Wells Fargo Weekly Economic & Financial Commentary, May 23, 2014

U.S.   Review

As Good as It Gets. As Good as Can Be Expected.

• April’s housing data showed some modest improvement but remain disappointing relative to expectations at the start of the year.
• New home sales rose 6.4 percent in April, while sales of existing homes rose 1.3 percent. Mortgage applications for the purchase of a home fell for the second straight week, however, and have fallen in four of the past five weeks.
• The index of leading indicators rose 0.4 percent in April and the Kansas City Fed’s manufacturing index posted another solid reading in May.

Global Review

Growth in the U.K. Economy Remains Solid

• Data this week showed that consumer spending was an important driver of British real GDP growth in the first quarter, and strong momentum in retail spending continued in April. The British pound continues to draw support from expectations that the Bank of England will begin to hike rates next year.
• In contrast, the next policy move by the European Central Bank likely will be toward more accommodation. The Eurozone’s economy continues to expand but not rapidly enough to bring about a welcome acceleration in consumer prices.