Manufacturing is also struggling. The Federal Reserve Bank of Philadelphia said that its general economic index fell in May to minus 5.2 from 1.3 the prior month. Readings greater than zero signal expansion in the area covering eastern Pennsylvania, southern New Jersey and Delaware. The median forecast called for 2.
A report earlier this week showed that manufacturing in the New York region unexpectedly declined to minus 1.4 this month from 3.1 in April.
Builders pulled back last month after housing starts reached an almost five-year high in March, yet a surge in permits signals residential construction will soon rebound. Building permits jumped 14.3% to a 1.02 million annualized rate in April, the highest level since June 2008.
Higher home prices have boosted household wealth and may help bolster spending. Residential real-estate prices rose in February by the most since May 2006, with the S&P/Case-Shiller index of house values in 20 cities up 9.3% from a year ago.
Still, the economy is projected to grow at a 1.6% annual rate in the second quarter, down from a 2.5% annual rate in the first three months of the year, based on the median forecast in a Bloomberg economist survey from May 3 to May 8.
Part of the reason for the projected second-quarter slowdown is an increase in the levy used to finance Social Security, which returned to 6.2% from 4.2%. A worker earning $50,000 a year is taking home about $83 less a month as a result.
Those higher taxes are affecting corporations including Wal-Mart Stores Inc., the world’s largest retailer, which has cut prices on groceries and other necessities. Still, first- quarter sales at U.S. Wal-Mart stores open at least 12 months fell 1.4%, the first drop after six straight gains. Analysts estimated a 0.1% decline.
“Top line revenue was challenged by a number of issues,” William S. Simon, chief executive officer of Wal-Mart U.S., said in an earnings conference call yesterday. He cited “the 2% increase in payroll taxes, reduced inflation and some of the most unfavorable spring weather we’ve seen in recent years across much of the country impacted our business.”