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:
Retailers Get Their Groove Back
The Commerce Department reported on Thursday that retail sales bounced back in July, up 0.6%. This was in-line with economists’ expectations. June retail sales were revised higher to show no change, compared with the previously reported 0.3% dip. Core retail sales, which exclude autos, gasoline, building materials and food services, increased 0.3% last month, while June’s figure was revised to a 0.2% rise. The 1.4% increase in automobile sales in July helped boost overall retail sales last month. So, overall, the economy is gaining momentum and we may see second-quarter GDP estimates lifted later this month.
Business—Including Wholesalers—Stock Their Shelves
According to the Commerce Department, business inventories increased 0.8% in June, which marks the biggest jump since January 2013. This beat economists’ expectations for a 0.3% rise. Business sales, excluding autos, gained 0.2% in June, while the inventory-to-sales ratio climbed to 1.37, up from 1.36 in May. The bigger-than-expected increase in business inventories in June was due to increases in manufacturing (0.6%), retail (0.9%) and wholesale (0.9%) inventories. As long as consumer demand continues to improve, we should see business continue to restock their shelves—which bodes well for overall economic growth.
Wholesale inventories increased more than expected in June, rising 0.9%. Economists were only expecting a 0.4% rise. May’s wholesale inventories were revised to show a 0.6% increase, down from the previously reported 0.8%. The Commerce Department reported that the surge in June was due to a rise in oil prices and a jump in farm products. The better-than-expected increase in June wholesale inventories implies that second-quarter GDP growth could also be revised higher.
Wholesale Inflation Remains Tame
For the third-straight month, producer prices increased, up 0.2% in July after June’s 0.4% rise. This beat economists’ estimates for a 0.1% increase last month. Excluding food and energy prices, the core PPI also rose 0.2%. Gasoline prices increased 1.5% in July, while food prices slipped 0.1%. In the past 12 months, the PPI has fallen -0.8%, while the core PPI has risen 0.9%. Due to consistently low oil prices and the strong U.S. dollar, inflation remains in check. So I do not expect that the PPI will rise significantly in the upcoming months, since there is a serious “commodity crunch” underway due to a strong U.S. dollar and ongoing concerns about China’s demand for raw commodities.
Layoff Activity Remains Near 15-Year Low
The Labor Department reported that initial claims for unemployment totaled 274,000, up 5,000 from the previous week and in-line with economists’ expectations. The four-week moving average dipped by 1,750 to 266,250, the lowest level in 15 years. Jobless claims have risen for the three-straight weeks, but they remain below the 300,000 threshold. That continues to point to an improving jobs market.
Industrial Output Heats Up
Industrial production posted its second-straight increase, rising 0.6% in July. Capacity utilization increased 0.3 points to 78% last month, and has risen 1.7 percentage points in the past year. Economists were expecting a 0.4% rise in industrial production and capacity utilization of 78%. Manufacturing output, which accounts for nearly 75% of industrial production, increased 0.8%. After industrial production slid in the first five months of the year, it is encouraging to see industrial production increase over the past two months. The manufacturing sector is finally starting to show signs of recovery.
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,