Bidenomics – 3 Economic indicators from Biden’s plan:
Affordable Child Care – Canada recently enacted a program that offers $10 a day childcare ($7 US). Biden and Harris are looking to provide a similar program as well as free pre-school for four-year-olds. Currently American’s pay approximately $15,000 annually or roughly $60 per day.
Credits for Selling Starter Homes – Biden has proposed a mortgage relief credit, providing middle-class first-time homebuyers an annual tax credit of $5,000 for 2 years, and a one-year tax credit of up to $10,000 for selling starter homes below the area median price point.
Corporate Taxes – to pay for these programs Biden proposed an increase in corporate taxes from 21% to 28%. During the Trump administration the Tax Cuts and Jobs Act of 2017 lowered the corporate tax rate from 35% to 21%. Currently the tax cuts are adding $100B per year to national debt. The tax increase would bring in approximately $5T over 10 years and about half of that would be needed to pay for proposed programs.
Mortgage Rates increased this week as the price of Mortgaged Backed Securities declined in response to a hotter than expected Producer Price Index. Rates are up approximately 0.25% from this time last year.
Manufacturing – the Empire State Manufacturing Index came in at -20.9 in March, far worse than expectations and a decline from the prior reading of -2.4%. Demand and labor continue to decline. This points to a softening in inflation.
Inflation – The Producer Price Index, which measures wholesale inflation, rose 0.6% in February, which was double market estimates. Year over year the index is up 1.6%. This number is still quite low but the rate of increase was more than anticipated. Energy prices drove the increases as they increased by 4.4%. The core rate, which strips out food and energy prices, rose 0.3% and is up 2% year over year.
The Consumer Price Index rose 0.44% in February, and year over year is up 3.2%. The core rate, which strips out food and energy, increased 0.36%. Year over year the core is up 3.8%, a slight decline from the previous month’s reading of 3.8%. While there is progress on inflation it doesn’t seem to be enough to push the Fed into action.
The Census Bureau reported that retail sales rose 0.6% in February after a weak January figure (-1.1%). If you remove auto sales, Retail Sales increased 0.3%. Core retail sales were flat in Feb – an important figure as it will figure into the GDP estimate. Consumer spending continues to slow down.
Mortgage Applications – to purchase homes rose 5% last week and are down 11% year over year. Refinance applications rose 12% last week and are up 5% year over year.