In the last month, we have seen big changes in the macro environment, as inflation has once again become the most important datapoint. In the US, core and headline inflation remain in line with previous readings and forecasts, with headline inflation 0.1% higher and core 0.1% lower. PPI, however, has continued rising, printing 0.7% month-on-month, its highest increase in seven months and double the expected growth. Inflation is now the main focus, as energy prices skyrocket worldwide and the bond market begins to price in Fed rate hikes. Everyone will be watching the next inflation prints, which will start incorporating the inflation hike from the war in the Middle East. 

The labour market has been showing mixed signals, with the latest non-farm payrolls exhibiting strength: the US economy added 178K jobs (the most since December 2024), but this follows a revised decline of 133K in February. Unemployment rate also dropped to 4.3%, its lowest in the last 12 months. 

Moving to the housing market, the biggest change has been the rise in borrowing costs, as mortgage rates reflect the latest leg-up in global bond yields. This has translated into softer sales in both existing and new homes, signs of a fragile and cooling housing market. 

Mortgage rates have skyrocketed this month, reacting to the bond sell-off amid the war. The 30-year mortgage has rallied by almost 50 bps while the 15-year mortgage rate is up by more than 35 bps. We are now sitting at the highest level since last summer. 

The median sale price for new houses has been fairly stable most of the last year, but has not hit its lows since the summer of 2025, one of the sharpest moves during the last year. 

For existing homes, pieces continue coming off consistently since the summer, with the latest small rally occurring well before mortgage rates rallied. Sales price of existing homes inched higher by 0.3% from the previous year to $398,000

Existing home sales rose by 1.7% from the previous month to an annualized rate of 4.09 million in February. This was a beat of expectations that they would fall to 3.89 million. Having said that, the print didn’t manage to reverse much of the 8% collapse last month, and unsold inventory rose by 2.4% to a total of 1.29 million. 

Sales of new homes collapsed by 17% from last month, marking the biggest monthly drop in the last 10 years! Putting things into context, however, two months ago they hit their highest level since 2022; with the current rally in mortgage rates, the decline makes sense.  

The Case-Shiller Home Price Index rose 1.2% year-on-year in January, down from 1.4% in December and below market expectations of 1.3%. This is the slowest growth rate since the summer of 2023, and the 8th consecutive month in which housing has lagged inflation. Location-wise, New York and Chicago have been performing the best, while Tampa has been performing the worst. 

The Bank of England keeps rates unchanged, with the most important data readings coming in line with forecasts. Gilt yields have been rallying hard during the Iran war, hitting their highest level since the financial crisis. The 10-year yield is now around 4.8%, around 50 bps higher than just before the war. With gilts very volatile and inflation risks exponentially increasing due to the energy price rallies, the rate path becomes very uncertain, with the market pricing a higher likelihood for hikes moving forwards. 

Data-wise, unemployment remains stable at 5.2%, its 5-year high, while the inflation rate is also stable at 3% (as forecasted and the previous reading). The growth story, however, seems to be deteriorating slightly, with GDP printing a 0% growth vs. the 0.1% expected month-on-month, while PMIs also disappointed. Manufacturing came out at 51.4 vs. 51.7 previously, and service came out at 51.2 vs. 53.9 previously. Finally, retail sales dropped 0.4% month-on-month, down from the 2% increase last month, as forecast.  

The housing market has been performing much better than the macro environment over the last month, as sales, prices and mortgage approvals all rose. The location differences are very noticeable, with the North driving all the growth as the South and London continue to underperform.  

The Halifax Index increased by 1.3% in February, vs. the expected 0.9%. This was the strongest growth since November, when the average UK home reached a new high of £301k. Month-on-month house prices rose by 0.3. Location-wise, the north kept outperforming (Northern Ireland (6.3%), Scotland (4.7%), Wales (2.4%) while the South East was down 2.2% and London kept falling, down 1%.  

The RICS UK Residential Survey showed the balance fell to -12% from -10% in January, marking the first decline in four months. It is worth mentioning that survey respondents showed a very negative outlook for London at -40% vs. compared with the national average. The 12-month outlook also deteriorated, with 33% of survey respondents now expecting growth, down from 43% last month. 

The macro picture in China was supportive in March, with inflation rising to 1.3% vs. the 0.7% forecast and the previous 0.2% reading. This is the highest level since early 2023. Industrial production was up by 6.3% vs. the 5% forecast and 5.2% previous reading, while retail sales rose by 2.8% year-on-year, outperforming the 1.1% forecast. 

Official PMI data showed manufacturing slipping back into growth territory in February (50.4 and 50.8), highlighting once again how much noise these readings have, fluctuating between growth/decline over the last 2 years. It is worth noting that all positive readings and upside spikes are followed by 2-3 poor readings afterward. 

For the housing market, there doesn't seem to be any light at the end of the tunnel. China’s new home prices across 70 cities dropped once again by 3.2% year-on-year in February, following the 3.1% drop recorded for January. We are now at the 32nd consecutive drop in house prices, with declines continuing in Beijing, Guangzhou and  Shenzhen. 

Don’t Miss Another Winning Trade

(n.d.). US Treasuries Yield Curve. US Treasuries Yield Curve. https://www.ustreasuryyieldcurve.com/

(n.d.). CME FedWatch Tool. CME Group. https://www.cmegroup.com/markets/interest-rates/cme-fedwatch-tool.html

(n.d.).Trading Economics. Trading Economics. https://tradingeconomics.com/united-states/nahb-housing-market-index

(n.d.).Goldman Sachs. Goldman Sachs. https://www.goldmansachs.com/

(n.d.).Bloomberg. Bloomberg. https://www.bloomberg.com

(n.d.). FRED. Federal Reserve Economic Data. https://fred.stlouisfed.org/

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