Spontaneous References to Tariffs Could Weigh on Final Consumer Sentiment Reading
Sale, consumerism and people concept – happy family with child and shopping cart buying food at grocery store or supermarket. (Photo: PPD/AdobeStock/Syda Productions)
The Survey of Consumers preliminary reading on consumer sentiment in May soared to 102.4, a 15-year high that crushed the consensus forecast. The forecast range was a low of 96.0 to a high of 97.8 and the consensus was 97.5, slightly higher than the final reading of 97.2 in April.
Preliminary Index
Prior
Consensus
Forecast Range
Actual
Consumer Sentiment Index
97.2
97.5
96.0 — 97.8
102.4
Current Economic Conditions
112.3
—
—
112.4
Index of Consumer Expectations
87.4
—
—
96.0
“The Index of Consumer Sentiment surged in early May to its highest level in fifteen years,” Richard Curtain, Chief Economist for Survey of Consumers, said. “All of the May gain was in the Expectations Index, which also rose to its highest level since 2004, while the Current Conditions Index was virtually unchanged and well below the cyclical peak set in March 2018.”
Mr. Curtain did note the potential negative impact of tariffs on the final reading on consumer sentiment. Most of the gains were recorded prior to the collapse of trade negotiations with China and reciprocal tariffs.
As the above chart shows, spontaneous references to tariffs peaked in July, corresponds to the initial tariff imposition. Negative references to tariffs rose over the prior week and Mr. Curtain said they are “likely to rise further in late May and June.”
Nevertheless, this marks only the fourth time during the expansion that the Survey of Consumers was above 100, all of which were measured under the Trump Administration.
The final reading on consumer sentiment for the month is scheduled to be released on Friday, May 31, 2019 at 10:00 AM EST.
Plan Reforms Legal Immigration System From Family-Based to Merit-Based, and Border Security
President Donald Trump at the White House on Thursday unveiled a plan to modernize the immigration system. It focuses on reforming the legal immigration from family-based to a merit-based, and border security.
“Our plan includes a sweeping modernization of our dysfunctional legal immigration process,” the president said in the Rose Garden. “The system will finally be fair, transparent and promote equality and opportunity for all.”
“If adopted, our plan will transform America’s immigration system into the pride of our nation and the envy of the modern world.”
The first part of the president’s plan limits the number of low-skilled immigrants who enter the U.S. based on family ties. The merit-based system would replace them with high-skilled workers, while leaving the number of migrants entering the country each year essentially unchanged.
Only about 12% are admitted based on employment and skills, while 66% are admitted based on family ties. If the president’s plan was adopted, the administration estimates that would shift to 57% and 33%, respectively.
“Currently, 66% of legal immigrants come here based on random chance,” President Trump said. “They’re admitted solely because they have a relative in the United States, and it doesn’t really matter who that relative is.”
Opponents of mass low-skilled immigration have long-argued the damage to Americans’ wages has been severe over decades of congressional paralysis on the issue. In the fourth quarter (Q4) 2018, wages rose 3% or greater for the first time since the Great Recession. They rose more than 3% on an annual basis for nine consecutive month last month.
But the administration argues that would be a much higher if the president’s plan was adopted.
The number the average yearly wage for legal immigrants is about $43,000. But immigrants admitted based on merit — such as education and skills — would see an average income of $126,000. That would push the average annual wage for all immigrants to about $96,000.
The release of the proposal comes only one day after Senator Lindsey Graham, S.C., the Chairman of the Judiciary Committee, proposed the “Secure and Protect Act of 2019”. The chairman’s proposal would end a legal loophole that allows illegal immigrants to remain in the U.S. without valid asylum claims.
President Donald Trump delivers remarks to unveil his plan to modernize the immigration system at the White House on May 16, 2019. (Photo: PPD)
President Trump praised Chairman Graham for his work and encouraged Congress to pass it. But it’s a less sweeping reform than the plan outlined at the White House.
“This plan was not developed — I’m sorry to say — by politicians,” President Trump said. “It was designed with significant input from our great law enforcement officials.”
“Everyone agrees that the physical infrastructure at the border and at the ports of entry is inadequate and woefully underfunded.”
The White House immigration plan is the result of a months-long effort headed up by Jared Kushner, the president’s son-in-law and senior adviser. Mr. Kushner, Vice President Mike Pence and White House senior adviser Stephen Miller met with a select group of Republican senators on Tuesday to discuss the plan.
Sources tell People’s Pundit Daily (PPD) that Mr. Kushner offered little as far as details, and Chairman Graham himself said he believed it was meant to draw a distinction between the parties ahead of the 2020 election cycle.
“I don’t think it’s designed to get Democratic support as much as it is to unify the Republican Party around border security,” he said on Tuesday after the meeting.
The president called on Democrats to work with him on the plan, though Democrats have neither an interest in reforming family-based legal immigration nor serious border security.
“We will keep our communities safe,” President Trump said. “Americans can have complete and total confidence that under this plan our borders will finally be fully secured.”
“We cherish immigration in this country. But a big proportion of them must come in through merit and skill.”
The Philadelphia Fed Manufacturing Business Outlook Survey rose sharply from 8.5 to 16.6 in May, nearly doubling the consensus forecast.
The regional manufacturing survey for the Mid-Atlantic follows the New York Fed’s Empire State Manufacturing Survey, which also nearly doubled the forecast for May. The results of both surveys may be early indicators of tariffs pushing domestic new orders higher.
More than 25% of the manufacturers reported increases in overall activity this month, while just 9% reported decreases. More than 41% of the firms expect activity to increase over the next six months, while 22% expect a decrease.
The employment diffusion index rose 4 points to 18.2, its highest reading in five months.
U.S. jobless claims graph on a tablet screen. (Photo: AdobeStock)
Initial jobless claims came in at 212,000 for the week ending May 11, a sharper than expected decline of 16,000 beating the consensus forecast. The 4-week moving average ticked up to 225,000, an increase of 4,750 from the previous week’s unrevised average of 220,250.
Prior
Consensus Forecast
Forecast Range
Actual
Initial Jobless Claims
228K
219K
210K — 221K
212K
No state was triggered “on” the Extended Benefits program during the week ending April 27.
In lagging data, the advance seasonally adjusted insured unemployment rate was unchanged at a very low 1.2% for the week ending May 4.
The advance number for seasonally adjusted insured unemployment during the week ending May 4 came in at 1,660,000, a decline of 28,000. The 4-week moving average rose to 1,668,250, an increase of just 1,500.
The highest insured unemployment rates in the week ending April 27 were in Alaska (2.5), New Jersey (2.2), California (2.0), Connecticut (1.9), Pennsylvania (1.7), Puerto Rico (1.7), Illinois (1.6), Massachusetts (1.6), Rhode Island (1.6), New York (1.5), and Washington (1.5).
The largest increases in initial claims for the week ending May 4 were in New York (+9,365), Illinois (+2,010), Missouri (+791), Kansas (+754), and Iowa (+676), while the largest decreases were in New Jersey (-6,239), Connecticut (-3,208), California (-1,920), Arizona (-668), and Wisconsin (-661).
New Residential Construction Statistics Stronger than Expected
New residential construction, hew homes, housing starts, building permits, depicted on blueprints. (Photo: AdobeStock)
New residential construction statistics for housing starts and building permits in April both beat their consensus forecasts. Even a match to the forecasts would’ve shown significant improvement.
Prior
Consensus Forecast
Forecast Range
Actual
Starts – SAAR
1.139M
1.200M
1.160M — 1.275M
1.235M
Permits – SAAR
1.269M
1.290M
1.269M — 1.302M
1.296M
Housing Starts
Privately‐owned housing starts in April were at a seasonally adjusted annual rate of 1,235,000. That’s up 5.7% (±13.0%) from the revised March estimate of 1,168,000, but 2.5% (±10.4%) below the April 2018 rate of 1,267,000.
Single‐family housing starts in April came in at a rate of 854,000, which is 6.2% (±13.7%) higher than the revised March figure of 804,000. The April rate for units in buildings with five units or more was 359,000.
Building Permits
Privately‐owned housing units authorized by building permits in April were at a seasonally adjusted annual rate of 1,296,000, a 0.6% (±2.6%) gain from the revised March rate of 1,288,000. But that is still 5.0% (±1.4%) below the April 2018 rate of 1,364,000.
Single‐family authorizations in April were at a rate of 782,000; this is 4.2% (±1.2%) below the revised March figure of 816,000. Authorizations of units in buildings with five units or more were at a rate of 467,000 in April.
Housing Completions
Privately‐owned housing completions came in at a seasonally adjusted annual rate of 1,312,000 in April, which is 1.4% (±15.5%) below the revised March estimate of 1,331,000. That is still 5.5% (±11.9%) higher than the April 2018 rate of 1,244,000.
Single‐family housing completions came in at a rate of 918,000, which is 4.1% (±13.4%) below the revised March rate of 957,000. The rate for units in buildings with five units or more was 381,000 in April
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Senator Lindsey Graham, R-S.C., on Wednesday introduced legislation to end an immigration law loophole allowing illegal entries to remain in the U.S. without valid asylum claims.
At a press conference, the Chairman of the Senate Judiciary Committee laid out four main fixes in the “Secure and Protect Act of 2019”. The first removes the incentive to gain access into the U.S. before asylum is granted by requiring claims to be made in either the applicants home country or in Mexico.
“The number of asylum claims is going through the roof. The number of unaccompanied minors coming from Central America is going through the roof,” Chairman Graham said.
“What I’m trying to do is stop the flow coming from Central America and regain control of our border and stop a humanitarian crisis that is just going to get worse over time.”
Senator Lindsey Graham, R-S.C., holds a press conference to introduce legislation to fix immigration loopholes allowing illegal entries to remain in the U.S. without valid asylum claims. (Photo: PPD)
Earlier this month, the Ninth Circuit Court of Appeals upheld the Trump Administration’s “Remain in Mexico” policy, reversing a lower court in San Francisco. The ruling temporarily allowed the administration to send asylum seekers back to Mexico while they wait for court proceedings.
Most asylum claims are ultimately found to be bogus. Asylum is reserved for those being persecuted for religious beliefs or political affiliation, not for poor economic or living conditions.
The Justice Department specifically prohibited fleeing gang violence as a valid reason for filing asylum claims last year.
Those currently seeking asylum after entering the U.S. illegally read from a prewritten script given to them by activist groups. If an adult brings a child illegally into the U.S. and claims asylum, there is a 98% chance they will still be allowed to remain.
“One of the most important things I can stress to you is that people are trying to get caught,” he said. “They’re not avoiding getting caught.”
Senator Lindsey Graham, R-S.C., holds a press conference to introduce legislation to fix immigration loopholes allowing illegal entries to remain in the U.S. without valid asylum claims. (Photo: PPD)
The Secure and Protect Act of 2019 would increase detention time to 100 days, allowing for the adjudication of an asylum claim, and a timely deportation if it is not granted. It approves the hiring of an additional 500 immigration judges to help adjudicate those cases.
Currently, there are almost 900,000 cases in backlog.
“To any Republican who doesn’t want to find a solution, then you own the problem,” Chairman Graham added. “The Democratic Party has marginalized this issue. They have told you ‘this is not a problem, Trump created this problem.’ When President Trump made his State of the Union speech, every Democrat said ‘This is just Trump hysteria, Trump demagoguery.’”
The bill also ends favoritism codified in the Trafficking Victims Protection Reauthorization Act (TVPRA), which currently allows a minor from Mexico or Canada (a contiguous country) to be quickly returned to said country if they are not a trafficking victim. Meanwhile, minors from any other (noncontiguous) country cannot be returned.
“To my Democratic colleagues, your credibility on this issue is pretty low right now,” he said. “You need to understand that you were wrong. This was a real problem.”
Industry production 4.0 and technology concept, depicting factory production on a conveyor belt with factory operational workers in uniform. (Photo: AdobeStock)
Industrial production was down 0.5% in April and output for the first quarter (Q1) is now down at an annualized rate of 1.9%. That includes downward revisions that were a net negative.
Manufacturing production fell 0.5% in April after being unchanged in March. The index for mining rose 1.6%, while the index for utilities fell 3.5%.
At 109.2% of its 2012 average, total industrial production was still 0.9% higher in April than it was a year earlier. Capacity utilization for the industrial sector fell 0.6 percentage point in April to 77.9%, a rate that is 1.9% below its long-run (1972–2018) average.
General Business Conditions Index Highest in Six Months
Prior
Consensus Forecast
Forecast Range
Actual
General Business Conditions Index
10.1
9.0
8.2 — 11.0
17.8
Future Conditions Index
12.4
—
—
30.6
The Empire State Manufacturing Survey nearly doubled the consensus forecast for May, gaining 8 points to 17.8 and beating the high end of the forecast range. The consensus forecast for the New York Fed’s monthly manufacturing survey was for a slight decline to 9.0.
The general business conditions index has risen for the second straight month and is now at the highest level in six months, or since November 2018.
Thirty-six percent (36%) reported conditions improved in May, while 18% reported that conditions had worsened. The new orders index gained 2 points to 9.7, and the shipments index rose 8 points to 16.3, the latter indicating a solid increase in shipments.
The employment index was down 7 points to 4.7, which suggests employment rose moderately, while the average workweek index held steady at 4.4.
The prices paid index was little changed at 26.2, and the prices received index was largely unchanged at 12.4.
Manufacturing firms were significantly more optimistic about the six-month outlook than they were last month. The index for future business conditions surged 18 points to 30.6. Firms expressed similar gains in future new orders and shipments, and expected solid increases in employment. No change in the average workweek was expected in the months ahead.
The capital expenditures index was little changed at a solid 26.2, and the technology spending index came in at 22.8, up slightly from April.
Group of friends sitting outdoors with shopping bags; several people holding smartphones and tablets. (Photo: AdobeStock/ OneInchPunch/PPD)
U.S. retail sales unexpectedly declined 0.2% (±0.5%) to $513.4 billion in April, missing the consensus forecast and lower than the forecast range. Year-over-year, retail sales are still 3.1% (±0.7%) higher than in April 2018.
Prior
Prior Revised
Consensus Forecast
Forecast Range
Actual
Retail Sales – M/M ∆
1.6 %
1.7 %
0.2 %
-0.1 % to 0.6 %
-0.2 %
Retail Sales less autos – M/M ∆
1.2 %
1.3 %
0.7 %
0.2 % to 1.1 %
0.1 %
Less Autos & Gas – M/M ∆
0.9 %
1.1 %
0.4 %
0.0 % to 0.5 %
-0.2 %
Control Group – M/M ∆
1.0 %
1.1 %
0.4 %
0.0 % to 0.5 %
0.0 %
Total sales for February 2019 through April 2019 were up 3.0% (±0.7%) year-over-year and the February 2019 to March 2019 period was revised from +1.6% (±0.5%) to +1.7% (±0.2%).
Retail trade sales were down 0.2% (±0.5%) from March 2019, but are still 2.8% (±0.5%) higher than last year. Nonstore retailers were up 9.0% (±1.2%) from April 2018, while sporting goods, hobby, musical instrument, and book stores were down 8.5% (±2.6%) year-over-year.
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