April showers bring May economic flowers
So much for the summer blues.
The Conference Board Monthly Indicators Consumer Confidence It was further evidence that the economy accelerated in May. A report released on Tuesday showed confidence rose to the first time in four months, defying expectations of a further decline.
Dana Peterson, chief economist at the Conference Board, reported: Strength in the labor market strengthened consumers’ overall assessment of the current situation.The percentage of consumers who said jobs were plentiful fell from 38.4% to 37.5%, but this was overshadowed by a larger drop in the percentage of consumers who said jobs were difficult to find, from 15.5% to 13.5%.
Moreover, consumers have become slightly more optimistic. Fewer consumers expect future economic, employment and income conditions to worsen.
“Compared to last month, confidence improved across all age groups. In terms of income, confidence increased the most among those earning more than $100,000. On a six-month moving average, confidence continues to be the highest among the youngest (under 35) and wealthiest (earning more than $100,000) consumers,” Peterson reported.
PMI and claims show signs of accelerating
This follows the release of preliminary S&P Global Purchasing Managers’ Index (PMI) figures last week. Unexpected surge in activity and manufacturing revivalThe survey showed business activity accelerated in May at the fastest pace in two years. The services sector led the economic recovery, posting the biggest increase in output in a year, but manufacturing also showed strong growth.
“The U.S. economic recovery is accelerating again after two months of slowing growth, with May PMI data pointing to the fastest expansion in more than two years. The data suggests the U.S. economy is back on track for another robust GDP increase in the second quarter,” S&P Global’s Chris Williamson wrote last week.
Data on initial claims for unemployment benefits tells the same story: Claims jumped to 232,000 in the week ending May 4, but that was mostly due to seasonal backlogs around school spring break. Claims have since declined to 223,000 the following week and 215,000 last week. The labor market appears to be in very good shape.
(Photo by Ümit Yıldırım/Unsplash)
These real-time economic reports tell the story: Regrowth After a brief period of relative weakness in March and April, rate cuts will likely accelerate again. If this is supported by hard data that we won’t see until June and July, it will be enough of a reason for the Fed to hold off on rate cuts for the rest of the year. Even with the soft data currently available, it seems highly unlikely that the Fed will feel confident enough to begin cutting rates in July or September.
No need to worry if consumer sentiment drops
But what about the consumer sentiment report released by the University of Michigan last week? Consumer sentiment declines in MayAt first glance, it appears to be running counter to the PMI, jobless claims and confidence reports, but the discrepancies may not be as large as they seem.
First, the final results of the University of Michigan Consumer Sentiment Index are Better than mid-monthsuggesting improvement as the month progresses. Moreover, the University of Michigan survey is far more likely to be dragged down by inflation expectations and the struggles of small businesses due to rising costs and labor shortages. In other words, the factors dragging down the consumer sentiment numbers are: It’s actually a sign of accelerating inflation..
Importantly, both the University of Michigan and the Conference Board metrics Rising inflation expectationsThis is certainly an issue that is likely to attract the attention of Fed officials when they next meet in mid-June.
A clearer picture of the economy for May will be available next week when the Labor Department releases nonfarm payrolls numbers. A strong reading will likely be enough. dashing hopes of a July rate cut And perhaps even eliminates the possibility of a September rate cut.
