CPI rose 0.2 percent in April, up 2.2 percent over past year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in April. Over the last 12 months, the all items index rose 2.2 percent before seasonal adjustment.

The index for all items less food and energy rose 0.1 percent in April after declining in March.  The index for all items less food and energy rose 1.9 percent over the last 12 months; this compares to a 1.8 percent average annual increase over the past decade.

Initial unemployment claims dip 2,000 in latest report

In the week ending May 6, initial unemployment claims were 236,000, a decrease of 2,000 from the previous week's unrevised level of 238,000. The 4-week moving average was 243,500, an increase of 500 from the previous week's unrevised average of 243,000.

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Bloomberg Consumer Comfort Index dips slightly in May

While consumer comfort remains near a 15-year high, Americans were a bit rattled about the prospects for the U.S. economy in the latest week, amid a recent report that first-quarter growth was the weakest in three years. Still, the index is on a healthy run, remaining above 49 for 11 straight weeks -- the longest such streak since September 2001.

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May Business Inflation Expectations: Up 2.0 percent over the next 12 months and 1.8 percent over past year

Respondents to the Atlanta Fed Survey indicated that, on average, they expect unit costs to rise 2.0 percent over the next 12 months. Inflation uncertainty increased slightly to 2.2 percent. Firms also report that, compared to this time last year, their unit costs are up 1.8 percent.

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Producer Price Index rose 0.5 percent in April, up 2.5 percent year-on-year

The Producer Price Index for final demand advanced 0.5 percent in April. On an unadjusted basis, the final demand index rose 2.5 percent for the 12 months ended April 2017, the largest increase since moving up 2.8 percent for the 12 months ended February 2012.

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First Quarter 2017 Economic Update: Some Mixed Signals but Real Estate Remains Strong

This seems to be an odd time for the U.S. economy, which has remained somewhat sluggish since the beginning of the year. This compares to a rise of nearly eight percent in the S&P 500 since January 1st and a seller’s market for housing in which there simply isn’t enough inventory to satiate several years of pent-up demand.

Meanwhile, both business and consumer confidence – which have been at record levels lately due to promised changes in our byzantine tax code and reductions in business regulations – are starting to slightly wane due to a political system still mostly stuck in neutral.

GDP growth, which averaged just 1.6 percent in 2016 --- the lowest since 2011 – fell further to an initial estimate of 0.7 percent during the first quarter of 2017, due largely to consumers, businesses and state and local governments tightening their spending. However, not only is it likely that this estimate will rise with the second and third iterations, but, as of mid-May, analysts are forecasting growth in the second quarter at 3.6 percent as investments in fixed assets rebound. Moreover, the Federal Reserve’s Beige Book showed residential construction growth accelerating through the end of March as non-residential construction remained strong.

Job growth, which rebounded by 211,000 in April, started out very strong in January and February – ranging from 216,000 to 232,000 -- before dipping sharply to just 79,000 in March. However, given April’s official unemployment rate dipping to 4.4 percent – a 10-year low – March’s performance is widely being viewed as a temporary dip due to poor mid-month weather, fewer construction jobs being added, and a dip in retail employment as that sector continues to battle against online competitors.

In terms of inflation, while the Consumer Price Index (less food and energy) dipped 0.1 percent in March, it has still risen by 2.0 percent over the past year, or even with the target set by the Federal Reserve. The Producer Price Index reported similar trends, dipping 0.1 percent in March but up 2.3 percent over the past 12 months.

Not surprisingly, due to this somewhat murky collection of jobs and inflation data, in its most recent May meeting the Fed delayed raising interest rates until the labor market has stabilized further and inflation needs some more taming.

If there is one area which is not murky, it is confidence. The University of Michigan’s Consumer Sentiment Survey has been on a high plateau since President Trump’s election, settling at around 97 in March and April. Nonetheless, a new trend in the survey has revealed stark differences based on political beliefs, with optimists in one corner and pessimists in the other, especially in terms of expectations for household incomes, inflation and unemployment. These partisan extremes can in turn cause instability and impact consumer spending.

Looking specifically at the building industry, builder confidence has remained at well over 60 since last September, and has averaged 68 since the beginning of 2017. In tandem with this confidence, construction spending rose for five straight months before slipping 0.2 percent in March. Although housing starts dipped 6.8 percent in March, they were still up over nine percent year-on-year. And, while March building permits rose a moderate 3.6 percent from February, they’re up by a robust 17 percent over the past year.

Similarly, sales of new single-family homes rose by 5.8 percent in March to an annual rate of 621,000 units, or a year-on-year increase of nearly 16 percent. Median new home sales prices rose 1.2 percent year-on-year to $315,000, but are still down from last year’s peak of $332,700 in December. At current sales rates, existing inventory would take 5.2 months to sell versus 5.5 months a year ago.

For existing homes, sales rose 4.4 percent in March to an annual rate of 5.7 million, which is also up nearly six percent from a year ago and marked the strongest month of sales since February of 2007. Median existing home prices rose close to seven percent year-on-year to $236,400, for the 61^st consecutive month of year-over-year increases. Although September inventory rose moderately to over 1.8 million homes to a still-brief timeline of just 3.8 months, it has fallen year-over-year for 22 consecutive months.

Looking ahead to 2017 versus 2016, the NAHB is projecting annual single-family starts to rise by 9.0 percent and multi-family starts to decline by 1.6 percent.In addition, look for a rise of 12.1 percent for new single-family homes to 626,000, and existing homes sales to increase 3.2 percent to 4.98 million.

Mortgage loan applications rise 2.4 percent in most recent survey as rates remain flat

The Market Composite Index increased 2.4 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 2 percent and refinances up 3 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged at 4.23 percent.

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Job openings rose 1.1 percent in March

The number of job openings was rose 1.1 percent to 5.7 million on the last business day of March. Over the month, hires rose 0.2 percent to 5.3 million, and separations rose 1.6 percent to 5.1 million, respectively.

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Small Business Optimism Index slips in April but still at historically high levels

The Index dipped 0.2 points April, settling at 104.5. April was the sixth straight month for historically high optimism, a hot streak not seen since 1983. Five of the Index components posted a gain, reaching levels not seen since before the previous administration. Three of the components declined, and two were unchanged. Nearly all of the slight decline was attributable to an 8-point plunge in expected business conditions.

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Consumer credit jumped 5.2 percent in March

Consumer borrowing rose at a solid 5.2% annual rate in March, suggesting the consumer has not completely retrenched.  Although the U.S. economy got off to a slow start this year as consumers dialed back spending, the Federal Reserve said earlier this week that the slump in first quarter growth was temporary.

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April job growth rebounded to 211,000, unemployment rate at 4.4 percent

Total nonfarm payroll employment increased by 211,000 in April, and the unemployment rate was little changed at 4.4 percent. Job gains occurred in leisure and hospitality, health care and social assistance, financial activities, and mining. Over the year, the unemployment rate has declined by 0.6 percentage point, and the number of unemployed has fallen by 854,000.

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Initial unemployment claims drop 19,000 in most recent report

In the week ending April 29, initial unemployment claims were 238,000, a decrease of 19,000 from the previous week's unrevised level of 257,000. The 4-week moving average was 243,000, an increase of 750 from the previous week's unrevised average of 242,250.

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Mortgage loan applications slip 0.1 percent in latest survey as rates rise slightly

The Market Composite Index decreased 0.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising four percent but refinances falling five percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 4.23 percent.

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Gallup Good Jobs Rate slipped to 44.7 percent in April

The U.S. Gallup Good Jobs Rate fell to 44.7% in April, down from 45.1% in March, but higher than the 44.4% measured in February. The current GGJ rate is slightly lower than the 44.9% recorded in April 2016.

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Labor productivity rose at 0.6 percent annual rate in 1Q 2017

Nonfarm business sector labor productivity decreased at a 0.6-percent annual rate during the first quarter of 2017, as output increased 1.0 percent and hours worked increased 1.6 percent.

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