Housing starts are expected to total 1.029 million in tomorrow’s update for May, based on The Capital Spectator’s median econometric forecast (seasonally adjusted annual rate). The projection represents a modest drop vs. the previously reported 1.072 million for April.
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Industrial production in May rebounded sharply from April’s decline, the Federal Reserve reports. Output advanced 0.6% last month, a strong reversal to the upside after a 0.3% drop in the previous month. The manufacturing component also revived, growing 0.6% in May vs. a 0.1% slump in April. More importantly, the year-over-year trend in industrial production (and manufacturing) continues to show improvement. Although the latest crisis in Iraq and the resulting rise in oil prices introduce a new phase of uncertainty for analyzing macro risk, today’s upbeat news at least tells us that the industrial slice of the US economy has been humming along at a healthy clip.
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Iraq, oil markets, and the U.S. economy
Econobrowser (James_Hamilton) | June 15
To summarize, my view is that the U.S. economy is less vulnerable to an oil price shock than we were in 2007. Moreover what has happened on the ground so far in Iraq should not have major immediate implications for the price of oil.
But longer term, we may have just witnessed the creation of an important new power in the Middle East. Among other spoils, ISIS apparently seized $425 million from the Iraq central bank in Mosul. From ABC News:

Analysts say the financial and strategic spoils of ISIS’s capture of Mosul and Tikrit could provide a significant, nearly unstoppable boon to its Syrian arm, helping turn the tide in the months-long battle for Deir Ezzor.

So the immediate implications for the U.S. economy may turn out to be minor. After that? The world seems to be changing.
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US industrial production in May is projected to increase 0.3% vs. the previous month in tomorrow’s release from the Federal Reserve, according to The Capital Spectator’s median econometric forecast. The expected gain represents a rebound after April’s 0.6% decline.
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● The Secret Club That Runs the World: Inside the Fraternity of Commodity Traders
By Kate Kelly
Summary via publisher, Penguin
Nestled deep in the towers of banking and finance are the commodities traders who spend their days gambling with oil, gold, and corn contracts. They’re highly educated world travelers with a penchant for risk, and they’re here to bet big on the future of the raw materials that make our economies hum. They’re wealthy, barely regulated, and can be a force for tremendous good – or ill. Now Kate Kelly, the bestselling author of Street Fighters, shines light not just on the commodities market, but also on some of its key figures. Her characters include Pierre Andurand, a hedge-fund manager who generated the winningest annual performance ever for an oil trader in 2008, and Ivan Glasenberg, whose secretive Swiss commodities giant, Glencore, has been thrown into the spotlight. Kelly paints a dramatic narrative of immense power in the hands of a few, and the so-far hapless efforts by the Obama Administration to rein in the cowboys.
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The US economic trend revived after a spring swoon, according to a markets-based profile of macro conditions. The Macro-Markets Risk Index (MMRI) closed at 10.6% on Thursday, June 12.  The comfortably positive reading suggests that business cycle risk remains low. A decline below 0% in MMRI would indicate that recession risk is elevated. By comparison, readings above 0% imply that the economy will expand in the near-term future.
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Retail sales in May rose at a lesser rate than the crowd expected, but the year-over-year trend continues to advance at a 4%-plus pace, the Census Bureau reports. Spending ex-gasoline sales doesn’t alter the generally upbeat profile. The last two monthly changes, however, show a substantial deceleration in growth. Is this a sign of trouble for the all-important consumer-spending outlook? Maybe, but if it is we’ll see a more persuasive signal in the annual pace of retail sales in the months ahead. For now, it looks like nothing much has changed in terms of the trend.
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Iraq oil shock could kill world economic recovery, experts warn
The Telegraph | June 11
As violence threatens Iraq’s oil industry, experts fear crude at $130 per barrel would damage the global economy.
Open warfare between the government and rebels in Iraq would pose a threat to the global economic recovery should oil production from the war-torn Middle East state suffer a serious disruption, analysts have warned….
“The worst case scenario is that we see production from Iraq slip down to levels in the last Gulf war, then oil could spike $20 a barrel very quickly,” Ole Hansen, vice-president and head of commodity strategy at Saxo Bank told The Telegraph.
“In that scenario, the entire economic recovery, which is still fragile, could stall and we could even slip back into recession in some regions.”
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US retail sales are expected to rise 0.2% in tomorrow’s May report vs. the previous month, according to The Capital Spectator’s median econometric forecast. The prediction represents a slightly faster rate of growth over the previously reported 0.1% gain for April.
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This is what perfection looks like: high trailing returns and low volatility. US equities (S&P 500) are up more than 18% on an annualized total-return basis over the past five years—roughly double the long-run gain. This happy state of affairs, as usual, is accompanied by a growing number of forecasts that we’ve passed over into a new norm. But we’ve been there and done that, many times, only to find out that visions of grandeur were built on sand. Reality is a series of regime shifts, where risk and return are still stochastic processes. That’s a problem–a big problem, but only if your expectations are set in stone and your portfolio mix is rigid and inflexible.
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