Equity markets had an uneventful week, as Federal Reserve Chair Janet Yellen said she still expects to raise rates this year if the economy continues to strengthen. However, she made it clear that the pace of increases will be gradual, and the market cheered a perceived reluctance to raise rates in the release of the April policy meeting minutes until the U.S. economy strengthens further.
Once again, lukewarm economic data supported that stance, remaining mixed as the manufacturing Purchasing Managers Index (“PMI”) slowed for the second straight month. In April, U.S. Housing starts rose to a seven year high, but existing home sales fell by 3.3%. The U.S. Consumer Price Index (“CPI”) rose 0.1% in April, but fell 0.2% for the 12 months through April. Energy prices fell 1.3% in April. They have fallen 19.4% from last year, and are the leading contributor to the low CPI numbers.
Continuing the data onslaught, core prices excluding food and energy climbed 0.3% for the month and 1.8% for the year. Finally, U.S. jobless claims rose 10,000 to 274,000, but the four-week moving average fell 5,500 to 266,250. Continuing claims were down 12,000 to 2.21 million. All the claims data are at lows since 2000.
Across the pond, Eurozone and German data showed a loss of economic momentum. Purchasing manager surveys for the Eurozone slipped, Germany’s economic growth slowed in May, and the business climate index of Germany’s Ifo Institute declined for the first time in seven months. Continuing the theme, China’s PMI fell in May, the third straight monthly decline and the fifth in six months. Export orders dropped to a 23-month low. It will be difficult for the U.S. economy to overheat with a global economy that continues to struggle.
We trust you enjoyed the Memorial Day weekend, and we are mindful of the price that has been paid and continues to be paid by those who serve and lay their lives down to protect the rest of us. We cannot thank you enough for your service.