A flowery end to May

The good news index (GNI), a measure of the diffusion of good headline numbers among a subset of the principal Federal economic indicators, rebounded strongly in May to reach 78.9 percent. This was the best month so far in the increasingly evident recovery.

As the evidence for recovery strengthens, I’ve become something of a NBER Business Cycle Dating Committee (NBCD) watcher. (NBCD watchers are something like Fed watchers, except more intellectual and better looking. To be fair, it must be noted that Fedwatchers are far more wealthy.)

Of the four NBCD members who have made easy-to-find statements about the possibility the economy is in a recovery, three made strong statements that it was their personal view that the economy has been in a recovery for some time. The fourth indicated that we should look at a longer sequence of positive reports before deciding.

In any case, we will stick by our December 4, 2009, call that the technical indicators we make or follow point to an April 2009 turning point. We’ll also stick to our call that the NBCD will not confirm the trough until nearly Christmas.

March exports rose to $147.9 billion but imports rose to $188.3 billion, resulting in a trade deficit of $40.4 billion, up from $39.4 billion in February. Two wrongs may not make a right, but two encouraging signs for demand can lead to a negative report; score a zero.

The price index for imports increased 0.9 percent in April. About 55 percent of the April increase was attributable to higher fuel prices. Nonfuel import prices rose 0.5 percent. Export prices increased 1.2 percent in April. The April advance was led by higher nonagricultural prices. Overall, this is just too much price inflation; score a zero.

U.S. retail and food service sales increased 0.4 percent from the previous month. Not a statistically significant change—score 0.5.

U.S. total business sales for March 2010 were up 2.3 percent from February. Good.
Industrial production increased 0.8 percent in April after having risen 0.2 percent in March. Good.

The Producer Price Index for Finished Goods declined 0.1 percent in April. At the earlier stages of processing, prices received by producers of intermediate goods moved up 0.8 percent and the crude goods index fell 1.2 percent. Good, on balance.

The CPI declined 0.1 percent in April after rising 0.1 percent in March. The index for all items less food and energy was unchanged in both March and April. Good.

Real average hourly earnings for all employees rose 0.1 percent from March to April. Real average weekly earnings rose 0.4 percent over the month. Good.

Sales of new one-family houses in April 2010 were at a seasonally adjusted annual rate 14.8 percent March. Good.

New orders for manufactured durable goods increased 2.9 percent in April. Good.

Real gross domestic product increased at a revised annual rate of 3.0 percent in the first quarter of 2010. The good news is muted a bit.

Personal income increased 0.4 percent in April. Personal consumption expenditures (PCE) increased $4.0 billion, or less than 0.1 percent. Mixed, albeit a good mix.