Decent Batch of U.S. Data Released This Tuesday

May 27, 2014

Although in line with street expectations, the Conference Board gauge of May consumer confidence printed 1.3 points higher than in April, at the highest point in over a year, and indeed at the second best level since 2008.  The average level in April-May of 82.4 follows period averages of 80.0 in the first quarter and 73.6 in the final quarter of 2013.

Two different house price indices were reported.  Housing has cooled, but the slower pace is not intensifying.

  • The Federal Housing Finance Agency’s index went up 0.7% in March, somewhat more than anticipated and by 6.5% on year.  The FHFA gauge was 1.3% higher on quarter and 6.6% greater than in the first quarter of 2013.
  • The Case-Shiller house price index for twenty metropolitan areas recorded a 1.24% seasonally adjusted monthly advance, easily beating expectations, and its 12-month rate of increase, 12.37%, also surpassed expectations although falling from on-year increases of 12.86% in February, 13.2% in January, 13.4% in December and a peak of 13.7% in November.

Markit Economics reported the preliminary findings of its purchasing managers survey of service-sector activities.  The overall index jumped 3.4 points to a 26-month high of 58.4.  Readings above 50 signify expansion, and those close to 60 as was the case in this report for May suggest a fairly rapid rate of growth.  The orders component went up 3.6 points, and jobs improved by 2.1 points.

The Commerce Department report on durable goods orders in April was expected to show a decline after gains of 2.6% in February and 3.6% in March, but the change was instead an increase of 0.8% on month and 7.7% on year.  While the closely watched non-defense and ex-aircraft durable goods orders sank 1.2%, that drop followed an increase of 4.7% in March.

So long as inflation remains well below 2.0% and the totality of labor market trends are subdued, which includes growth in income and wages and ratio of employees to the population, the Fed is not inclined to raise interest rates.  Other signs of continuing expansion such as those reported today will be welcomed and indeed are needed, but the broad thrust of monetary policy needs to remain very accommodative until the upbeat news spreads into most labor market measures and inflation.

Copyright 2014, Larry Greenberg.  All rights reserved.  No secondary distribution without express permission.



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