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:
December Retail Sales Disappoint
In December, U.S. retail sales declined 0.9%; economists had expected a 0.1% dip. Much of this was due to falling gasoline prices; gas stations saw sales plunge 6.5%—the most since December 2008. Excluding energy, food, auto and building material sales, core retail sales pulled back 0.4%. At the same time, furniture stores and restaurant sales grew. To say the least, the December retail sales data was a disappointment. However, economists are still largely optimistic about consumer spending over the long term. In fact, even when accounting for the latest drop, core sales are up 3.2% over a year ago.
Business Stockpiles Grow As Expected
In November, U.S. business inventories increased 0.2%, right in line with economists’ expectations. Retail inventories, which exclude autos, climbed 0.1%. Business sales dipped 0.2% in November, and at the current sales pace, it would take 1.31 months for business to empty their shelves. Again, business inventories weren’t as strong as wholesale inventories (up 0.8% in November), these were still strong results. In the past year, business inventories have increased 4.4%, while business sales have risen 2.2%.
Jobless Claims Continue to Fall
For the week ending January 3, jobless claims fell by 4,000 to a 294,000 annual rate. Economists were looking for a decline to 290,000. The four-week moving average dipped to 290,500, down from 290,750 in the previous week. While last week’s jobless claims didn’t fall as far as economists had expected, first-time jobless claims remain below 300,000, which is the benchmark of normal economic activity.
Deflation Begins to Brew
The Producer Price Index slipped 0.3% in December, marking the steepest decline since October 2011. Economists had expected prices to dip 0.4% last month. Excluding food and energy, prices increased 0.3% in December, which was well above economists’ expectations for a 0.1% rise. Falling oil prices is helping keep inflation in check, as producer prices have only climbed 1.1% in the past year. And as long as oil prices remain low, inflation should remain under control.
The Labor Department announced today that the Consumer Price Index (CPI) declined 0.4% in December, which represents the biggest monthly decline in six years. Energy prices plunged 4.7% in December, led by a 9.4% decline in gasoline prices. Excluding food and energy prices, the core CPI was unchanged in December. For 2014, CPI rose only 0.8%, which is the smallest annual rise in the past 50 years. So inflation is still not a threat, which will help support the Fed in keeping interest rates ultralow in 2015.
Industrial Output Slows
Industrial production dipped 0.1% in December, while November’s figure was revised to a 1.3% gain, up from 1.1%. Capacity utilization decreased to 79.7%, down from 80% in November and below economists’ projections for 79.9%. Even with the dip last month, industrial production climbed at a 5.6% annual rate in the fourth quarter, and overall industrial output in December was up 4.9% year-over-year. So the U.S. economy continues to show strength.
That’s all I have for you this week. Because the U.S. markets will be closed for the MLK holiday, I’ll be in touch with the latest Portfolio Grader changes and Stock of the Day on Tuesday.
Have a great weekend,