U.S. current gross domestic product (GDP) growth lies between “hesitant” and “robust”. With the possible exception of Japan – where the results of “Abenomics” remain up in the air – it’s the best the industrialized world has to offer at this time. The following are key leading indicators.
1. First quarter U.S. GDP growth was revised slightly down from +2.5% annualized in the initial estimate to +2.4% in the second estimate. It’s still a substantial improvement over Q4 2012’s +0.4%. Q1 personal consumption expenditures were +3.4% and investment in residential structures, consistent with the improvement in housing starts, was +12.1%.
2. The American economy created 175,000 net jobs in May, with the services sector up by 179,000. Year-over-year total employment was +1.6% and work in services was +2.1%.
3. Business and professional services (+57,000) and leisure and hospitality (+43,000) were the job-creation leaders. Work in construction (+7,000) rose, but on assembly lines in manufacturing (-8,000), it fell. The unemployment rate edged up to 7.6% from 7.5%.
4. The initial jobless claims number over the past four weeks has averaged 347,000. It spiked at 670,000 in the recession. Where it currently sits is positive news for the work force, but it would be even better if the figure fell to a range of 300,000 to 325,000.
5. The possibility the Federal Reserve will begin to “taper” back on its bond purchases is beginning to affect what have been all-time recording-setting stock market index values. But there is also media speculation that Mr. Bernanke wants to see jobs increase by 200,000 per month over a consistent stretch of time before he will advocate easing the Fed’s low interest rate stance. It will take 12 months in a row of 200,000 net new jobs for total employment in the country to return to its pre-recession peak of January 2008.
6. The Conference Board’s Consumer Confidence Index rose to 76.2 in May, its highest level in more than five year (February 2008’s level was 76.4). A helping factor has been a 2.2% year-over-year increase in average weekly earnings. The Institute of Supply Management’s latest Purchasing Managers’ Index dropped below 50.0% to 49.0% in May, indicating a contraction in manufacturing even as the economy continues to grow.
7. Shopkeepers are outperforming expectations. May’s total retail sales were +0.6% month to month and +4.3% year over year. The comparable figures for motor vehicle and parts dealers were +1.8% and +8.5%. Sellers of building materials and garden equipment saw +0.9% and +10.1%. Non-store retailers (i.e., the Internet) recorded +0.7% and +11.3%.
8. Canada’s 2013 first quarter annualized “real” (i.e., inflation-adjusted) GDP growth rate was +2.5%. The respectable gain was almost all due to an improvement in trade (especially in energy products) with the U.S. Domestic demand increased only 0.4%.
9. The Canadian labor market recorded a near-record month-to-month improvement in payroll positions in the latest month, +95,000. Construction (+42,000) made a major contribution, as did services (+65,000). Manufacturing shed 14,000 jobs. The jobless rate fell slightly to 7.1%. Average weekly earnings have increased a substantial 3.1%.
10. Housing starts in May jumped back up to the 200,000-unit level, seasonally adjusted and annualized (SAAR), after dipping to 175,000 units in April. The cause was likely due to start-ups on multi-unit projects (i.e., condo towers) for which sales were made last year.
11. Whereas U.S. light motor vehicle sales are +7.4% year to date versus January to May of last year, in Canada the equivalent percentage change is a somewhat lesser +2.4%.
12. As a side effect of the foregoing, the capacity utilization rate in Canada’s transportation equipment sector fell in Q1 of this year to 85.9% from 88.4% in 2012’s Q4 and an even better 89.7% in 2012’s Q1. Total industry’s usage, however, has improved to 81.1% in the latest quarter from 80.5% in Q4 and 80.7% in Q1 a year ago. Manufacturing’s usage rate now sits at 79.7%, about even with Q4 (79.5%) and down from Q1 2012 (81.6%).
13. Internationally, Germany’s highest court has convened to determine if the European Central Bank (ECB)’s commitment to buy short-term bonds from ailing debtor nations is legal within the confines of the nation’s constitution. It commits German taxpayers to cover foreign losses. So far, the ECB has not had to act on its promise. The mere mention of the possibility has scared off speculators and lowered interest rates for Italy, Spain and other indebted nations. If the ruling is favorable, then all will be (relatively) okay with the Euro-zone going forward. If not, there may be more financial turmoil.
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