Almost every day a major government agency or private organization releases new information covering the status of some pocket of the economy. I’m here to help you sift through the barrage of economic data out there and determine what this will mean for your stocks.
#1—American’s Go Shopping
In July, retail sales edged up 0.2% from the previous month despite a drop in auto sales. Core retail sales, which excludes the volatile auto, gas and building supply categories, rose 0.5% in July–the biggest such gain since December. This was a solid report and was in line with economist expectations, and it’s encouraging to see that spending continues to climb even as Americans reduced credit card debt. Overall, retail sales were good.
#2—Less on the Shelves
In June, business inventories came in unchanged from the previous month. Economists were expecting a modest 0.1% increase in inventories. Compared with a year ago, inventories were up 3.5%. In addition, May’s inventories were revised to show a 0.1% drop instead of the initially reported 0.1% gain.This wasn’t a particularly good report, as businesses remain cautious about restocking. Since inventories dramatically impact GDP growth, many economists’ estimates for second-quarter GDP growth may need to be revised down.
#3—No Inflation Here…
Wholesale prices were flat in July, largely due to a drop in natural gas and gasoline costs. Economists were expecting the PPI to rise 0.3%. Excluding these more volatile components, the core PPI rose 0.1%, also below the 0.2% gain expected from economists. It’s clear that there is very little inflationary pressure at the wholesale level in the U.S. economy, giving the Fed plenty of room to continue its monetary pump as needed. However, it’s the consumer level inflation that we need to watch—more details a bit further down the page.
#4—A Check in on Jobs
Jobless claims dropped 15,000 to an annual rate of 320,000. Economists had expected the measure to rise to 340,000, so these results were a big surprise. The less volatile four-week moving average fell 4,000 to 332,000, the fewest since November 2007 and the fifth straight decline. This was a strong report as the headline initial claims number was the lowest number since 2007. But while fewer initial claims is a strong sign, we need to see an increase in hiring before we really see consumer confidence pick up.
#5—The Real Inflation
In July, the Consumer Price Index rose 0.2% on gains for gasoline, housing, clothing and food. Excluding energy and food, the core consumer-price index also rose 0.2%. Both these numbers were in line with economist expectations. Consumer prices have increased 2% over the past 12 months, and the core has increased 1.7%. The gain in inflation at the consumer level could lead the Fed to act sooner, rather than later, and helps justify the higher bond yields we’ve seen in the past few months.
#6—A Blip in Production?
In July, industrial production was unchanged as output came in flat as a decline in manufacturing output and utilities counteracted an uptick in mining activity. This was under economists’ expectations of a 0.4% rise in production. This was the first time in three months that we saw a decrease in manufacturing, and was a bit of a surprise considering the heat wave that we saw over much of the Northeast and Midwest in July. However, we did see two regional Fed reports that showed production expanded in the New York and Philadelphia districts this month, signaling that this may be a temporary blip in the uptrend.
Have a nice weekend,