Retail Sales Pause Again, Inflation Takes a Spring Break. What We Learned During the Week of April 10 – 14

Retail sales unimpressed again during March while inflation reversed course. Here are the 5 things we learned from U.S. economic data released during the week ending April 14.

#1Retail sales softened again during March. The Census Bureau reports that retail and food services sales slipped 0.2 percent during the month to a seasonally adjusted $470.8 billion. Despite the recent weakness, sales were 5.2 percent above their year ago pace. After removing the 1.2 percent sales decline among auto dealers and parts stores, retail sales held steady during the month and were up 5.0 percent from a year earlier. Sales improved during the month at electronics/appliance stores (+2.6 percent), apparel retailers (+1.0 percent), grocery stores (+0.5 percent), and department stores (+0.2 percent). Sales during March fell at building material retailers (-1.5 percent), gas stations (-1.0 percent), sporting goods/hobby stores (-0.8 percent), and restaurants/bars (-0.6 percent). Meanwhile, nonstore retailers (including internet-based retailers) saw sales jump 0.6 percent during the month, putting them 11.9 percent above their March 2016 mark.Growth in Internet Sales-1992-2017-041417

#2Consumer prices declined for the first time in a year during March. Per the Bureau of Labor Statistics, the Consumer Price Index (CPI) sank 0.3 percent on a seasonally adjusted basis during the month, the first time since February 2016 in which the measure of consumer prices dropped. Some of the decrease was the product of a 3.2 percent drop in energy prices, reflecting lower prices for gasoline (-6.2 percent), fuel oil (-0.8 percent), utility delivered natural gas (-0.8 percent), and electricity (-0.1 percent). Food prices grew 0.3 percent (its largest single-month increase since May 2014) with four of six major grocery categories experiencing price increases. Net of energy and food, core CPI slipped 0.1 percent but remained 2.0 percent above that of a year earlier. While prices grew for transportation services (+0.4 percent), medical care commodities (+0.2 percent), shelter (+0.1 percent), and medical care services, they declined for used vehicles (-0.9 percent), apparel (-0.7 percent), and new vehicles (-0.3 percent).

#3Wholesale prices edged down during March. The Producer Price Index for final demand slipped 0.1 percent on a seasonally adjusted basis during the month, its first monthly decrease since last August. Core PPI for final demand (net of energy, food, and trade services) grew 0.1 percent. The former remained 2.3 percent above its year ago market while the latter’s 12-month comparable was +1.7 percent. PPI for final demand goods slipped 0.1 percent, with energy PPI down 2.9 percent and food PPI up 0.9 percent. An 8.3 percent drop in the wholesale price of gasoline helped pulled down the former while higher prices for meats and processed poultry were partially responsible for the latter’s increase. PPI for final demand services slipped 0.1 percent with wholesale prices for trade services and transportation/warehousing declining 0.1 percent and 0.2 percent, respectively.

#4The pace of hiring slipped during February even as the count of job openings grew. According to the Bureau of Labor Statistics, employers hired a seasonally adjusted 5.314 million workers during the month, down 90,000 from January and off 2.4 percent from a year earlier. Private sector employers added 4.968 million workers, off 99,000 from January and 2.5 percent from a year earlier. Industries with the largest year-to-year percentage increases in hiring included construction (+6.3 percent), manufacturing (+6.3 percent), transportation/warehousing (+4.8 percent), and health care/social assistance (+1.1 percent). Hiring slowed versus a year earlier in financial activities (-19.7 percent), retail (-9.0 percent), leisure/hospitality (-5.9 percent), and the government (-2.0 percent). Even if the pace of hiring chilled, the number of available jobs did not. There were a seasonally adjusted 5.743 million job openings at the end of February, up 118,000 from January and +3.2 percent from a year earlier. Private sector employers reported 5.235 million job openings, a 2.8 percent increase from a year earlier. Industries the largest positive 12-month comparables in terms of job openings included health care/social assistance (+21.1 percent), manufacturing (+19.0 percent), financial activities (+8.1 percent), and government (+7.0 percent). 5.701 million people left their jobs during March (-2.2 percent versus February 2016). Voluntary quits were up 3.4 percent from a year earlier to 3.084 million while layoffs plummeted 13.6 percent versus February 2016 to 1.584 million.

#5Small business owner sentiment held firm in March. The National Federation of Independent Business reports that its Small Business Optimism Index lost 6/10ths of a point to a seasonally adjusted reading of 104.7 (1986=100). Even with the decline, the index has remained above 100.0 for four straight months (essentially since last fall’s election), which kept it near its highest readings in a decade. Just two of the index’s ten components improved during the month: plans to make capital outlays (up three points) and plans to increase employment (up a point). Six other index components weakened during March: expected real sales (down eight points), earnings trends (down four points), current inventories (down three points), current job openings (down two points), plans to increase inventories (down a point), and expectations for the economy to improve (down a point). The press release characterized the survey results as “an excellent performance) but also noted that the group’s measure of uncertainty rose to its second highest level ever as small business owners are “having a difficult time anticipating the factors that affect their businesses, especially government policy.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 8, 2017, First-Time Claims, seasonally adjusted): 234,000 (-1,000 vs. previous week; -24,000 vs. the same week a year earlier). 4-week moving average: 247,250 (-8.0% vs. the same week a year earlier).
University of Michigan Index of Consumer Sentiment (April 2017-preliminary, Index (1966Q1=100), seasonally adjusted: 98.0: (+1.1 points vs. March 2017, +9.0 points vs. April 2016).
Import Prices (March 2017, not seasonally adjusted): -0.2% vs. February 2017, +4.2% vs. March 2016.  Net of fuel: +0.2% vs. February 2017, +1.0% vs. March 2016.
Export Prices (March 2017, not seasonally adjusted): +0.2% vs. February 2017, +3.6% vs. March 2016.  Net of agricultural exports: +0.2% vs. February 2017, +3.3% vs. March 2016
Treasury Budget (March 2017, Budget Surplus/Deficit): -$176.2 billion (vs. February 2017:  -$192.0 billion, March 2016: -$106.5 billion).  First six months of FY2017: -$526.9 billion (+14.7% vs. first six months of FY2016).
Manufacturing & Trade Inventories (February 2017, seasonally adjusted): $1.840 trillion (+0.3% vs. January 2017, +2.8% vs. February 2016).

The opinions expressed here are not necessarily those of Kevin’s current and previous employers. No endorsements are implied.

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