May Pending Home Sales rose .1% m/o/m, about in line with expectations of flat and April was revised higher to a gain of 7.1% from 6.7%. The y/o/y gain was 4.6%. The Northeast and West saw gains while the Midwest and South fell. The $10,000 California tax credit would not be reflected in this data as it only applies to new homes but the $8000 federal tax credit does as it applies to first time buyers of either old or new homes. According to, the average 30 yr mortgage rate in May was 5.02% (from 4.95% in April) and ended the month above 5.2%. Today it’s at about 5.4% so the data still doesn’t reflect this change. What did change of course in May was a dramatic improvement in the markets and in confidence after the Q1 pain but the labor market still remained tough. Refi’s have shown the largest beta to changes in interest rates over the past few months according to the MBA data.

The ISM manufacturing # is 44.8, about in line with the consensus of 44.9, up 2 points from May and is at the highest since Aug ’08. New Orders fell below 50, down almost 2 points to 49.2 while Backlogs fell a touch to 47.5. Production though rose 6.5 points to 52.5, the highest since Jan ’08. The Employment index rose 6.4 points to 40.7 to the highest since Sept ’08. Export Orders rose 1.5 points to just shy of 50 at 49.5 and it’s the highest since Sept ’08. Inventories still reflect the destocking as they fell 2 points to 30.8, the lowest since 1982 while customer inventories fell to the lowest since ’05. Prices Paid followed the rise in commodity prices and is back to 50, also since the first time since Sept ’08. Net-net, the question remains how long the bridge is from a slowing rate of contraction to a period of expansion. According to ISM, a PMI above 41.2, over time, does indicate an expansion of the overall economy but still a contraction in manufacturing.

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