IIt’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 Producer Price Index
On Tuesday, the Labor Department announced that the Producer Price Index (PPI) was unchanged in May. Wholesale energy prices declined 3% in May, while whole food prices declined 0.2%. Excluding food, energy and trade, the core PPI declined 0.1% in May. In the past 12 months, the PPI has risen 2.4% and the core PPI has risen 2.1%. Due largely to falling energy prices, wholesale inflation has disappeared, which will take pressure off the Fed to raise key interest rates higher.
The Consumer Price Index (CPI)
On Wednesday, Labor Department then announced that the Consumer Price Index (CPI) declined 0.1% in May, due largely to the fact that gasoline prices declined 6.4%. Excluding food and energy, the core CPI rose 0.1% in May. In the past 12 months, the CPI is now running at a 1.9% annual pace, down from a 2.7% annual pace four months ago. The core CPI, excluding food and energy, is now running at a 1.7% annual pace in the past 12 months. So inflation on both the wholesale and consumer level has cooled immensely, which again takes pressure off the Fed to raise key interest rates further.
The biggest economic news on Wednesday was that the Commerce Department announced that retail sales declined 0.3% in May, which represents the largest monthly decline in retail sales in 16 months. A 2.4% decline in sales at gas stations distorted overall retail sales, so falling gasoline prices were largely responsible for the big drop in retail sales. Normally, when gasoline prices fall, it puts more money in consumers’ pockets, so they tend to spend that money elsewhere. Interestingly, sales at department stores decline 1% in May, while online Internet sales rose 0.8%. Also notable is that vehicle sales declined 0.2% in May. Year-to-date, retail sales are running 3.9% higher than the same period in 2016, so there is no reason to panic. However, the dramatic slowdown in retail sales should cause the Fed to hesitate before it raises key interest rates further.
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,