Slowing growth and economic activity along with declining inflation contributed to the Federal Reserve leaving the prime rate unchanged at 2.25 - 2.50% in their March meeting along with beginning to reduce its balance sheet reduction and May and stopping the reduction altogether in September. Projections for economic activity were also downgraded from December’s levels, with the median estimate of GDP dropping from 2.3% to 2.1% for 2019, and from 2.0% to 1.9% for 2020, but remaining at 1.8% for 2021 and 1.9% for the longer run. Unemployment rate projections ticked up +0.2% to 3.7% for 2019 and 3.8% for 2020, while longer run projections dropped from 4.4% to 4.3%. The prime rate estimates were modified to reflect the Fed’s more patient current policy, with the target rate for 2019 dropping from December’s 2.9% estimate to 2.4%, and the estimate for 2020 and 2021 dropping from 3.1% to 2.6%, while the longer run rate estimate remained steady at 2.8%.

Existing home sales rose a record +11.8% in February, recovering from January’s downwardly revised -1.4% slump to help boost year over year sales from -8.7% in January to -1.8%. Home prices rose for the 84th consecutive month, with February increasing +3.6% for single family homes to a median price of $251,400 and condominium/co-op prices rising +3.1% to a median price of $233,300. Sales grew the most strongly in the West, up +16.0% to an annual rate of 1.16 million sales (-7.9% Y/Y), followed by the South at +14.9% for 2.39 million sales (-0.4% Y/Y), and then the Midwest at +9.5% for 1.27 million sales (0.0% Y/Y), with sales in the Northeast unchanged from January at 690,000 (+1.5% Y/Y).

IHS Markit’s Purchasing Managers’ Composite Flash Index dropped -1.5 to a 6-month low of 54.3 with services down -1.2 to a 2-month low of 64.8, manufacturing down 0.5 to a 21 month low of 52.4, and manufacturing output down -1.1 to a 33 month low of 51.6. The slowing business growth reflected cautious spending patterns and a dip in optimism for business outlook to the weakest since June 2016. Subdued demand resulted in new work rising at the slowest pace since April 2017 and a slowing of staff hiring. Comments from a number of manufacturers responding to the survey indicated a cyclical slowdown in demand that resulted in the slowest rate of new order increase in nearly two years.