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:
In October, wholesale inventories improved 0.4%, outpacing economists’ expectations of a 0.2% rise. This even includes a 1.4% plunge in auto inventories. Excluding automobile stockpiles, core wholesale inventories jumped 0.6%. Driving the increase were electrical goods, machinery, apparel and metals stockpiles. September wholesale inventories were also revised higher to reflect a 0.4% gain, above the previously reported 0.3% increase. This was great news. Between the stronger-than-expected October results and the September revision, some economists are raising their estimates for Q4 GDP.
Initial Claims for Unemployment
For the week ending December 6, first-time jobless claims ticked down 3,000 to a 294,000 annual rate. Economists had predicted that the layoff activity measure would dip to 295,000 so these were slightly better-than-expected results. The four-week moving average rose by 250,000 to a 299,250 annual rate. Persistently low jobless claims, coupled with a rebound in hiring activity, is great news for the jobs market.
In November, retail sales jumped 0.7%, the biggest increase in eight months. Economists were only expecting a 0.4% rise in retail sales, so this was truly a surprise. October retail sales were also revised higher to reflect 0.5% growth, up from 0.3% previously. Even though gas station sales declined 0.8% in November, consumers spending at building material and garden sales rose 1.4%, clothing sales rose 1.2%, and non-store Internet retailers rose 1%. Also notable is that vehicle sales rose 1.7% in November. Consumer spending has accelerated since gasoline prices started to pull back. Clearly, when you put more money in consumers’ pockets, they spend it accordingly. Retail sales are now up 5.1% in the past 12 months, which is still below pre-recession growth of 5.5%. But this is still a very positive report, as it shows that consumers are starting to spend more and that should add nicely to GDP growth in the fourth quarter.
In October, business inventories increased 0.2%, which was right in line with economists’ expectations. Retail inventories, which exclude automobiles, rose 0.3%. At the same time, business sales dipped 0.1% in October. Manufacturers saw sales decline 0.8%, retailers reported a 0.4% increase and wholesalers posted a 0.2% gain. And at the current sales pace, it will take 1.30 months for businesses to empty their shelves, the same rate as September. While these results weren’t quite as strong as the wholesale inventories report, they were still solid. And over the past twelve months business inventories have increased 4.8% while business sales have improved 3.4%. So there is clear progress over the long run.
Producer Price Index (PPI)
In November, the Producer Price Index (PPI) declined 0.2%. This was a slightly steeper drop than expected; economists were expecting a 0.1% dip. Wholesale energy prices fell 3% while the wholesale cost of goods declined by 0.7% (representing the biggest monthly drop in wholesale goods since April 2013). Excluding food and energy prices, the core PPI was unchanged, below economists’ expectations of a 0.1% increase. This is the second month in a row that the PPI has declined. No matter how you slice it, deflation is here and will persist as long as commodity and import prices continue to fall due to a strong U.S. dollar.
That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes and Stock of the Day on Monday.
Have a great weekend,