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:
The Labor Department reported on Tuesday that productivity declined 0.5% in the second quarter, which was the third-straight quarterly decline. The drop was truly a surprise, as economists were expecting second-quarter productivity to increase 0.3%. In the past 12 months, productivity has slipped 0.4%. That’s the first annual productivity decline since the second quarter 2013. The weak productivity data will likely give the Fed another excuse to postpone a key interest rate hike.
Earlier this week, the Commerce Department announced that wholesale inventories increased 0.3% in June, topping economists’ estimates for inventories to remain unchanged. May inventories were revised higher to show a 0.2% rise, vs. the previously announced 0.1% gain. The increase in inventories in June should add nicely to second-quarter GDP estimates.
Initial Claims for Unemployment
For the week ending August 6, jobless claims declined by 1,000 to 266,000. That just missed economists’ estimates for jobless claims to total 265,000. The four-week moving average increased by 3,000 to 262,750. Still, jobless claims have remained below 300,000 for 75-straight weeks, which is the longest streak in 46 years.
Producer Price Index (PPI)
In July, the Producer Price Index (PPI) declined 0.4%, which was the largest monthly drop since September 2015. Excluding food and energy, core PPI slipped 0.3%. So falling oil prices was not the only culprit for the dramatic decline in wholesale prices last month. The decline in PPI was also a shock to most economists, as they were expecting PPI to increase 0.1% and core PPI to rise 0.2% in July. In the past 12 months, PPI has risen only 0.8%. So overall, there isn’t any inflationary pressure that the Fed would need to fight by raising key interest rates.
This morning, the Commerce Department announced that retail sales were flat in July. That missed economists’ estimates for retail sales to increase 0.5%. Excluding vehicle sales, retail sales actually slipped 0.3%, which is a sign that the U.S. consumer is growing more cautious. In the past 12 months, retail sales have only gained 2.3%, which is igniting fears that GDP growth could stall in the third quarter.
In June, business inventories bounced 0.2% and sales surged 1.2%. That was the largest increase in inventories in more than three years, and the biggest rise in sales since February 2013. At the current sales pace, it would take 1.39 months for inventories to be depleted. The reduction in inventories should help support second-quarter GDP growth.
That’s all I have for you this week; I’ll be back online on Monday with your weekly ratings changes.
Have a great weekend,