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Income, Spending and Core Inflation Rise

According to the latest monthly Department of Commerce snapshot, personal incomes improved 0.4% in May. Personal spending, however, advanced just 0.2% (half the gain forecast by economists polled by Reuters) and was actually flat when adjusted for inflation. May also brought the sixth straight 0.2% monthly increase for the core PCE price index, which the Federal Reserve uses as its inflation yardstick. The core PCE was up 2.0% year-over-year through May, reaching the central bank’s annualized inflation target for the first time in more than six years.1

 

CONSUMER CONFIDENCE GAUGES SHOW JUNE DECLINES

The University of Michigan consumer sentiment index and the Conference Board consumer confidence index both came in lower for June. The UMich index dipped 1.1 points from its previous reading to a final June mark of 98.2; meanwhile, the CB’s gauge dipped 2.4 points to a still-impressive 126.4.2

 

New Home SALES JUMP 6.7%

In part, this May gain can be credited to a 17.9% surge in the South, which left new home buying in that region at its best annual pace in 11 years. The Census Bureau also noted that the median new home sale price fell 3.3% across the 12 months ending in May.3

 

A LOSING WEEK, BUT A WINNING QUARTER

All three of the major Wall Street indices retreated last week. The S&P 500 lost

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Retirement...How Much is Enough

When It Comes to Retirement Savings, How Much Is Enough?

While it is hard for any pre-retiree to determine an exact answer to that question, it seems some are just stumped. A Bankrate survey just asked working-age Americans how much they should save to have a comfortable retirement, and the most common answer (61%) was “Don’t know.” The average estimate of those 39% who ventured a guess was $650,000. One average, members of Generation X felt they would need $1 million, while baby boomers and those age 73 and older most frequently said $500,000.

Just 16% of the pre-retirees surveyed said they were deferring 15% or more of their salaries into retirement accounts, which is a common recommendation these days. Twenty-one percent reported saving 5% or less per paycheck. That does not portend good things to come, given that workers older than 50 should have the equivalent of several times their salary saved for retirement. Yes, retirement planning is an “inexact science” – but that does not mean an individual or couple can simply wing it and hope for the best. Before retirement approaches, a conversation with a retirement planner should happen, to help a pre-retiree identify income needs, potential income sources, and threats to savings. That discussion may bring more clarity to a retirement transition.1

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Rising Rates, New Tariffs, Mixed Stock Results

FED, NEW TARIFFS GET WALL STREET’S ATTENTION

As expected, the Federal Reserve adjusted the target range on the federal funds rate to 1.75%-2.00% on Wednesday. The central bank’s latest dot-plot projection, however, raised some eyebrows: it showed four interest rate increases planned for 2018 instead of three. The median forecast of Fed officials puts the benchmark interest rate at 2.4% at the end of this year, on the way to a peak of 3.4% in 2020. Friday morning, the Trump administration announced new 25% tariffs on at least $34 billion of Chinese imports. Hours later, China retaliated, declaring that it would levy 25% import taxes on a minimum of $34 billion of goods from America. The U.S. and China both plan to implement their new tariffs on July 6.1,2

YEARLY INFLATION REACHES 2.8%

The latest Consumer Price Index shows the highest 12-month inflation reading in six years; the core CPI (which leaves out food and fuel costs) rose 2.2% in the year ending in May. Both the headline and core CPI were up 0.2% last month. Wholesale inflation, as measured by the Producer Price Index, increased 0.5% in May.3,4

AN IMPRESSIVE ADVANCE FOR RETAIL SALES

According to the Department of Commerce, the May gain was 0.8% (0.9% with car and truck buying factored out). This follows an April improvement of 0.4% (revised up from 0.3%).4

A MIXED WEEK FOR THE MAJOR INDICES

Once again, the Nasdaq Composite outran the Dow Jones Industrial Average

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Q2 GDP Expectations Surge.

100 MONTHS OF GROWTH FOR SERVICE BUSINESSES

The Institute for Supply Management announced this milestone as it revealed a 58.6 May reading for its non-manufacturing purchasing manager index. That excellent reading was well north of the 56.8 mark seen in April. Fourteen of the fifteen service industries followed by the PMI reported expansion in May; the information sector was the only outlier.1

Q2 GDP OUTLOOK BRIGHTENS

Is the economy now expanding at the rate of 5% a year? The bold new estimate by the Federal Reserve Bank of Atlanta nearly says as much. The Atlanta Fed projects a 4.6% GDP reading for Q2. The first quarter saw a 2.2% rate of growth, and the economy grew 2.3% for all of 2017.2

SOCIAL SECURITY TO TAP ITS RESERVES THIS YEAR

Last week, Social Security’s trustees announced that the program needs to dip into its trust funds for the first time in 36 years in order to fully fund itself in 2018. In their annual report, the trustees noted that monthly benefits could be reduced

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Strong Job Growth Continues

HIRING, HOUSEHOLD SPENDING STRENGTHEN

Net job growth surprised to the upside in May: companies added 223,000 more workers than they laid off or fired. At 3.8%, the unemployment rate is now where the Federal Reserve thought it would be at the end of 2018, and it is also at its lowest level since April 2000. Underemployment, as measured by the Department of Labor’s U-6 jobless rate, fell 0.2% in May to a 17-year-low of 7.6%. Year-over-year wage growth was measured at 2.7% in this latest labor market snapshot. In another sign of a strong economy, the Department of Commerce said that consumer spending grew by a noteworthy 0.6% in April, with consumer incomes rising 0.3%.1,2

CONSUMER CONFIDENCE REBOUNDS

The Conference Board’s closely watched consumer confidence index improved to 128.0 in May, rising 2.4 points from its April mark. Analysts polled by MarketWatch expected a reading of 127.5.2

FACTORY SECTOR CONTINUES TO BOOM

Growth picked up in U.S. manufacturing last month, according to the Institute for Supply Management’s May purchasing manager index. At an impressive reading of 58.7, the PMI was 1.4 points better than it was in April and matched its average reading over the past 12 months. The index has not been below 56.5 for a year. Any reading above 50.0 indicates expansion.3

WALL STREET SHRUGS AT NEW IMPORT TAXES

The Trump administration is following through on its pledge to impose tariffs

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