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.”

How’s that second-quarter rebound holding up? Well, it’s shaky. The economic reports in the weeks ahead could tell us otherwise, but the numbers published so far for May offer a mixed bag of results for the US economy.
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● US Manufacturing PMI eases to 16-month low in May | Markit
● US Existing Home Sales Fall Short of Expectations In April | Mortgage News Daily
● US Jobless Claims Rise, But Still Point to Growing Labor Market | WSJ
● US Leading Economic Index Climbs 0.7% In April, More Than Expected | RTT
● National activity index less negative in April, Chicago Fed says | MarketWatch
● Consumers’ Expectations for U.S. Economy Drop Most Since 2013 | Bloomberg
● German Business Confidence Weakens In May | RTT

The Chicago Fed National Activity Index’s three-month average (CFNAI-MA3) ticked higher in April, but growth remained below the historical trend for the third month in a row. The latest string of three consecutive negative values represents the longest stretch of below-trend data in nearly two years. Still, CFNAI-MA3 inched up to -0.23 last month and so it remains well above the -0.70 mark that signals the start of new recessions. Nonetheless, growth is still weak by recent standards and so today’s report will continue to stoke debate about the economic outlook.
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