US ECONOMY & POLITICS

U.S. New-Home Sales Post Surprise Drop Amid Record-High Prices – Bloomberg, 6/23/2021

• Sales of new U.S. homes dropped unexpectedly in May as elevated home prices continue to weigh on affordability and builders rush to replenish inventory.
• Purchases of new single-family homes fell 5.9% to a 769,000 annualized pace after a downwardly revised 817,000 in April, government data showed Wednesday.
• The median estimate in a Bloomberg survey of economists called for a 865,000 rate.
• The number of homes sold in May and awaiting the start of construction — a measure of backlogs — was little changed from a month earlier at 276,000, Wednesday’s report showed.
• The total number of homes sold with construction underway eased to 305,000 in May.
• There were 330,000 new homes for sale in May, the most since July 2019. At the current sales pace, it would take 5.1 months to exhaust the supply of new homes, compared with 4.6 months in the prior month.
• The median sales price rose to a record $374,400.
• Mortgage applications have fallen sharply since January, suggesting that demand for homes is slowing.

U.S. June Manufacturing Index at Record High, Services Dip – Bloomberg, 6/23/2021

• A measure of U.S. manufacturing activity expanded in June at the fastest pace in records dating back to 2007, fueled by easing pandemic restrictions and a strengthening domestic economy.
• The IHS Markit flash index of purchasing managers at manufacturers increased for a fourth straight month to 62.6 from 62.1 a month earlier, the group reported Wednesday. The services measure fell to 64.8, though remains near record levels.
• A measure of manufacturers’ output prices rose to the highest in data back to 2007. Service providers also registered continued growth in costs and prices charged, providing further evidence of the inflationary pressures building across the economy.
• Overall, the IHS Markit flash composite index of purchasing managers at manufacturers and service providers eased but continued to show robust growth.

Fed officials say “temporary” inflation surge may be longer than thought – Reuters, 6/23/2021

• A period of high inflation in the United States may last longer than anticipated but should still ease over time as the economy settles back to normal, two U.S. Federal Reserve officials said on Wednesday.
• The comments from Fed Governor Michelle Bowman and Atlanta Federal Reserve bank president Raphael Bostic are the latest to try to reset public expectations around a price surge U.S. central bankers have largely characterized as transitory.
• That remains the case, Bostic said in an interview on National Public Radio’s Morning Edition, but “temporary is going to be a little longer than we expected initially…Rather than it being two to three months it may be six to nine months.”
• Bowman in remarks to a Cleveland Federal Reserve bank conference said she agrees prices are being driven by clogged supply chains and surging demand as the economy reopens, factors that should ease.

Fed’s Powell Plays Down Inflation Threat – Wall Street Journal, 6/23/2021

• Federal Reserve Chairman Jerome Powell said it’s highly unlikely that inflation will rise to levels seen in the 1970s but acknowledged significant uncertainty as the economy reopens.
• While the Fed anticipated that the end of the pandemic would temporarily push up inflation this year, Mr. Powell said Tuesday on Capitol Hill that the increases in prices have been larger than central bankers had expected and may prove more persistent.
• Mr. Powell said that while he has “a level of confidence” in the prediction that inflation will start to subside, “it’s very hard to say what the timing of that will be.”

Fannie-Freddie Investors Get Mixed Ruling From Supreme Court – Bloomberg, 6/23/2021

• The U.S. Supreme Court gave Fannie Mae and Freddie Mac investors a mixed ruling in their challenge to the government’s collection of more than $100 billion in profits from the government-sponsored enterprises.
• The justices threw out claims that the Federal Housing Finance Agency exceeded its authority under federal law.
• But the court also said investors might be able to win damages on a separate claim that the so-called profit sweep was illegal because the FHFA director was unconstitutionally insulated from being fired by the president.
• The second part of the ruling could mean President Joe Biden will be able to oust Mark Calabria, the FHFA director and an advocate for releasing the mortgage giants from government control.

EUROPE & WORLD

UK inflation pressures mount as bounce-back slows only slightly -PMI – Reuters, 6/23/2021

• Inflation pressures faced by British firms hit record levels this month, and growth in the private sector cooled only slightly from an all-time high in May when coronavirus restrictions were lifted, a survey showed on Wednesday.
• The preliminary reading of the IHS Markit/CIPS UK Composite Purchasing Managers’ Index (PMI) pointed to one of the strongest monthly improvements in business activity since 1998, with a reading of 61.7 – not far off May’s unprecedented 62.9.
• Input costs matched a previous record increase from June 2008 and prices charged by firms rose by the largest amount since these records began in 1999, as disruption to supply chains caused a scramble for components.
• The PMI survey showed hiring rose by a record amount in June but many firms were unable to operate at full capacity because of staff shortages. The lack of candidates also pushed up wages.
• The PMI for the services sector dipped to 61.7 in June from 62.9 in May. The index for the smaller manufacturing sector fell to 64.2 from 65.6.

GSK’s drugs arm to get $11 bln booster from consumer spin-off – Reuters, 6/23/2021

• GSK set out plans on Wednesday to turn its consumer healthcare arm into a separately listed company, in a move that will deliver an 8 billion pound ($11 billion) windfall and other financial benefits for its underperforming drugs business.
• Investors have been waiting for details of the separation, which was first unveiled in December 2018 when GSK agreed a joint venture for consumer brands such as Sensodyne toothpaste and Advil painkillers with Pfizer.
• The British group also gave details of a research pipeline which it says has benefitted from the restructuring work of chief scientist Hal Barron, but said it would pursue deals as well to further improve its drug development prospects.
• GSK forecast the pharmaceuticals business would increase sales by more than 5% a year to 2026, broadly in line with analysts’ current expectations.
• It said that business was expected to receive a dividend of up to 8 billion pounds from the consumer arm, which will have its own listing on the London Stock Exchange.

Factmonster – TODAY in HISTORY

• The Senate overrode President Truman’s veto of the Taft-Hartley Act. (1947)
• Richard Nixon and H. R. Haldeman discussed ways to obstruct the FBI’s Watergate investigation. Revelation of this conversation spurred on Nixon’s 1974 resignation. (1972)
• Dr. Jonas Salk, the medical pioneer who developed the first polio vaccine, died. (1995)
• The U.S. Supreme Court upheld the University of Michigan’s School of Law affirmative action policy. (2003)