Sprouts of green wheat grass are all over the U.S. economy, but like a Uruguayan soccer player, housing and Q4 GPD continue to take their bites of the economy’s muscle building amino acids. Our advice is to look ahead, not back. Clinging to past economic data will only benefit the minority political party. We’ll get enough of that between September and November.
First on Monday, the Chicago Federal Reserve reported that its National Activity Index for May rose to 0.21, up from -0.15 in April. A measure of 0 indicates equal trend growth, while negative numbers suggest below trend growth. So, while 0.21 is low, it’s still a positive trend.
Also, on Monday, Markit’s Manufacturing Indices for China, Japan and the U.S. suggested an expanding global economy, though Europe lagged somewhat behind us. Overall, U.S. manufacturing activity increased 1.1 to 57.5 in May from 56.4 in April. Anything over 50 suggests expansion. This is the highest month-over-month increase since May 2010.
Finally, the National Association of Realtors reported that, contrary to housing data later in the week, housing is showing signs it’s the little sprout that could. May’s existing home sales increased 4.9 percent, the largest increase since August 2011.
Just as we were ready to dance the housing market jig, however, the S&P/Case-Shiller Index reported on Tuesday that the pace of year-over-year home sales slowed in April and property values in April increased 10.8 percent. While that’s a positive number, it’s the smallest increased since April 2013 and 1.6 percent slower than March’s 12.4 percent increase. The U.S. Federal Housing Finance Agency pretty much confirmed S&P/Case-Shiller when its own housing index for April’s came in flat.
That’s it for Tuesday. Tuesday kinda sucked. Monday’s May housing report was better. As we said, look ahead (May’s data, as opposed to April’s).
Wednesday brought about news that confirmed the fourth quarter of 2013 was bad. First the Commerce Department reported that fourth quarter GDP was actually -2.9 percent, rather than the previously reported -1 percent. Yes, those are negative signs you see. This suggests that more factors than bad weather played a role in contracting the economy, so both political parties were right. Then, the Bureau of Economic Analysis, a department within the Commerce Department, reported that first quarter corporate profits came in 3.0 percent lower than first quarter 2013 and 9.8 percent below fourth quarter 2013. This suggests the miserably revised fourth quarter 2013 GDP number may creep into first quarter 2014 GDP. Because of these factors, economists, who are frequently surprised by their poor estimates, have pared back second quarter 2014 estimates.
The Labor Department reported on Wednesday that fewer people than hosts off The View have lost jobs as initial jobless claims for the week ended June 21 remained at post-recession lows as it fell a modest 2,000 to 314,250. This suggests business confidence. Hopefully business looks forward, rather than at their Q1 profits. The service sector again led the way, according to Markit, as its service sector index increased to 61.2 in June, up from 58.1 in May.
As a prelude to Friday, personal incomes increased 0.4 percent, according to the Bureau of Economic Analysis. Despite that, the Commerce Department reported that consumer spending increased by a modest 0.2 percent, but after adjusting for inflation fell for the second month in a row. Much of the blame for this has been put on weak healthcare spending.
Durable goods orders, also, dropped by 1 percent in May, reported the Commerce Department. Fingers are pointed towards the Pentagon for reduced defense spending, but we’re about to start a war and ramp up another. So, durable goods orders may improve in the near future. When nothing else works to ramp up the economy, start a war. Orders for everything else, excluding defense, rose 0.6 percent.
Rounding out Wednesday’s news, the Mortgage Bankers Association reported that mortgage applications for the week ended June 21 fell 1 percent. Both the refinance and initial applications indices decreased 1 percent, as well. Nationally housing remains volatile. Check local market if you must buy a home.
On Thursday, Bloomberg reported that its June consumer comfort index remained unchanged from the week prior at 37.1. This interests us, as much of the economic news has been mixed to poor and consumers don’t seem to be bothered. Then, the Kansas City Fed broke our manufacturing hearts when it reported its manufacturing composite index fell to 6 in June from 10 in May. Unlike their peers in NYC and Philly and the nation as a whole, manufacturing in the Plains hurts. The cause for this is being blamed on lack of skilled workers. Job opportunities are in the Plains and in the Coal States if you can put your weed down.
On Friday, the Department of Agriculture reported that diseases and droughts continue to push up food prices. Because of California’s drought, consumers can expect a 28 percent increase in avocados (my guacamole!), 34 percent increase in lettuce (my low-carb burgers!) and a general increase in fruit prices by 6 percent (my colon!). It’s not too late to start that backyard garden.
Finally, the Thomson Reuters/University of Michigan consumer sentiment report showed that despite the mixed economic news, consumer sentiment increased to 82.5 in June, up from 81.9 in May. This could be due to increased wages and the slower rate of unemployment or just general delusion.
There are things, such as weather and disease, over which we don’t have much control. You can, however, negotiate some of your bills. With the increase in food and gas prices, adjust your consumption and call your other billers to negotiate your bills down. You won’t bat a thousand, but any little bit helps. If you need additional cash and are an investor, consider creative ways to generate more. Options are a riskier investment, especially if you don’t know what you’re doing. Educate yourself before considering this strategy. This is not a recommendation specifically for you, but a general suggestion.
If you’re not an investor nor comfortable with such complex recommendations and still have a job, consider a job change. Sure, this is easier said than done in this environment, but doing nothing produces nothing. Those who remain committed to their employer, tend to be take advantage of over the life of their career. Yours isn’t your grandfather’s job.
If you’re a teenager stuck in a minimum age job, don’t worry. There’s hope for you. Consider these creative and ingenious ways to become financially independent by the time you reach adulthood because eventually you and your friends must move out of your parent’s house. If this book doesn’t help, maybe Hillary Clinton will. The next presidential election is in 2016 and in today’s economy, neither Hillary nor you can start too early otherwise you may contract spoiled adult child syndrome.
If all else fails, give like Colorado’s own Amy Adams.
That’s the economic and personal finance news you need to know this week. Come back every Saturday for the Debt Free Guys’ brief and lighthearted take on news you may otherwise find boring. Finally, if you haven’t already, buy a copy of the #MoneyConscious Student for the eventual or current college student in your life. This will position them for future financial success because, at the end of the day, it’s not how much you make but how much you save and invest.