Consumer economic recovery on the horizon?

U.S. economic data suggests a consumer recovery coming out of weak first quarter economic data. May retail sales grew 1.2%, but only 1% excluding strong auto sales. Confidence among consumers and small businesses is improving as shown in the following reports:

  • National Federation of Independent Business (NFIB) Small Business Optimism Index up 1.4 points in May to 98.3.
  • Preliminary University of Michigan Consumer Sentiment for June is up 3.9 points to 94.6.

Labor market conditions continue to point to improvement.

  • Federal Reserve (Fed) Labor Market Conditions Index rose 1.3 points in May.
  • Weekly Initial Jobless Claims are at 279,000, the 14th consecutive week below 300,000.
  • Job openings rose to 5.38 million in April.

The improving tenor of economic data is supportive of our view that the Fed will increase interest rates at the September meeting. This week, consumer prices for May should also allay fears of deflation, with continued improvement in core prices, reflecting stronger housing and labor markets.

Outside the United States, data was mixed. Inflation data from Europe seems to indicate deflation pressures are abating while China continues to see softer prices. Growth in Japan for the first quarter was solid, rising 3.9% (annualized), but April industrial production data softened for Europe, outside of Germany. Despite monetary easing policies across these regions, economic activity appears to be slow, with few signs of acceleration.

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Robert L. Haworth, CFA, is a senior investment strategist and Darrell Behnke is the Madison market leader for the Private Client Reserve of U.S. Bank.

This information represents the opinion of U.S. Bank and is not intended to be a forecast of future events or guarantee of future results. It is not intended to provide specific advice or to be construed as an offering of securities or recommendation to invest. Not for use as a primary basis of investment decisions. Not to be construed to meet the needs of any particular investor. Not a representation or solicitation or an offer to sell/buy any security. Investors should consult with their investment professional for advice concerning their particular situation. The factual information provided has been obtained from sources believed to be reliable, but is not guaranteed as to accuracy or completeness. The organizations mentioned in this publication are not affiliates or associated with U.S. Bank in any way.

Past performance is no guarantee of future results. All performance data, while deemed obtained from reliable sources, are not guaranteed for accuracy. Indexes shown are unmanaged and are not available for investment.

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