Interest Rate Roundup

Thursday, May 31, 2007

Chicago PMI blowout! Construction spending details ...

Fasten your seat belts -- the Chicago Purchasing Manager index was a blowout!

* The overall index for May came in at 61.7, up from 52.9 in April and well above expectations for a reading of 54.

* Strength was widespread, with the employment index up sharply (to 57.3 from 50.5), the production index up sharply (69.8 from 62.2) and new orders up sharply (71.1 from 56.5)

* Inflation? That picture wasn't pretty. The prices paid index surged to 70.2 from 64.9 in April. That's the highest reading since last August.

Coupled with decent jobless claims and strong confidence figures, these numbers indicate the economy bounced back somewhat in May. Bonds are definitely on thin ice, price-wise, heading into tomorrow's May payroll and May ISM reports. In fact, they're dipping below the 109 level as I write. Ten-year yields are testing 4.9% again.

Meanwhile, construction spending gained 0.1% in April. Economists expected an unchanged reading. March's spending gain was revised upward to +0.6% from +0.2%.

Residential spending remained weak, with a 0.9% drop in April. That matched the decline registered in March. Non-residential spending, on the other hand, was up 1.1%, led by gains in spending on lodging, manufacturing, transportation, and power.


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