- Personal Income for April fell .1% versus estimates of a .3% gain and an upwardly revised .8% increase in March.
- Personal Spending for April rose .5% versus estimates of a .4% gain and an upwardly revised .4% increase in March.
- The PCE Core for April rose .1% versus estimates of a .2% increase and unch. in March.
- The Change in Non-farm Payrolls for May was 157K versus estimates of 132K and 80K in April.
- The Unemployment Rate for May was 4.5% versus estimates of 4.5% and 4.5% in April.
- Average Hourly Earnings for May rose .3% versus estimates of a .3% gain and a .2% increase in April.
- Pending Home Sales for April fell -3.2% versus estimates of a .3% gain and a -4.5% decline in March.
- ISM Manufacturing for May rose to 55.0 versus estimates of 54.0 and a reading of 54.7 in April.
- ISM Prices Paid for May fell to 71.0 versus estimates of 73.0 and a reading of 73.0 in April.
- The Final Univ. of Mich. Consumer Confidence reading for May rose to 88.3 versus estimates of 88.0 and a prior estimate of 88.7.
BOTTOM LINE: Personal spending in the US rose in April and a measure of prices increased less than forecast, a sign American consumers will keep the economy growing this quarter without accelerating inflation, Bloomberg said. The Core PCE, the Fed’s favorite inflation gauge, rose 2.0% year-over-year versus the 20-year average of 2.5%. This was the smallest gain since February 2006. Adjusted for inflation, disposable incomes have risen 5.6% over the last year. Personal spending was revised up to an annual rate of 4.4%, the highest in a year. I continue to believe consumer spending will remain healthy over the intermediate-term as inflation slows more, gas prices fall, the job market remains healthy, stocks rise further, home sales stabilize at relatively high levels and interest rates remain historically low.
Employers in the US hired more workers than forecast last month, signaling the economy is rebounding, Bloomberg reported. The economy has created about 2 million jobs in the last year. As well, the Monster Employment Index hit another record high in May. The 50-week moving average of initial jobless claims has been lower during only two other periods since the 70s. The unemployment rate is a historically low 4.5%, down from 5.1% in September of 2005, notwithstanding fewer real estate-related jobs and significant auto production cutbacks, which are now subsiding. The unemployment rate's current 12-month average is 4.6%. It has been lower during only two other periods since the 50s. Most measures of Americans' income growth are still almost twice the rate of inflation. Average Hourly Earnings rose 3.8% year over year, substantially above the 3.2% 20-year average. The 10-month moving average of Americans' Average Hourly Earnings is currently 4.03%, and 1998 was the only year during the 1990s expansion that it exceeded current levels. I continue to believe the job market will remain healthy over the intermediate-term without generating substantial unit labor cost increases.
An index of pending sales of existing homes in the US unexpectedly fell, Bloomberg reported. Pending home re-sales fell 10.4% in the Northeast and 10.2% in the West. They rose 2.3% in the Mid-west and .7% in the South. The recent rise in mortgage rates will likely slow the housing recovery, which should prevent the 10-year yield from rising meaningfully above 5%. However, I still believe housing sales are stabilizing at relatively high levels by historic standards.
Manufacturing growth in the US unexpectedly accelerated last month as orders picked up, Bloomberg reported. The Prices Paid component fell to 71 versus a reading of 73 the prior month. The New Orders component rose to 59.6 from 58.5 in April. I continue to believe the manufacturing sector will add to overall economic growth this quarter, after subtracting meaningfully from growth during 1Q on substantial inventory de-stocking.
Confidence among US consumers rose in May, helped by an improving job market and rising stock values, Bloomberg said. The Current Conditions component, a gauge of whether it’s a good time to buy big-ticket items like cars, rose to 105.1 from 104.6. I continue to believe both measures of consumer confidence will make new cycle highs over the intermediate-term.
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