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…
Index of Leading Economic Indicators
On Thursday, the Conference Board announced that its leading economic index (LEI) rose 0.2% in May. The currently conditions component also rose 0.2%, but the lagging component that looks at the last several months rose a more impressive 0.5%. Most of the 10 LEI components continued to rise steadily. The LEI is a good indicator of overall economic health, so it looks like the U.S. economy will likely achieve the 3.7% annual GDP growth predicted by economists.
On Wednesday, a survey from the National Association of Manufacturers reported that 95.1% of manufacturers surveyed have a “positive outlook for their companies.” This is the highest reading ever in the 20-year history of this survey. So, between a robust manufacturing sector and higher consumer spending based on retail sales, second-quarter GDP growth is shaping up to the strongest in several years.
The Commerce Department announced on Tuesday that housing starts rose 5% in May to a 1.35 million annual pace. This was significantly higher that economists’ consensus estimate of 1.3 million. New housing starts remain especially robust for single-family homes, at a 936,000 annual pace. Overall, housing starts are now at an 11-year high (the fastest activity since 2007). I should add that new building permits declined 4.6% in May, but given that they have risen 8% in the past 12 months, I’m not worried about the near-term dip.
Existing Home Sales
Interestingly, according to the National Association of Realtors, existing home sales declined 0.4% in May to 5.43 million. This was below economists’ consensus estimate of 5.52 million. The dilemma with existing home sales was largely attributable to rising median prices, higher mortgage rates and a lack of inventory. Currently, there is only a 4.1-month supply of existing homes on the market, which is substantially below the benchmark for balanced inventories, which is a 6-month supply. As a result, it remains a sellers’ market until new home starts continue to create more inventory.
That’s all I have for you this week. I’ll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,