commodity prices tied to the Iran war and the lingering impacts associated with tariffs.

Wholesale prices of goods used in residential construction rose in May as energy prices continued to climb. In May, residential building material prices, excluding energy, rose at their highest yearly rate since January 2023, as prices were up 4.4% from a year ago and up 0.7% over the month. Meanwhile, prices for services rose 4.7% over the year, but were unchanged from the previous month. The Producer Price Index for final demand increased 1.1% in May, after rising 1.1% in April. Compared to a year ago, final demand prices were up 6.5%. …The price index for inputs to new residential construction rose 1.3% in May and was up 6.9% from last year. …Among input goods, the largest year-over-year increase was for No. 2 diesel fuel as prices were 105.9% higher than a year ago. …Softwood lumber prices were up 5.6% from a year ago in May while ready-mix concrete prices were up 1.7% and Gypsum building materials prices were down 1.1%.

Inflation accelerated to a new three-year high in May, driven by continued increases in energy costs from the Iran war. Energy costs drove more than 60% of the monthly increase. …On a non-seasonally adjusted basis, the Consumer Price Index (CPI) rose by 4.2% in May from a year ago, following a 3.8% increase last month, according to the BLS latest report. This was the largest annual increase since April 2023. …Outside of energy, other top contributors that rose in May included indexes for communication (+1.3%), airline fares (+2.7%), personal care (+1.0%) and recreation (+0.3%). …The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.3% in May. The index for owners’ equivalent rent (OER) rose by 0.3%, while the index for rent of primary residence (RPR) increased by 0.4% over the month. 

Existing home sales rose to a five-month high in May as more first-time buyers stepped back into the market. The share of first-time buyer reached 35% in May, the highest since June 2020. However, sales remained weak compared to historical norms, with still-tight inventory continued to push up home prices. Mortgage rates, though lower than a year ago, have increased more than 50 basis points since the Iran war began in late February and remain stuck around 6.5% in recent weeks. Energy shock has reaccelerated inflation, which has outpaced wage growth, further weighing on housing affordability. Total existing home sales, including single-family homes, townhomes, condominiums, and co-ops, rose 3.2% to a seasonally adjusted annual rate of 4.17 million in May, the highest since December 2025, according to the National Association of Realtors (NAR). On a year-over-year basis, sales were 3.2% higher from a year ago. 

Annual inflation rose to a three-year-high of 4.2% in May, underscoring how elevated energy prices are rippling through the US economy, according to new data from the Bureau of Labor Statistics. Prices rose 0.5% on a monthly basis, driven higher by the US-Israeli war with Iran, the latest Consumer Price Index shows. The higher cost of energy accounted for 60% of the monthly increase. …“[4.2%] is still too hot for comfort, but the more important news was that the increase was concentrated mainly in energy, especially gasoline, rather than spreading widely across the economy,” economist Sung Won Sohn, at Loyola Marymount University. …May’s release is the first inflation report since Kevin Warsh was sworn in as the chair of the Federal Reserve, succeeding Jerome Powell. With inflation moving in the wrong direction and the labor market showing signs of resilience, economists expect the US central bank to keep rates unchanged — or even consider raising them.

A new study by the NAHB finds that regulations at the federal, state and local levels add $131,734 to the cost of a new single-family home—26.4% of the average sales price of $499,500 as of January 2026. Breaking down the total regulatory costs further, the study revealed that $84,939 of the final house price is the result of costs incurred by the builder due to regulation during the construction phase of the home while $46,795 is attributable to regulation during land development. “This study illustrates how excessive regulation is deepening the nation’s housing affordability crisis and making it harder for builders to deliver the affordable, attainable housing that our nation sorely needs,” said NAHB Chairman Bill Owens, a home builder and remodeler from Worthington, Ohio. “Policymakers should remove unnecessary and costly regulations that are pricing buyers out of the market and slowing construction of new homes and apartments.”

Despite rising inflation and ongoing economic uncertainty, the U.S. labor market remained resilient in May. Nonfarm payrolls increased for the third consecutive month, and the unemployment rate held steady at 4.3%. Job gains were concentrated in leisure and hospitality, local government, and health care, while financial activities experienced a decline in payroll employment. Wage growth moderated in May, with average hourly earnings rising 3.4% year-over-year. This pace is 0.5 percentage points lower than a year ago. Importantly, wage growth has been outpacing inflation for nearly two years, which typically occurs as productivity increases. …Job growth in early 2026 has improved notably compared with 2025 but has yet to fully match the pace observed in 2024. Through May, monthly payroll gains have averaged 114,000, compared with 10,000 per month in 2025 and 122,000 per month in 2024.

Mortgage rates continued to increase in May as inflation accelerated. According to Freddie Mac, the 30-year fixed-rate mortgage averaged 6.41% in May, up 7 basis points  over April. Since the conflict in the Middle East began, the 30-year mortgage rate has increased by 36 basis points. The average 15-year rate averaged 5.76% in May, up 7 bps from April, and up 33 basis points since the end of February. Even so, both rates remain lower than a year ago by 41 bps and 19 bps, respectively. The 10-year Treasury yield, a key benchmark for long-term borrowing, averaged 4.47% in May, 16 bps higher than the previous month. …Persistently high inflation has also strained household budgets. As people used more of their disposable income or drew down on savings to cover everyday expenses, the personal saving rate fell to 2.6% in April. The rate was the lowest since June 2022 when CPI was at its peak.