Tuesday, June 30, 2015

Home Prices Increased in April

The 20-City Case-Schiller Composite gained 4.9% year-over-year in April, slightly lower than March’s gain of 5.0%. The 10-City Composite gained 4.6% in April from the previous year, down from the 4.7% year-over-year gain in March. The National index recorded a 4.2% gain on an annual basis in April, compared to a 4.1% annual gain in March.

On a monthly basis, all three indices posted increases as the 10-City Composite increased 1.0%, and the 20-City Composite and National Index rose 1.1%.

Of the cities reporting month-over month increases, Seattle and San Francisco posted gains of 2.3% and 2.0%.

Denver and San Francisco posted the highest year-over year gains, with respective price increases of 10.3% and 10.0%. Washington DC posted the slowest rate of growth, with prices increasing at an annual rate of 1.1%.

Read the S&P/Case-Schiller release.

Friday, June 26, 2015

OCC: Performing Mortgages Improve in First Quarter

The percentage of mortgages that were current and performing at the end of the first quarter reached 94.2, up from 93.2 percent at the end of 2014 and up from 93.1 percent a year before, according to the Mortgage Metrics Report released yesterday by the OCC.

Only 2.6 percent of mortgages were seriously delinquent at the end of the first quarter, 16.4 percent lower than a year earlier. The report also showed a decline in foreclosure activity, with 83,058 new foreclosures in the quarter — 8.6 percent lower than a year ago. “Improved economic conditions and foreclosure prevention assistance contributed to the decline in foreclosure activity,” the OCC said.

Read the OCC report.

Largest, Most Sustained Increase in Consumer Optimism Since 2004

Consumer sentiment rose to 96.1 in June, up 5.4 points from the previous month according to the University of Michigan Consumer Sentiment Index. The index is currently 15.6 points higher than in June of 2014.

The first half of 2015 marked “the largest and most sustained increase in consumer optimism since 2004,” according to Richard Curtin, chief economist of UM’s Surveys of Consumers. “Moreover, the recent surveys recorded those same records when consumers were asked to evaluate prospects for the national economy, their personal finances, and buying conditions. Consumer spending will remain the driving force of economic growth in 2015.”

The Current Economic Conditions index rose 8.1 points to 108.9, while the Index of Consumer Expectations rose 3.6 points to 87.8.

Thursday, June 25, 2015

Income and Expenditures Increased in May

Personal income increased $79.0 billion, or 0.5%, in May according to the Bureau of Economic Analysis, the same pace as the previous month. Personal consumption expenditures (PCE) increased $105.9 billion, or 0.9%, in May after increasing only 0.1% in April.

Disposable personal income – personal income less personal current taxes—increased $65.5 billion, or 0.5%, in May, after gaining 0.4% in April. Real disposable income increased 0.2% in May compared to a 0.4% increase in April.

The personal savings rate as a percentage of disposable income was 5.1%, down 3 basis points from April.

Wages and salaries increased $37.1 billion, compared with an increase of $21.6 billion in April. Goods-producing industries saw the most significant growth as payrolls increased 79% on the month to $33.7 billion. Manufacturing payrolls added 0.2% for a May total of $600 million.

The Price index for PCE increased 0.3% in May compared with an increase of less than 0.1% in April. The PCE price index, excluding food and energy increased 0.1% in May, consistent with April.

Read the BEA release.

Wednesday, June 24, 2015

Boston Fed: Unbanked More Likely to Use Prepaid Cards

People without checking accounts are nearly twice as likely as those who do have checking accounts to own a general-purpose, reloadable prepaid card, according to researchers at the Federal Reserve Bank of Boston. Twenty-four percent of the banked have a prepaid card, while 45 percent of the unbanked do, they found.

The 4.8 percent of U.S. adults who do not have a checking account but who do have a prepaid card are more likely to have wages deposited to their prepaid card and more likely to use it to make payments, indicating — the researchers said — that prepaid cards are substituting for checking accounts for unbanked customers.

Read the Boston Federal Reserve study.

GDP Fell 0.2% in the First Quarter

U.S. Real GDP for the first quarter decreased at a rate of 0.2%, according to the third estimate released by the Bureau of Economic Analysis. The second estimate had reported a 0.7% decline.

The upward revision reflected stronger personal consumption expenditures (PCE) than previously estimated. The decline in exports was also less than previously estimated, but was offset by an increase in imports.

Net exports were ultimately the largest drag on GDP, decreasing 5.9% in the first quarter, after gaining 4.5% in the fourth.

Real personal consumption increased 2.1% in the first quarter, a much slower rate compared to the 4.4% growth in the previous quarter. Real nonresidential fixed investment decreased 2.0% in the first quarter, in contrast to an increase of 4.7% in the fourth quarter. Real federal government spending was unchanged this quarter after falling 7.3% in the fourth quarter.

Read the BEA release.

Tuesday, June 23, 2015

New Home Sales Rose 2.2% in May

Sales of new single-family houses in May rose to a seasonally adjusted annual rate of 546,000 according to the U.S. Census Bureau and Department of Housing and Urban Development. The May rate is 2.2% above the revised April rate of 534,000 and is 19.5% above the year-ago rate of 457,000.

New home sales increased in two of the four regions. Sales in the Northeast rose 87.5% on the month to 30,000 new homes, and sales in the West rose 13.1% to 138,000. The Midwest and South regions saw declines in sales, falling 5.7% and 4.3% respectively.

The median sales price of new homes sold in May was $282,800, down 2.9% from April. The average price was $337,000, up 0.9% on the month.

At the end of May, there was an estimated supply of 4.5 months at the current sales rate.

Read the Census release

New Orders for Durable Goods Fell in May

New orders for manufactured durable goods decreased 1.8% to $228.9 billion in May, according to the U.S. Census Bureau. New orders for manufactured durable goods has been down three of the last four months. This decrease, followed a 1.5% decrease in April. Excluding defense, new orders decreased 2.1%.

Defense new orders for capital goods grew 8.2% to $8.8 billion as shipments increased 0.3% to $9.5 billion.

Excluding transportation, new orders increased 0.5%. New orders for transportation equipment fell 6.4% to $71.7 billion—orders for transportation equipment have declined for three of the last four months.

Shipments of manufactured durable goods, down four of the last five months, decreased 0.1% to $239.9 billion, following a 0.2% decrease in April.

Inventories of manufactured durable goods declined in May, following twenty-three consecutive monthly increases. Inventories decreased 0.2% to $400.6 billion.

Read the Census release

Monday, June 22, 2015

Existing Home Sales Increase to Highest Pace in Nearly Six Years

Existing home sales increased 5.1% to a seasonally adjusted rate of 5.35 million in May according to the National Association of Realtors, up from a revised 5.09 million in April. Existing home sales have increased year over year for the last eight months.
Median existing-home prices increased 7.9% year over year to $228,700, the 39th consecutive month of year over year price increases.

Total housing inventory increased 3.2% over the month to 2.29 million homes available for sale, up 1.8% from a year ago. There is currently a 5.1 month supply of existing homes available for sale, down from 5.2 months in April.

The percent share of first-time home buyers rose to 32%, up from 27% a year ago. “The return of first-time buyers in May is an encouraging sign and is the result of multiple factors, including strong job gains among young adults, less expensive mortgage insurance and lenders offering down payment programs,” stated NAR Chief Economist Lawrence Yun.

Existing home sales increased in all four regions, rising 11.3% in the Northeast, 4.1% in the Midwest and 4.3% in both the South and West. Each region also saw significant year-over-year gains in home prices.

All cash sales were 24%, the same as in April, but down from 32% a year ago. Individual investors purchased 14% of homes in May, unchanged from April but down 2% from a year ago.

Read the NAR report

Thursday, June 18, 2015

CPI Increases on Higher Energy Prices

The Consumer Price Index increased 0.4% in May on a seasonally adjusted basis, led by sharp increases in prices for gasoline. Prices are unchanged from one year ago, a slight improvement from the 0.1% decline reported last month.

The energy index gained 4.3% in May, led by a 10.4% gain in gasoline prices. Fuel oil also increased in May, though only by 0.7%. Electricity prices declined 1.2% after remaining flat in April. On a yearly basis, the energy index fell 16.3%.

Non-food and non-energy items increased 0.1% on the month, after a 0.3% increase in April. The index for new vehicles gained 0.2% on the month and 0.8% over the last 12 months. Medical care commodities increased 0.4% and transportation services increased by 0.7%. Apparel costs posted a decline of 0.5% for the month and are down 1.5% for the year.

The food index was unchanged for the second month in a row, as the index for food at home declined by -0.2%, while the index for food away from home increased 0.2%. On a yearly basis, the food index rose 1.6%, due largely to increases to food away from home.

Read the BLS release

Wednesday, June 17, 2015

Fed Holds Steady

Though the Committee noted that economic activity has expanded moderately after the first quarter, the Federal Reserve Open Market Committee in its June meeting reaffirmed its view that the current 0% to 0.25% target range for the federal funds rate remains appropriate.

Despite holding steady this meeting, the FOMC forecasts still show that a rate increase is likely before the end of this year.

The Committee in their statement noted that though growth in household spending and the housing sector has improved, business fixed investment and net exports were ‘soft’ and inflation was still running below long-term objectives.

"While the committee views the disappointing economic performance in the first quarter as largely transitory, my colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained," stated Chair Janet Yellen during her post-statement press conference.

The chair also reemphasized her view that the course of the rate increases will not be pre-determined.

"We absolutely do not expect to follow any mechanical 25 basis points a meeting, 25 basis points every other meeting - no plan to follow any type of mechanical approach to raising the federal funds rate. We will evaluate incoming conditions and move in the manner that we regard as appropriate.”

According to FOMC member projections, the majority of Committee members expect the federal funds rate to reach 0.625% by the end of 2015.

Read the Fed statement.

Tuesday, June 16, 2015

Housing Starts Fall in May after Strong Gains in April

Housing starts in May were at a seasonally adjusted annual rate of 1.036 million, 11.1% below the revised April estimate of 1.165 million, but 5.1% above the May 2014 estimate of 986,000. Single family housing starts were at a rate of 680,000, 5.4% below the revised April rate of 719,000. Starts for multi-family units grew at a rate of 349,000, 18.5% below the revised April estimate.

Housing starts fell across all four regions, most dramatically in the Northeast, dropping 26.5% to 139,000. The West fell 12.5% to 253,000, the Midwest fell 10.2% to 149,000 and South fell 5.0% to 495,000.

Building permits were at a seasonally adjusted annual rate of 1.275 million, up 11.8% from April’s revised rate of 1.140 million, and 25.4% above the May 2014 rate of 1.017 million. Permits for single family units were at a rate of 683,000, 2.6% above April’s revised estimate of 666,000. Multi-family permits were at a rate of 557,000.

Housing completions in May were at a seasonally adjusted annual rate of 1.034 million, 4.7% above April’s revised estimate of 988,000 and 14.5% above the May 2014 rate. Single family housing completions were at a rate of 635,000, 5.2% above April’s rate, and multi-family completions were at a rate of 392,000.

Read the Census release.

Monday, June 15, 2015

Homebuilder Confidence Reached Yearly High in June

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) rose 5 points to a level of 59 in June, the highest reading since September.

All three index components experienced gains for the month. Buyer traffic rose 5 points to 44, current sales conditions rose 7 points to 65, and expectations for sales in the next six months rose 6 points to 69.

All four regions posted month-over-month gains in June. The Northeast and West each posted monthly gains of 5 points, rising to 47 and 61 points respectively. The Midwest rose 8 points to 57, and the South rose 4 points to 63.

NAHB’s Chief Economist David Crowe noted that the index indicates “[growing] optimism among builders that housing will continue to strengthen in the months ahead.”

Read the NAHB/Wells Fargo release.

Industrial Production Declines Again in May

Industrial production decreased 0.2% in May—the sixth consecutive month without a gain in the index. April’s reading was revised downward to 0.5%, but the rates for previous months were revised higher.

Manufacturing output fell by 0.2%, down from a gain of 0.1% in April. Mining output fell 0.3%, an improvement after declining more than 1% per month, on average, over the previous 4 months. Output of utilities rose by 0.2% in May, 1.4% higher than a year ago.

Capacity utilization for the total industry was 78.1%, down 2 basis points from April’s revised estimate, and 2 percentage points below the 1972-2014 average.

Final products declined by 0.3% — largely from declines in consumer goods, as business equipment registered production gains. Nonindustrial supplies were flat in May, but up 2.2% from last May. The index for materials declined 0.1% due to drops in production for non-energy related goods.

Read the Federal Reserve release.

Friday, June 12, 2015

Producer Prices Post Largest Gain Since 2012

Producer prices rebounded in May, climbing 0.5%, seasonally adjusted, according to the U.S. Bureau of Labor Statistics, attributable to prices for final demand goods which rose 1.3%. This was the second monthly increase in the past six months. Producer prices fell 1.1% on a yearly basis.

Eighty percent of the broad-based advance in prices for final demand goods is attributable to prices for final demand energy, which increased 5.9%. The gasoline index largely contributed to the increase, jumping 17.0% on a monthly basis.

The indexes for final demand goods less foods and energy and for final demand foods rose 0.2% and 0.8%, respectively.

The index for final demand services was unchanged in May. Prices for final demand services less trade, transportation, and warehousing moved down 0.2%, and the index for final demand transportation and warehousing services dropped 0.1%. In contrast, margins for final demand trade services advanced 0.6%.

Read the BLS report.

Thursday, June 11, 2015

Household Net Worth Rose by $1.6 Trillion, Savings Rate Jumps to 5.5%

Household net worth increased by $1.6 trillion during the first quarter of 2015 to $84.9 trillion, a 2.0% increase over the fourth quarter and a 5.7% increase from a year ago.

Nonfinancial assets of households and nonprofit organizations increased 1.9% from the previous quarter and 5.7% over the previous year. Real estate values contributed to most of the growth, increasing 2.1% from the previous quarter and 6.3% from the previous year.

Financial assets of households and nonprofit organizations increase 1.6% from the previous quarter and 5.1% from the previous year. The quarterly growth was mainly driven by increases in time and savings deposits, corporate equities, mutual fund shares and pension entitlements.

Household debt increased 2.2% annually to $14.2 trillion (excluding charge-offs of home mortgages). Mortgage debt excluding charge-offs decline 0.3% at an annual rate. Consumer credit climbed, increasing 5.6% from the previous quarter.

The household saving rate jumped to 5.5% in the first quarter, 0.8 percentage points above the fourth quarter 2014 and 0.6 percentage points above the first quarter 2014.

Nonfinancial business debt rose at an annual rate of 6.6%, driven by an increase in corporate bonds and foreign direct investment in the U.S.

Federal government debt decreased at an annual rate of 0.4%, a drop from the positive 5.4% annual rate in the previous quarter. Conversely, state and local government debt rose at an annual rate of 4.8% in the first quarter.

Read the Federal Reserve release.

Retail Sales Climb in May

There were $444.9 billion of retail and food services sales in May (after adjustment for seasonal variation and holiday and trading-day differences but not for price changes), according to the U.S. Census Bureau. This level represented an increase of 1.2% from the previous month, and 2.7% from May of last year.

Core retail sales — excluding automobiles and parts — increased by 1.0% from the previous month and 1.3% from the previous year.

Retail trade sales increased by 1.4% from April, and 2.0% from May 2014. Gasoline sales declined by 3.7% for the month, and were 19% lower than a year ago. Both motor vehicles and parts dealers and sales from food services and drinking places rose by 8.2% on the year.

Read the Census Bureau release.

Tuesday, June 9, 2015

Small Business Optimism Highest Level Since December

The NFIB Small Business Optimism Index increased 1.4 points to 98.3 in May, the highest level since December. Eight of the ten components posted improvements, with the highest gain seen in the Earnings Trends (9 points). The two components that declined were Plans to Make Capital Outlays (-1) and Expect Real Sales Higher (-3).

Earnings Trends improved to the highest level since October 2005, mainly due to a decline in the percent reporting lower earnings on a quarterly basis. The 3 point decline in Expected Real Sales volume followed a combined 10 point decline since the beginning of this year.

The component tracking whether business owners believe that now is a good time to expand gained 4 points while respondents expecting the economy to improve increased 3 points.

Credit conditions continued to be satisfactory for small business owners; just 4% of all owners reported that all their borrowing needs were not met, unchanged from the previous month and historically low. Financing and interest rates remained the least cited concern, consistent with the previous month. Taxes and government requirements and red tape shared the top position as the single most important problem.

Read the NFIB report.

Friday, June 5, 2015

Consumer Credit Grew 7.25% (SAAR) in April

Consumer credit increased at a seasonally adjusted annual rate (SAAR) of 7.3% in April to $3.38 trillion. Revolving credit rose at an annual rate of 11.6% (to $900 billion) and non-revolving credit increased at an annual rate of 5.8% ($2.49 trillion).

Total outstanding consumer credit increased by $20.5 billion, down slightly from the previous month’s increase. Total outstanding non-revolving credit increased by $11.9 billion, while outstanding revolving credit increased by $8.6 billion, up from $4.9 billion in the previous month.

Federal Government holdings of student loans continue to be the largest portion of non-revolving credit, making up 36% of outstanding credit. Finance companies and depository institutions are the secondary holders of non-revolving credit, each holding approximately 25%. Depository institutions continue to be the primary holder of revolving credit, holding 82%.

Read the Federal Reserve release.

U.S. Added 280,000 jobs in May

Total nonfarm payroll employment rose by 280,000 in May, up from last month’s revised estimate of 221,000. The unemployment rate rose slightly to 5.5%. The Federal Reserve has placed its full-employment estimate between 5.0% and 5.2%.

Health services posted strong numbers again, with healthcare and social assistance adding nearly 58,000 jobs. Leisure and hospitality added 57,000 jobs, up sharply from a gain of 10,000 in April. Professional and business services added 63,000 jobs for the month and over 671,000 for the year.

Mining industry employment declined for the fifth month in a row, falling 17,000 in May. Since the beginning of the year, mining employment has fallen by 68,000.

The civilian labor force rose by 397,000 in May, though the labor force participation rate was little changed at 62.9%. The participation rate has held between 62.7% and 62.9% since April 2014.

Average hourly earnings increased by 8 cents to $24.96. Hourly earnings have increased by 2.3% over the last year.

The number of long-term unemployed, those jobless for 27 weeks or more, was little changed at 2.5 million. This group accounts for 28.6% of the unemployed. The number of discouraged workers—those not looking for work because they believe no jobs are available, was 563,000 – down 134,000 from a year ago.

Read the BLS release.

Thursday, June 4, 2015

Oil-Related Job Cuts Wane

Employers announced plans to shed 41,034 workers from their payrolls in May, following the 61,582 planned job cuts announced in April, according to a report issued by Challenger, Gray & Christmas.

May's announced job cuts were 23% lower than the 52,961 planned job cuts announced in May 2014. In the first five months of 2015, employers announced 242,830 job cuts, 13% more than the first five months of 2014.

The number of oil-related job cuts appear to be declining, as 1,019 planned job cuts were attributed to the fall in oil prices in May, compared to 20,675 the previous month.

“Oil prices are starting to stabilize. Exploration and extraction companies responded quickly to the drop in prices, but they are likely to be careful about cutting too deeply, as they will need workers on hand when demand inevitably increases. Unless, there is another severe drop in the price of oil, we probably will not see another surge in oil-related job cuts this year,” said John A. Challenger, chief executive officer of Challenger, Gray & Christmas.

The financial sector and the government had the largest number of job cuts, announcing 5,539 and 5,502 cuts, respectively.

Read the press release.

Wednesday, June 3, 2015

U.S Foreign Trade Deficit Drops Nearly 20% in April

The U.S. international trade deficit narrowed in April to $40.9 billion, down $9.7 billion from March, attributable to both a $1.9 billion increase in exports and a $7.8 billion decrease in imports.

The goods deficit decreased by $9.3 billion to $60.7 billion and the surplus in services increased $0.4 billion to $19.8 billion.

Exports of goods increased $1.9 billion to $129.0 billion driven by a $2.1 billion increase in capital goods, partially offset by a $0.2 billion decrease in the net balance of payments adjustments. Exports of services increased less than $0.1 billion to $60.9 billion.

Imports of goods decreased $7.4 billion to $189.6 billion driven by a $4.9 billion decrease in consumer goods imports. Imports of services decreased $0.4 billion to $41.1 billion.

The petroleum deficit decreased $0.7 billion to $6.8 billion, the fourth consecutive monthly decline.

Read the Census Bureau release.
Read full report.

Non-Manufacturing ISM Index Continued to Grow, But at a Slower Pace

The Non-Manufacturing ISM Report on Business Index was 55.7 in May, 2.1 percentage points lower than the previous month. Index readings above 50 indicate expansion in the non-manufacturing economy. May was the 64th consecutive month of economic growth. Fifteen industries reported growth in May. The only industry reporting contraction is Mining.

The Business Activity Index was 59.5, 2.1 percentage points slower than the previous month, but still continuing the growth trend for the 70th consecutive month. Respondents attributed the growth to “business expansion and seasonal increases” and “spring season peak activity of consumer good flowing to major retailers.”

The Employment Index was 55.3, 1.4 percentage points slower than the previous month. Survey respondents cite “additional demand for services necessitated increased staffing counts” and “staffing for new client” as employment drivers in May. The only two industries reporting a reduction in employment are Mining and Educational Services.

The New Orders Index was 57.9, 1.3 percentage points slower than April, but still continuing the growth trend for the 70th consecutive month. Respondents reported the continued growth was driven by “more demand and requests for services” and “seeing new business development and new service requirements with new customers planning new and higher levels of market demands.”

The Supplier Deliveries Index declined 3.5 percentage points to 50.0. Seven industries reported slower deliveries and 8 reported faster deliveries.

Read the ISM Release.

Beige Book: Economic Activity Expanded and Loan Demand Increased

Overall economic activity expanded during the reporting period from early April to late May according to the fourth Federal Reserve Beige Book of 2015. While the pace of growth varied among districts, outlook among respondents were generally optimistic, with growth expected to continue at a modest to moderate pace in several districts.

Overall loan demand increased and credit quality and delinquency rates were stable or improved. Credit standards were mostly unchanged, except for scattered reports of easing in the Philadelphia, St. Louis, Atlanta and San Francisco Districts. On the consumer lending side, several districts noted increased demand for auto loans, and reports on mortgage lending were mixed.

Most districts said residential and commercial real estate activity and construction improved since the last report. Home prices continued rising and low home inventories continued to constrain sales activity in some areas of the country.

Manufacturing activity generally held steady or increased over the reporting period, except for in the Dallas District where it was slightly weaker and in the Kansas City District where it fell markedly. Retail spending increased in most districts and retailers expect continued sales growth in 2015. Overall vehicle sales rose, particularly for trucks and SUVs which auto dealers in some districts attributed to lower gasoline prices.

Employment levels were up slightly over the reporting period, with some reports of layoffs. Wages rose slightly. Prices were stable or ticked up, although manufacturers in some districts cited lower input prices.

Read the Federal Reserve release.

Bank Economists See Rebound from Economic Soft Patch

The U.S. economy will rebound from a lackluster first half with 2.8% annualized inflation-adjusted real GDP growth in the second half of this year, according to the Economic Advisory Committee of the ABA. The committee sees 1.8% growth over the four quarters of the year, rising to 2.6% in 2016.

The committee, which includes 16 chief economists from among the largest banks in North America, attributes the weak first quarter to a range of temporary factors, including seasonal distortions, bad weather, the West Coast port strike and the sharp drop in oil sector investment. However, the fundamentals remain positive, with healthy household and business balance sheets, low oil prices and interest rates, and strengthening housing and stock prices.

The fiscal and monetary policy environment is also supportive of growth. Fiscal policy is no longer a headwind, as tax and spending policies turn neutral at the federal, state and local level. The group forecasts the federal budget deficit will stabilize at $480 billion in fiscal year 2015.

The committee expects the Federal Reserve to maintain near-zero interest rates until September. Thereafter, the bank economists see a gradual normalization of rates over the next several years.

“The Fed is ready to move once the data show clearly that the weak first quarter was an aberration,” said Ethan Harris, chairman of the group and co-head of global economics research at Bank of America Merrill Lynch. “Nonetheless, we see this as a gentle normalization process rather than an attempt to curb growth and stop inflation.”

The group sees lower energy prices as a net positive for the economy. Low prices have hurt the oil patch, cutting into mining employment and capital spending. However, the boost to consumers will more than offset this negative.

"Initially, the oil price drop has triggered a sharp drop in the mining sector, but little response from consumers," said Harris. "However, as the year unfolds we expect mining to level off even as consumers spend more of their savings from gas."

While the collapse in mining investment contributed to a 2.8% annualized decline in business fixed investment in the first quarter, the committee sees about 5% growth in overall capital expenditures over the coming quarters as investments in other industries pick up.

The committee sees monthly job gains of 200,000 or so this year and next, with the unemployment rate expected to decline to about 5% over the year ahead. Moreover, the improving labor market is starting to show up in modestly better wage growth.

"The stronger job market is finally giving your average Joe a little bit of wage-negotiating power," said Harris. "Over the next several years, this should help reverse some of the dramatic widening in the income distribution."

The committee expects 2.7% real consumption growth in 2015.

"Solid job growth, improving wages and lower energy costs should encourage more families to spend," said Harris.

The group expects residential investment to continue to recover, with gains in housing starts and home sales. The EAC expects home prices nationally to rise almost 5% this year.

"While mortgage lending remains tight, an improving labor market and stronger household formation should support the housing market," said Harris. "However, millennials seem more inclined to rent rather than own, suggesting that growth will remain concentrated in the multi-family market."

The group sees improving credit quality and availability. Delinquency and charge-off rates are expected to continue to fall. Consumer bank credit is expected to grow more than 5% over the course of this year and next.

"We're optimistic that business lending will continue to grow at a double-digit rate, supporting the rise of business investment ahead of anticipated interest rate increases," said Harris.

Low inflation resulting from falling energy prices has temporarily pushed year-over-year headline inflation into negative territory.

"Outside of energy, the improving domestic economy could put upward pressure on prices, but the weak global backdrop and a strong dollar should limit any inflation acceleration," said Harris. As we move to 2016, the committee expects inflation to settle around 2%.

Read the full press release.
See the detailed EAC forecast numbers.

ADP: Private Sector Added 201,000 Jobs in May

According to the ADP National Employment report, the private sector added 201,000 jobs in May, as both goods-producing and services sectors experienced increased job growth. The May report downwardly revised the April and March headline numbers by 4,000 and 13,000 jobs, respectively.

Small businesses, companies with fewer than 49 employees, added 122,000 jobs, up from 97,000 in April. Medium businesses, companies with 50 to 499 employees, added 65,000 jobs, the same as the previous month. Large businesses, companies with greater than 500 employees, added 13,000 jobs in May, as companies with 500-999 employees lost 3,000 jobs but companies with 1,000+ employees added 16,000 jobs.

Goods-producing employment rose by 9,000 jobs, an 8,000 job increase from the previous month. The construction industry added 27,000 jobs but the manufacturing sector lost 5,000 jobs.

The service-providing sector employment rose by 192,000 jobs, up from 164,000 in April. Professional/business services contributed the largest gain, adding 28,000 jobs in May, down from 35,000 jobs in April. Trade/transportation/utilities added 56,000 jobs and financial activities added 12,000 jobs.

Read the ADP release.

Monday, June 1, 2015

ISM Manufacturing Index Reports Growth

The ISM manufacturing index rose to 52.8 points in May. Index readings above 50 indicate expansion in the manufacturing economy. Respondents noted that the economy is showing signs of improvement, as well as some easing of the West Coast port issues. Some industries noted that the strong dollar is hurting sales in Asia and lowering profits in Europe. Of the 18 manufacturing industries indexed, 14 reported growth, down from 15 in April.

The index for new orders increased 2.3 points to 55.8, while inventories rose 2 points. The gap between these two indices increased to 4.3 points, indicating that inventories are not keeping up with current demand.

The employment index rose to 51.7, up from 48.3 in April. Of the 18 industries, 14 reported employment growth, up from 11 in April. Only the computer and electronic products industry reported a decrease in employment.

Export orders for May registered 50.0 points, indicating no change from the previous month. The imports index rose 1 point to 55.0—the 28th consecutive month of growth in imports.

The prices index was 49.5, up 9 points from April, marking the 7th consecutive month of raw material prices decreasing.

Read the ISM release

Construction Spending Reaches $1 trillion (SAAR)

Construction spending increased 2.2% in April to a seasonally adjusted annual rate (SAAR) of $1,006.1 billion. March spending was revised up from $967.2 billion to $984.0 billion. Construction spending during the first four months of 2015 amounted to $288.7 billion, 4.1% higher than the first four months of 2014.

Total private construction rose to $725.2 billion (SAAR), 1.8% higher than the revised March estimate of $712.1 billion.

Private residential construction rose to $353.1 billion (SAAR), 0.6% above March’s estimate, as both construction of single and multi-family homes rose for the month. For the year, private residential construction declined 2.1%.

Private non-residential construction increased by 3.1%, with lodging construction posting the most notable gains. Construction related to communication infrastructure was the only non-residential segment to post a decline.

Public construction rose 3.3%, despite an 8.9% decline in the commercial public construction segment and a 15% decline in the power public construction segment. Public construction increased 3.5% for the year.

Read the Census release

Personal Income Increases, Expenditures Fall Flat

Personal income increased $59.4 billion, or 0.4%, in April according to the Bureau of Economic Analysis, compared to the less than 0.1% increase the previous month. Personal consumption expenditures decreased $2.6 billion, or less than 0.1% in April, following an increase of 0.5% in March.

Disposable personal income — personal income less personal current taxes — increased $48.8 billion, or 0.4% in April, after being flat in March. Real disposable income increased 0.3%, compared to a 0.2% decrease the previous month.

The personal savings rate was 5.6%, up 4 basis points from March.

Private wages and salaries increased $15.7 billion, compared with an increase of $8.4 billion in March. Goods-producing industries’ payrolls increased $1.5 billion, manufacturing payrolls increased $0.4 billion, services-producing industries increased $14.2 billion and government wages and salaries increased $2.0 billion.

Supplements to wages and salaries increased $4.3 billion in April, compared with an increase of $3.8 billion in March. Proprietors' income increased $2.5 billion in April, in contrast to a decrease of $0.5 billion the previous month.

The price index for PCE increased less than 0.1% in April, compared with an increase of 0.2% in March. The PCE price index, excluding food and energy, increased 0.1% in April, consistent with March.

Read the BEA release.