Until recently, we have either received mixed or disappointing economic data. However, the newfound strength in the U.S. labor market will serve as a key factor for optimism moving forward. With job growth averaging more than 200,000 a month and wage growth showing marked improvements, the U.S. economy is ripe for continued household spending.
Additionally, the rebound in retail sales in May serves as a positive indication of growth in Gross Domestic Product for the second-quarter. With consumer spending accounting for nearly 70 percent of economic growth, positive reports in our nation’s GDP will be a key determinant in the months ahead.
The economy struggled coming out of the gate in 2015 just like it did in 2014, and the economic outlook has not played out precisely as we had anticipated when we released our annual forecast earlier in the year. After a weak first quarter, the economy found its footing this spring and is expected to continue its rebound. Nonetheless, our forecast of 4.1 percent for the year will likely need to be updated to account for these changes.
This month’s full report includes these highlights:
Consumer spending and retail sales rebounded in May signifying renewed momentum heading into the second half of the year.
June’s preliminary University of Michigan consumer sentiment index climbed 3.9 points from May’s 90.7 to 94.6, with much of the gain due to consumers’ belief that current economic conditions have improved.
The March headline Consumer Price Index rose 0.4 percent between April and May, somewhat slower than expected.
Gross Domestic Product
Net exports hampered GDP growth in the first quarter. Much of the volatility in the trade deficit was due to the West Coast port slowdown, taking off nearly 2 percentage points from GDP growth.
The June NAHB housing market index jumped to a reading of 59 from 54 in May, a much stronger than expected score.
The labor market received a surprise in June as the Bureau of Labor and Statistics reported private sector job growth of 260,000.
Retail Jobs and Openings
Employment, excluding auto, gas and restaurant sales, increased 23,800 in May to 12.81 million jobs seasonally adjusted, a gain of 242,700 from May 2014.
Personal Income and Spending
April Personal Income rose 0.4 percent and Personal Consumption Expenditures was flat. On a year-over-year basis, personal income is up 4.1 percent while consumption is up 2.7 percent.
Leading Economic Indicators
The Conference Board’s Leading Economic Index increased 0.7 percent in May, matching April’s increase.