Flash June PMI is Encouraging on Several Fronts
Existing Home Sales add more support for this portfolio holding
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*S&P’s June Flash PMI report offers positives for the economy and inflation
*Existing Homes Sales data showed the recent upturn continued in May
*Here’s our plan for Builders FirstSource shares
S&P has published its Flash June PMI report and in our view it’s rather positive for not only the speed of the economy, but also for inflation. The combination shows the economy on pace for 2%-2.5% GDP, continuing to grow at or above trend, with job gains continuing while inflation pressures continued to slow. In short, this report will support the “no-landing” thinking while suggesting more “good data” for the Fed is likely in the June CPI report due on July 11. Because S&P’s Flash data isn’t baked into the Atlanta Fed’s rolling GDPNow forecast, we shouldn’t expect to see any meaningful updates later today and near-term Fed speakers will continue to say they need more clarity before starting to cut rates. Even so, what we saw in the flash data was encouraging, and if we weren’t in a funky holiday week and a triple witching Friday, it would be better received.
Also, this morning, the National Association of Realtors published May Existing Home Sales data, which at first blush showed declines, but the not seasonally adjusted data shows a meaningful pickup compared to earlier this year. We see that adding another layer of support for the housing market and our shares of Builders FirstSource BLDR. In our opening comments, we noted we could see some volatility injected into the market because of triple witching today. For that reason, we’re holding off adding to BLDR today, but we are closely watching the shares with our next move in mind.
Now let’s dig into S&P’s initial take on June and May Existing Home Sales as well
Flash June PMI
The headline S&P Global Flash US PMI Composite Output Index edged higher from 54.5 in May to 54.6 in June, its highest since April 2022. The service sector led the upturn with additional support from manufacturing, while new order inflows hit a three-month high.
Selling price inflation cooled to a five-month low in June with a five-month low hit for the services sector. Selling prices in the manufacturing sector hit a six-month low in June per S&P’s initial findings. Rates of input cost inflation moderated in both manufacturing and services, but wage gains were still called out as being a factor in the service sector. Even so, job creation accelerated in June, registering the largest gain in nine months. Service sector payrolls rose to their highest levels in five months while manufacturing payrolls increased at the sharpest rate in 21 months.
Existing Home Sales
Existing home sales rose 2.8% year over year to 4.11 million units on a seasonally adjusted annual rate. Similar to what we saw with the May Housing Starts data, when we look at the non-seasonally adjusted data we see a more pronounced pick up in May existing home sales to 364K compared to 323K in April and the 250K average for Q1 2024. We pay attention to Existing Home Sales data because it along with Pending Home Sales are leading indicators for the housing market. May Pending Home Sales will be published on June 27.
