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FUEL FOLLY There’ s currently talk of suspending the $ 0.184 / gallon federal gasoline tax. This would not only cost the Treasury $ 3.5 billion / month, but it’ s bad policy, by inverting market signals that encourage conservation with a push towards increased consumption. Instead, use the money to give all 130 million US households a check for $ 27 / month so they can spend the money how they wish. Then, because gasoline is not deliberately subsidized, consumption will fall.
MUTED MOMENTUM April pending home sales rose 1.4 %, better than the 0.9 % expected but down from 1.7 % last month. More importantly, Y-o-Y sales rose 3.2 %, which at first glance looks passable until one recalls that last April was when“ Liberation Day” tariffs were imposed, causing the stock market to swoon. So, a rise of 3.2 % is hardly the stuff dreams are made of. Over the last 6 months pending sales have slid 1.1 %.
UNEVEN UPSWING The key economic problem, and the primary reason the bottom third or half of the population is struggling, is because of the near complete stagnation in real after-tax personal income. Corporate earnings are
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excellent, due in part to stellar productivity growth, and relative to national income and GDP, they continue to hit new peaks. This buoys equities and turbocharges spending by the wealthy, all part of this K-shaped economic cycle.
CHAIR CHALLENGES Kevin Warsh is the 17th Fed Chairperson. Since the start of the 5th Chairperson, Eugene Meyer on 9 / 16 / 30, the average return of the S & P 500 during the first three months of the new Chair’ s term has been- 12 %. The worst was Alan Greenspan, whose term commenced on 8 / 11 / 87. He saw the market decline 33 %; Eugene Mayer follows closely at-32 %. The best performer, Ben Bernacke at 2 %. Hold on tight.
POSITIVE PRODUCTION April industrial production was surprisingly strong, rising 0.7 % M-o-M with a 20bps upward revision to March. Manufacturing jumped 0.6 % M-o-M and March was also revised up 20bps; nice. But the strength is highly selective and fits with the macro themes currently driving the economy. AI-related capital spending was up 1.5 % M-o-M, defense restocking tied to the Iran conflict and utilities production were both up 1.9 % M-o-M. Strong but painfully uneven.
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FLAT FIELDS The Friday File: The state with the smallest difference between the highest and lowest elevation is Florida at 345ft. Delaware follows at 448ft, then Louisiana at 543ft, Mississippi at 806ft, RI at 812ft, and Indiana at 937ft. Alaska has the largest differential at 20,320ft, then California at 14,776ft, Washington at 14,411ft, Hawaii at 13,796ft, Nevada at 12,661ft, and Arizona at 12,563ft. The median is 4,441ft, Colorado is 10th at 11,118.
CRITICAL COMPUTE AI-driven demand is reshaping not only data-center investment but also financial innovation. CME Group is exploring a futures market for AI compute capacity. AI infrastructure is now sufficiently large, volatile, and capital intensive to require hedging tools. Tradable compute futures could offer real-time price signals for AI infrastructure scarcity, cloud margins, and data-center buildout. The market would include benchmarks like the H100 Rental Index, which tracks Nvidia H100 GPU rental costs.
DORMANT DWELLINGS April existing home sales came in at 4.02 million, up 0.2 % M-o-M and flat Y-o-Y, putting an exclamation point to a failed spring selling season.
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Moreover, inventory is up 5.8 % Y-o-Y which pushed months of inventory to 4.4 from 4.2 in March and 3.8 in Jan / Feb. Home price appreciation, if you can call it that, rose 0.9 % Y-o-Y, but with inflation at 3.8 %, real home prices fell 2.9 % Y-o-Y!
TARIFF TRADE SCOTUS invalidated all countryspecific tariffs. Last week another court invalidated the tariffs introduced to replace the initial tariffs. This means replacement tariff monies will also have to be returned to the importers / wholesalers / retailers, which will boost their profits as they ALREADY passed the costs on to households. It’ s hard to think of a more economically destructive illegal policy, hated by everyone, that boosts corporate profits at the expense of households.
Elliot Eisenberg, Ph. D. is an internationally acclaimed economist and public speaker specializing in making economics fun, relevant and educational. Dr. Eisenberg earned a B. A. in economics with first class honors from McGill University in Montreal, as well as a Master and Ph. D. in public administration from Syracuse University. Eisenberg is the Chief Economist for GraphsandLaughs, LLC, a Miami-based economic consultancy that serves a variety of clients across the United States. He writes a syndicated column and authors a daily 70-word commentary on the economy that is available at www. econ70. com.
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