LIVE MARKETS-"Liberation day" economics: Flash PMI, new home sales, mortgages

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"LIBERATION DAY" ECONOMICS: FLASH PMI, NEW HOME SALES, MORTGAGES

Data on Wednesday offered a mixed picture of the U.S. economy, even as Americans polled by Reuters/Ipsos are souring on Donald Trump's handling of it.

For starters, while business activity is still expanding this month, it's lost some velocity.

S&P Global released its advance "flash" April purchasing managers' indexes (PMI) for the manufacturing and services sectors.

For a change of pace, activity on the manufacturing side USMPMP=ECI unexpectedly picked up some steam, edging up 0.5 point to 50.7 and hanging onto expansion by its fingernails.

Analysts expected the metric to dip below 50, the dividing line separating expansion from contraction.

The services sector USMPSP=ECI, however, shed 3.2 points to land at 51.4, weaker than the 52.5 consensus.

The composite reading USPMCF=ECI dropped 2.3 points to 51.2.

The data "point to a marked slowing of business activity growth at the start of the second quarter, accompanied by a slump in optimism about the outlook," says Chris Williamson, chief business economist at S&P Global. "At the same time, price pressures intensified, creating a headache for a central bank which is coming under increasing pressure to shore up a weakening economy just as inflation looks set to rise."

It should be noted that the survey was conducted directly after Trump's "Liberation Day" tariff hootenanny.

Shifting to the housing market, the sales of newly constructed single-family homes USHNS=ECI increased by 7.5% in March to 724,000 units at a seasonally adjusted annualized rate (SAAR).

That's 6.5% more than the 680,000 analysts expected.

March, of course, was prior to "Liberation Day."

Delving into the Commerce Department's report, the south provided the upside muscle, rising 13.6%, offsetting declines in the Northeast and the West.

At last month's sales pace, it would take 8.3 months to sell every new home on the market, down from 8.9 months in February, and the average sale price of freshly built single-family homes rose by 1.0%.

"We still see limited upside for sales in 2025 given our forecast for mortgage rates to remain elevated and the economy to weaken in response to the Trump administration's tariff policies," writes Nancy Vanden Houten, lead U.S. economist at Oxford Economics.

Indeed, it's worth keeping in mind that last month's surprise surge in new home sales occurred at a time when mortgage rates appeared to be cooling down.

The picture has shifted since "Liberation Day."

The cost of financing home loans rose for a second consecutive week, a feat which failed to impress would-be borrowers, according to the Mortgage Bankers Association (MBA).

The average 30-year fixed contract rate USMG=ECI added 9 basis points to land at 6.90%, a two-month high.

As a result, applications for loans to purchase homes USMGPI=ECI slid by 6.6% and refi applications USMGR=ECI, which accounted for 37.3% of total mortgage activity, plunged 20.0%.

Combined, overall mortgage demand tumbled 12.7%.

Mortgage rates tend to ape benchmark Treasury yields, which spiked last week amid a bond rout prompted by President Donald Trump's chaotic trade policies.

Noting that the 30-year fixed rate has posted "an almost 30-basis-point increase over two weeks," Joel Kan, MBA's deputy chief economist adds, "Similar to the previous week, economic uncertainty and rate volatility impacted prospective homebuyers."

The average 30-year fixed rate is now 34 basis points cooler than it was during the same week last year.

Over the same time period, purchase and refi demand have improved by 6.4% and 42.5%, respectively.

(Stephen Culp)

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