On Friday, the Conference Board released the latest leading and coincident indicators. The LEIs increased .6% while the CEIs rose .3%. The report’s internals were strong: 9/10 LEIs were higher while all 4 CEIs advanced – even industrial production, which declined in 4 of the last 6 months. And the LEIs 6-month rate of change was up .2% to .6%. Overall, this was the best LEI report of the year.
This week’s housing news was positive: building permits increased 3.6% M/M while housing starts rose 6.6% M/M. But both figures declined Y/Y (5.3% and 1.7%, respectively). More importantly, both data series are moving sideways:
Housing starts (red line) fluctuated between ~ 1.1 and 1.2 million for the last 12 months. Building permits’ (blue line) overall range has been a wider 200,000, with figures moving between ~1.1 and ~1.3 million.But both are contracting on a Y/Y basis, which is a bit concerning. Rounding out the good news, existing home sales were up 1.7% M/M and 6% Y/Y. It’s important to remember that at the macro level, residential investment is one of the strongest areas of GDP growth:
Industrial production finally increased, rising .7%. But the longer-term trend is still lower:
And the index’s components are not encouraging:
Mining consistently dropped for a half-year and utilities declined in 4 of the last 6 months. Only manufacturing rose more than half the time since November – hardly an encouraging sign.We’re beyond the point where we can argue temporary factors are to blame. Instead, this key economic sector is slowing, portending future weakness.
The Federal Reserve hinted that a June rate hike was a strong possibility, sending the markets lower. The weekly bond market review covers this development in depth.
The Atlanta Fed’s GDP now model is predicting 2Q growth of 2.5%, down slightly from the earlier 2.8% prediction. Still, the forecast remains sunnier than the 1Q number.
No Comments