It’s Friday and that means it’s time to review the latest economic data and identify which pockets of the economy are heating up and which are slowing down. Don’t worry about catching every headline and every report throughout the week—I recap all of the most important news impacting your wealth right here every Friday. Let’s take a look at this week’s big headlines:
Wholesale and Business Inventories Grow, Sales Slip in January
In January, wholesalers increased their stockpiles by 0.6% to $521.2 billion. This was stronger than expected; economists had forecast a 0.3% rise. Meanwhile, December wholesale inventories were revised up to reflect a 0.4% gain. Breaking down January’s results, auto stockpiles made up a good chunk of the gain. Excluding autos, wholesale inventories advanced 0.4%. This is the number that is used in calculating first-quarter GDP. The headline figure was pretty strong, but economists are cautioning that this growth is unsustainable. That’s because wholesalers aren’t drumming up the sales needed to support this kind of inventory turnover. January wholesale sales fell 1.9%, below economists’ estimates of a 0.2% rise.
In February businesses added 0.4% to their inventories, above economists’ estimates of a 0.3% gain. Retail inventories jumped 0.7%, the largest such gain since July. However, businesses also reported that sales fell 0.9% in January. At the current sales pace it would take 1.32 months for the current inventories to be used up, up from 1.30 last month. The business inventories report largely mirrored what we found in the wholesale report. Hopefully the warmer spring weather will help sales rebound and keep inventory turnover high.
February Retail Sales Herald First Signs of Spring
In February retail sales advanced 0.3%, above economists’ expectations of a 0.2% rise. Receipts rose in most categories, and core sales (which excludes autos, gasoline, building materials and food sales) still rose 0.3%. Unfortunately, January and December’s retail sales declines were further revised down to -0.6% and -0.3%, respectively, compared with initial estimates of -0.4% and -0.1%. The colder-than-expected winter clearly put a damper on December and January sales. Fortunately, much of the U.S. is finally thawing and commerce is reportedly rising as people get out and about. I expect that the spring thaw will significantly boost both business and consumer spending in the upcoming weeks and months.
Jobless Claims Fall to Three-Month Low
Last week, initial jobless claims declined by 9,000 to 315,000. Economists had called for an annual rate of 335,000 so this was better than expected. This represents the lowest level in almost three months. The closely watched four-week average of new jobless claims declined by 6,250 to 330,500. The decline in the four-week moving average is encouraging. If both retail sales and employment continues to firm up, I believe that GDP growth will strengthen considerably.
Wholesale Inflation Remains Tame
During February wholesale prices fell 0.1%. This was somewhat unexpected, as economists had expected the PPI to rise 0.2%. Meanwhile, the core PPI, which excludes volatile energy and food prices, fell 0.2%, also below economists’ estimates of a 0.1% rise. As it stands, wholesale inflation remains tame. We’ll get a better view at the inflation picture when the Consumer Price Index (CPI) for February is released next Tuesday.
Have a nice weekend,