The Chicago Fed National Activity Index (CFNAI)
Chicago Fed Activity Index Rebounds. The Chicago Fed National Activity Index increased to 0.29 in May of 2021 from a downwardly revised -0.09 in April, pointing to a pick up in economic growth, led by improvements in production-related indicators. Production-related indicators contributed +0.29, up from -0.05 in April; the contribution of the employment, unemployment, and hours category rose to +0.16 from +0.06 and the contribution from the sales, orders, and inventories category was +0.02 compared to -0.06. On the other hand, the personal consumption and housing category contributed -0.18, down from -0.04. The index’s three-month moving average went up to +0.81 from +0.17
Existing Home Sales
Sales of existing homes in May dropped for the fourth straight month due to a very low supply of homes on the market. Existing home sales fell 0.9% last month from April to a seasonally adjusted annualized rate of 5.8 million units, according to the National Association of Realtors. The 5.8 million rate is modestly above pre-pandemic levels. Sales were 44.6% higher than a year earlier, but that comparison is skewed massively given that the housing market basically shut down for about two months at the start of the pandemic. The market then rebounded dramatically last summer and remained strong for all of last year.
Wholesale Inventories Advance
The May 2021 advance wholesale inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $707.5 billion, this represents a 1.1% (±0.2%) increase from April 2021 and a 7.8% (±1.2%) rise relative to May 2020. The percentage change from March 2021 to April 2021 was amended from up 0.8% (±0.4%) to up 1.0% (±0.4%).
Corporate Profits
US Corporate Profits Unexpectedly Rise in Q1. Corporate profits in the United States jumped 1.7 percent to USD 1,983.8 billion in the first quarter of 2021, after falling 3.3 percent in the previous period and compared with a preliminary estimate of a 0.8 percent drop.
Current Account
June 23, 2021. U.S. Current Account Deficit Widens in First Quarter 2021. The U.S. current account deficit, which reflects the combined balances on trade in goods and services and income flows between U.S. residents and residents of other countries, widened by $20.7 billion, or 11.8 percent, to $195.7 billion in the first quarter of 2021. The widening mostly reflected an increased deficit on goods and a reduced surplus on primary income. The first quarter deficit was 3.6 percent of current dollar gross domestic product, up from 3.3 percent in the fourth quarter.
New Home Sales
Sales of new U.S. single-family homes fell to a one-year low in May 2021 as the median price of newly built houses soared amid expensive raw materials, including framing lumber.The second straight monthly decline in sales reported by the Commerce Department on Wednesday was the latest indication that the tailwind from the COVID-19 pandemic could be subsiding. Single-family housing benefited from a migration from cities as millions of Americans sought more spacious accommodations for home offices and schooling during the pandemic. New home sales dropped 5.9% to a seasonally adjusted annual rate of 769,000 units last month, the lowest level since May 2020. April's sales pace was revised down to 817,000 units from the previously reported 863,000 units. The median new house price jumped 18.1% from a year earlier to $374,400 in May. Economists polled by Reuters had forecast new home sales, which account for 11.7% of U.S. home sales, would be at a rate of 870,000 units in May.
New home sales are considered a leading housing market indicator as they are recorded when contracts are signed. The drop hinted at some easing in demand. Applications for loans to purchase homes have fallen this year and housing market surveys on potential buyers have also softened.
PMI Composite Flash - Services
Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 63.9 in June 2021, down from 68.7 in May 2021, but nonetheless signaling a historically elevated rate of expansion in output across the private sector. Price pressures also remained elevated in June. The rate of input price inflation softened slightly but was the second-fastest on record. Manufacturers continued to note rapid increases in raw material and fuel costs, whilst service providers highlighted higher wage bills to attract workers plus greater transportation fees and fuel costs.
The seasonally adjusted IHS Markit Flash U.S. Services PMI Business Activity Index registered 64.8 in June 2021, down from May's series record of 70.4. The marked expansion was the second-sharpest since data collection began in October 2009.June data signaled the greatest improvement in operating conditions among goods producers on record, as highlighted by the IHS Markit Flash U.S. Manufacturing Purchasing Managers' Index (PMI) posting 62.6 in June 2021, up from 62.1 in May.
Jobless Initial Claims
Jobless claims hold above 400,000 for the second week in a row Initial jobless claims totaled 411,000 for the week ended June 19, a decline from the 418,000 in the previous period but worse than the 380,000 estimate. Continuing claims decreased to 3.39 million. In other reports, durable goods orders rose 2.3%, below the Dow Jones estimate, while the final reading on first-quarter GDP came in at 6.4%, in line with expectations.
Real Gross Domestic Product - GDP
The economy grew at a 6.4% rate last quarter, unrevised from the estimate published in May. That followed a 4.3% pace of expansion in the fourth quarter. GDP report from the Commerce Department on Thursday confirmed economic growth accelerated in the first quarter, thanks to the massive fiscal stimulus. Gross domestic product increased at a 6.4% annualized rate last quarter, the government said in its third estimate of growth for the first three months of the year. That was unrevised from the estimate published last month. The economy grew at a 4.3% rate in the fourth quarter. Growth this quarter is forecast to be around a 10% rate.
Mortgage Applications
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Jobless
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Durable Goods Orders
U.S. Durable Goods Orders Rise 2.3% in May 2021. Orders to U.S. factories for big-ticket manufactured goods rose for the 12th time in the last 13 months in May 2021, pulled up by a surge in demand for civilian aircraft. The Commerce Department said Thursday that orders for durable goods — meant to last at least three years — climbed 2.3% in May, reversing a 0.8% drop in April and coming despite a backlogged supply chain and a shortage of workers. Orders for aircraft shot up 27.4% last month after climbing 31.5% in April. Excluding transportation orders — which can bounce wildly from month to month — durable goods orders rose 0.3% last month, down from a 1.7% gain in April..
Intal Trade - US. Trade in Goods
The advance estimate of the U.S. trade deficit in goods widened to $88.1 billion in May 2021 from $85.7 billion in April. The May deficit was nearly exactly the $88.0 billion shortfall anticipated by the Action Economics Forecast Survey. Exports fell 0.3% m/m (+58.6% y/y) in May following a 1.1% m/m gain in April. By contrast, imports increased 0.8% m/m (+39.2% y/y) in May after a 1.9% m/m decline in April. Even with the widening of the deficit in May, the April-May figures put the deficit on course in Q2 to be narrower than in Q1. Net exports subtracted 1.5%-points from Q1 GDP growth. The April-May figures point to net exports contributing to overall GDP growth in Q2 for the first time in four quarters.
Personal Income
PCE
Including volatile food and energy prices, the PCE index rose 3.9% for the year and 0.4% for the month. Most of the inflation increase came from energy, with prices rising 27.4% against just a 0.4% gain in food costs. The headline increase was the biggest since August 2008, just before the worst of the financial crisis hit and sent inflation on a path lower that would last throughout the longest economic recovery in U.S. history. Inflation has spiked recently amid a confluence of factors. They include supply chain disruptions in which manufacturers of key products have been unable to keep up with escalating demand that has come with the economic reopening. Soaring real estate prices also have played a factor as lumber costs have soared, though that trend has reversed lately.
Finally, the current numbers are influenced by what economists call “base effects,” or skewed comparisons with a year ago when government restrictions put much of the economy in limbo. Those base effects are likely to dissipate when the June numbers come out next month.
Consumer Spending or Real PCE
Consumer spending was flat for the month, missing expectations, while personal income declined 2%, less than the expected 2.7% drop. A separate part of Thursday’s report showed that consumer spending was flat for the month, versus the estimate for a 0.4% increase, while personal income declined 2%, less than the expected 2.7% decline. Those numbers also had been distorted, primarily by government stimulus checks that had sharply boosted both income and spending.The personal saving rate was 12.4%, a decline from April’s 14.5%.
Core PCE Price Index May 2021 - Inflation
Key inflation indicator posts biggest year-over-year gain in nearly three decades. The May 2021 core personal consumption expenditures price index, an important inflation gauge for policymakers, rose 3.4% from a year ago, in line with Wall Street estimates. That was the biggest increase since 1992 and reflective of ongoing price pressures. A key inflation indicator that the Federal Reserve uses to set policy rose 3.4% in May from a year ago, the fastest increase since the early 1990s, the Commerce Department reported Friday. Though the gain was the biggest since April 1992, it met the Dow Jones estimate and markets reacted little to the news. The stock market posted mostly solid gains, while government bond yields were moderately higher. The core personal consumption expenditures price index increase reflects the rapid pace of economic expansion and resulting price pressures, and amplified how far the nation has come since the Covid pandemic-induced shutdown of 2020. Though the reading could add to inflation concerns, Fed officials continue to insist that they see the current situation as temporary and likely to abate as conditions return to normal. The core index rose 0.5% for the month, which actually was below the 0.6% estimate.
Consumer Spentiment UM
Consumer Sentiment Improved in June. Consumers appear to feel better about the future, with a dip in expectations for inflation seen in the University of Michigan survey. The University of Michigan index of consumer sentiment improved in June to 85.5 from May's 82.9 reading, reaching the second-highest level since the pandemic. The University of Michigan index of consumer sentiment improved in June to 85.5 from May's 82.9 reading, reaching the second-highest level ...The final reading was driven by sentiment among consumers who earn more than $100,000 a year and mostly by their view of future economic conditions, according to Richard Curtin, the survey's chief economist.
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