● US May auto sales race to strongest pace in nearly a decade | Reuters
● US factory orders fall for eighth time in nine months In April | MarketWatch
● OECD Cuts Global Growth Outlook as Investment Lags | Bloomberg
● Eurozone Growth Ticks Lower In May: PMI Composite Index | Markit
● German yields extend rise on inflation, Greek prospects | Reuters
● China’s service providers see sharpest rise in new orders for 3 years: PMI | Markit

Private nonfarm payrolls in the US are projected to increase by 167,000 (seasonally adjusted) in tomorrow’s May update of the ADP Employment Report, based on The Capital Spectator’s median point forecast for several econometric estimates. The median projection represents a fractionally lesser increase vs. April’s rise.
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Judging by the comments of several high-profile perma bears, the US economy should be in recession any day now. But the Treasury market seems to be reading a different script.
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● US consumer spending flat in April, higher incomes boost savings | USN&WR
● US ISM mfg. index edges up to 52.8%, beats expectations | MarketWatch
● Global manufacturing growth ticks higher in May: PMI | Markit
● Slowest increase in US mfg. new orders for almost 18 mos. | Markit
● Eurozone y-o-y consumer prices in May rose for the first time in 6 months | WSJ
● German Unemployment Falls In May | RTT
● Greece debt crisis talks held as deadline nears | BBC

Consumer spending was unchanged in April, the US Bureau of Economic Analysis reports, but income delivered a better-than-expected rise. There’s also upbeat news for private-sector wages for April, which posted moderately stronger growth–growth that translates into a faster year-over-year gain. The firmer numbers on wages, the primary source of personal income, implies that the recent softness in consumption is self-imposed rather than the blowback from a slump in household earnings. The upward trend in the income ledger is still modest, but it provides another clue for arguing that the US economy isn’t in danger of sliding into a new recession.
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Gross domestic product (GDP) is down, but gross domestic income (GDI) is up. One hints at the possibility of a recession for the US while the other still points to growth, albeit at a lesser pace than we’ve seen recently. GDP retreated by 0.7% in the first quarter, but GDI—considered an alternate and arguably superior measure of economic activity—increased 1.4% (real seasonally adjusted annual rates).
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Positive performance was a rare commodity in May for the major asset classes. With the exception of US stocks and a fractional gain for US high-yield bonds, red ink dominated last month’s return ledger. The big loser: emerging market stocks in US dollar terms. After surging in April, posting the biggest monthly advance in more than three years, the MSCI Emerging Markets Index gave up a more than half of that gain and stumbled 4.0% last month.
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● US Economy Contracted 0.7% in First Quarter | NY Times
● Forget GDP: Here’s the new way Wall Street is measuring the US economy | BI
● Consumer Sentiment in U.S. Decreased in May to Six-Month Low | Bloomberg
● Eurozone Manufacturing Recovery Continues In May | RTT
● Germany May Manufacturing PMI 51.1 vs Flash Reading 51.4 | Bloomberg
● UK CIPS May Manufacturing PMI Lower Than Forecasts | MNI
● Greece faces crucial week of IMF repayments | BBC

● Hubris: Why Economists Failed to Predict the Crisis
and How to Avoid the Next One
By Meghnad Desai
Review via Times Higher Education
Far from being finally tamed, as much of the economics profession liked to boast, boom and bust was just on hold for a while. As Desai argues, the idea of automatic equilibrium is a dangerous delusion. Disequilibrium, not equilibrium, is the natural order. “Capitalism is a dynamic system but it works through creating cycles and crises. It is a disequilibrium system.” In seeking an explanation for the post-2008 crisis, Desai turns to “long wave” theories, such as the one developed in the 1920s by the Russian economist Nikolai Kondratieff, that predict periodic turbulence rather than equilibrium. He suggests that 2008 was at the tail end of the upswing phase of a 40-year-long Kondratieff cycle that began with a downswing lasting from the early 1970s to the early 1990s.
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As expected, US GDP for the first quarter was revised down to a modest decrease in today’s update from the Bureau of Economic Analysis. Economic activity slumped 0.7% in the first three months of the year in seasonally adjusted annualized terms, below the mild 0.2% rise previously reported. The negative revision certainly adds a bit more gloom to the macro outlook. But for the moment it’s still reasonable to reserve judgment. The headline data for the quarterly comparison looks troubling, but it’s not yet a definitive signal that the economic recovery is dead.
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