In an increasingly familiar pattern, data was mixed again this week. Forward-looking indicators were generally positive and consistent with improved economic performance this summer.
After slumping through February and March, residential construction activity rebounded in April. Total housing starts surged by 20.2 percent to a 1.135 million unit annual rate in April, with gains in both single-family and multifamily units. Total permits were up by 10.1 percent in April, to a 1.143 million unit rate.
According to the National Association of Home Builders, builder confidence dropped in May, by two points to 54, following a strong April survey. Fifty-four is still a good number, but it does imply a little giveback in May after the strong April data. That said, we continue to expect firmer residential construction activity and home sales this summer.
The Conference Board’s Leading Economic Index for April increased by 0.7 percent, helping to reduce concern about the weak and somewhat controversial Q1 real GDP growth of +0.2 percent. We expect to see a negative revision, bringing Q1 real GDP growth down close to -0.5 percent. The strong gain in the leading indicators index for April reinforces expectations for a rebound in real GDP growth for Q2 and Q3. The coincident index and the lagging index also increased in April, showing the breadth of economic momentum.
Existing home sales for April dipped by 3.3 percent to a 5.04 million unit rate, after a strong March report. We can’t say yet that existing home sales have broken out of their near-5.0 million unit range, where they were for most of 2014.
Labor data looks good halfway through the second quarter. Initial claims for unemployment insurance increased by 10,000 for the week ending May 16, to hit 274,000, still a very good number. Continuing claims for the week ending May 9 fell by 12,000 to reach 2,211,000.
The Federal Reserve Bank of Philadelphia’s regional manufacturing survey notched down, but to a still positive 6.7 in May. The Kanas City Fed’s regional manufacturing survey declined sharply in May to –13. A strong dollar and a weak energy sector were blamed.
The Consumer Price Index for April increased by 0.1 percent. Energy prices were a small drag.
The minutes of the Federal Open Market Committee meeting of April 28/29 confirm that the Fed is unlikely to begin lifting the fed funds rate in June. We still think September is the most likely month for lift-off.
For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly 05-22-15.