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 Disappoint
The Commerce Department reported that retail sales unexpectedly dropped 0.3% in June, missing economists’ estimates for a 0.3% increase. May sales were revised down from 1.2% to 1%. Auto sales also pulled back, falling 1.1% compared to 0.8% rise last month. So core retail sales, excluding autos and gas stations, slipped 0.1% in June, down from a 0.7% gain in May. This is the first time since February that retail sales have declined. Over the past year, retail sales have risen only 1.4%, so clearly, the consumer remains very cautious. As a result of the disappointing retail sales report and downward revisions, economists are now likely lowering their second-quarter GDP forecasts.
Jobless Claims Dipped Last Week
On Thursday, the Labor Department revealed that initial claims for unemployment dipped from 297,000 to 281,000 last week. Economists expected that jobless claims would dip to 285,000. Meanwhile, the four-week moving average increased 3,250 to 282,500. Overall claims have held below 300,000 for 19 weeks in a row, which is still a positive sign that the labor market is improving.
Business Inventories Tick Up in May
The Commerce Department reported that business inventories rose 0.3% in May, after increasing 0.4% in April. This beat economists’ estimates for a 0.2% increase. Meanwhile, the retail inventory-to-sales ratio was unchanged at 1.36. Business sales, excluding autos, increased 0.4%, slower than April’s 0.5% growth. Business inventories also contribute to GDP growth estimates, but due to downward retail sales revisions, I still expect economists to revise their second-quarter GDP forecasts lower.
Industrial Production Increases in June
In June, U.S. industrial output climbed 0.3%, after declining 0.2% in May.This came as somewhat of a surprise to economists, who estimated production to increase by 0.2%. Manufacturing output, which accounts for nearly 75% of industrial production, was unchanged for the month. Meanwhile, mining and utilities only slightly increased 0.2%. Industrial capacity utilization dropped to 78.4%, upwardly revised from a 78.2% reading in May and above expectations for a 0.1% decline. Industrial production is finally gaining momentum after a very rough start to the year. Despite a harsh winter, falling oil prices and the strong dollar, the index is still up 1.5% from a year ago.
U.S. Consumer Prices Increased in June
U.S. Consumer Prices Increased in June, in line with economists’ estimates. Energy prices rose 1.7%, and food prices increased 0.3%. Excluding food and energy prices, the core CPI increased 0.2% in June, in-line with economists’ estimates. Meanwhile, there was an increase in the index for all items for the first time in 12-months. This is the second month in a row that consumer prices have increased. However, much of this stems from oil prices, which increased 3.4% last month, and rising food costs. Meanwhile, core consumer prices have actually risen 1.8% in the past year, suggesting the possibility of inflation.
Housing Starts Rise as Building Permits Surge
According to the Commerce Department, U.S. housing starts rebounded big time in June,. as groundbreaking increased 9.8% to a seasonally adjusted 1.17 million units. That’s up significantly from May’s revised pace of 1.07 million units, and surpassed economists’ estimates for a 1.12 million unit pace. Building permits increased last month, rising 7.4% to a pace of 1.34 million unit rate. That’s the highest level since July 2007. An increase in building permits and groundbreakings suggest that there’s growing demand for housing in the U.S; a sign that the economy is still on a solid rebound.
That’s all I have for you this week; I’ll be in touch again next week with the latest ratings updates out of Portfolio Grader.
Have a great weekend,