US economy shows signs of slowing despite housing recovery

The data on the United States economy last week mostly provided further evidence of a slowing economy even as the housing sector continues its recovery.

A big disappointment among last week's reports was the unexpected decline in retail sales in June. Retail sales fell 0.5 percent, the third consecutive monthly decline.

Another ominous sign was the fall in the Conference Board's leading economic index. It fell 0.3 percent in June following a 0.4 percent rise in May and a 0.1 percent decline in April.

Ataman Ozyildirim, economist at The Conference Board, noted: “The US LEI declined in two of the last six months, and its six-month growth rate has eased in the last three months.”

Also declining in June were existing home sales, which fell 5.4 percent.

However, there were also positive US economic data last week.

Industrial production rebounded 0.4 percent in June after having fallen 0.2 percent in May.

And notwithstanding the fall in existing home sales, the recovery in home building appears to be intact.

The National Association of Home Builders/Wells Fargo housing market index rose 6 points to 35 in July, its highest level in five years.

Housing starts rose 6.9 percent in June to a seasonally adjusted annual rate of 760,000 units, the highest since October 2008.

Building permits did fall 3.7 percent last month but the May rate had been the highest since September 2008.

At least Federal Reserve Chairman Ben Bernanke appears relatively sanguine about the economy. In his testimony to the Congress last week, Bernanke acknowledged that the economy decelerated in the first half of the year. However, he also said that some of the headwinds the economy is facing, such as tight borrowing conditions, should fade over time and allow the economy to grow more rapidly.

However, Bernanke also said that one risk to this outlook is the euro-area fiscal and banking crisis. Here, the situation appears not to have improved much, if at all, last week.

Spain's five- and 30-year yields hit euro-era records last week while the 10-year yield rose back above 7 percent, rising 61 basis points to close at 7.27 percent on Friday, just short of the euro-era record of 7.285 percent.