The US economy is showing more signs of weakness. Nowhere is that more evident than in the real estate market. The sale of previously owned homes in April shrank 2.1% y/y, following a 2.8% drop in March. Sales declined every month so far this year and are poised to decline further. Sales of new single-family homes declined 1.5% in April after a 2% drop in March. Also important, building permits fell 0.9% from the previous month to a seasonally adjusted annual rate of 1,364 thousand in April 2018.

So far, the poor housing market statistics have not yet shown up in the employment statistics, which are due out Friday. If they are poor, we may see pressure on the White for some simulative policies. The imposition of tariffs on imports of steel and aluminum will not help the economy nor will the threat of tariffs on luxury cars from Germany. Indeed, Trump’s trade threats could well backfire and cause a reversion into a global recession. The US stock market is already feeling the heat as the key indicators continue to slump on a daily basis.

President Trump’s forecast of substantial increases in GDP are illusory at best. He is expecting growth rates of 4%-5% and what we will be seeing are growth rates closer to 2%, if that. A negative GDP in the quarters ahead are a distinct possibility. Consequently, we may expect the Fed to hold off on any rate hikes this year.