There are a lot of interesting details embedded in this number, specifically how strong consumer spending was.
I still have concerns about dwindling savings and increasing credit balances, as well as historically high APRs, but will worry about that another day.
I think credit card APRs specifically are off the charts. Other forms of credit (mortgages etc) not so much. Credit card issuers are commanding a 15% margin over prime rate, while charge-off i.e. the risk to the credit issuer is around 3%, near all-time lows. In other words credit issuers are raking in record unearned profits.
This FRED series only goes back 30 years but if you look at the Fed Statistical Abstract consumer credit tables, APRs in 1985 were < 19% and in 1980 were < 18% so 21% and higher are very exceptional.
Consumer is tapped out, economy is flashing yellow warning light and the Fed needs to cut now. Lots of spending currently being driven by Boomers running off of assets and paying cash (~40% of consumer spending), but there is only so much of that. Per the Sahm rule and rising unemployment, we are approaching recession territory and the potential for a self reinforcing consumer demand destruction spiral (people lose jobs, pull back spending, more people lose jobs, even more spending gets pulled back, and so forth).
And expectations. If the US was coming off a year of, say 3.2% growth, or if the fed predicted 3.1% (I love how they never include margins of error) then this wouldn't be such a rosy picture.
I don't know if the Fed themselves gives margins of error, but the GDPNow indicator the Atlanta Fed puts out (https://www.atlantafed.org/cqer/research/gdpnow) also includes ranges for industry forecasts. In this case it seems we were above even the most optimistic expectations.
No, we had the ZIRP era for too long and there’s still too much stupid money in the economy. Let it burn itself out and let the economy reorient towards more efficiency which is what high interest rates force your economy to be.
Trying to call for rate reductions now would be so poorly planned I hope you never get anywhere near the federal reserves power structures.
They're going to lower rates before the election. Then come Jan/Feb, the market is tanking, home prices will drop further, and the fed will start aggressively lowering rates.
Cheaper mortgage rates means institutional capital that was otherwise sitting on the sidelines in T-bills will be deployed directly into that remaining supply.
Just start building already, 6.8 % for the 30-year fixed is well within historical precedent. High housing prices are a result of asset inflation for a product priced at the margin. Only way around that is to increase supply.
(Also consider this: there is nothing more unproductive than real estate - the stupid capital must be forced out of the mattress and into productive ventures.)
Until workers in the US are making a living wage, pay affordable prices for their shelter and healthcare needs, and are not $500 away from a life changing economic event, wages must be driven higher and immigration must be restrained (even if this drives up costs and reduces profits). More job openings due to lower interest rates increases competition for workers, driving up wages.
Yours is a recipe for inflation. The shelter thing is key. We need to build a lot more of it at a price we can afford and that means we have to keep a lid on wages, which will be OK because we'll be driving down the cost of shelter. Fully agreed on the reduce profits bit; middleman profits are the key component of both shelter and grocery inflation.
Shelter inflation is driven by supply shortages. There is no appetite for increased immigration crowding out domestic workers to keep prices low for new inventory homebuyers. The electorate already has substantial support for deporting the ~11M unauthorized folks in the country today [1]. Mass deportations are highly unlikely, but it is a reasonable proxy for increased immigration appetite. Build more housing, pay living wages to labor performing the work, cut cost of capital, compress profits for new housing if necessary [2] [3]. As your comment mentions above with regards to the credit card spread and profits, homebuilders are milking the housing market in a similar manner, because they can. More immigration doesn't solve that, it just makes us all worse off (reducing domestic worker opportunity and increasing affordable housing competition) to support homebuilder profits.
I still have concerns about dwindling savings and increasing credit balances, as well as historically high APRs, but will worry about that another day.