Two numbers landed this week that, taken together, tell you everything about the American economy right now. On Tuesday, S&P Global’s flash PMI showed U.S. manufacturing expanding at its fastest pace in four years. On Wednesday, the Census Bureau reported new home sales collapsing to 580,000 — a 7.3% monthly plunge that missed Wall Street’s consensus by more than 50,000 units.
One economy makes things. The other buys houses. Right now, they’re moving in opposite directions — and neither story is quite what the headline numbers suggest.
New home sales: the buyer’s market nobody asked for
The Census Bureau and HUD reported that new single-family home sales fell to a seasonally adjusted annual rate of 580,000 in May, down from 626,000 in April (revised). That’s a 7.3% drop month-over-month and 6.8% below May 2025 levels. Economists had penciled in 632,000 — a miss of roughly 8%.
The inventory math is equally grim. There were 496,000 new homes sitting on the market at the end of May, and at the current sales pace, that works out to 10.3 months of supply — up from 9.3 in April and firmly in buyer’s market territory. The median sales price held essentially flat year-over-year at $424,900, while the average jumped 5% to $540,600, suggesting the mix is skewing toward higher-end homes while entry-level buyers stay sidelined.
The backdrop: 30-year mortgage rates dipped below 6.5% in early June — a welcome reprieve — but remain high enough to lock out first-time buyers and keep existing homeowners with 3% mortgages glued to their current properties. The spring selling season, the housing market’s traditional showcase, appears to have fizzled.
The PMI paradox: factories are booming while cutting workers
Tuesday’s June flash PMI numbers from S&P Global were a Rorschach test. The manufacturing PMI hit 55.7 — the best reading since May 2022 — and manufacturing output surged to 57.7, the fastest since July 2021. New orders for goods rose at the sharpest rate in over four years.
But here’s the catch: employment in manufacturing fell for the second straight month, and the pace of job cuts was the worst since 2009 when you exclude the pandemic lockdowns. Chris Williamson, S&P Global’s chief business economist, flagged it bluntly: “Factory job cuts are running at the highest since 2009 if the pandemic is excluded, reflecting concerns over the sustainability of the recent upturn in demand.”
What’s driving the output surge? Stockpiling. Input inventories were accumulated at the second-fastest rate in nearly two decades of survey history, as manufacturers raced to front-run supply chain disruptions from the Middle East conflict and the lingering effects of the 2025 tariff regime. Supplier delivery times lengthened the most since August 2022. This is precautionary buying, not organic demand.
On the services side, the picture was less dramatic but no more encouraging. The services PMI inched up to 51.3 from 50.7 — barely in expansion territory — with businesses citing elevated prices, higher interest rates, and low confidence as persistent headwinds. The composite index landed at 52.2, consistent with an economy growing at about a 1% annualized rate in the second quarter.
What it means for markets
The housing data reinforces the case that the Federal Reserve’s higher-for-longer stance is working — perhaps too well. A housing market with 10.3 months of supply is one where builders have lost pricing power, and the flat median price tells you demand is softening even as mortgage rates ticked down. For homebuilder stocks and the broader real estate sector, the May numbers are a warning shot.
Meanwhile, the PMI data suggests inflation isn’t going quietly. Input prices cooled slightly from May but remained the third-highest since the start of 2023. Selling prices held at May’s elevated rate, with services firms reporting the fastest price increases in 11 months. If the stockpiling boom fades and real demand doesn’t materialize, manufacturing’s four-year-high head fake could unwind quickly.
What to watch next
Thursday is the heavy day. The BEA drops May PCE inflation — the Fed’s preferred gauge — alongside personal income and spending data. Economists expect core PCE of 0.3% month-over-month (3.4% YoY), but the headline PCE year-over-year print is already showing 4.1%, above the 3.8% forecast. Also on Thursday: durable goods orders for May (consensus: -4.0% after a 7.9% surge), weekly jobless claims (223,000 expected), and the third estimate of Q1 GDP. New York Fed President John Williams and Chicago’s Austan Goolsbee both speak Thursday evening.
Friday brings the final University of Michigan consumer sentiment reading for June, where the preliminary 49.0 print — the worst in over two years — has already raised eyebrows. Minneapolis Fed President Neel Kashkari rounds out the week’s Fed commentary.
And don’t forget: a new set of tariffs is live. The 50% tariff on allies and 100% on strategic competitors — the ones President Trump signed into law in April — took effect June 1. The first glimpse of their impact will show up in advanced trade data on Friday, but the full story won’t be clear for months. Early PMI evidence suggests they’re already warping supply chains.