The big number for the week, retail sales, fell in May, by -0.2%, which was along the lines of the median forecast.  The non-auto component was weaker than expected, though, by almost 0.5%.  Additionally, data from earlier recent months was revised downward.  Weakness emerged from several areas, especially those on the ‘fringe’ of spending, such as sporting goods stores, health and personal care.  However, areas like clothing, furniture and electronics were up—which appears odd, but is in line with the inconsistent results from some of these metrics.  We expect more of the same going forward. Read more

The Federal Reserve beige book of regional economic conditions came out this last week, and the conclusion was ‘moderate growth,’ although labor has fallen off a bit.  Almost all of the Fed’s regions (Philadelphia was the exception) were generally showing decent growth.  Echoing these same sentiments, Chairman Bernanke’s remarks to the Joint Economic Committee weren’t earth-shattering in terms of surprises.  He classified current economic growth again as ‘moderate,’ although ‘significant downside risks to the outlook’ remain.  Also, he commented on labor market slowing, which he and other economists believe may be partially due to weather issues earlier on in the year and/or choppiness due to a recovery process as the result of excessive layoffs during the Great Recession.  Read more

As you might have expected, there is a lot to talk about this week.  So much so, that we turned this Weekly Review into a ‘Special Edition’ variety.

In the revised estimate, first quarter GDP growth was adjusted from 2.2% down to 1.9%.  This would probably not be as surprising or impactful in its own right, but coupled with more immediate May data, it made a negative dent on investor sentiment.  The details of the report included higher final sales, while consumer spending was revised down, as was government spending (a big part of this).  While disappointing, this data is now old news.  Second quarter growth is expected to be a bit better, but maybe not dramatically so.  Estimates have remained in the 2.0-3.0% range, although we very well could stay in the lower end of that for the time being. Read more

A larger number of eyes were looking at regional Fed surveys this week, due to the weaker-than-expected Philadelphia Fed number from last week.  The Richmond Fed index fell more than expected, from +14 in April to +4 in May, as shipments fell; however, employment rose strongly.

Durable goods orders were generally in line with consensus for April—up +0.2% on the month.  However, the goods orders less transports (aka ‘key components version’) was weaker than anticipated (down -0.6% versus a forecast +0.8%).  ‘Core’ orders, which excluded non-defensive items and aircraft fell by almost 2%.  These figures are poorer, not dramatically so, but still point to a possible soft spot in economic growth during the past few months. Read more

Consumer borrowing increased by $21.3 billion for March to $2.54 trillion, which represented the largest monthly increase since November 2001. In addition, the bank loan officer survey showed an increased willingness to lend. Apparently, the feared credit contraction from consumers buckling down and doing some ‘extreme’ saving hasn’t happened, at least on a permanent basis. Despite a lack of confidence and continued economic fears, this isn’t entirely surprising, as it can take a long time to change economic and cultural behavior—assuming a change is what people are after in the first place. Americans are spenders.
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The April ISM rose somewhat unexpectedly in April (from 53.4 to 54.8—strongest since June of last year), and the composition was not bad either, as new orders, production and employment were all higher. The inventory portion of the index was down, which was an indirect positive as well. This was arguably the most important release of the week.

On the negative side, construction spending rose less than expected for March (up +0.1% versus consensus +0.5%), and a few prior months were revised downward. As for details, the private construction spending side was up almost a percent, while government outlays dropped by a bit more—causing the net difference. Read more