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:
Wholesale and Consumer Prices Cool
On Thursday, the U.S. Labor Department reported that the Producer Price Index (PPI) reading for September fell 0.5%. The reading for August remained the same and was revised 0.2% higher for July. September marks the eighth straight 12-month decline. The biggest factor in the decline was attributed to lower gas prices. As I mentioned back in September, with PPI readings moving lower, inflation remains relatively non-existent, which presents a conundrum for the Fed. While the rest of Wall Street is anxiously awaiting the rate hike announcement, I still believe the economic data is not strong enough to warrant a hike just yet, and even if they do, it will be a very minimal increase.
The Labor Department announced on Thursday that its Consumer Price Index (CPI) declined 0.2% in September, due largely to a 9% decline in the cost of gasoline. The cost of food rose 0.4% in September, so the core CPI, excluding food and energy, rose 0.2%. In the past 12 months, the CPI has been unchanged, while the core CPI has risen 1.9% due largely to higher rental costs. Since the CPI has been unchanged in the past 12 months, there will be no cost of living adjustment for Social Security recipients in 2016.
Retailers Feel the Pinch
Retail sales were flat for September, rising just 0.1%. Like the PPI figures, lower gasoline prices were the largest determining factor in the figure. Service station receipts for the month were down 3.2%. Retail sales in August were also revised down giving a reading of 0% vs, the previously announced 0.2% gain. In the past 12 months, retail sales have risen 2.4%, but rose a more robust 4.9% when gasoline station sales are excluded. Unfortunately, in the past couple months, overall retail sales have clearly decelerated.
Business Stockpiles Stagnate
The Commerce Department announced on Wednesday that U.S. business inventories were flat again in August. This marks the second straight month inventories neither rose nor fell. Retail inventories excluding autos rose 0.4% in August after increasing 0.3% in July. Businesses are still working their way through existing inventory and this could put further pressure on the manufacturing sector.
Layoff Activity Remains Low
On Thursday, initial jobless claims totaled 255,000 last week. This was 15,000 less than expected. This reading brought the four-week average down to 265,000. The labor market is still showing signs of improvement and hiring is continuing to pick up.
Industrial Activity Slows
In September, industrial production declined 0.2% from August. This was in line with economists’ estimates. Capacity utilization fell from 77.8% in August to 77.5% in September. Economists previously forecasted 77.3% capacity utilization. Meanwhile, August industrial production was revised higher to reflect a 0.1% decline, up from the previously stated 0.4% decline. This is the second month in a row that industrial production has fallen. Clearly, the strong U.S. dollar is weighing on U.S. manufacturing.
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,