Retail Sales

US retail sales rose at a solid pace in April, a sign that consumers may be rebounding from weak spending seen earlier this year and is driving stronger economic growth. Retail sales increased at a 0.3 percent rate in April, down from a 0.8 percent gain in March, revised higher from the original 0.6 percent gain. The spending gains were spread across most retail categories, with large gains in both furniture and clothing stores. Consumer spending has rebounded in the past two months after a weak beginning of the year in the first two months of January and February, this acceleration trend could accelerate growth in the next April-June quarter. Consumption growth is on track for a large rebound in the second quarter which should push the overall GDP growth up to more than 3 percent; this would be an improvement from the first quarter, January-March, when the economy expanded at a 2.3 percent rate. A strong job market, which is showing early signs of lifting Americans’ incomes, could help drive spending gains in the months ahead. Tax cuts have also left most US households with more money to spend, though that extra cash has been eroding in the recent weeks by the sharp jump in gasoline prices. The unemployment rate is at a 17-year low od 3.9 percent. And measures of consumer confidence remain mostly healthy despite the higher gas costs and rocky stock market. Retail sales data show that clothing store sales jumped 1.4 percent fueled by price cuts.

Business Inventories

US business inventories remained the same in March after recording a rise in sales, falling short of predictions of a 0.1 percent gain. Inventories were still up 3.8 percent on a yearly basis, however. Total sales rose 0.5 percent, led by a 0.7 gain for retailers. The total business inventories/sales ratio based on seasonally adjusted data at the end of March was 1.34. The March 2017 ratio was 1.38.

Housing Market Index

The Housing Market Index is a gauge of builder opinion on the relative level of current and future single-family home sales. Readings above 50 indicate a favorable outlook on home sales, and below 50 indicates a negative outlook. The latest reading of 70 is up 2 from last month’s revised number. This is the fourth time the Housing Market Index has reached 70 or higher this year. This solid May report shows that builders are confident considering the growing consumer demand for single family homes.

Mortgage Applications

Mortgage applications decreased by 2.7% for the sixth straight week of declines, as mortgage rates reached a seven year high this week. The refinance index dropped 4% while the purchase index fell 2% from last week. The refinance share of mortgage activity decreased from last week’s 36.3% to 35.9% of total applications, still at the lowest level since September of 2008.

Housing Starts

US housing starts fell short of expectations coming in at 1.287 million in April vs. an expected 1.310 million, dropping 3.7 percent from 1.336 million. Building permits are also below March’s pace of a revised 1.310 million units last month to a declining 1.350 million rate.

Jobless Claims

New applications for US jobless benefits increased more than expected last week, but the number of Americans on unemployment fell to its lowest level since 1973, pointing to diminishing labor market slack. Initial claims for state unemployment benefits rose 11,000 to a seasonally 222,000 for the week ending in May 12th. This was slightly above economists’ predictions of a gain of 215,000. The labor market is viewed as being close to or at full employment with the jobless rate near a 17 ½ year low of 3.9 percent. This rate is near the Federal Reserve’s forecast of 3.8 percent unemployment rate by the end of the year. The four-week moving average of initial claims is viewed as a better measure of labor market trends as it irons out volatility that occurs week to week. The four-week average fell 2,750 to 213,250 last week for the lowest level since December of 1969.

Leading Indicators

A composite index of leading economic indicators saw gains for the sixth straight month in April. The Leading Economic Index gained 0. Percent to 109.4 matching economists’ expectations. In April stock prices and housing permits were the only negative contributors whereas the labor market components which made negative contributions in March, improved in April. The measure of the 10 key metrics of economic movement jumped 0.3 percent to 109 in March which followed a gain of 0.7 percent in February. Aprils increase and continued uptrend suggests solid growth that should continue into the second half of 2018.