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Thursday's economic reports revealed a mixed array of headlines that were modestly disappointing on balance, as the factory sector lull extended into May alongside what is proving an anemic recovery path for the housing sector. The Philly Fed survey revealed a May downtick to 6.7 from 7.5 to leave that measure still just above the 5.0 one-year low in March, with an ISM-adjusted index drop to 50.0 from 50.8. The 10,000 initial claims pop in the Bureau of Labor Statistics (BLS) survey week still left a lean 274,000 level.
Philly Fed
The Philly Fed downtick to 6.7 from 7.5 in April left the measure above the 5.0 one-year low in March but well below the 24.3 figure in December and the 40.2 two-decade high in November. The ISM-adjusted index similarly fell to 50.0 from 50.8 in April and a 47.6 two-year low in March, versus a 58.8 ten-year high in November. All the major Philly Fed components are wallowing around weak levels, with May declines for the employment, delivery and prices paid components that offset gains for new orders and shipments.
Ongoing weakness in the producer sentiment measures since November likely reflect pressure on factories from the inventory overbuild into Q1 and a petro-hit to mining-sensitive factories, alongside more temporary distortions from the port strike and weather headwinds.
The capital expenditure plans measure rose to 16.8 from 15.8 in April but a higher 16.4 in March, versus a 32.9 cycle-high in March of 2011 and a 1.4 cycle low in July of 2012. The Empire State's capital expenditure plans index fell to 15.6 from 24.5 in April, versus a 32.6 four-year high in February and a 38.2 cycle-high in May of 2010.
The Philly Fed job components fell in May after rising in April and falling in March, with fluctuations around lean levels. The employment index fell to 6.7 from 11.5 in April and 3.5 in March, versus a -2.0 two-year low in January, a 20.3 three-year high in November, and a 23.1 cycle-high in May of 2011. The workweek index fell to -5.6 from 3.4 in April and a -11.4 two-year low in March, versus a -16.4 cycle-low in June of 2012 and a 14.2 cycle-high in December of 2010.
Initial Claims
The 10,000 U.S. initial claims bounce to 274,000 in the BLS survey week reversed some of the surprisingly tightness in the prior three readings of 264,000 last week, 265,000 at the start of May, and a 262,000 cycle-low at the end of April. Claims are still tight relative to pre-May levels, and are displaying a cyclical downtrend that became obscured in early-April by a temporary spike around the Easter holiday period. Claims are averaging just 269,000 in May, following higher prior averages of 281,000 in April, 285,000 in March, 306,000 in February and 290,000 in January.
Continuing claims fell 12,000 to a 2.211 million cycle-low in the second week of May from a 2.223 million (was 2.229 million) prior cycle-low last week. Before the steep March-April declines, improvement in continuing claims stalled through the winter as seen last year, though we saw none of the summer plateau in 2014 that was evident in each of the prior four years.
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