Inflation and Jobs for May 15th

If you like economic data, then it’s your lucky day. The first report to hit the wires was the Consumer Price Index (CPI), which came in a little hotter than expected, up 0.3% on the headline and up 0.2% on Core CPI. The year over year number on headline is 2.0%, while the Core stands at 1.8%. This is a jump from the numbers reported last month at 1.5 and 1.6% respectively. These numbers are now closer to Fed’s target range between 2-2.5%. But the Fed prefers the Personal Consumption Expenditures (PCE) measure of inflation, which has been coming in at lower levels. Remember that PCE does not take any housing costs into consideration. In contrast, 24% of the CPI number is from housing costs. Mortgage Bonds have shown surprising strength in the face of a higher than anticipated CPI figure. Initial Jobless Claims were released for the week ending May 10th and it was the lowest number in 7 years at 297k. This was a drop of 24k from last week’s figure, which was revised slightly higher from 319k to 321k. Again Mortgage Bonds are showing resiliency after a stronger Initial Claims number.

The stronger economic news kept rolling in with the Empire State Manufacturing Survey, which measures manufacturing in the NY region, came in at 19.01. The number far exceeded expectations of a reading of 5.00. This surge in the survey is a signal for spring momentum in the manufacturing sector. The report was led by employment, which was up nearly 13 points. The Philadelphia Fed Manufacturing Survey was also released and came in a 15.4, which was a bit higher than expectations of 14.3. Industrial Production and Capacity Utilization were both slightly below expectations, but these reports have shown recent strength.

The National Association of Home Builders (NAHB) Housing Market Index for May came in at 45, the lowest number in a year. This was softer than expectations of 49, and lower than last month’s 46. This figure, which is almost in real time, tracks builders’ sentiment. Perhaps part of the reason for the softer number the median home price on homes has risen significantly. We will have to see if the weaker sentiment results in a reduction in prices.

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