Several economic reports in recent weeks have raised questions about the strength and durability of US growth for the near-term future, but a broad review of the numbers through May still suggest that the general trend remains positive. Certain corners of the economy paint a worrisome profile—industrial output, for example. Nonetheless, a diversified mix of indicators from across the US macro spectrum imply that NBER won’t declare May as the start of a new recession.
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● U.S. Housing Starts Pull Back, but Permits Point to Pickup | WSJ
● Preview – Fed eyes mixed bag of data as new rate “regime” nears | Reuters
● UK Jobless Remains At 7-year Low; Wage Growth Tops Forecast | RTT
● Bank of England officials unanimous in keeping rates on hold | WP
● Greek Central Bank Warns of ‘Uncontrollable Crisis’ if Bailout Talks Fail | WSJ

Is the US on the cusp of a new recession? The latest numbers on industrial production suggest that business-cycle risk is rising. Why, then, don’t we see confirming signals from other key indicators? Notably, payrolls are still rising at a solid pace (in year-over-year terms)—ditto for real personal consumption expenditures. The industrial sector is clearly weak, and getting weaker, but for the moment this appears to be an isolated downtrend. It could turn out to be something darker, although a broad review of the numbers suggests otherwise, based on current data.
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● US industrial output hurt by weakness in manufacturing, mining | Reuters
● NY Fed Manufacturing Index Unexpectedly Falls in June | WSJ
● US manufacturing sector said to be in a technical recession | MarketWatch
● US Housing Market Index Jumps To Nine-Month High In June | RTT
● UK Inflation Turns Positive In May | RTT
● ZEW: German economic sentiment hits 5-month low | MarketWatch

Housing starts are expected to total 1.083 million units (seasonally adjusted annual rate) in tomorrow’s update for May, according to The Capital Spectator’s average point forecast for several econometric estimates. The projection represents a moderate decline in residential construction vs. April.
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The US equity market has regained front-runner status for the trailing one-year return (250 trading days) among the major asset classes, but the edge is looking considerably less impressive compared with the glory days of recent years. In fact, rolling one-year returns overall are a diminished lot lately, based on our standard set of ETF proxies that track broad measures of the global opportunity set. There are fewer positive returns for the trailing 250-day period while the performance histories that are still in the black reflect relatively modest gains  vs. recent history. In short, earning a risk premium isn’t getting any easier.
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● US Airstrike in Libya Targets Planner of 2013 Algeria Attack | NY Times
● US Consumer sentiment rebounds in early June | CNBC
● U.S. Producer Prices Climb as Oil Stabilizes | WSJ
● Greece Enters Fateful Week as Brussels Talks End Fruitlessly | Bloomberg
● U.S. gas prices rise but appear to be peaking: survey | Reuters
● Eurozone merchandise exports rise 9% in April 2015 vs. year ago | Eurostat

US industrial production is expected to increase 0.1% in tomorrow’s May report vs. the previous month, according to The Capital Spectator’s average point forecast for several econometric estimates. The average prediction represents a modest rebound from April’s 0.3% decline.
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● The Next Financial Crisis and How to Save Capitalism
By Hossein Askari and Abbas Mirakhor
Summary via publisher (Palgrave Pivot)
The financialization of the economy – the rapid growth of the financial sector relative to the real sector and their decoupling – has brought a number of interrelated problems which have contributed to growing income and wealth inequality. In this work, Hossein Askari and Abbas Mirakhor assert that it is time to make a bold change by putting our financial house in order and on a better path. Patchwork solutions such as higher capital requirements for banks and better regulations, supervision and enforcement are important, but at best they will only delay another inevitable financial crisis with devastating fallouts. The authors identify the prevalence of debt financing as the heart of the problem, and advocate for a fundamental reform of the financial system that reduces the supremacy of debt and increases the fraction of reserves in fractional reserve banking.
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Should we continue to consider the weekly jobless claims data as one of the more “reliable” leading indicators of the US business cycle? If the answer is “yes” — as it should be — then yesterday’s update continues to offer an encouraging outlook for the economy. Although new filings for unemployment benefits ticked up by 2,000 in the first week of June to a seasonally adjusted 279,000, that’s close to a 15-year low. In other words, the implied forecast remains upbeat for the labor market and, by extension, the US macro profile.
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