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 Rebound Back in March
Retail sales bounced back in March, rising 0.9%, after three straight months of declines. This was in line with economists’ expectations. Excluding automobiles, gasoline, building materials and food services, retails sales increased 0.3%, up from a 0.2% decline in February. After a rough winter season, it looks like U.S. consumers are warming up to spending more, and the pullback in economic growth during the first quarter could be short-lived. And since Americans’ savings are at their highest level in more than two years, we could see a nice rise in consumer spending in the months ahead.
Producer Prices Rise
The Labor Department reported that the Producer Price Index increased 0.2% in March, after declining 0.5% in February. Core PPI, which excludes food and energy, climbed 0.2% higher. Economists were looking for overall prices to rise 0.2% and core PPI to increase 0.1%. Food prices declined 0.8% in March, while energy prices increased 1.5%. While PPI is down 0.8% in the past year, core PPI has risen 0.9%. With energy prices now stabilizing, we could see inflation and the PPI start to rise modestly in the coming months. Any rise in inflation could put some pressure on the Fed to lift interest rates this year.
Business Inventories Slightly Increase
In February, U.S. business inventories increased a modest 0.3%, which was above economists’ expectations for a 0.2% rise. Excluding autos, retail inventories climbed 0.5% in February, while business sales remained unchanged. At the current sales pace, it would take 1.36 months for businesses to empty their shelves. Given the continuing high ratio of inventories, businesses will likely remain hesitant to add more stock to their shelves.
Industrial Production Falls
Industrial production slipped 0.6% in March, after a 0.1% increase in February. That represented the largest drop in more than two and a half years. Economists were looking for a 0.3% decline. Capacity utilization dropped 0.6% to 78.4% last month, which was also below economists projects for 78.7%. This was a disappointing report, to say the least. Overall, industrial production declined 1% in the first quarter, which marks the first quarterly decline since 2009. A 17.7% pullback in oil and gas well drilling weighed on mining production, and that dragged down industrial production last month. The poor report signals that the U.S. economy weakened during the first quarter.
Jobless Claims Increase
For the week ending April 11, jobless claims increased by 12,000 to a 294,000 annual rate. Economists were expecting claims to decline to a 280,000 annual pace. The four-week moving average increased slightly to 282,750 but still remains below the 300,000 threshold. Despite the uptick in jobless claims last week, the job market is continuing to show strength. In fact, the people still getting aid after an initial week slipped by 40,000 to 2.27 million for the week ending April 4, which is the lowest reading since December 2000.
Housing Starts and Building Permits
In March, housing starts increased 2% to a 926,000 annual pace, which was below economists’ expectations for a 1.04 million-unit annual pace. Building permits decreased 5.7% to a 1.04 million-unit pace. Again, harsh winter weather hindered home construction last month. But it is worth noting that we are starting to see a rebound in regions hit the hardest by winter, as housing starts in the Northeast and Midwest increased a stunning 115% and 31.3%, respectively.
Consumer Price Index Increases in March
For the third-straight month, the core consumer price index, excluding food and fuel, increased 0.2% in March. Overall, CPI also rose 0.2%. The Labor Department reported that the increase was due to gains in medical care, rents, clothing and used vehicles. Much of the increase in CPI in March can be attributed to rising gasoline prices, which increased nearly 4% last month. With oil prices stabilizing, we’re also seeing a slight increase in inflation.
Economic Indicators Gain for Seventh Straight Month
The Conference Board report that its Leading Economic Index increased 0.2% to 121.4 last month, up from a 0.1% increase in February. This was slightly below analysts’ expectations for a 0.3% rise. While this was the seventh-straight gain, the weaker-than-expected economic activity could signal that the U.S. economy is still growing at a slower pace.
Consumer Confidence Better Than Expected
The University of Michigan’s Consumer Sentiment Index showed a preliminary April reading of 95.9, up from March’s 93.0 and better than analysts’ expectations for 94.0. The increase in the University of Michigan’s Consumer Sentiment Index is the second-highest level in more than eight years, and signals that the U.S. consumer is growing more optimistic.
That’s all I have for you this week. I’ll be in touch with the latest Portfolio Grader changes on Monday.
Have a great weekend,