As the saying goes, ‘if at first you don’t succeed, try, try again’. The Institute for Supply Management took that to heart this week, when it corrected its May manufacturing number not once, but twice. The index was released at 10AM on Monday, coming in at 53.2. Then the institute said it applied the wrong seasonal data to the index, and corrected the reading to 56. Shortly after that, it corrected the number again to 55.4.
And with a number released just once, the ISM reported that growth in the service sector accelerated in May at the fastest pace in 9 months, with its non-manufacturing index rising to 56.3 – the highest since last August’s reading of 57.9.
In other positive news, construction spending rose to the highest level in five years, increasing in April to an annual rate of $953.5 billion. The gain was led by an increase in public construction spending, while private construction outlays were flat.
Household net worth rose by $1.5 trillion in the first quarter, thanks to rising home prices and stock market gains. The increase brought US household net worth to $81.76 trillion.
On the downside, job cuts climbed to the highest level in one year, employers announcing plans to reduce payrolls by 52,961 in May. The heaviest cuts occurred in the tech sector, as computer firms announced plans to reduce payrolls by 18,799. So far this year, employers have announced a total of 214,600 planned job cuts.
The US trade deficit ballooned in April to its highest in two years, as imports hit a record high $240.6 billion, and exports slipped to $193.3 billion, suggesting that trade could be a drag on growth for the second quarter.
Source: Commerce Department
In an unprecedented move, the European Central Bank cut its deposit rate below zero, making it the first major central bank to move rates into negative territory. With the rate on its deposit facility now at negative .10%, the ECB is in effect charging banks to park money there. The cut was part of a series of measures aimed at fighting the euro zone’s disinflation. ECB President Mario Draghi stated that “we decided on a combination of measures to provide additional monetary policy accommodation and to support lending to the real economy. The measures will contribute to a return of inflation rates to levels closer to 2 percent”. For the past eight months inflation has been stuck well below the ECB’s goal of just under 2%.
The US jobless rate held at 6.3% last month, and the economy added 217,000 jobs, bringing US payrolls past their pre-recession peak. And while the jobless rate held at a six-year low, the labor force participation rate held at 62.8 – the lowest since March 1978.