The US economy contracted less in the first quarter than previously estimated, with GDP revised to show a .2% drop instead of .7%, reflecting higher consumer spending and less of a decline in exports. Consumer spending was revised up to 2.1%, and the drop in exports was revised down to 5.9%.
On a positive note, sales of existing homes rebounded in May, rising 5.1% to an annual rate of 5.35 million and reaching the fastest pace since late 2009, as first-time homebuyers stepped up their purchases, accounting for 32% of sales. At the current sales pace, it would take 5.1 months to clear May’s unsold inventory of 2.29 million homes. According to the National Association of Realtors, “Solid sales gains were seen throughout the country in May as more homeowners listed their home for sale and therefore provided greater choices for buyers. However, overall supply still remains tight, homes are selling fast and price growth in many markets continues to teeter at or near double-digit appreciation. Without solid gains in new home construction, prices will likely stay elevated — even with higher mortgage rates above 4 percent”.
Sales of new homes also rose in May to a seven-year high, up 2.2% to an annual rate of 546,000. The stock of new homes was unchanged at 206,000, which amounts to a 4.5 month supply.
Consumer spending rose in May by the most in six years, up .9% as Americans splurged on new cars and spent more to fill up on gas. The uptick in spending was accompanied by a draw down of savings, with the savings rate slipping to 5.1%. Personal income increased by .5% for the second month in a row.
On the downside, durable goods orders slipped 1.8% in May, but the decline was mostly due to a 35% drop in commercial aircraft.