● Fed minutes signal rate hike firmly on the table for June | Reuters
● Business Inflation Expectations Rise Slightly to 1.9% | Atlanta Fed
● Despite lowest rates in a year, mortgage appls down 1.6% last week | CNBC
● Study Projects TPP Will Provide Modest Gains for US Economy | WSJ
● US ISM Survey Chiefs: Hoping For Better Months Rest of Year | MNI

Economic growth has been winding lower lately and the deceleration trend is on track to continue in April, based on The Capital Spectator’s analysis of the three-month average of the Chicago Fed’s National Activity Index (CFNAI-MA3). Tomorrow’s report for the first month of the second quarter is expected to show that the Fed bank’s business cycle benchmark will tick lower. The Capital Spectator’s average forecast of CFNAI-MA3 by way of several econometric estimates calls for a mild decline to -0.25, which is slightly below the -0.18 reading for March. The -0.25 projection is still well above the tipping point that marks the start of recessions, but the negative print continues to point to below-trend growth for the US.
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US economic growth remains sluggish, hinting at the possibility that a new recession may be near. But the numbers don’t align with a pessimistic intuition. The probability is extremely low that April marked the start of an NBER-defined downturn, based on published reports to date. Projecting a broad set of indicators into the near-term future suggests that the US will continue to sidestep a macro slump. Yes, the outlook could deteriorate if the incoming numbers stumble. But for the moment, recession risk remains low.
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● US home construction rebounds in April | MarketWatch
● US Industrial Output Up in April On Higher Utility Demand | CFO
● Inflation in US rises in April at fastest rate in 3 years | MarketWatch
● Strong US data bolsters second-quarter growth prospects | Reuters
● GDPNow Q2 GDP estimate for US ticks down to +2.5% | Atlanta Fed
● Redbook: US retail sales +0.5% YoY midway through May | TradingEcon
● Fed officials say several rate hikes are possible in 2016 | Reuters
● Rate Hike Fear In US Drags Down Stocks | Fox Business

US housing starts and industrial activity posted solid increases in April, rising by stronger-than-expected rates last month. But the upbeat news is clouded by negative trends for the year-over-year data. In the housing sector, the change in tone on the downside is conspicuous—for the first time in 13 months, new residential construction and newly issued building permits fell relative to their respective year-earlier levels. Meanwhile, industrial output rebounded sharply in April, rising by a better-than-projected 0.7%. But the improvement wasn’t enough to reverse the red ink in the annual comparison. As a result, US industrial activity contracted last month in year-over-year terms–as it’s been doing since last September.
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The spread between long and short Treasury yields has been narrowing lately, a change that some analysts see as a warning sign for US economic growth. The current numbers overall suggest that that the macro trend is sliding into the business-cycle ditch, but there’s still plenty of concern about painfully slow growth. How slow can it go before tipping into a formal recession? No one really knows, but the flatter yield curve these days is attracting attention in the wake of wobbly equity prices and mixed economic news.
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● NAHB Index Unchanged in May, Pointing to Steady Housing Growth | WSJ
● NY Fed Mfg Index fell sharply in May | MarketWatch
● Corp bonds trouncing Treasuries in 2016 | Bloomberg
● Oil near 6-month high as outages support prices | Reuters
● The economic source of the current anger | WaPo

Economists are projecting growth for the monthly comparisons in tomorrow’s April updates on residential housing construction and industrial output in the US. But while the consensus forecasts are calling for an encouraging start for the second-quarter data, the implied one-year changes are still on track to stay negative.
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The Bank of England’s governor on Friday warned that Britain risked an economic recession if citizens voted to leave the European Union (EU) in next month’s referendum. “In that scenario we would expect a material slowing in growth, a notable rise in inflation, a challenging trade-off,” Mark Carney predicted at a news conference. Prudent advice from a sober-minded central banker? Or, as critics charge, a misguided effort to sway a democratic debate by pushing an institution that should remain above the fray into the political arena?
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Broadly defined commodities bounced higher last week, topping the performance list for the major asset classes, based on a set of proxy ETFs. iPath Bloomberg Commodity (DFP) increased 1.4% for the five trading days through May 13, delivering a relatively outsized gain vs. the rest of the field.
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