The recent stumble in US economic data raises new questions about the timing of the Fed’s plans for raising interest rates. The earliest forecast for the first round of tightening monetary policy has been pushed up to September, although some analysts say that the turning point for rates will come later, perhaps early next year. Much depends on the incoming data, of course. Meantime, what is the Treasury market telling us? One way to cut through the noise in search of signals is to calculate a series of moving averages on Treasury yields. By that standard, the market’s sending mixed messages these days. The 2-year yield—considered to be the most sensitive spot on the yield curve for rate expectations—is trending up. The 5- and 10-year yields, by contrast, continue to trend lower, although there are some clues that suggest that the slide has run its course in longer-term maturities.
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● US Jobless Claims Rise, But Job Growth Still Seen Strong | WSJ
● US pending home sales race to nine-year high in April | Reuters
● Consumer Comfort in US Slumps on Views of Buying Climate | Bloomberg
● Eurocoin Business Cycle Indicator Rises Further In May | RTT
● German retail sales rebound in April | Reuters
● French Consumer Spending Rebounds Less Than Expected In April | RTT
● Weak Household Spending, Inflation Dampen Japan Economic Outlook | RTT
● Is China easing losing its mojo? | CNBC

New claims for unemployment benefits in the US increased last week, but the trend remains encouraging. The consensus forecast told us that claims would post a modest dip to a seasonally adjusted 270,000 in today’s release for the week through May 23; instead, filings jumped to 282,000, the US Labor Department reports. But the four-week average, which is close to a 15-year low, barely budged and the year-over-year change continues to fall at a healthy rate. In short, there’s not much news in today’s update, which means that this leading indicator continues to point to ongoing growth for the labor market.
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Earlier this week Fed Vice Chairman Stanley Fischer laid out the conditions for raising interest rates. “The tightening of US policy,” he said in prepared remarks for a speech in Tel Aviv, “will begin only when the U.S. expansion has advanced far enough–when we have seen further improvement in the labor market and when we are reasonably confident that the inflation rate will rise to our 2 percent goal.”
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● US mortgage applications post 5th consecutive decline | Consumer Affairs
● US Redbook Retail Sales Index +1.8 month to date in May vs. year ago | MNI
● ECB Nowotny: ‘No Flexibility’ On Rules To Support Greece | MNI
● China factory PMI seen as lackluster in May despite stimulus moves | Reuters
● UK to quit EU unless reforms go through, says UK foreign minister | Guardian
● Russia masses heavy firepower on border with Ukraine | Reuters

How’s that second-quarter rebound working out for the US? It’s still a shaky affair, but there are signs that the macro trend has strengthened a bit, based on a preliminary review of sentiment indicators for May. At the very least, the latest numbers suggest that that the US isn’t slipping into a recession. Growth is still weak, but to the extent that we can discern a bias in the big-picture change for the current month vs. April, the comparison is positive overall via the latest round of numbers.
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● New Home Sales In US Rise 6% in April After Decline in March | NY Times
● US Home prices rose faster than expected in March | USA Today
● US service sector business activity expands at a slower pace in May | Markit
● The Conference Board US Consumer Confidence Index Increases In May | CB
● German consumer sentiment set to rise in June: GfK | MarketWatch
● UK Retailers See Strong Growth In Sales In June: CBI | RTT

The US economy is expected to grow at a faster rate in the second quarter vs. Q1, based on a variety of predictions, but the improvement may turn out to be a hollow achievement. Indeed, the hurdle is quite low for beating the near-flat expansion in the first three months of the year vs. 2014’s Q4. As for the outlook for this year’s Q2 data, which the government will publish on July 30, let’s just say that minds (and models) differ by more than a trivial degree at this point.
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● US Inflation Closer to Fed’s Goal After Core Prices Advance | Bloomberg
● Yellen says Fed on track for first rate hike this year | USA Today
● German Growth and Confidence Slip | WSJ
● Capital Economics Expects Global Growth To Pick Up In Q2 | RTT
● With Money Drying Up, Greece Is All but Bankrupt | NY Times
● A parallel currency for Greece: Part I | VoxEU

With the arrival of the Memorial Day weekend, the unofficial start of summer is here. And that, dear readers, provides an excuse for your editor to cease and desist from blogging for a few days. The usual routine resumes on Tuesday, May 26. Meantime, let’s not waste another minute. As Bill observed long ago, “summer’s lease hath all too short a date.”