PMI Survey Data For May Point To Weak US Growth In Q2

Survey data published by Markit Economics this week anticipates a weak US economic profile for May. Today’s flash estimate of the Services PMI for this month dipped modestly to 51.2, or just slightly above the neutral 50 mark that separates growth from contraction. The news follows Monday’s preliminary May numbers for the US Manufacturing PMI in May, which is close to a stagnant reading of 50.5. Taken together, the two updates suggest that economic activity decelerated in May.
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The Bounce-Back For 10-Year Equity Performance Has Less Bounce

The US stock market rebounded sharply yesterday, dispensing the biggest daily gain in two months. But the latest surge doesn’t change much for the trailing 10-year return, which remains well below its median for the rolling decade-long changes posted over the last 50 years. That may or may not be relevant for developing intuition about future performance, but it’s a reminder that the recovery in the US stock market in recent years still pales relative to previous boom in the 1980s and 1990s.
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Initial Guidance | 25 May 2016

● US New-Home Sales Jump to Highest Level in Over 8 Years | NY Times
● Richmond Fed: Manufacturing activity slowed in May | Richmond Fed
● Americans’ confidence in the US economy remains steady in mid-May | Gallup
● ECB’s Villeroy: Brexit Risks High for UK and Eurozone | MNI
● China’s currency fixing weakens against US$ to 5yr low | Bloomberg
● The Longer the Correction, the Longer the Bounce Back | WSJ
● German consumer morale inches higher heading into June | Reuters

Is The Case For A June Rate Hike Premature?

The Federal Reserve continued to press ahead yesterday with its public relations effort of talking up the possibility of a rate hike, perhaps as early as next month. The latest addition to the hawkish-chattering club is the Philly Fed’s Pat Harker, who advised on Monday that “I can easily see the possibility of two or three rate hikes over the remainder of the year.” The comment follows similar remarks from central bankers in recent days, including the New York Fed’s Bill Dudley, who said that “if I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation.”
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Initial Guidance | 23 May 2016

● US existing home sales rise 1.7% in April | MarketWatch
● Fed’s Rosengren tells FT: US ‘on the verge’ of meriting June rate hike | Reuters
● Euro-Area Growth Seen Slowing via PMI survey | Bloomberg
● Brexit ‘would spark year-long recession’, UK Treasury warns | BBC
● Bookmaker odds suggest UK will remain in EU | OCA
● Japan’s economy remains on a “moderate recovery” track | MNI

Book Bits | 21 May 2016

The Sharing Economy: The End of Employment and the Rise of Crowd-Based Capitalism
By Arun Sundararajan
Summary via publisher (MIT Press)
Sharing isn’t new. Giving someone a ride, having a guest in your spare room, running errands for someone, participating in a supper club—these are not revolutionary concepts. What is new, in the “sharing economy,” is that you are not helping a friend for free; you are providing these services to a stranger for money. In this book, Arun Sundararajan, an expert on the sharing economy, explains the transition to what he describes as “crowd-based capitalism”—a new way of organizing economic activity that may supplant the traditional corporate-centered model. As peer-to-peer commercial exchange blurs the lines between the personal and the professional, how will the economy, government regulation, what it means to have a job, and our social fabric be affected?
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Hawkish Fed Chatter And Another Slide In Base Money Supply

A second interest rate hike may be near, advised New York Fed President Bill Dudley on Thursday. “If I’m convinced that my own forecast is on track, then I think a tightening in the summer, the June-July time frame, is a reasonable expectation.” The release of Fed minutes from the last policy meeting fall in line with that thinking. So, too, does the April update on real (inflation-adjusted) base money supply (M0), which contracted in year-over-year terms in April, marking the third decline in the past four months.
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Initial Guidance | 20 May 2016

● Fed’s Dudley points to interest rate hike in June or July | MarketWatch
● Jobless claims fall back to earth in mid-May | MarketWatch
● US Leading Economic Index Rises More Than Expected In April | RTT
● Philly Fed Mfg Index Unexpectedly Fell In May | RTT
● Chicago Fed Index: US Economic Growth Picked Up in April | Chicago Fed
● Bloomberg Consumer Comfort Index rises in mid-May | Seeking Alpha