US Stocks rose this week encouraged in part because the FED thinks the economy is becoming strong enough to withstand interest rate increases later this year but also encouraged that the FED will likely raise rates very gradually. Generally the economic news released this week was positive. Oil prices declined slightly during the week and the dollar declined slightly. A summit Monday between European leaders may help to begin a solution regarding Greek debt. In particular this week:
·The Federal Reserve reported that manufacturing output fell 0.2% in May. From a year ago factory production is up only 1.8%. Keep in mind that manufacturing only accounts for 12% of the US economy while consumer spending makes up the largest part of the economy. The broader industrial production index also fell 0.2%. The strong dollar hampering exports and the collapse in oil prices affecting drilling activity were cited as reasons for the decline. Still manufacturing is barely higher than before the great recession started.
·The Commerce Department reported that housing starts declined 11% in May following the sharp 22% increase in April. However, permits increased 12% in May signaling future gains in home construction.
·The Labor Department reported
oConsumer prices rose 0.4% in May. Excluding volatile food and energy, consumer prices rose a modest 0.1%. The price increases came in less than expectations. From a year ago consumer prices were unchanged. Excluding food and energy consumer prices were up 1.7% from a year earlier.
oThe average hourly wage grew 0.3% in May. Adjusted for inflation wages fell 0.1%.
oFirst time claims for unemployment in the prior week fell 12,000 to 267,000. The four week moving average of claims fell 2,000 to 276,750.
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