Morning Report: The economy slips in February

Vital Statistics:

	Last	Change
S&P futures	3908	8.4
Oil (WTI)	61.22	-0.72
10 year government bond yield		1.69%
30 year fixed rate mortgage		3.35%

Stocks are flattish this morning on no real news. Bonds and MBS are up small.

The upcoming week will have a lot of Fed-speak, but should be relatively non-eventful for economic data. We will get personal incomes and spending on Friday, along with the third revision of Q4 GDP.

Congress has allocated money to help struggling landlords who aren’t receiving rent from the their tenants. That said, many landlords are turning down this aid because of the strings attached. “If you have someone who wasn’t upholding their end of the contract…you’re asking the housing provider to sign up for essentially another year of this person being in this unit unable to pay,” said Amanda Gill, government affairs director for the Florida Apartment Association, a landlord trade group.

The Chicago Fed National Activity Index slipped in February, as production and consumption fell. Bad weather was a factor in the production numbers, but shouldn’t have played a part in the consumption area. The idea that we are going to start a rip-roaring recovery in the back half of the year is predicated on spending, particularly stimulus funds. If people use that money to pay bills or reduce debt, the effect will be much smaller.

Existing Home Sales fell 6.6% in February, according to NAR. That said, they still were up 9% on a YOY basis. The median home price came in at $313,000, which was up 16% from a year ago. Inventory stood at just over 1 million homes, which is a 2 month supply.

“Despite the drop in home sales for February – which I would attribute to historically-low inventory – the market is still outperforming pre-pandemic levels,” said Lawrence Yun, NAR’s chief economist.

“I still expect this year’s sales to be ahead of last year’s, and with more COVID-19 vaccinations being distributed and available to larger shares of the population, the nation is on the cusp of returning to a sense of normalcy,” Yun said. “Many Americans have been saving money and there’s a strong possibility that once the country fully reopens, those reserves will be unleashed on the economy.”