What We Are Watching This Week

  • Consumer Confidence
  • Durable Goods
  • New Home Sales
  • Personal Consumption Expenditure Index (PCE)

Highlights From Last Week

  • US Retail Sales
  • Housing Starts
  • US Leading Indicators

U.S. stocks recorded modest gains during the shortened trading week, as markets were closed on Wednesday for the Juneteenth holiday. These gains helped push the S&P 500 Index to new all-time highs. The week also exhibited signs of broadening and rotation in the market, with value stocks outperforming growth stocks and most major benchmarks surpassing the technology-heavy Nasdaq Composite.

Canada’s largest market concluded the week on a downward trajectory, primarily due to the drag from resource stocks on Friday. The TSX Composite Index fell by 26.49 points to close at 21,554.86, marking a weekly decline of 84 points, or 0.39%. The Canadian dollar also experienced a slight weakening, dropping 0.06 cents to 73.02 cents. Energy, materials, and gold stocks were the leading detractors, while Tech stocks provided some positive momentum. On the economic front, retail trade in Canada increased by 0.7% to $66.8 billion in April. The Industrial Product Price Index remained unchanged month-over-month in May but rose 1.8% year-over-year. The Raw Materials Price Index declined by 1.0% month-over-month in May but increased by 7.6% year-over-year. Housing prices rose by 0.2% in April, the same rate of increase as in April 2023.

The pan-European STOXX Europe 600 Index rose by 0.79% in local currency terms, rebounding as concerns about political uncertainty eased and prospects for monetary policy easing improved. Major stock indexes saw gains: Germany’s DAX increased by 0.90%, France’s CAC 40 Index rose by 1.67%, Italy’s FTSE MIB climbed by 1.97%, and the U.K.’s FTSE 100 Index added 1.12%.

Business activity in New York State experienced a modest decline in June 2024, as indicated by the Empire State Manufacturing Survey. The headline general business conditions index rose by ten points but remained negative at -6.0. New orders were stable, and shipments saw a slight increase. Delivery times shortened somewhat, and supply availability, a new monthly indicator in the report, showed little change. Inventories remained flat. Labor market conditions were weak, with employment and hours worked continuing to decrease. The pace of input and selling price increases moderated slightly for the second month. Despite the current weak activity, optimism about the six-month outlook improved to its highest level in over two years.1

In May, U.S. retail sales edged up by 0.1%, following a significant downward revision of April’s sales figures. Core retail sales, excluding automobiles, gasoline, building materials, and food services, increased by 0.4% in May, despite a downward revision for April. The modest rise in retail sales suggests continued economic sluggishness in the second quarter. However, the slowdown in consumer spending may be overstated due to lower gasoline prices affecting service station receipts.

The retail sales report for May presented a mixed picture:

  • Sales at gasoline stations fell by 2.2% due to lower fuel prices.
  • Building material and garden equipment sales decreased by 0.8%.
  • Food services and drinking places saw a 0.4% decline, the largest since January.
  • Furniture store sales dropped by 1.1%.
  • Motor vehicles and parts dealers’ receipts rose by 0.8%.
  • Online store sales increased by 0.8%, rebounding partially from April’s 1.8% decline.
  • Sales at sporting goods, hobby, musical instrument, and bookstores surged by 2.8%.
  • Electronics and appliance store sales rose by 0.4%, and clothing retailer sales increased by 0.9%.

These variations reflect underlying economic dynamics and consumer behavior, with moderate consumer spending expected in the second quarter.2

In May, industrial production rose by 0.9%, and manufacturing output also increased by 0.9%, following declines in the previous two months. The mining index increased by 0.3%, and utilities advanced by 1.6%. Total industrial production reached 103.3% of its 2017 average, 0.4% higher than the previous year. Capacity utilization rose to 78.7%, just below its long-term average.

By market groups, gains were widespread across major market groups. The consumer goods index increased by 1.3%, with all components except home electronics rising. Business equipment saw a small gain of 0.2%, as gains in information processing and industrial components outweighed a decrease in the transit component. Defense and space equipment increased by 1.0%, nearly 10% higher than the previous year. The materials market group gained 0.8%, with non-energy durables and non-energy nondurables each up around 1% and energy materials rising by 0.6%. By industry, manufacturing output rose by 0.9%, slightly above the previous year’s level. Durable manufacturing increased by 0.6%, nondurable manufacturing jumped by 1.1%, and other manufacturing (publishing and logging) increased by 0.2%. Notable gains in durable goods were seen in wood products (2.6%), machinery (2.3%), and computer/electronic products (0.8%). Furniture and related products saw the largest decline (2.6%), about 7% below the previous year. Printing and support fell by 1.5% within nondurables, while other categories saw gains. Mining output increased by 0.3%, with oil and gas extraction gains partially offset by declines in other mining and support activities. Utilities output rose by 1.6%, 3.9% higher than the previous year. Capacity utilization for manufacturing increased to 77.1%, below the long-term average. Mining utilization increased to 92.7%, above the long-term average, and utilities utilization rose to 71.5%, remaining below the long-term average.3

The US Department of Labor reported for the week ending June 15, initial claims for seasonally adjusted unemployment benefits were 238,000, a decrease of 5,000 from the revised figure of 243,000 for the previous week. The 4-week moving average rose by 5,500 to 232,750, with the prior week’s average revised slightly from 227,000 to 227,250. For the week ending June 1, the total number of continued claims across all programs was 1,731,039, an increase of 37,292 from the previous week. In the comparable week of 2023, there were 1,674,834 claims.4

The U.S. Census Bureau and the U.S. Department of Housing and Urban Development have released the new residential construction statistics for May 2024: Building Permits for privately-owned housing units authorized by building permits reached a seasonally adjusted annual rate of 1,386,000. This represents a 3.8% decrease from the revised April rate of 1,440,000. It is also 9.5% lower than the May 2023 rate. Single-family building permits decreased by 2.9% and building permits for units in buildings with five units or more stood at 382,000. Housing Starts for privately owned housing decreased by 5.5% from the revised April estimate. It is also 19.3% lower than the May 2023 rate. Single-family housing starts were at a 5.2% decrease from the revised April figure. The rate for units in buildings with five units or more was 278,000. Privately owned housing completions were at a seasonally adjusted annual rate of 1,514,000. This is an 8.4% decrease from the revised April estimate of 1,652,000. However, it is 1.0% higher than the May 2023 rate of 1,499,000. Single-family housing completions decreased by 8,5% (±10.1%) from the revised April rate. The rate for units in buildings with five units or more was 479,000.5

The Conference Board Leading Economic Index(LEI) for the U.S. decreased by 0.5 percent in May 2024 to 101.2 (2016=100), following a 0.6 percent decline in April. Over the six months between November 2023 and May 2024, the LEI fell by 2.0 percent—a smaller decrease than its 3.4 percent contraction over the previous six months. “The U.S. LEI fell again in May, driven primarily by a decline in new orders, weak consumer sentiment about future business conditions, and lower building permits,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board. “While the Index’s six-month growth rate remained firmly negative, the LEI doesn’t currently signal a recession. We project real GDP growth will slow further to under 1 percent (annualized) over Q2 and Q3 2024, as elevated inflation and high interest rates continue to weigh on consumer spending.” The Conference Board Coincident Economic Index (CEI) for the U.S. rose by 0.4 percent in May 2024 to 112.4 (2016=100) after increasing by 0.1 percent in April. The CEI grew 0.6 percent over the six months ending May 2024, down from its 1.0 percent increase over the previous six months. The CEI’s component indicators—payroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial production—are included among the data used to determine recessions in the U.S. All four components of the Index improved last month, with industrial production making the largest positive contribution to the Index. The Conference Board Lagging Economic Index® (LAG) for the U.S. inched down by 0.1 percent in May 2024 to 119.4 (2016=100) after increasing by 0.3 percent in April. As a result, the LAG’s six-month growth rate softened to 0.7 percent between November 2023 and May 2024, down from 0.8 percent over the previous six months.6

WKYear to Date
S&P400 Mid-cap1.26%5.40%

Important Information:

Warren Gerow is an independent investment wealth consultant to Sightline Wealth Management.

Sightline Wealth Management LP (“Sightline”) is an investment dealer and is a member of the Canadian Industry Regulation Organization (CIRO) and the Canadian Investor Protection Fund (CIPF).

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The opinions and information contained in this article are those of Sightline Wealth Management (“Sightline”) as of the date of this article and are subject to change without notice. Sightline endeavours to ensure that the content has been compiled from sources that we believe to be reliable. The information is not meant to be used as the primary basis of investment decisions and should not be constructed as advice. Each investor should obtain independent advice before making any investment decisions.

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