Update on Retail Sales, Unemployment and More

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 Inventories Decline

In December, wholesale inventories fell 0.1%. This was actually better-than-expected, as economists were looking for a 0.2% drop. Wholesalers also reported a 0.3% decline in sales, following a 1.3% drop in November. Meanwhile, November stockpiles were revised lower, reflecting a 0.4% decline compared with the previously reported 0.3% dip. This is the third month in a row that wholesalers have cut their inventories. And while inventories were slightly better than economists’ expectations, they were weaker than the estimate the government used to calculate its prediction for fourth-quarter Gross Domestic Product. So we’ll likely see further downward revisions to fourth-quarter GDP.

Initial Claims for Unemployment Fall

For the week ending February 6, initial claims for employment fell by 16,000 to a seasonally adjusted 269,000. This was well below the consensus forecast of 283,000. Meanwhile, the four-week moving average fell by 3,500 to 281,250. For 49 weeks in a row, jobless claims have remained below 300,000. Any reading below this level typically indicates a strong labor market. Then again, there are plenty of other weak spots in the labor market, including the workforce participation rate. So I’m cautiously optimistic, at best.

Retail Sales Increase

Retail sales increased more than expected in January, rising 0.2% compared to the 0.1% forecast. December retail sales were revised slightly higher to show a 0.2% gain, up from the previously reported 0.1% rise.Retail sales excluding automobiles, gas, building materials and food services increased 0.6%, up from a 0.3% decline in December. Despite global economic uncertainty, U.S. consumers are now starting to spend the money they are saving at the fuel pump. With December’s revised figure, retail sales have now increased for three-straight months.

Business Inventories Rise

Business inventories increased 0.1% in December, up from November’s 0.1% decline. This was in line with economists’ estimates. Retail inventories, which exclude autos, increased 0.2% in December. Business sales dropped 0.6%, and at the current sales pace, it would take 1.39 months to empty shelves. Given the increase in inventories and the decline in sales, the inventory-to-sales ratio is at its highest level in more than six years. The high ratio could continue to weigh on GDP growth.

Have a great weekend,

Louis Navellier

Louis Navellier

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