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:
Retail Sales Take A Breather In April
For April, retail sales barely budged, up just 0.1% to $434.6 billion. That was also much lower than expectations for 0.4%. March retail sales were revised higher to 1.5%, reflecting the largest gain since March 2010. After strong February and March retail sales, it’s not surprising to see a pullback in April. The economy is still on track to post faster growth in the current quarter, and economists are looking for consumer spending to post its third–straight quarter of significant growth.
Businesses Stock Up for Spring
U.S. business inventories climbed 0.4% in March, just shy of economists’ projections for 0.5%. Retail inventories were flat, and the retail inventory–to–sales ratio dropped to 1.42 in March vs. 1.44 in February. Business sales increased 1.0%, compared with a 0.9% increase in February. That represented the largest gain since May 2013. At this pace, it will take about 1.3 months to clear business’ shelves, which is unchanged from February. Now that the cold winter weather is fading into the background, we should see a resurgence in business’ appetite to restock their shelves–which should add to the robust economic growth we’re expecting in the second quarter.
Wholesale Prices Surge…
For April, we saw the biggest increase in U.S. wholesale prices since September 2012. The Labor Department reported that PPI jumped 0.6%. Food prices soared 2.7%, the largest jump since February 2011, while energy prices increased 0.1%. Excluding the volatile food and energy prices, April’s PPI rose 0.5%. While U.S. wholesale prices have been moving higher, they’ve still been fairly volatile. So no real trend has developed, and inflation still remains in check.
…And Consumer Prices Jump (A Sign of Inflation?)
Yesterday, the U.S. Labor Department reported that April’s headline CPI reading jumped 0.3%, while the core CPI (which excludes food and energy) increased by 0.2%. Economists were looking for a 0.3% headline CPI reading and a 0.1% core CPI reading. Yesterday’s CPI reading marks two positive readings in a row, which has some concerned that inflation is starting to rear its ugly head. But with CPI still below the Fed’s 2.0%–2.5% target, inflation still remains relatively tame.
Industrial Production Stumbles
In April, U.S. industrial output stumbled 0.6%. Analysts were surprised by yesterday’s report, especially since industrial production was revised higher to 0.9% for March. All major market groups fell in the March to April period, with final products hit the hardest and declining 1%. Industrial capacity utilization dropped to 78.6%, down from 79.2% in March and below expectations for a 0.1% decline. While this report was a little disappointing, industrial production has been solid so far this year, with 1.1% growth in February and 0.7% growth in March. I still think the economy is showing signs of improvement, but we’ll keep a close eye on May’s report to see if industrial output bounces back.
Layoff Activity At a Seven–Year Low
The Labor Department revealed yesterday that initial claims for unemployment fell to their lowest level in seven years, dropping 7.5% last week. Initial claims for unemployment declined 24,000 to 297,000, well below analysts’ expectations for 317,000. The four–week moving average dipped 0.6% to 323,250. After weeks of rising numbers, this was a welcome sign that the labor market is indeed improving.
Homebuilding Springs Forward
In April, home building soared 13.2%, its fastest pace so far this year. Housing starts jumped to a seasonally adjusted annual rate of 1.07 million, up from 947,000 in March. That’s well above the consensus estimate for a rate of 980,000. Single family starts also climbed higher, up 0.8% to a rate of 649,000. Building permits increased 8%, while single–family home permits rose 0.3%. Weak housing has been concern, as new and existing home sales have slowed. But another gain in single family home starts in April is an important indicator that demand is picking up from middle–class families, albeit at a slow pace.
Have a great weekend,
P.S: I will be speaking at the Detroit Marriott Troy in Troy, Michigan on Wednesday, May 20th at 7 PM. 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.