5 Ways to Make Sense of the U.S. Economy

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:

Housing Starts Reach 8-Year High

The Commerce Department report on Tuesday that home construction surged in April, with U.S. housing starts increasing 20.2% to an annual rate of 1.14 million homes, the fastest pace since November 2007. Single-family home construction rose 16.7% in April, while apartment building surged 31.9%. Building permits increased 10.1% over March to an annual rate of 1.14 million last month. The jump in housing starts and building permits in April could very well be the prelude to an increase in new homes sales in the upcoming months.

Jobless Claims Remain at 15-year Low

The Labor Department reported yesterday that initial claims for unemployment increased to 274,000 for the week ended May 16. This missed economists’ expectations for claims to total 270,000. The four-week moving average fell to 266,250, the lowest level in 15 years. While economic data has been relatively missed lately, the continuing decline in the four-week moving average of jobless claims is a positive sign that the U.S. labor market is bouncing back.

Homes Sales Slide in April

In April, sales of existing homes slipped 3.3% to a 5.04 million annual rate,, which was below economists’ forecast for an increase to a 5.24 million pace. The sales pace in March was revised higher to 5.21 million, up from the previous 5.19 million. Housing inventory increased to 2.21 million last month, and it would now take 5.3 months to sell all homes currently on the market. After March’s robust sales pace, the April figure was disappointing, to say the least. However, continuing low interest rates and a recovering job market should help boost home sales in the coming months. Plus, April’s sales rate was still above the annual sales pace of 5 million.

Consumer’s Confidence Warms-up

The Conference Board reported that its Leading Economic Index increased 0.7% to 122.3 in April. This was more than double economists’ predictions for a 0.3% increase. This marked the eighth-straight gain in the index, and implies that the U.S. economy is continuing to expand and that the slowdown in GDP growth may be contained to the first quarter.

Consumer Price Continues to Inch Up

The Labor Department reported that the CPI increased 0.1% in April, after rising 0.2% in March. Core CPI, which excludes food and energy, climbed 0.3%, which as was the largest gain since January 2013. In the past 12 months, CPI has fallen 0.2%, while core CPI has risen 1.8%. Some economists feel that this could entice the Fed to raise interest rates in September or even July. However, I still believe that recent economic data will keep the Fed standing pat through year end.

That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.

Have a great weekend,

Louis Navellier

Louis Navellier

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