Monthly Report: April 2025

United States

Macro-wise, in April, economic data was supported by inflation continuing its downtrend, while Non-Farm Payrolls came out nearly double what was expected. The dramatic increase in uncertainty due to trade tariffs has created volatility and a more subdued macro outlook. 

Core US inflation month-on-month came out at 0.1% vs. 0.3% expected (2.8% vs. 3% YoY) while US inflation dropped -0.1% month-on-month vs. the 0.1% expected (2.4% vs. 2.5% YoY). Retail Sales showed a 1.4% month-over-month (MoM) growth, higher than the 1.1% forecast. However, both manufacturing and services PMIs trended lower, printing 50.8 (vs. 53 expected) and 49 (vs. 50 expected), respectively. 

US housing showed mixed results once again. On the one hand, we have higher borrowing costs for longer-dated mortgages, lower existing home sales, lower housing starts, and higher overall housing inventory. On the other hand, we have stable shorter-term mortgage rates, a higher number of mortgage applications, and a surge in new home sales. 

The 30-year mortgage rate is currently at 6.81%, up around 25 basis points from last month, while the 15-year mortgage rate remains at 5.95%, unchanged from last month. Despite the continued drops in both inflation and energy prices, the US-China trade war and tariffs on the rest of the world have increased uncertainty and raised inflationary expectations, keeping rates high. 

Existing home sales dropped by almost 6% month-on-month. This marked the biggest drop in two years and the lowest level since October. 

Housing starts dropped by 11% month-on-month to the lowest level in four months, despite building permits for March printing slightly higher than expected. 

New Home Sales increased by 7%, following up on the 2% increase the month before. We are now at the highest level for the last 6 months. There has been an increase in mortgage applications that has supported this trend, as well as a slight drop in median prices for new homes. We await the new print in a few days to see if there is a continuation of this trend. 

United Kingdom

Once again, the UK generally has a positive macro picture. GDP growth month-on-month was 0.5% vs. the 0.1% expected. The unemployment rate remains stable at 4.4% (as expected), while inflation continues to move downwards (2.6% vs. 2.8% expected year-over-year). Retail sales showed a 0.4% month-on-month growth, beating the 0.3% drop that was expected.

The primary damper has been PMIs, with both manufacturing and services being in contraction territory. Manufacturing printed 44 and hasn’t been above 50 since October, while services dipped to 48.9 after a strong print for March (52.5). This latest print has ended a 17-month series of expansion. It will be very interesting to see whether this continues or is just an anomaly. Tariffs have taken their toll, as business activity expectations have weakened, with many companies mentioning fears of a recession. 

Despite the good macro picture, housing data in the UK came much weaker this month, showing price depreciations and lowered expectations for the future. 

The Halifax house index dropped again, month over month, by -0.5%, compared to the expected 0.2% increase. Year over Year, the index still gained 2.8% but fell short of the 3.7% expectation. This marked the most significant drop in over one year. 

The RICS Price Balance survey finally normalised to a 2% increase in March, easing down from the 11%, 22%, and 26% surges in the previous three months. Geographically, the main outliers have been Scotland and Ireland, which continue to show strong growth in their housing markets. The three-month price expectations printed at a net balance of -26, suggesting that general expectations are for future price declines. The increase in stamp duties this month is likely a contributing factor in this outlook.  

China

Macro-wise, there has been some improvement in China, with Retail Sales showing a 5.9% year-over-year growth, compared to their 4.4% forecast. Additionally, industrial production jumped to 7.7% year-over-year, beating the 5.8% expectation, and GDP growth came in at 5.4% compared to the 5.2% expected. With manufacturing PMIs now in expansion territory, there is hope that Chinese growth could be back on the table. These improvements have not been reflected in better housing statistics for China. Also, it's worth noting that all of the recent positive data doesn’t include any negative impacts from the trade war. We await manufacturing PMIs in a few days, which are likely to soften to around 50, reflecting the adjustment in expectations due to the tariffs. 

Looking at the housing market, China’s new home prices dropped by 4.5% year-on-year for March, a slight improvement from the 4.8% drop recorded in February. We are now at the 21st consecutive month of declines; however, we are at the lowest contraction since June. Monthly, new home prices were unchanged, following a 0.1% fall in the previous month. 

Some of the recent measures taken by China have been lowering purchase thresholds, reducing taxes, and setting standards for quality housing. Even though, in the grand scheme of things, we haven't seen a big impact on nationwide housing prices, there have been positive signs of softer and localised data. Nationwide, the land premium rate (the percentage by which winning bids exceed starting prices) averaged above 10% in February, hitting a 44-month high. In Beijing, new home sales surged 125.6% in March from February, while second-hand transactions rose 61.4%. Shenzhen also saw a sharp increase, with new home transactions up 75.1% year-over-year from January to April, and second-hand home sales rising 55%. 

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References

(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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