I’m a numbers guy, so I get a real kick out of reviewing the latest economic data and identifying which pockets of the economy are heating up and which are slowing down. However, with breaking economic news coming out nearly every day, I understand that it can be a hassle keeping up with each and every report. So every Friday in this blog I hit the past week’s highlights and provide my take on the latest economic trends. Let’s take a look at this week’s big headlines:
The U.S. Consumer
In January, retail sales edged up just 0.1%, following a 0.5% gain in both December and November. Sales rose a somewhat faster 0.2% if we exclude the auto sector, and many analysts are blaming the slow pace on the end of the payroll tax cuts. The good news here is that the data is slightly better than economists’ expectations for retail sales to be unchanged and up 0.1% excluding the auto sector. In addition, retail sales have climbed 4.4% in the last year, more than twice the rate of consumer inflation, so I’m not terribly concerned about a single data point.
The Private Sector
In December, business inventories added 0.1% to a seasonally adjusted $1.62 trillion. That’s a 5.1% gain compared to Dec. 2011, and the ratio of inventories to sales was 1.27, down from 1.28 in November. November’s inventories growth was lowered to 0.2% growth from a 0.3% gain. The data largely matched economists’ forecasts, and I’m expecting to see further improvement here as we head further into the year and shake off some of the uncertainty in Washington D.C.
In January, industrial production fell 0.1%. This came below economists’ expectations, which called for a 0.4% gain, and it represents a slowdown from the revised 0.4% growth we saw in December. The main culprit was a 0.4% drop in manufacturing output, particularly in motor vehicle production. Meanwhile, mining activity declined 1%. Capacity utilization also declined from 79.3% in December to 79.1% in January. January’s lukewarm results were somewhat tempered by upward revisions for the previous two months. While the Fed had originally estimated a 1% gain in November and a 0.3% gain in December, this was revised to gains of 1.4% and 0.4% respectively. On top of this, separate manufacturing reports suggest that this may just be a pause in manufacturing activity rather than the start of a downward trend.
The Jobs Market
This week, initial jobless claims fell a further 27,000 to 341,000, far below economists’ estimates of an annual rate of 365,000. Meanwhile, the four-week moving average rose 1,500 to 352,500, remaining near a five-year low. This was strong news, and it helped shore up the market on Thursday. While the data was close to cycle lows, it likely wasn’t affected by seasonal or one-time factors, as we saw with the numbers in January. This is exactly what I’ve discussed—a slow but steady improvement that is more sustainable than big jumps.
This Monday, Wall Street is closed to commemorate President’s Day. So you can expect me to check back in first thing on Tuesday morning when the markets reopen. In the meantime, have a good weekend!
P.S.: Next week, I will be speaking at the Waldorf Astoria Naples in Naples, Florida, on February 19 at 7 p.m. and then at the Grand Hyatt Tampa Bay in Tampa, Florida, at 7 p.m.
You may attend at no cost, but please call 800-454-1395 to register. I will review where investors can achieve the highest yields in both bonds and stocks, as well my current market outlook, favorite stock picks and have an extensive question-and-answer session. For a complete list of my upcoming appearances, please visit my Event Calendar.