U.S. economic data from this week confirm that the household sector is strengthening, driving a GDP rebound for the about-to-be completed second quarter. Labor market conditions are improving, home sales are ramping up, auto sales are robust and the strong majority of U.S. economic indicators are consistent with an economy that is gaining momentum.
The BEA released their third estimate of 2015Q1 real GDP growth. It now shows a -0.2 percent annual rate, revised up from -0.7 percent. At the end of July, the BEA will release their annual benchmark revision to GDP data.
May home sales confirm that the U.S. housing market is warming up. New home sales increased by 2.2 percent in May to a 546,000 unit annual rate. Existing home sales increased by 5.1 percent in May to a 5.35 million unit rate. According to the Mortgage Bankers Association, the interest rate on a 30-year fixed rate mortgage was 4.22 percent as of June 12.
New orders for durable goods declined by 1.8 percent in May. The drop reflects volatility in commercial aircraft orders, down 35.3 percent in May. Core orders, nondefense capital goods excluding aircraft, increased by a moderate 0.4 percent.
Nominal consumer spending surged by 0.9 percent in May. The personal consumption expenditure (PCE) price index was up 0.3 percent in May as energy prices gained 4.7 percent, leaving real consumer spending with a solid 0.6 percent increase. The personal saving rate dropped from 5.4 percent in April to 5.1 percent in May, reversing its climb from October through last February. After adjusting for taxes and inflation, real disposable income increased by 0.2 percent in May.
Consumer sentiment improved in June according to the University of Michigan survey.
Initial claims for unemployment insurance increased inconsequentially by 3,000 to hit a still-low 271,000 for the week ending June 20.
Federal Reserve Governor Jerome Powell said that he thinks there is a good chance that the Fed will begin to lift the fed funds rate in September, with another increase possibly coming in December. We expect to see more hints from the Fed by the end of July.
For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly 06-26-15.