New residential housing construction dipped slightly in May, falling 0.3% vs. the previous month, the US Census Bureau reports. Meanwhile, newly issued building permits rose 0.7% last month. The mixed profile also shows up in the year-over-year changes for both indicators, albeit in reverse. The key takeaway: the recent slowdown in housing construction growth will probably linger for the foreseeable future. That’s not dire news, but today’s update suggests that the housing sector’s ability to boost economic growth generally may be waning.
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Recession chatter is on the rise lately. “After seven years of expansion, the U.S. economy appears to be headed for a recession,” writes an economics lecturer at Yale. Meanwhile, Bloomberg this week advised that US recession odds increased to 55% due to a flattening yield curve. And a survey of 400 real estate professionals shows that a majority expect a recession within the next 18 months. The dark forecasts may be right—or wrong. Based on the available data to date, however, the probability is still low that the US economy has fallen into an NBER-defined recession in the recent past.
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New filings for unemployment benefits in the US increased 13,000 last week to a seasonally adjusted 277,000, the Labor Dept. reports. That’s still a low number in historical terms and taken at face value the latest report implies that the labor market will continue to expand. But today’s release reveals a worrisome return of year-over-year gains in the data—for both seasonally adjusted and unadjusted figures. It could be noise, but the pattern of late is hinting at the possibility that the tide may be turning for this leading indicator.
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The benchmark 10-year Treasury yield eased yesterday (June 15) to 1.60%–the lowest since late 2012, based on daily data via Treasury.gov. The downtick follows yesterday’s decision by the Federal Reserve to delay another rate hike. Why? The economy’s too weak to sustain another round of policy tightening, at least for the moment. As a result, the benchmark Treasury yield is closing in on its all-time low in July 2012 of just above 1.40%. Will we see a new record low at some point in the near future? No one knows, of course, but it’s premature to discount the possibility. In other words, the multi-decade bull market for bonds isn’t quite dead after all.
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US industrial activity slumped 0.4% in May, well below expectations. The monthly decline reverses April’s bounce and throws cold water on the notion that output was heading toward a summer revival. The manufacturing component fell, too, posting a 0.4% drop that pushed this slice of output into the red in year-over-year terms for the first time this year, according to this morning’s update from the Federal Reserve.
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The benchmark 10-year Treasury yield yesterday remained at its lowest level since late-2012, according to daily data published by Treasury.gov through June 14. For the second consecutive day, this widely followed rate held at 1.62%–more than 60 basis points below the level at the start of the year. The implication: the bond market is expecting that the Federal Reserve will leave interest rates unchanged in today’s FOMC meeting—and perhaps for months to come.
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Retail spending in the US rose 0.5% in May, the Census Bureau reports–a bit better than economists expected. The gain marks a sharp downshift from April’s 1.3% bounce. But April’s unusually strong advance isn’t sustainable and so it’s no great tragedy that today’s report is weaker by comparison. Overall, looking at the last two monthly increases suggests that there’s still a healthy glow for retail sales. A less-encouraging profile emerges, however, when we focus on the year-over-year trend, which is probably more reliable for analyzing the appetite for spending.
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