GDP contracts, but other economic indicators in the green. Real gross domestic product declined at an annualized rate of 0.9 percent in the second quarter, following the 1.6 percent decrease posted in the opening three months of the year. While two consecutive quarters of falling GDP is considered by some to be the technical signal for a recession, the actual state of the economy is more complex. The April to June GDP drop was predominantly… Read More

Sales indicative of transitionary period. Consumers continue to spend more than they did before the health crisis, with core retail sales in June up nearly 27 percent relative to pre-pandemic. Potential oncoming headwinds are starting to emerge, however, which is shifting shopping preferences. Last month, inflation surged 9.1 percent year-over-year as food prices rose 10.4 percent annually. This escalation is weighing on consumer confidence, which fell to its lowest level since February 2021, and shifting… Read More

High inflation persists, but pressure may ease. The Consumer Price Index advanced 9.1 percent year-over-year in June, its fastest pace since November 1981. Accelerated inflation was predominantly driven by higher energy and food prices. Excluding those two categories, core CPI inflation was 5.9 percent last month, a slowdown from the March high of 6.5 percent. While a widespread shortage of raw materials, finished goods and labor continue to push up prices, some relief may be… Read More

Possible recession predictor lit up this month. In early July, the spread between the two-year and 10-year treasuries inverted, with the yield on the shorter-term instrument inching above that of the long-term note. Typically, bonds with longer maturities pay a higher interest rate to compensate investors for the risk of holding those assets longer. When yields invert, it implies investors perceive more economic risk in the near future than down the line. Six of the… Read More

Job growth continues at consistent, above-average pace. Employers added 372,000 personnel to payrolls in June, bringing the total job count to within 0.4 percent of the February 2020 high. June marked the fourth consecutive month with an unemployment rate of 3.6 percent and job creation in the high-300,000 range. While last month’s hiring trails measures from earlier in the year, it is nevertheless well above other periods of tight unemployment. Encouragingly, robust employment growth is… Read More

Fed executes steepest rate hike in decades. At its June 15 meeting, the Federal Open Market Committee (FOMC) raised the federal funds rate 75 basis points to a target range of 1.50 percent to 1.75 percent. This was the largest single increase since November 1994 and brings the total year-to-date advancement to 150 basis points. Additional rate hikes are anticipated through the rest of the year, likely lifting the year-end target range into the 3.50… Read More

Tightening monetary policy highlights utility of rate swaps and caps. Commercial real estate investors have long had multiple avenues for hedging against rising interest rates. The Federal Reserve’s commitment to raising interest rates, renewed by higher-than-anticipated CPI inflation in May, has brought these options back to the forefront of many borrowers’ minds. For investors with floating rate debt, there are two prominent options to hedge against rate climbs: an interest rate swap and cap. A… Read More

Retail sector approaches a junction. Improvements in grocery and dining-related spending were brightspots in May, when core retail sales advanced marginally against a backdrop of high inflation. The recent gains recorded across the two retail segments occurred alongside declines in home-based purchasing categories, including furniture, electronics and online spending. This activity points to a broader shift in consumer behavior away from the consumption of home goods and toward necessities and some social experiences. This adjustment… Read More

Job growth overcomes inflation concerns. Total employment increased by 390,000 personnel in May, consistent with April hiring, while the unemployment rate held at a historically low 3.6 percent for a third consecutive month. Continued job creation is an important baluster amid economic turbulence stemming from elevated inflation and rising interest rates. June will likely bring the year’s third rate hike from the Federal Reserve, as well as marking the start of quantitative tightening. Higher interest… Read More

Bloomberg Features Marcus & Millichap CEO Hessam Nadji The Forces Driving Real Estate And the Role the Fed Will Continue to Play Is another Housing Bubble in the making? What’s different this time? The property types poised for gains and the forces driving them. How rising interest rates will affect the broader real estate market.