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 Drop
Retail sales dropped 0.1% in February, topping economists’ estimates for a 0.2% decline. Retail sales excluding automobiles, gas, building materials and food services increased 0.3% last month, also topping forecasts for a 0.2% jump. January retail sales were revised to a 0.4% decline, down from the previously reported 0.2% increase. The latest retail sales report is a bit concerning, as it shows the U.S. consumer isn’t spending as much as economists’ had hoped–and that could weigh on U.S. GDP growth forecasts going forward.
Producer Price Index (PPI) Slips
The Labor Department reported that its Producer Price Index (PPI) slipped 0.2% in February, which was in line with economists’ expectations. Core PPI, which excludes food, energy and trade services, increased 0.1% last month. In the past 12 months, PPI is unchanged, while core PPI is up 0.9%.Weak energy prices and falling food costs weighed on PPI last month, yet a slightly weakening U.S. dollar helped boost factory orders in February. Still, overall inflation remains tame.
Business Inventories Increase
Business inventories climbed 0.1% in January, while December’s inventories were revised to an unchanged reading, down from the previously reported 0.1% gain. Retail inventories, which exclude autos, increased 0.2% in January. Business sales slipped 0.4% in January, and at the current sales pace, it would take 1.4 months to empty the shelves. The inventory-to-sales ratio is now at its highest level since May 2009, and that could weigh on GDP growth this year.
Consumer Price Index (CPI) Declines
The Labor Department reported that its Consumer Price Index (CPI) slipped 0.2% last month, as a 13% decline in gasoline prices weighed on the index. Core CPI, which doesn’t include food and energy costs, climbed 0.3% higher in February, which was better than economists’ forecasts for a 0.2% rise. In the past 12 months, CPI has risen 1% and core CPI has increased 2.3%. This report shows that inflation is starting to firm up, yet it still remains well below the Federal Reserve’s 2% target. And as evidenced by the Fed’s statement on Wednesday, inflation is still expected to remain in check for the foreseeable future.
Housing Starts Jump & Building Permits Drop
In February, housing starts jumped 5.2% to a 1.18 million-unit pace, which topped estimates for a 1.15 million-unit pace. January housing starts were revised slightly higher to a 1.12 million-unit pace, up from the previously reported 1.099 million-unit pace. On the other hand, building permits dropped 3.1% to a 1.17 million-unit pace in February. The rebound in housing starts last month marked the highest level reached in five months, and that’s a positive sign that Americans are growing more confident in the U.S. economy.
Industrial Production Slips
Industrial production slipped 0.5% in February, due in part to a 1.4% decline in mining production and a 4% drop in utilities production. This missed economists’ forecasts for a 0.3% decline. Manufacturing production, on the other hand, increased 0.2% last month. Capacity utilization dropped to 76.7%, down from 77.1% in January. Weak energy prices coupled with warmer spring weather weighed on industrial production overall last month. However, it is a positive sign that manufacturing production has now risen for two-straight months, which means the worst could be behind us.
Initial Claims for Unemployment Rise
For the week ending March 12, initial claims for unemployment increased by 7,000 to 265,000. The prior week’s claims were revised lower by 1,000. The four-week moving average also climbed higher, rising by 750 to 268,000. Even though jobless claims jumped up from a five-month low last week, jobless claims have remained below the 300,000 threshold for 54-consecutive weeks. That’s the longest stretch in more than 50 years.
Index of Leading Economic Indicators Increase
The Conference Board announced yesterday that its index of leading economic indicators increased 0.1% to 123.2 in February, after falling 0.2% in January. The current conditions index rose 0.1% last month. While the decline in building permits weighed on the LEI last month, increases in four of the 10 indicators helped boost the index. So the U.S. economic outlook is improving.
Have a great weekend,