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Economic news in the U.S. was mostly sub-par this past week. But markets were hopeful of a favorable outcome in Greek elections on Sunday and markets incurred quite a bit of wishful thinking on central banks easing if the Greek election outcome is not good for the Eurozone.
 Stocks ended the week up despite sluggish economic news in the U.S. There was a notable amount of daily volatility related to European sovereign debt. Traders are counting on central banks to “come to the rescue.” Stocks dipped Monday on disappointment on a bailout package for Spanish banks. Stocks gained Tuesday despite a jump in Spanish bond yields after Chicago Fed President Charles Evans took the position for further ease if needed in a speech.
But equities headed down at mid-week on worries about Greek elections—whether pro-euro candidates or not will win in parliament. Also, retail sales in the U.S. were somewhat disappointing. Lower oil prices pulled down the energy sector.
Thursday, a favorable report on consumer prices (headline CPI down notably) led traders to believe that the Fed and other central banks are in position to ease further—especially if needed after the Greek elections. Equities gained Friday on expectations that central banks will flood markets with liquidity if needed. There was little to support such expectations but this belief lifted equities. Stocks were up moderately for the week, largely on hopes of central bank actions which may or may not take place.
Equities were up this past week. The Dow was up 1.7 percent; the S&P 500, up 1.3 percent; the Nasdaq, up 0.5 percent; the Russell 2000, up 0.3 percent; and the Wilshire 5000, up 1.0 percent.
For the year-to-date, major indexes are up as follows: the Dow, up 4.5 percent; the S&P 500, up 6.8 percent; the Nasdaq, up 10.3 percent; the Russell 2000, up 4.1 percent; and the Wilshire 5000, up 6.2 percent.
Weekly percent change column reflects percent changes for all components except interest rates. Interest rate changes are reflected in simple differences.
 Treasury yields moved only moderately daily this past week, net down for the week. Rates dipped Monday as traders moved to Treasuries on contagion concerns about Spanish banks. Tuesday, rates rose on expectations of further ease by the Fed after comments by Chicago Fed President Charles Evans endorsing further loosening. Yes, rates rose on belief of further ease in monetary policy.
Rates softened Wednesday on disappointing retail sales but nudged up Thursday on speculation of further monetary ease by central banks. But at week’s close, many traders decided to play it safe and park money in Treasuries ahead of Greek elections and yields dipped moderately.
For this past week Treasury rates were mostly down as follows: 3-month T-bill, up 1 basis point; the 2-year note, unchanged; the 5-year note, down 4 basis points; the 7-year note, down 5 basis points; the 10-year note, down 6 basis points; and the 30-year bond, down 6 basis points.
 It was a quiet week for oil prices. Daily moves were marginal. After quiet Monday and Tuesday, the spot price of West Texas Intermediate fell a “whopping” 70 cents for the day on soft retail sales. Crude “jumped” a little over a dollar a barrel on Thursday on belief that the Federal Reserve will ease monetary policy to boost growth.
Net for the week, the spot price for West Texas Intermediate rose 77 cents per barrel to settle at $84.03.
News about real activity this past week was mixed at best and mostly negative. However, lower energy costs are starting to reach the consumer and soon should be boosting spending and confidence—but not yet in the latest data.
 Retail sales in May were pulled down by a decrease in gasoline prices. Retail sales in May declined 0.2 percent, following a 0.2 percent dip in April.
Motor vehicle sales actually added to sales, gaining 0.8 percent, following a 0.1 percent rise in April. The boost from autos was not expected as unit new motor vehicle sales, according to auto manufacturers, fell a monthly 4.4 percent. The Commerce Department bases auto sales on a small survey and also allocates sales between consumer and business sectors.
 Excluding motor vehicles, retail sales fell 0.4 percent, following a 0.3 percent decline in April (originally up 0.1 percent). The market consensus was for down 0.1 percent. Gasoline sales dropped a sharp 2.2 percent after declining 1.4 percent in April.
Sales excluding autos and gasoline in May posted a modest 0.1 percent dip, matching the decline in April. Core components were mixed but mostly down.
Weakness was led by gasoline stations (down 2.2 percent) and building materials & garden equipment (down 1.7 percent). Also declining were food & beverages, health & personal care, sporting goods & hobby, general merchandise, miscellaneous store retailers, and food services & drinking places.
On the plus side, nonstore retailers gained 1.3 percent, clothing & accessories rose 0.9 percent, electronics & appliances advanced 0.8 percent, and furniture & furnishings increased 0.4 percent.
Overall, consumer spending turned sluggish in May and April was softer than earlier believed. However, a key question that remains is whether atypically warm weather in the winter shifted sales forward at the expense of later months.
 The Reuters/University of Michigan consumer sentiment index in June fell 5.2 points to 74.1, putting the Reuters/University of Michigan index at a 2012 low. The latest sentiment report is for the first two weeks of this month and it showed sharp weakness in expectations, down 5.4 points to 68.9 and another 2012 low, and nearly as sharp weakness in current conditions, down 5.1 points to 82.1 which is yet another low for this year.
With oil coming down, inflation expectations do not appear to be a threat to consumer health though five-year expectations in this report showed a surprise 2 tenths increase to 2.9 percent. One-year expectations were unchanged at 3.0 percent.
With gasoline prices down, the dip in the consumer mood likely is tied to lack of progress in the labor market with unemployment still high.
 Industrial production dipped in May with weakness in manufacturing and strength in mining and utilities. Overall industrial production slipped 0.1 percent, following a rebound of 1.0 percent in April.
By major components, manufacturing fell 0.4 percent, following a 0.7 percent jump in April. Motor vehicles output declined 1.5 percent after a 4.0 percent surge in April. Manufacturing excluding motor vehicles declined 0.3 percent after a 0.5 percent boost the prior month.
 In May, mining output rebounded 0.9 percent, following a 0.6 percent drop the month before. Utilities output rose 0.8 percent, following a 5.3 percent surge in April.
Overall capacity utilization eased to 79.0 percent from 79.2 percent in April. The market forecast was for 79.2 percent.
Manufacturing had some pullback in May after a robust April. However, manufacturing surveys, including the Empire State report, generally point to modest forward momentum.
 Activity slowed but is still growing in the New York Fed's manufacturing sector according to the Empire State index which came in above zero at 2.29, a level however well below May's very strong pace of 17.09. Details show slowing growth this month for new orders, shipments, and employment as well as a slip in the six-month outlook. Price readings show slowing pressure for inputs and a sharp easing in pricing power for finished goods which are both consistent with slowing activity.
The good news in this report is that most factors are still expanding this month though the pace is much slower than May. But this report was still stronger than last month's report from the Philly Fed where actual contraction was evident.
 CPI inflation in May turned negative on continued significantly lower energy costs. Meanwhile, the core rate held steady and moderately warm. The consumer price index fell 0.3 percent in May, following no change the month before. The consensus forecast was for a 0.2 percent decline. Excluding food and energy, the CPI gained 0.2 percent, compared to 0.2 percent in April. Analysts projected a 0.2 percent rise.
 By major components, energy dropped a monthly 4.3 percent after falling 1.7 percent the prior month. Gasoline declined a sharp 6.8 percent, following a drop of 2.6 percent in April. Food prices were unchanged in May, following a 0.2 percent gain in April.
Within the core, the indexes contributing to the increase were largely the same ones as in April: shelter, medical care, used cars and trucks, apparel, airline fares, and new vehicles. The indexes for household furnishings and operations and for tobacco declined.
In more detail, the index for shelter rose 0.2 percent for the eighth month in a row, with the rent index up 0.2 percent and the index for owners’ equivalent rent up 0.1 percent. The index for lodging away from home rose 1.5 percent in May after declining in April. The index for medical care rose 0.4 percent, its largest increase since November, as the index for hospital services rose 0.6 percent for the second month in a row. The index for used cars and trucks posted its third consecutive significant increase, rising 1.0 percent. The apparel index also continued to rise, repeating its April increase of 0.4 percent. The index for airline fares, up 2.1 percent in April, rose 1.0 percent in May, while the new vehicles index increased for the fourth month in a row, rising 0.2 percent. The indexes for recreation and personal care each rose 0.1 percent in May. Among the few indexes to decline were household furnishings and operations, which declined 0.3 percent, and tobacco, which fell 0.2 percent.
Year-on-year, overall CPI inflation eased to 1.7 percent from 2.3 percent in April (seasonally adjusted). The core rate remained at 2.3 percent on a year-ago basis. On an unadjusted year-ago basis, the overall figure was up 1.7 percent in May, compared to 2.3 percent in April while the core was up 2.3 percent, matching April’s rate, not seasonally adjusted.
The obvious good news from the latest CPI report is that consumers are paying less at the gas pump, freeing up some money to spend elsewhere. The 0.2 percent decline in May retail sales turns slightly positive in real terms with the CPI dropping 0.3 percent. But within the Fed, there likely will be diverging opinions on inflation. Headline numbers are favorable but the core is stubbornly on the warm side.
 Lower crude oil prices are working their way into softer inflation again in May. And food prices have weakened. The PPI in May dropped a sharp 1.0 percent, following a fall of 0.2 percent in April. The core PPI, however, advanced 0.2 percent after rising 0.2 percent in April. The market consensus was for a 0.2 percent increase.
 By major components, energy fell 4.3 percent, following a decrease of 1.4 percent in April. Gasoline prices plunged a monthly 8.9 percent after falling 1.7 percent the prior month. Food cost inflation dropped to minus 0.6 percent, following a 0.2 percent rise in April.
Within the core, over a quarter of the May rise is attributed to the pharmaceutical preparations index, which climbed 0.7 percent. For other notable components, passenger cars rose 0.2 percent while light trucks declined 0.4 percent.
For the overall PPI, the year-ago rate in May was 0.8 percent, compared to 1.9 in April (seasonally adjusted). The core rate in May held steady at 2.8 percent. On a not seasonally adjusted basis for May, the year-ago headline PPI was up 0.7 percent, compared to up 1.9 percent for April while the core was up 2.7 percent, matching the pace in April on an NSA year-ago basis.
Economic news was more on the negative side this past week. Still, momentum is on the positive side but sluggish. The big issue in the near term is whether Greek elections favor pro-euro candidates or not. The outcome will likely impact financial markets more than real activity in the U.S.
Highlights are the highly anticipated Wednesday FOMC statement, FOMC forecasts, and chairman’s press conference. Traders expect at least some modest additional accommodation. But housing gets second billing with the NAHB housing index on Monday and housing starts the next day and existing home sales and FHFA house prices on Thursday.
The NAHB housing market index in May rose five points to a new recovery high of 29 and more than reversing April's revised four point drop. May's good news was led by both current sales and buyer traffic. Expectations of future sales were up but are still a bit below strength earlier in the year.
NAHB housing market index Consensus Forecast for June 12: 29
Range: 26 to 31
Housing starts rebounded 2.6 percent in April after declining 2.6 percent in March. The April pace of 0.717 million units was up 29.9 percent on a year-ago basis. In April, the comeback was led by the multifamily component but single-family also was healthy. Looking ahead, housing permits in April declined 7.0 percent, following an 8.8 percent increase in March. Weakness was seen in the multifamily component in April while the single-family component improved. The multifamily component is quite volatile.
Housing starts Consensus Forecast for May 12: 0.720 million-unit rate
Range: 0.700 million to 0.750 million-unit rate
Housing permits Consensus Forecast for May 12: 0.736 million-unit rate
Range: 0.710 million to 0.770 million-unit rate
The FOMC announcement at 12:30 p.m. ET for the June 19-20 FOMC policy meeting is expected to leave policy rates unchanged. Also, the Fed will release its quarterly forecast between the announcement and the chairman’s press conference. The forecasts are expected at about 2:00 p.m. ET. Markets have expectations of some type additional easing such as an extension of Operation Twist.
FOMC Consensus Forecast for 6/20/12 policy vote on fed funds target range: unchanged at a range of zero to 0.25 percent
Chairman press conference after the FOMC meeting statement is scheduled for 2:15 p.m. ET. Fed Chairman Ben Bernanke conducts a press conference after FOMC meetings in which participants present their quarterly economic forecasts. Bernanke is expected to comment on the forecast and take Q&A.
Initial jobless claims rose 6,000 in the June 9 week to a 386,000 level. And the prior week was revised to 380,000 which is 3,000 higher than the initial estimate. The four-week average was up three times in a row with a 3,500 gain to 382,000 in the latest week.
Jobless Claims Consensus Forecast for 6/16/12: 383,000
Range: 374,000 to 390,000
The PMI manufacturing flash index for May slipped 2.1 points to 53.9, a level over 50 to indicate monthly growth but below April to indicate a slower rate of growth. But readings were nevertheless healthy and include moderate growth for new orders, for output and for employment. The final reading for May for the overall index came in at 54.0.
PMI manufacturing flash index Consensus Forecast for June 12: 53.8
Range: 53.0 to 54.0
Existing home sales in April posted a 3.4 percent increase, following a 2.8 percent decrease in March. Gains were solid across regions. While the April increase is encouraging, the trend since the first of the year has been flat. April’s 4.62 million unit annualized pace is basically back to January’s 4.63 figure. Again, the good news is that the dips in February and March (when warm weather should have led to stronger numbers, according to some) are not the trend. However, sales are up 10.0 percent on a year-ago basis (SA), indicating that there is general but modest upward momentum. A statistical negative in the report was a rise in supply, to 6.6 months from 6.3 and 6.2 in the prior two months. But the rise may be due to optimism about modest improvement in the housing market as potential home-sellers added to the inventory level at a monthly 9.5 percent. Still, supply to sales is well down from a year ago when it was at 9.1 months.
Existing home sales Consensus Forecast for May 12: 4.57 million-unit rate
Range: 4.46 to 4.74 million-unit rate
The general business conditions index of the Philadelphia Fed's Business Outlook Survey for May dropped to minus 5.8 from plus 8.5 in April. New orders were discouraging as the index fell 3.9 points to minus 1.2, indicating mild contraction for May.
Philadelphia Fed survey Consensus Forecast for June 12: 0.5
Range: -3.0 to 4.0
The FHFA purchase only house price index rose an outsized 1.8 percent in March, following a 0.3 percent gain in February and a 0.5 percent decline in January. The year-on-year rate also surged, to plus 2.7 percent versus the two prior readings of plus 0.3 percent and minus 1.3 percent. Scheduled increases in April for FHFA mortgage insurance premiums tripped a surge in mortgage applications in late March and may also be at play in this data. Homebuyers may have been willing to pay a higher price in March to avoid higher premiums in April. Or demand is simply stronger and home sellers are no longer in a price cutting mood.
FHFA purchase only house price index Consensus Forecast for April 12: +0.6 percent
Range: +0.3 to +1.0 percent
The Conference Board's index of leading indicators in April declined 0.1 percent, following a 0.3 percent rise in March and 0.7 percent boost in February. The two biggest negatives in April were building permits and initial jobless claims, with negative percentage contributions of 0.20 and 0.19, respectively. The positives in the report were once again led by the spread between short and long rates, a spread made favorable by the Fed's near zero rate policy. This component added 0.20 percentage points to the April index. Indications on factory orders and credit conditions were also positive.
Leading indicators Consensus Forecast for May 12: 0.0 percent
Range: -0.3 to +0.4 percent
R. Mark Rogers is the author of The Complete Idiot’s Guide to Economic Indicators, Penguin Books, 2009.
Econoday Senior Writer Mark Pender contributed to this article.
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