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Econ Wrap-Up: Philly Fed, Leading Economic Indicators, Current Account, & More

6/18/2015
By Jennifer Coombs

Initial jobless claims for the week of June 13th are now back near historic lows as initial claims fell by 12,000 to 267,000 which is close to the low-end of the consensus range at 265,000. This brings the 4-week rolling average down by 2,000 more claims to 276,750. The week of June 13th is also considered the sample week for the Bureau of Labor Statistics’ employment report, and when compared to the sample week in May the reading is 8,000 claims lower, but when compared to the 4-week average claims are up by 10,250. Continuing claims, reported with a one-week lag, reversed last week’s gain and dropped by 50,000 to 2.222 million. However, the 4-week average is about 2,000 claims higher at 2.231 million. Nevertheless, both are very favorable readings and since there are no special factors in the report, this confirms some positive conditions among those that are unemployed.

 

 

Next, we got a taste of the very first sign of manufacturing strength in a long time. The Philadelphia Fed Index surged in the June report beyond expectations to 15.2 for the strongest reading since December 2014. This gain was confirmed by the exact same 15.2-surge for new orders, which is at the highest reading since November 2014. Other readings are also positive, with a jump in unfilled orders, a slowing in delivery times, higher pricing thanks to the surge of oil, and prices received showing just marginal pressure. Employment, however, only showed a marginal gain this month but this may increase since there was a nearly 6-point jump in the 6-month outlook to a very positive 39.7 reading – the best since January 2015. While it’s tempting to really get excited about how great the Philly report looks, it’s too early to tell if this report is just an outlier amid some very weak manufacturing reports. Fed reports from Richmond and Kansas City will be released next week, and it’s known that both of these reports and the Dallas report have been very weak in 2015 so far.

 

 

Lastly, there is some remarkable strength being posted in the Conference Board’s Index of Leading Economic Indicators (LEI), which surged by 0.7% in May for the second month in a row. The big surge in building permits is what moved the index higher and ultimately points to an impressive recovery among new home sales. As of yesterday, we know that the Fed’s skepticism on the economy will keep interest rates low, and so this component remains a big positive for the index. Jobless claims and credit conditions also contributed to the monthly gain. There was a very subdued 0.1% gain in the coincident index, which echoes the overall theme for the year: weakness in the first half, followed by an exaggerated bounce back in the second half. Overall, all 10 components of the LEI were positive for the month of May.

 

 

Though expanding, the US trade deficit came in better than expected at -$113.3 billion from a revised estimate of -$103.1 billion (from -$113.5 billion). It was expected that the trade deficit would come in at $116.5 billion for the quarter. When compared to GDP, the current gap has become very manageable at 2.6%. During the quarter, the US saw strength in its exports which are now valued at $58.7 billion versus $57.6 billion in the fourth quarter.

 

 

As for the consumer price index (CPI) report, the year-over-year core headline was among one of the biggest since February 2013. During the month of May, on a monthly basis, CPI rose 0.4%, just shy of the consensus estimate of 0.5%, but much larger than the unrevised +0.1% in April. On an annual basis, CPI improved from a -0.2% reading in April to a 0.0% reading in May. The monthly core reading, which subtracts food and energy rose by a meager 0.1% compared to the prior 0.3% gain and the +0.2% consensus. Now, the real impressive figure is the annual core CPI growth. Over the past twelve months, core CPI rose 1.7%, very close to the 1.8% gain in April.

 

Jennifer Coombs
Wall Street Strategies

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