Month: June 2025

CONSUMER WATCH

Light Vehicles Sales Decrease to 15.65 million SAAR in May

Wards Auto released their estimate of light vehicle sales for May: U.S. Light-Vehicle Sales Growth Slows in May After March-April “Tariff” Surge (pay site).

Although sales in May dropped to a level more in line with – in fact, slightly below – pre-tariff expectations after spiking above trend in the prior two months due to consumers trying to get ahead of potential tariff-related price increases, part of the cooling off was caused by the drain on inventory from the March-April surge.

The drop in inventory, which at the end of last month was down year-over-year for the first time in nearly three years, helped explain a 10% decline in incentive spending in May from April, as there was less pressure to move stock off dealer lots despite the sharp slowdown in demand.

That dynamic likely continues not just in June, but into Q3, as most automakers do not currently appear anxious to raise production levels enough to fully replace declining stock levels.

Sales in May (15.65 million SAAR) were down 9.4% from April, and down 1.1% from May 2024. Sales in May were well below the consensus forecast.

Tracking the Short-Run Price Impact of U.S. Tariffs

Research paper from Harvard Business School Pricing Lab

This paper provides a timely analysis of the short-run impact of the 2025 U.S. tariffs on consumer prices by leveraging a novel combination of high-frequency retail price data, detailed country-of-origin information, and tariff classifications. Through custom price indices and targeted visualizations, we capture how prices evolved across affected and unaffected categories, and between imported and domestic goods. (…)

Our analysis reveals that the announcement of U.S. tariffs prompted rapid but still relatively modest price adjustments, with the extent of these changes varying by product origin and category. The most pronounced price increases occurred among imported goods. However, domestic products also saw some gains, likely driven by expectations of rising input costs and shifts in consumer demand.

Notably, we observe differences across countries: price increases for Chinese goods were both larger and more persistent than those for products from Canada and Mexico, where retailers may have viewed the tariffs as more temporary or less likely to be
sustained.

Importantly, price pressures extended beyond directly affected categories, with even unaffected sectors showing gradual increases—suggesting broader strategic pricing and supply chain spillovers. These findings underscore the wide-ranging impact of trade policy, which can influence retail prices far beyond the specific goods targeted by tariffs.

Goldman Sachs:

We expect tariffs to raise the effective tariff rate by 13pp, which we estimate would raise core PCE inflation from 2.5% year-over-year in April to 3.6% in December 2025 despite offsetting disinflationary pressures. Our forecast reflects a sharp acceleration in most core goods categories, where tariff-related increases in prices will be most acute in consumer electronics, autos, and apparel categories due to their reliance on imports, but only a limited impact on core services inflation, at least in the near term.

We similarly expect tariffs to boost core CPI inflation this year, from 2.8% in April to 3.5% in December 2025. Aside from tariff effects, we expect underlying trend inflation to fall further this year, reflecting shrinking contributions from the auto, housing rental, and labor markets.

We expect drug pricing policy changes and lower oil prices to weigh modestly on inflation this year, but the effects will only offset a small share of the boost to inflation from tariffs.

We expect tariffs to provide only a one-time price level boost that causes inflation to rise this year before coming back down next year. We are less worried that the reacceleration this year could prove more persistent because we expect the economy to be weak this year, and because we see the coming inflation rebound as less threatening than the 2021-2022 episode because the cumulative inflation overshoot should be much smaller, the labor market is much less tight and forward-looking wage indicators have so far continued to fall, and household spending power is no longer elevated by fiscal transfers.

JOLTS

Job openings increased by 191k to 7,391k in April from an upwardly revised 7,200k in March, above expectations. Job openings increased the most in the professional and business services (+171k) and private education and health services (+115k) sectors but declined the most in the leisure and hospitality (-92k) and other services (-60k) sectors.

The job openings (+0.1pp to 4.4%), hiring (+0.1pp to 3.5%), and layoff (+0.1pp to 1.1%) rates increased, while the quits rate declined (-0.1pp to 2.0%). The federal government hiring rate was unchanged at 1.0%, while the layoff rate declined by 0.2pp to 0.1% in April. (GS)

This was for April. Friday we get May’s job report. Indeed Job Openings keeps weakening:

Foreign Arrivals at US Airports Declining

Trump Signs Order Doubling US Steel, Aluminum Tariffs to 50%

Trump cast the move, which took effect at 12:01 a.m. Washington time on Wednesday, as necessary to protect national security.

An order signed on Tuesday said the previous charge had “not yet enabled” domestic industries “to develop and maintain the rates of capacity production utilization that are necessary for the industries’ sustained health and for projected national defense needs.”

“Increasing the previously imposed tariffs will provide greater support to these industries and reduce or eliminate the national security threat posed by imports of steel and aluminum articles and their derivative articles,” according to the directive, which the White House posted on X. (…)

From my Monday post:

Charts from Goldman Sachs. Spot US HRC prices are 31% higher than EU and Brazil, 50% higher than Japan and 107% higher than China. On rebar: +21-36%, +44% and +93% respectively. Yet, we import less of the lower cost stuff. What cost MAGA?

Automakers Race to Find Workaround to China’s Stranglehold on Rare-Earth Magnets Major manufacturers, fearful they will have to shut down assembly lines, consider moving some parts production to China

Several traditional and electric-vehicle makers—and their suppliers—are considering shifting some auto-parts manufacturing to China to avoid looming factory shutdowns, people familiar with the situation said.

Ideas under review include producing electric motors in Chinese factories or shipping made-in-America motors to China to have magnets installed. Moving production to China as a way to get around the export controls on rare-earth magnets could work because the restrictions only cover magnets, not finished parts, the people said.

If automakers end up shifting some production to China, it would amount to a remarkable outcome from a trade war initiated by President Trump with the intention of bringing manufacturing back to the U.S. (…)

[China] controls roughly 90% of the world’s supply of these elements, which help magnets to operate at high temperatures. Much of the world’s modern technology, from smartphones to F-35 jet fighters, rely on these magnets. (…)

China was supposed to have eased export controls on rare-earth magnets as part of a 90-day tariff truce agreement with the White House, but the country has slow walked license approvals for magnets. Trump accused China of violating its deal with the U.S. China has pushed back at the notion that it was to blame, alleging “discriminatory and restrictive measures” by Washington, including restricting exports of AI chips and revoking visas for Chinese students. (…)

In May, industry groups representing most major automakers and parts suppliers told the Trump administration that vehicle production could be reduced or shut down imminently without more rare-earth components from China. (…)

Analysts say China has superior technical know-how for separating rare earth from surrounding rocks.

American carmakers aren’t the only ones struggling to source magnets from China.

Car companies in Japan and India have also warned of looming manufacturing disruptions. In Europe, automakers say that the pace of export license approvals hasn’t kept up with their demand. (…)

The lack of magnets hits EVs and hybrid vehicles harder than conventional cars and trucks. A typical EV contains far more rare-earths than a gasoline-powered model, but rare-earth magnets are found throughout any modern vehicle. (…)

Bloomberg adds:

One complication is that the US and China appear to have different understandings of what was agreed on rare earths at last month’s trade talks in Geneva, Cory Combs, head of critical mineral supply chain research at Trivium China, told Bloomberg TV.

“On the US side, it seems clear now, there was a sense that Beijing would completely remove the requirement of an approval,” Combs said. “That was not what Beijing seems to think it agreed to.” (…)

Trump had signaled a wish to have a call with his Chinese counterpart as early as February and later said he was willing to travel to the Asian nation to meet with Xi, although no such engagement has been scheduled so far.

• Trump Says China’s Xi Is ‘Extremely Hard to Make a Deal With’

China Weighs Ordering Hundreds of Airbus Jets in Major Deal

(…) A deal could involve about 300 planes and include both narrowbody and widebody models, they said, with one person saying the order could range between 200 and as many as 500 aircraft. (…)

Airbus has steadily increased its share of sales to China, helped by a final assembly line in Tianjin for its popular A320 family aircraft. A deal of the magnitude being discussed would help cement the European planemaker’s dominance in one of the world’s top aviation markets.

For its US rival Boeing Co., doing business in China has become more difficult as the company gets caught up in President Donald Trump’s trade war with Beijing. (…)

French President Emmanuel Macron and Chancellor Friedrich Merz of Germany are among leaders that may visit Beijing in July to mark 50 years of diplomatic relations between China and the European Union. Their countries are the two biggest shareholders in Airbus. (…)

Should the order run to 500 planes it would rank as one of the biggest ever and certainly the largest for China. (…)

Any deal would likely be carried out through China’s state-run aircraft procurement body, which typically negotiates on behalf of the country’s airlines.

50% steel and aluminum tariffs probably don’t help Boeing…

India Challenges US on Auto Tariffs in Toughening Trade Stance

New Delhi informed the WTO that the 25% US tariffs on imports of passenger vehicles and light trucks along with certain auto components are “safeguard measures” — trade restrictions — and affect its exporters, according to a notification. India has sought “consultation” with Washington on the tariffs.

In recent weeks, China’s ability to pull through a truce with the US despite defiance and the legal challenges to President Donald Trump’s trade tariffs back home have emboldened India to adopt a more assertive tone in its trade talks.

The move on auto tariffs comes amid the US doubling levies on steel and aluminum and coincides with the visit of a US trade team in New Delhi to advance the discussions.

Separately, India has threatened retaliatory duties on some US goods in response to Washington’s duties on steel and aluminum. (…)

Bessent Says China Has a ‘Choice’ on Whether or Not to Be a Reliable Partner

(…) “They either want to be a reliable partner to the rest of the world, or they don’t,” Bessent said via video link to the American Swiss Foundation Leadership Summit in Zurich on Tuesday. (…)

Trump “wants the US to become more of a manufacturing economy,” Bessent said. The US is trying to remain a destination for foreign and domestic investment with tax cuts, trade rebalancing and deregulation, adding that precision manufacturing is one of the goals of the Trump administration, he said. (…)

Look who’s talking about reliable partners!

US manufacturing PMI picks up in May – Tariffs related

The headline index from the report, the seasonally adjusted S&P Global US Manufacturing Purchasing Managers’ Index™ (PMI^®), posted 52.0 in May. That was up from readings of 50.2 in the preceding two months and represented solid overall growth which was the best since February’s recent high.

May’s improvement in the PMI was driven by an uplift in new orders and an outsized contribution from input inventories which, in 18 years of data collection, rose at an unprecedented pace. Similar factors drove growth in both instances – efforts by manufacturers and their clients to front-run tariff related increases in prices and supply-side disruption.

For new orders, which rose to the strongest degree in three months, demand from within the United States was noted as the primary driver of growth as international sales remained relatively subdued, rising only slightly following April’s steep fall. Trade policies and tariffs continued to weigh on foreign demand, according to panelists.

Despite the uplift in order books, production volumes were trimmed marginally for a third month in a row. Capacity was also broadly sufficient to deal with the dual requirements of both incoming and existing orders as backlogs of work fell again, albeit modestly. Firms also added to their finished goods inventory, which rose for the first time since last November.

An increase in labor capacity was registered in May, with a net increase in employment signaled for the first time in three months. However, growth was only marginal, with some firms noting difficulties in finding suitable workers to fill vacancies.

Tariffs helped explain another steep increase in manufacturing input prices during May. Latest data showed that raw material price inflation remained high, despite dropping to a three-month low, amid reports that suppliers were passing on tariff related cost increases. Supplier delivery delays were also noted, linked to growing stock shortages at vendors. The degree to which supplier performance worsened was the steepest for over two-and-a-­half years.

In response to higher input costs, factory gate prices were also raised in May, and to the greatest degree since November 2022.

Finally, manufacturers are hopeful of a more stable trading environment in a year’s time, with growing expectations among the panel that disruption to markets caused by tariffs will dissipate in the months ahead. This helped to explain why confidence in the outlook improved in May to a three-month high – and to a level fractionally above the survey average

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence

“The rise in the PMI during May masks worrying developments under the hood of the US manufacturing economy. While growth of new orders picked up and suppliers were reportedly busier as companies built up their inventory levels at an unprecedented rate, the common theme was a temporary surge in demand as manufacturers and their customers worry about supply issues and rising prices.

“These concerns were not without basis: supplier delays have risen to the highest since October 2022, and incidences of price hikes are at their highest since November 2022, blamed in most cases on tariffs. Smaller firms, and those in consumer facing markets, appear worst hit so far by the impact of tariffs on supply and prices.

“Encouragingly, manufacturers regained some optimism in May after sentiment had been hit hard by tariff announcements in April, partly reflecting the pauses on new levies. However, uncertainty clearly remains elevated amid the fluid tariff environment, and factories have so far shown a reluctance to expand headcounts in the face of such volatility.”

The ISM survey outlines the “worrying developments”:

• ISM Manufacturing Index Signals Waning Activity in May

Manufacturing activity retreated again in May, notching the fourth-straight monthly decline for the ISM manufacturing index amid a measurable deterioration in trade-related activity. That is not to suggest that things were going swimmingly before the recent escalation in trade tensions. To be sure, the headline index failed to register even a single month on the good side of 50 in all of 2023 and 2024.

But in the wake of the election, the factory sector had regained a little lost swagger. After sinking to its lowest level of 2024 in October, the ISM rose for three-straight months amid hopes for less regulation and lower taxes. January marked the not-quite nose-bleed-inducing summit of just 50.9. The ensuing descent for the manufacturing sector has occurred against a backdrop of an ever-changing and increasingly Byzantine list of tariffs that is sowing confusion for American industry and is impacting U.S. firms’ orders from abroad.

In the fabricated metals space, one respondent illustrated this concept with the very direct observation that “tariff uncertainty is impacting new international orders. Tariffs are also the main reason our Asia customers are requesting delayed shipments.”

While the indexes for import and export orders do not feed directly into the headline measure, they do offer an empirical way to measure how broadly these trade issues are impacting businesses. The export orders measure dropped to 5-year low of 40.1 and the imports measure fell to 39.9, a level not seen since 2009 when the global financial crisis slowed global trade to a crawl.

Source: Institute for Supply Management and Wells Fargo Economics

Four of the five indexes (production, new orders, supplier deliveries, inventories, employment) that feed into the headline ISM index rose last month, though all but one remain consistent with contraction. Inventories was the only component to slip and supplier deliveries is the only that remains in contraction, both of which reflect tariff pressure.

The measure of current activity—production—rose in May after hitting a historically-low level in April, but at 45.4, it’s still consistent with some of the lowest-levels of activity outside the pandemic in the last couple of decades. It’s little surprise that new demand remained constrained with the new orders index barely budging and registering contraction for the fourth straight month. In the context of on-again, off-again tariff policy, most businesses are left sitting on their hands as they await any sign of more-persistent clarity.

The prices paid index came down slightly, but continues to run at a level consistent with higher cost pressure in the manufacturing sector. “We have entered the waiting portion of the wait and see, it seems. Business activity is slower and smaller this month. Chaos does not bode well for anyone, especially when it impacts pricing.” The employment metric also continues to be consistent with layoffs in the sector.

Source: Institute of Supply Management and Wells Fargo Economics

It also looks to be getting a bit more challenging to get inputs as well. The supplier deliveries index rose to 56.1, given this is an inverse metric this is consistent with some of the longest wait times for needed inputs in nearly three years. This measure is something to pay attention to. Not only will longer delivery times signal trade-related supply chain disruptions, but as we detailed in a note last week, it could boost the headline ISM in coming months and overstate the health of the manufacturing sector.

Current supply challenges are already reminiscent of the pandemic for some—a respondent from the Electrical Equipment, Appliances & Components industry said, “The administration’s tariffs alone have created supply chain disruptions rivaling that of COVID-19.” Another from the Computer & Electronic Products industry said, “…No one is willing to take on inventory risk.” The drop in the inventories index comes as the pull-forward in demand looks to have run its course, leading inventories back into contraction.

There is ultimately no industry untouched by tariffs and the selected respondent comments summarize an uncertain and chaotic environment. Purchasing managers are reporting softening demand conditions, increased cost pressure and declining profitability.

From NBC:

After U.S. businesses massively front-loaded international orders in the first quarter to avoid tariffs imposed by the Trump administration, a swing back was to be expected in the second quarter. However, the reversal appears to be much more dramatic than anticipated.

Trade balance data published last Friday showed a 19.8% decline in goods imports in April—the largest monthly drop since records began in 1989. Goods exchanges do not appear to have rebounded in May, judging from the ISM Manufacturing Report published this morning.

As today’s Hot Chart shows, the sub-index tracking new export orders came in at just 40.1—a level never seen outside of recessionary periods. Meanwhile, the import index saw its third-largest monthly decline in history (-7.2 index points) and stood at its lowest level since the Great Recession (39.9).

The collapse of trade in the second quarter will affect economic data in different ways depending on the country. In the United States, it should result in higher-than-expected GDP growth, with sinking imports acting as a major boost. Elsewhere, however, the impact will be the opposite. A decline in exports will indeed act as a drag on growth among the United States’ trading partners, notably Canada. The impact could be significant for the manufacturing sector, which has already been experiencing a decline in production and jobs for several months.

China: PMI signals first deterioration in operating conditions in eight months The headline seasonally adjusted Purchasing Managers’ Index™ (PMI) posted 48.3 in May, down from 50.4 in April. Registering below the neutral 50.0 mark for the first time in eight months, the latest data signalled that manufacturing sector conditions deteriorated midway through the second quarter. Moreover, the reading was the lowest recorded since September 2022. Central to the easing of manufacturing business conditions was the reduction in new orders. Incoming new work contracted at the quickest pace in over two-and-a-half years. This was attributed by surveyed businesses to deteriorating demand conditions and was partly driven by a second successive monthly decline in export orders. In line with the reduction in new work, manufacturing output fell for the first time in 19 months. Slower inflows of new work meanwhile contributed to a further depletion of backlogged orders in May. The reduction in capacity requirements further led Chinese manufacturers to scale back headcounts in May, either through redundancies or the non-replacement of job leavers. Additionally, a marginal reduction in purchasing activity was observed in May, though a renewed – albeit fractional – rise in stocks of purchases suggested that there was an adequate level of pre-production inventory holdings among Chinese goods producers. Stocks of finished goods accumulated for the first time in four months, albeit only slightly. Survey respondents indicated that this was due to both falling sales and delays in outbound shipments of products. Supplier lead times meanwhile lengthened marginally for the third month in a row in May. Turning to prices, average input costs and output charges continued to decline midway through the second quarter of 2025. Moreover, the rates of reduction accelerated since April. While lower raw material and energy costs underpinned the fall in input prices, which firms passed on to clients, charges were also suppressed by heightened competition. On the other hand, there was a renewed increase in export charges, the first in nine months. Finally, sentiment in the Chinese manufacturing sector improved in May. Optimism picked up since April as firms grew more hopeful that trade conditions can improve and the widening of export markets will help to drive sales in the year ahead. Commenting on the China General Manufacturing PMI® data, Dr. Wang Zhe, Senior Economist at Caixin Insight Group said: (…) “The contraction in supply and demand was attributed to sluggish external demand, which fell for a second straight month. The gauge for new export orders dropped to the lowest level since July 2023. Notably, the decline in supply and demand was particularly pronounced for investment products. “Employment continued to decline. The job market shrank at a faster pace than in April, marking the eighth instance of a decline in employment in the past nine months. “In light of downward market pressure, manufacturers remained cautious when it came to hiring. Investment product manufacturers laid off a significant number of workers. Amid tepid demand, businesses continued to clear backlogs of work, keeping the corresponding indicator in contraction and sending it to its lowest since January 2022. “Prices remained at a low level as supply and demand weakened. Input costs declined for the third straight month on falling prices of energy and chemical raw materials. Sales prices were also subdued as businesses sought to lower prices to remain competitive, resulting in the corresponding gauge contracting in May for the sixth straight month. (…) “Major macroeconomic indicators showed a marked weakening at the start of the second quarter. The downward pressure on the economy has significantly intensified compared to preceding periods. “In terms of policy, the lasting impact of earlier measures that aimed to stimulate consumption needs further evaluation, and follow-up actions should be introduced based on actual conditions. “More importantly, boosting domestic demand should be grounded in improving household incomes. As such, feasible and effective measures must be taken to improve the employment environment, strengthen social security, raise household disposable income, improve market expectations, and ultimately drive a continued economic recovery.”

Canada: Output and new orders fall sharply

The S&P Global Canada Manufacturing Purchasing Managers’ Index™ (PMI®) posted 46.1 in May. That was slightly up on April’s 45.3 but nonetheless below the critical 50.0 no-change mark for a fourth month in a row. (…)

International demand remained especially hard hit, with new export business again declining to a steeper degree than overall sales. Trade with the neighbouring United States was again reported to be weak. (…)

Price data meanwhile showed an acceleration of input cost inflation. There was again evidence that tariffs had led to a general uplift in input costs, with vendors reportedly raising their charges.  Latest data showed a marked overall increase in output charges,
despite the rate of inflation dropping to a three-month low.

Mexican manufacturing sector contracts further in May

Despite rising from April’s 50-month low of 44.8, the headline index posted 46.7, pointing to a solid decline in business conditions.

New orders shrank markedly and for an eleventh month running during May. A substantial drag on sales volumes came from abroad, with new export business decreasing at the second-fastest rate since February 2021. US tariffs were once again widely cited as a drag on demand for Mexican goods (…).

May survey data signalled steep cost pressures for Mexican manufacturers. Although the rate of increase in input prices eased, it remained elevated. Unfavourable exchange rate movements were cited by panellists, as were price hikes from vendors and US tariffs.
Prices charged rose, albeit only marginally and at a softer pace.

Other Asian PMIs released yesterday paint a broadly similar picture:

• Japan: Total new business fell modestly, with lower sales generally linked to subdued demand conditions amid US tariffs and increased client hesitancy. The decline in new export orders also moderated since April, but remained solid overall.
• Vietnam: New business from abroad declining at a much faster pace than total new orders.
• Indonesia: Manufacturers signalled particular falls in exports to the US.
• Taiwan: New export orders declined at the steepest pace in nearly a year-and-a-half.
• South Korea: New orders fell at the fastest pace since June 2020, and the strongest rate in almost a decade if the COVID-19 pandemic period is excluded. Respondents particularly mentioned the US as a source of falling new export orders.

New orders are manufacturers’ lifeblood. Trade is about to slow meaningfully.

(Bloomberg)

Revenues from Tariffs Spiked to $23 Billion in May, up by 168% in 3 Months

Collections from customs and certain excise taxes spiked by $6.5 billion, or by 37.5%, in May from April, to $24.0 billion, nearly triple the average monthly collections in 2024 ($8.2 billion), according to the Treasury Department’s daily data today.

Over the past three months, they spiked by $15 billion, or by 168%.

This $24.0 billion is the amount in customs and excise taxes that the Department of Homeland Security – which includes Customs and Border Protection – transferred in May into Treasury Department’s checking account at the Fed, the Treasury General Account. This total of $24 billion includes a small amount in “certain excise taxes” (in April, $1.1 billion). The rest is from tariffs – so, roughly $23 billion in receipts from tariffs.

At May’s pace, these customs and excise taxes would amount to $288 billion per year, up by $190 billion from 2024. (…)

OECD Warns That World Growth to Slow Amid Trade Turmoil The global economy is now set to grow by 2.9% this year and next, a downgrade from previous forecasts

Collectively, the global economy is now set to grow by 2.9% this year and next, the OECD said in its quarterly report released Tuesday. That marks a downgrade to the group’s previous forecasts, which saw growth at 3.1% in 2025 and 3% in 2026, and suggests the world economy is set to slow from the 3.3% expansion it booked last year. (…)

The U.S. itself will be among the economies worst hit, the group said. The world’s largest economy is set to grow just 1.6% this year, a sharp deceleration from 2024’s 2.8% and lower than OECD’s previous forecast of 2.2% for the year, as a result of Trump’s tariffs, wider policy uncertainty, lower net immigration and cuts to federal workforces, the group said. (…)

Mexico and Canada, which are particularly vulnerable to a hit to their trade with their common neighbor, will also see sharp slowdowns in growth this year, according to the forecasts. The Mexican economy will grow just 0.4%, while Canada’s economy will expand by 1.0%, the OECD expects. (…)

In the average wealthy economy, investment is set to take a sustained hit in the current environment, similar to the damage dealt by previous global shocks such as the global financial crisis and the Covid-19 pandemic, Pereira said.

“We would not be surprised to see investment come down again,” he said. “That’s why substantial policy support for housing investment, business investment, and public investment is key so that we can bring more investment to the table and more growth to the economy.” (…)

“With the recent spike in effective tariffs and the inflationary pressures associated with that, we expect [US] inflation to reach around 4% by the end of this year,” he said. So we’re not expecting policy-rate changes this year.”

Eurozone Inflation Falls Below Target Investors expect the European Central Bank to cut borrowing costs by a quarter point on Thursday to 2%

(…) May’s decline was driven by a drop in services inflation to 3.2% from 4.0% in April, its lowest level since March 2022. That was in part due to the later timing of Easter, but also wages that declined sharply, easing pressure on businesses in the labor-intensive sector. Unemployment, however, equaled a record low of 6.2% in April, data also published Tuesday said. (…)

• Highly Unusual Divergence in US-EU Inflation Outlook

The consensus expects inflation to rise in the US and fall in the eurozone. Combined with the worsening US fiscal situation, this highly unusual divergence will continue to put upward pressure on US rates across the curve and downward pressure on rates in Europe.

It’s a homebuyer’s market — if you can afford one

There are nearly 500,000 more home sellers than buyers in the U.S. housing market, Redfin estimates.

That’s the widest gap on record — and a big reversal from just a few years ago, when home buyers were desperate to find a place to live, sending prices into the stratosphere.

There are 33.7% more sellers than buyers now. At no other point since Redfin began tracking in 2013 have sellers outnumbered buyers by this large a percentage.

• A year ago, sellers outnumbered buyers by just 6.5%, and two years ago, buyers outnumbered sellers.
• Redfin counted sellers as the number of active listings in a given area and created a model to estimate the number of buyers.

For home sellers “the mortgage rate lock-in effect is easing,” per Redfin. “For most people, it’s not realistic to stay put forever; job changes, return to office mandates and divorce force people to move.” Higher mortgage rates are also becoming normalized. “The idea of taking on a higher mortgage rate also isn’t as shocking as it was when rates first skyrocketed in 2022.”

Historically, when sellers outnumber buyers, prices drop. And in some markets, prices have already started falling.

• Home prices fell in 11 of the top 50 most populous U.S. metro areas in the four weeks ended April 20, per Redfin. That includes Austin; Oakland, California; and Tampa, Fla.
• Redfin believes prices will dip 1% by the end of the year (not exactly a huge sale, to be sure).

Data: Redfin. Chart: Axios Visuals

House prices jumped 54% since the pandemic, double rentflation. It is still much cheaper to rent, even more so with mortgage rates near 7%:

FYI:

“Yesterday, as everybody knows, [was the] first day of hurricane season,” [FEMA leader] Richardson said. “I didn’t realize it was a season.”

Mr. Richardson does not seem seasoned enough for this job, does he?