Edge and Odds

The enemy of knowledge is not ignorance, it’s the illusion of knowledge (Stephen Hawking)

It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so (Mark Twain)

Edge and Odds

Invest with smart knowledge and objective odds

NEW$ & VIEW$ (29 JUNE 2016)

My timing was pretty good. Apart from Brexit (from the Euro and out of the Euro Soccer ball), there wasn’t much on the eco and finance world in recent days. But the Atlantic salmon was very present on the Moisie River.

U.S. Consumer Spending Rose 0.4% in May Consumer spending climbed in May, suggesting a key pillar of the U.S. economy has bounced back after a lackluster start to the year.

Personal spending, which measures how much Americans paid for everything from autos to airfare, increased 0.4% in May from a month earlier, the Commerce Department said on Wednesday. Consumption had climbed a revised 1.1% in April and was flat in March. (…)

Personal income, which includes wages, government benefits and other sources, climbed 0.2% in May. Wages and salaries advanced 0.2%. (…) The personal saving rate in May was 5.3%, the lowest level of the year and well down from a near-term peak of 6% in March.

The personal-consumption expenditures price index rose 0.2% in May from the prior month. From a year earlier, the index climbed 0.9%.

So-called “core” prices, which exclude the volatile categories of food and energy, climbed 0.2% from the prior month and 1.6% from a year earlier.

From Bloomberg:

After adjusting for inflation, which generates the figures used to calculate gross domestic product, purchases rose 0.3 percent in May after a 0.8 percent increase in April that was also the biggest gain since August 2009.

Here’s the darker way of looking at the same numbers:

After an exuberant April, spiking hope that everything was awesome with a surge in spending, May has dragged US consumers back down to earth. The 1.1% (revised) jump in spending in April (highest since Aug 09) is over as May’s 0.4% gain is back in the land of ‘normal’ once again. Income rose just 0.2% MoM (less than expected) slowing dramatically from last month to near the weakest YoY growth since March 2014. The savings rate fell once again on the back of this (down 0.1%) to 5.3%. (…)

Pending Home Sales Skid in May

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, slid 3.7 percent to 110.8 in May from a downwardly revised 115.0 in April and is now slightly lower (0.2 percent) than May 2015 (111.0). With last month’s decline, the index reading is still the third highest in the past year, but declined year-over-year for the first time since August 2014.

Lawrence Yun, NAR chief economist, says pending sales slumped in May across most of the country.

U.S.FLASH SERVICES PMI REMAINS WEAK AT 51.3

June data highlighted another subdued month for the U.S. service sector, with activity growth remaining marginal and job creation easing to its least marked for a year-and-a-half. Incoming new work increased at the fastest pace since January, but the rate of expansion remained weaker than its post-crisis trend. Meanwhile, service providers indicated another drop in confidence regarding the year-ahead business outlook, with the latest reading the weakest since the survey began in late-2009.

At 51.3 in June, the seasonally adjusted Markit Flash U.S. Services PMI™ Business Activity Index was unchanged since May and only marginally above the neutral 50.0 threshold. As a result, the average reading for the second quarter of 2016 (51.8) was only slightly stronger than seen during the first three months of the year (51.4).

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Reports from survey respondents suggested that relatively subdued demand continued to weigh on activity growth in June, reflecting heightened economic uncertainty and risk aversion among clients. Latest data signalled only a moderate increase in new business volumes, although the pace of expansion picked up slightly since May and was the strongest for five months.

Staffing levels increased across the service economy in June. However, the rate of job creation eased for the third month running and was the slowest since December 2014. Softer employment growth in part reflected a lack of pressure on operating capacity at service sector firms, as highlighted by a sustained reduction in unfinished work during June.

Meanwhile, input cost inflation remained subdued and slowed to its weakest since March. This in turn acted as a brake on output charge inflation across the service sector, which remained marginal and eased since the previous month.

Looking ahead, service sector companies indicated subdued confidence regarding the one-year ahead outlook for business activity. The degree of positive sentiment moderated for the second month running and was the lowest since the survey began over six-and-a-half years ago.

Markit Flash U.S. Composite PMI™

Adjusted for seasonal influences, the Markit Flash U.S. Composite PMI Output Index registered 51.2 in June, up only fractionally from 50.9 in May. The latest reading signalled a marginal expansion of U.S. private sector output. Both the service economy (‘flash’ index at 51.3 in June) and the manufacturing sector (‘flash’ output index at 50.9 in June) recorded subdued rates of expansion.

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Chris Williamson, chief economist at Markit said:

The survey data indicate that any rebound in the economy from the weak first quarter was largely confined to April, and that growth has since faded again. The June PMIs, which provide the first insight into national business activity in the second quarter, suggest the underlying rate of growth in the economy is only a meagre 1%.