The Top 5 Economic Reports of the Week

It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:

April Showers Bring May Flowers for Industrial Activity

U.S. industrial output increased in May, marking the third time in four months. Industrial production climbed a seasonally adjusted 0.6% month-over-month. Capacity utilization rose 0.2 percentage points to 79.1%. The increase in May represented a 0.6% rise in manufacturing production, which included a 1.5% jump in automotive output, a 1.1% jump in machinery production and a 1.3% jump in mining output. This was a positive report, especially after industrial production slid 0.6% in April. Industrial production continues to be solid, with February up 1.1% and March up 0.7%. So the economy continues to show signs of improvement.

May Housing Starts Are One Million Strong

In May, housing starts fell 6.5% from April, but still above a seasonally adjusted annual rate of one million. This marks the fourth month in the past year that the annual rate was one million or better. April’s rate was 1.07 million. Single-family starts slid almost 6% in May, and multi-family construction dropped more than 8%. Building permits also fell, dropping 6.4% to an annual rate of 991,000 after posting three months above the one million rate. A slowly recovering housing market continues to be a concern, especially with single family starts dropping in May since it’s an important indicator of middle-class family demand.

Buyer Beware: Inflation Brews

Consumer prices rose dramatically in May, posting their biggest increase in 15 months. The consumer price index climbed 0.4% in May, following the 0.3% rise in April. In the past 12 months, consumer prices have surged 2.1% as inflation started brewing in the U.S. The increase was across the board, with food, energy, housing, apparel and other costs all rising. Food prices rose 0.5%, the biggest jump since August 2011. Energy also climbed higher, with gasoline prices increasing 0.7%. This is the third positive reading in a row, which further shows that inflation is now brewing in the U.S. Yet CPI still remains below the Fed’s 2% target, so it is still relatively tame.

Layoff Activity Trends Lower

For the week ending June 14, initial claims for unemployment dipped to a 312,000 annual rate. That marked a drop of 6,000 from the previous week. Weekly claims are now around levels not seen since mid-2007. The four-week moving average also decreased, falling 3,750 to 311,750. This is a positive report, and the dip lower this past week matched economists’ expectations. In addition, the number of workers drawing unemployment fell by 54,000 to 2.56 million. So this week’s report further shows that the labor market is slowly improving.

LEI Point to Stronger Second Half

For the fourth-straight month, the leading economic indicators (LEI) index increased. In May, the index increased by 0.5%, while economists were expecting a 0.6% jump. The biggest positive contributions during the month came from the interest rate spread, jobless claims and manufacturing hours. Given that this is the fourth-straight month that the LEI index has risen, economists are expecting U.S. economic growth to pick up the pace during the second quarter.

Have a great weekend,

Sincerely,

signed: Louis Navellier

Louis Navellier

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