Worse than expected and prior month revised lower, but otherwise muddling through at modest rates of annual growth:

Highlights

Aircraft had been the strength but is now the weakness for durable goods which, pulled down by a second straight downswing for commercial aircraft, fell 1.1 percent in May. When excluding transportation, a reading that excludes aircraft, orders actually rose, but not very much at only 0.1 percent which falls 4 tenths shy of Econoday’s consensus. An unquestionable negative in the report is an unexpected 0.2 percent decline for core capital goods orders (nondefense excluding aircraft).

Orders for commercial aircraft fell a rounded 12 percent for a second straight month with orders for defense aircraft, which are always volatile, also hurting May, down 31 percent. Shipments of core capital goods, like orders for this category, are another weakness in the report, down 0.2 percent and when combined with April’s tiny 0.1 percent gain, don’t point to any punch at all for business investment in second-quarter GDP.

But there are positives in the report including a solid 0.6 percent jump in machinery orders, a category that helped limit the monthly dip in capital goods. Vehicles are also a positive with a strong 1.2 percent gain that follows a 0.5 percent rise in the prior month. Shipments of vehicles are on a similar climb.

Other readings include a 0.8 percent gain in total shipments that follows, however, two prior declines and an unwanted 0.2 percent decline in total unfilled orders which is once again back in the contraction column. Inventories rose 0.2 percent which is about in line with the rate of general activity.

This report isn’t all bad but the capital goods readings are a tangible disappointment for the second-quarter outlook, pointing to lack of confidence in business prospects. The data contrast sharply with the ongoing strength in regional surveys. But in actual government data, the factory sector isn’t having a breakout year as some had hoped.

Also worse than expected:

Highlights

A decline in manufacturing production and weakness in employment combined to pull down the national activity index to minus 0.26 in May from a revised plus 0.57 in April. The production component fell to minus 0.16 from April’s 0.53 reflecting May’s 0.4 percent decline in manufacturing production. The employment component fell to minus 0.02 from 0.12 on a sharp drop in civilian employment in the household sample of the employment report and a modest slowing in payroll growth. The consumer & housing component is also a negative, at minus 0.09 from minus 0.07 and once again the result of weakness in housing permits. This report underscores how soft May really was for a second-quarter that looks increasingly at risk.

Also down a bit:

Highlights

In an understandable slowing from unusual acceleration, the Dallas Fed’s general activity index slipped to 15.0 in June vs 17.2 in May. New orders have slowed to 9.6 from May’s 18.1 with unfilled orders moving to 1.3 from 8.1. The report underscores production as an important reading and here the story is the same, slowing to 12.3 from 23.3 in May.

Price data are steady with inputs continuing to show pressure, at 15.6, but selling prices lagging significantly, at 3.6. Employment data show continued pressure for wages & benefits, at 21.1 vs 24.3, with hiring positive at a 1.3 point gain to 9.6.

Though the general activity index is at its lowest level since November last year, cooling in this report is welcome given the unsustainable rates of growth in prior months. But with the price of oil on a severe downswing right now and testing the $40 area, future acceleration for this report may be limited.

The credit collapse continues:

Trumped up expectations continue to revert:

Highlights

The economy is solid, at least the service sector, but on the whole is losing momentum, based on Markit’s flash data for June. The composite PMI slowed to 53.0 vs Econoday’s consensus for 53.8 with services also at 53.0 and manufacturing at 52.1, both short of expectations.

Services offer the best news with new orders and employment solid and optimism on the outlook particularly positive. In a special sign of strength, service companies in the sample are reporting the best gains in selling prices so far this year.

Manufacturing, however, moved to its slowest rate since September last year with both new orders and output down, offsetting gains in hiring and also inventories. Input costs slowed with selling prices here still weak.

The service strength in this report keeps it from being downbeat, though the weakness in manufacturing, which has been struggling this quarter, is not welcome.

Composite of manufacturing and services:

A bit better than expected, but no homes are built without permits, and permits are down.

Also, as per the charts, which are not population adjusted, sales have flattened recently and remain historically depressed:

Going nowhere, and with mortgage lending decelerating not much hope this will add to growth vs last year:

Highlights

Housing has been sliding which adds importance to May’s very solid 1.1 percent rebound in existing home sales to a higher-than-expected 5.620 million annualized rate. Today’s report is mostly solid throughout and includes gains for single-family homes, up 1.0 percent to a 4.980 million rate, and also condos, up 1.6 percent to a 640,000 rate.

The sales gains did not come at the expense of price concessions as the median price rose 3.2 percent to $252,800. Year-on-year, the median is up 5.8 percent and shows seller strength relative to a 2.7 percent gain for on-year sales.

Another positive is supply which, aided by strength in prices, is moving into the market, to 1.960 million vs 1.920 million in April and 1.800 million in March. Relative to sales, supply is at 4.2 months vs 4.1 and 3.8 in the prior two months.

The South is the leading and by far the largest region for sales, up 2.2 percent on the month for a 4.5 percent on-year gain to a 2.340 million rate. The West is next, up a monthly 3.4 percent to 1.220 million and a 3.4 percent gain from last year. The Northeast, which had been lagging, is showing life, up 6.8 percent on the month with the year-on-year rate up 2.6 percent at 780,000. Sales in the Midwest are May’s only negative, down 5.9 percent and down 0.8 percent on the year at 1.280 million.

The housing sector opened the year strongly but mostly fizzled during the Spring selling season. Yet this report limits that weakness and should confirm expectations for a bounce back in Friday’s new home sales report. Watch next week for pending home sales which will offer an advance indication on existing home sales in June.

This is not population adjusted. Sales remain seriously depressed:

Saudi output holding steady at reasonable levels. The set price and let quantity adjust:

Seems they’ve been reducing discounts more than increasing them lately?

Word getting around about the lending slowdown as per this chart I recently saw:

These spiked up with the Presidential election and are only slowly coming back down:

Muddling through at just over a 2% annual rate, but q2 looking weaker than q1:

Highlights

Forget about all the strength in the low sample-sized regional reports. Government data are not pointing to strength at all as manufacturing readings in the May industrial production report are a matter of concern.

Industrial production could manage no better than an unchanged reading in May while the manufacturing component fell 0.4 percent. Both are lower than expected with manufacturing below Econoday’s low estimate.

Vehicle production fell sharply in the month, down 2.0 percent in a reminder that consumer spending on autos has been very weak this year. And in a reminder of how weak capital goods data have been, production of business equipment fell 0.7 percent. Hi-tech goods, in yet further confirmation of trouble, were unchanged in the month.

The mining component is a positive in this report, up 1.6 percent for a second straight strong gain, with the utilities component also positive, at plus 0.4 percent.

But manufacturing makes up the vast bulk of the nation’s industrial sector and today’s report makes April’s strength look very isolated. This report is bad news for durables data yet to be released not to mention factory payrolls.

Note that traditional non-NAICS numbers for industrial production may differ marginally from NAICS basis figures.

Housing is sagging in line with sagging bank real estate lending:

Highlights

Home builders have been very optimistic this year but are a little less upbeat this month. The housing market index slipped to 67 in June, down 2 points from a downward revised 69 in May and just below Econoday’s low estimate. But expectations for future sales, at 76, remain unusually strong with current sales also unusually strong at 73. The one component, however, that had been coming to life is back below 50 as traffic fell 2 points to 49. Lack of traffic, and here the emphasis is on first-time buyers, does not point to renewed strength for home sales data which started the year very strong but have since slowed. Regional data are very solid with the West, Midwest, and South all clumped near composite scores of 70 while the Northeast continues to lag in the distance at 46. Watch for housing starts on tomorrow’s calendar where snap-back strength is the call.

This is part of the reason the Fed hiked rates…
;)

States tend to be pro cyclical. As tax collections slow, so does spending: