Implications: Hasta la vista, slow patch. The manufacturing sector is already reaccelerating from the Japan-related supply chain disruptions that afflicted it in April and May. As we said in our Monday Morning Outlook back on May 23, the "soft patch" was largely due to the disasters in Japan that caused automakers to shift normal summer re-tooling shutdowns into the spring as well as other supply chain problems in other sectors. We were particularly pleased by the gain in the employment index to 59.9, which supports our view that next Friday's job report will show a reacceleration as well. Expect more strong reports from manufacturing in the months ahead as the Federal Reserve remains loose and consumer purchasing power continues to strengthen. Auto sales will rebound steeply over the next few months as dealers are able to replenish what are now extremely low inventory levels. However, the news was not as good in the construction sector, where building activity declined 0.6% in May (-1.5% including downward revisions to prior months). The drop in May was led by home improvements. Government construction also declined, due to street paving and schools. Commercial construction was the bright spot, growing 1.2% and led by power plants and manufacturing facilities. In other recent news, new claims for jobless benefits declined 1,000 last week, to 428,000. Continuing claims for regular state benefits declined 12,000 to 3.70 million. In housing news, pending home sales, which are contracts on existing homes, increased 8.2% in May and are up 15.5% versus a year ago. Also, the Case-Shiller index, which measures home prices in the 20 major metro areas, dipped only 0.1% in April (seasonally-adjusted) as 9 of the 20 regions had price increases. Regardless, national average prices are down 4% from a year ago and at a new post-recession low.
|
|
Posted on Friday, July 1, 2011 @ 12:11 PM
|