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New home sales rise……New home sales rose a healthy 6.4% in April,
reflecting normal seasonal improvement but also some snapback from the impact
of the very severe winter weather in most of the U.S. Given the recent softness
in the housing market, sales of both new and existing homes are down 6.8% from
a year ago.
What’s the
point? This is another in a series of recent positive
readings for the housing market and has positive implications for the economy.
It appears the housing market is beginning to accelerate, some of this, of
course, is seasonal. We believe there is pent-up demand for housing based on
new household formation; however, tight credit and structural changes in the
labor markets have held back the recovery. We believe as employment continues
to improve, the housing market should also gradually improve. We also believe
there is improving likelihood of changes in bank regulations that could help to
improve the housing market over the next year. Link: http://money.msn.com/business-news/article.aspx?feed=AP&date=20140523&id=17646348
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Food inflation accelerating…..The USDA reported today that severe drought in
California could have a lasting impact on fruit, dairy and egg prices, and that
inflation in meat prices appears poised to continue.
What’s the
point? Long-term weather patterns,
namely drought conditions, appear to be having an increased effect on food
inflation. This is somewhat of a concern because it could spark a move to
higher inflation generally. While we believe the likelihood that food price
inflation will result in significantly higher general inflation is low, we note
there have been periods in our history where sectoral inflation stoked a rise
in general inflation, partly due to change in “inflation psychology”. We
believe the probability that food price inflation would spark higher general inflation
in the near term is low for a variety of reasons including demographics trends,
structural issues with the labor force, and excess global capacity. Link: http://money.msn.com/business-news/article.aspx?feed=OBR&date=20140523&id=17646363
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