- U.S GDP shrank by 1.4% in Q1
- The PCE Deflator rose 0.9% in March and 6.6% year-over-year
- The S&P CoreLogic Case-Shiller 20-City Composite Index rose at a 19.8% annual rate in February
Top Three Market Headlines
U.S. GDP Declines in Q1: The Bureau of Economic Analysis last week reported that U.S. gross domestic product ("GDP"), a measure of all goods and services produced, declined by a seasonally adjusted annual rate ("SAAR") of 1.4% in Q1 of 2022. The result was a material reversal from Q4 2021, when the economy expanded at a 6.9% SAAR. Key factors driving the Q1 decline included decreases in inventory investments, exports, and government spending, as well as an increase in imports (which subtracts from the GDP measurement). On the other hand, higher expenditures by consumers aided GDP in Q1, though this was centered on services, as spending on goods declined in the quarter.
Fed's Preferred Inflation Index Jumps in March: The price index embedded within the latest personal income and spending report from the BEA, referred to as the PCE Deflator, indicated that consumer prices rose 0.9% in March, or 6.6% over the prior year. The "core" PCE Deflator, which strips out volatile food and energy prices and is considered the Federal Reserve's preferred inflation gauge, rose 0.3% from the prior month, or 5.2% over the prior year. While this remained much higher than the Fed's target of 2.0%, it was down marginally from 5.3% in February, marking the first month-to-month decline in the annual rate in more than a year.
Home Prices Escalated in February: Home prices continued surging across the nation during February, as indicated by the 20.2% year-over-year increase for the S&P CoreLogic Case-Shiller 20-City Composite Index. This was an increase from 19.0% in January and the highest annual rate recorded in the 20-year history of the 20-City Composite. All 20 cities saw an acceleration in prices, with higher annual gains in February than January. The largest gains were recorded in Phoenix, Tampa, and Miami (+39.2%, +32.6%, and +29.7%, respectively). The continued price momentum has been keyed by high demand combined with a persistent shortage of homes for sale.