From bad to worse:

Another May reversal from a hopeful April gain:

Richmond Fed Manufacturing Index

Highlights
The Richmond Fed index fell a sharp 15 points in May to minus 1, adding further evidence of a serious slowdown in manufacturing activity as also indicated in last week’s Empire State and Philly Fed reports for May. Several of the survey’s key measures dropped steeply and went into contraction from previous strength, with shipments down 22 points from April to -8, backlog orders down 24 points to -13 and capacity utilization down 24 points to -6. New orders which were particularly strong in the previous two months, dropped 18 points to 0. On the employment side, wages remained at a respectable plus 15, but the average workweek fell 4 points to 6 and the number of employees index shed 4 points to 4. Only inventories and prices were a positive for manufacturing in the Richmond Fed region during May, with finished inventories up 5 points to 19 and raw materials inventories up 10 points to 25, while prices received finally showed a small improvement, rising to an annualized rate of 0.77 percent.

Unexpectedly large April jump in this volatile series. Best to wait and see what May brings before jumping to conclusions?

New Home Sales

Highlights
The new home sales report has sealed its reputation as the wildest set of data around. April’s annualized rate came in at 619,000 which is not a misprint. This is the highest rate since January 2008 and dwarfs all readings of the recovery. February 2015’s rate, way behind at 545,000, is the next highest rate this cycle. The data even include a very large 39,000 net upward revision to the two prior months, a gain that reflects annual revisions which are included in the data. The monthly 16.6 percent surge is not only far beyond expectations but is the biggest monthly gain since way back in January 1992.

The data also include a big jump in prices, up 7.8 percent in the month to a record median $321,100 while the year-on-year rate, which was negative in the March report, is at plus 9.7 percent year-on-year.

But the surge in sales is a negative for supply as supply relative to sales fell very sharply to 4.7 months from 5.5 months. The total number of new homes for sale was little changed, down 1,000 at 243,000.

Regional data show a more than 50 percent jump in the Northeast where however the number of sales relative to other regions is very low. The same is true of the Midwest where sales fell 4.8 percent in the month. The two main regions for new home sales both show outsized gains with the South up 15.8 percent and the West up 23.6 percent.

Year-on-year, total sales are suddenly up 23.8 percent, this at the same time that the median price is now well past the 6 percent rate where housing appreciation had been trending. Even though new home sales are volatile, which reflects the report’s small sample sizes, and even though low supply will limit future gains, the outlook for housing just got a big boost. Talk will build for a greater contribution from housing to overall growth. Watch for FHFA house price data on tomorrow’s calendar where another month of solid appreciation is expected.

Nice move higher but still at very low levels:

Still below the Fed’s target and ‘core’ moving down a bit year over year:

Consumer Price Index

Housing starts better than expected, permits up a bit and last month’s revised down a bit.

And, of course, no house legally gets built without a prior permit and the chart isn’t looking promising:

Housing Starts

Still down and out:

And E commerce retail sales growth is working its way lower as well:

Note the % change this year vs last year chart, which takes out all the ‘seasonal’ factors, remains negative:

Industrial Production

The two Feds are somewhat divergent. And I still don’t see the credit expansion required to offset savings desires:

Weak U.S. tax receipts suggest things are not so good for the U.S. consumer even as employment continues to grow, Deutsche Bank Chief U.S. Economist Joseph LaVorgna said Monday.The three-month moving average for U.S. jobs gains remains “good” at around 200,000 positions per month, but growth in tax receipts has fallen from about 6 percent a year ago to 3 percent today, LaVorgna said.”That tells me income growth is a lot weaker than what official numbers show, which would explain why consumer spending has been so soft,” he told CNBC’s “Squawk Box.”

The so called ‘control group’ is retail sales minus food, auto dealers, building materials, and gas stations and used as an indication of ‘core’ consumer spending.

Note that it was growing faster before 2008, when it collapsed. And while it again has grown since 2008, the annual rate of growth has been working its way lower over time:

First, this survey is ‘one man one vote’ and not ‘one dollar one vote’. So when the price of gasoline collapsed even thought it was a transfer of funds, to the penny, from sellers to buyers, there were nominally many more buyers than sellers, so this survey spiked up. And the weak retail sales since the oil related capital expenditures collapsed support this narrative.

Second, even so sentiment is not all that high vs prior cycles.

Better than expected and some upward revisions as well.

Retail Sales

Highlights
The consumer snapped back to life in April, driving retail sales 1.3 percent higher to beat Econoday’s consensus by 4 tenths and the high estimate by 1 tenth. Gains are spread throughout most of the report.

Autos are the key component, up a sharp 3.2 percent to reverse the prior month’s decline. Excluding autos, retail sales rose 0.8 percent.

Sales at gasoline stations, boosted by higher prices, also contributed strongly, up 2.2 percent in the month. But even excluding both autos and gasoline, sales still rose 0.6 percent for the third straight gain, two of which are very strong.

Apparel was a big contributor in April along with nonstore retailers and with restaurants also showing a gain. The only component in contraction was building materials & garden equipment which hints at a little cooling for what has been very solid residential investment.

Year-on-year rates all improved though total sales remain very soft at 3.0 percent. Auto sales, pulled down by tough comparisons with very strong sales this time last year, are up only 3.1 percent on the year. But other components show strength with the ex-auto ex-gas rate at a healthy 4.4 percent for a 5 tenths gain in the month.

Today’s report points to a solid start for the second quarter and gives some life to the possibility of a June FOMC rate hike.

Notice how this has flattened (decelerated):


Welcome move back up here:

Note how in the euro area it was a sudden shortfall in private sector deficit spending that reduced aggregate demand, and has yet to recover or be ‘replaced’ by either lower taxes or more public spending:

Rail Week Ending 07 May 2016: Rail Continues To Move Deeper Into Contraction

Week 18 of 2016 shows same week total rail traffic (from same week one year ago) declined according to the Association of American Railroads (AAR) traffic data. Rolling averages continue moving deeper into contraction.