Today's set of macro data were quite weak and confirming the increased risk of a U.S. hard landing:
- A 8.4% fall in existing home sales in March. These sales are now at their lowest since June 2003. Single-family sales fell 9.5%; this is the largest fall since January 1989. Also the months of unsold homes as a ratio of sales is now further up and signaling significant excess supply that will reduce home prices over the next few months.
- Consistent with the data above on home sales, the Case-Shiller home price indices for February showing continued fall in home prices. The 10-city index fell 1.5% y-o-y; this is the lowest level since October 1993. The 20-city index fell 1.0%; this is the lowest level in the six-year history of this measure.
- Consumer confidence was down in April falling to 104.0 from an upward revised 108.2. The fall derives from worries about labor market and higher gas prices. The components of the index - especially the labor one - were also worrisome.
- The Richmond Fed manufacturing index fell to -11 from -10. Its ISM-equivalent composite index fell to 46.9 from 47.5. The other regional Fed surveys have also been weak so far for April.
- The new version of the Greenspan-Kennedy paper confirmed that MEH has been an important source of consumption growth in 2001-2005. Recent sharp fall in MEW thus bodes poorly for consumption growth ahead. See the forthcoming RGE Brief on MEW by Christian Menegatti coming out this week for more details various measures of MEW and on the relation between and consumption growth.
These data and trends are all consistent with the view that the growth slowdown in Q1 - likely to be sharply down relative to the already weak Q4 - will persist and get worse in the current Q2 quarter. Q1 will turn out not to be the bottom of the growth slowdown (as argued by the consensus); Q2 looks - based on current data - on a trajectory to show an even worse growth rate than Q1. Thus, the chances of a U.S. hard landing are clearly increasing.