Month in Review (May)

• The Bureau of Economic Analysis said that economic growth slowed during the first quarter from 3.1% in Q4 to 1.8%. Despite 244,000 new jobs, the unemployment rate edged upward to 9%, according to the Bureau of Labor Statistics (BLS).
• Higher food and energy costs pushed up the annual consumer inflation rate to 3.2%–the highest level since October 2008, according to the BLS–and wholesale prices rose 6.8% from a year ago. Energy prices also resulted in the highest monthly U.S. trade deficit since June of last year.
• Uncertainty about Greece’s fate was aggravated by the arrest and resignation of the head of the International Monetary Fund, a key component of the European Union’s bailout mechanism. Reports that Greece’s austerity measures weren’t sufficient didn’t help; neither did the European Central Bank’s warning that any attempt to restructure the country’s debt could have dire consequences.
• The Federal Reserve laid out its game plan for unwinding quantitative easing by the end of June as scheduled. Before it begins raising short-term interest rates post QE2, the Fed will first stop reinvesting the proceeds of maturing holdings into Treasury bonds.
• The housing market continued to suffer. Both new home sales and housing starts were down almost 24% from the same time last year, sales of existing homes dropped nearly 13% over the year, and home prices experienced a double-dip downturn when the Standard & Poor’s/Case-Shiller index returned to 2002 levels.
• The U.S. hit the current $1.4 trillion ceiling on the level of debt the Treasury may issue to pay the nation’s existing bills. A series of accounting measures, including a decision to halt investments in two federal employee pension funds, may buy time for Congress to come to some agreement on whether to raise the debt limit.

Source: Broadridge Financial Solutions, Inc