Withholding tax collections continued to grow at a strong pace through the period ended June 10. The annual growth rate has hit a plateau around +6% after accelerating for a couple months in the normal 3-4 month cyclical pattern. The peak of this cycle is due this month.
Total tax collections in May rose by more than 6% versus last year in spite of one less weekday this year than in 2014.
There’s nothing in the data to indicate any shift in the trend of the US economy. We have repeatedly seen the seasonally adjusted headline numbers understating the economy’s actual growth rate for several months. I have mentioned in my free reports on the economic data that eventually the headline numbers must catch up to the reality when past seasonal adjustment errors and other errors are corrected as the latest data comes in. We saw that on Friday with the retail sales data which finally caught up with the raging growth we had seen in the actual inflation adjusted data, ex gas sales for months. I wrote last about this in May.
Wall Street pundits treated the news as if it were something new–that consumers had finally started spending their gas savings in May. In fact, that was not the case. The data was merely catching up with what it had missed in previous months. But it affirmed my take through that period that the data would continue to force the Fed’s hand in moving toward the initiation of the attempt to raise interest rates.
Meanwhile the US Government continues to build up its massive, record setting pile of cash. It could have reduced Treasury supply more than the slight amounts by which it has, but it seems intent on building a “rainy day fund.” The implications of that are covered in the Treasury Supply and Demand reports.