- Existing home sales fell for the 12th straight month in January
- The current federal-funds rate target range is 4.50% to 4.75%
- Personal consumption rose 1.8% in January
Top Three Market Headlines
Existing Home Sales Slump Continues: The National Association of Realtors reported last week that sales of existing homes declined again in January to a seasonally-adjusted annualized rate (SAAR) of 4.0 million. This was the twelfth consecutive month of decreasing sales, as well as the slowest month of activity since October of 2010. Compared to the prior year, sales were down by 37% in January, reflecting the considerable impact rising mortgage rates have had on the market. Meanwhile, sales of new homes — a much smaller segment of the housing market — increased in January to a SAAR of 670,000, the highest level of sales in ten months, though this was still 19% lower versus the prior year.
Fed Minutes Highlight Rate Debate: Minutes of the Federal Reserve's early February meeting, released last week, revealed that most Fed officials supported slowing the pace of interest rate increases. At the meeting, the Fed's rate-setting committee agreed to raise the federal-funds rate by 0.25 percentage points to a target range of 4.50% to 4.75%, which followed larger moves of 0.50 and 0.75 points in December and November of last year, respectively. Committee members noted that a slower pace of rate hikes would allow them to assess the impact of prior rate hikes on inflation. At the same time, a few officials favored a stronger rate hike, cautioning against weakening the central bank's inflation fight too soon.
Consumer Spending Escalated in January: The Bureau of Economic Analysis (BEA) reported last week that personal consumption expenditures (PCE), a measure of consumer spending for all goods and services, rose 1.8% in January compared to the prior month. This was the first increase in three months and the largest monthly gain since March 2021. The advance was driven by demand for manufactured goods like motor vehicles, household furnishings, and equipment. The rise in spending far outpaced that of personal income, which rose at a 0.6% pace over the prior month, according to the BEA.