Last Week in Review…

Market Update_f1_highRes

Last Week’s Economic News in Review

August 17, 2016

Retail sales were flat and producer prices tumbled, which indicated the odds were against interest rates rising anytime soon. Meanwhile, layoffs saw little change.

Retail Sales

Retail sales for July were virtually unchanged from June, totaling $457.7 billion, according to last week’s report from the Census Bureau. While this was 2.3 percent higher than July 2015’s performance when compared annually, the market had expected at least 0.4 percent growth over June.

“The July retail sales report was a disappointment,” JPMorgan Economist Michael Feroli told Business Insider. “These disappointing July figures came after a strong run for the data over the prior three months.”

The only bright spots in the Bureau’s July data were sales at vehicle and parts dealers, which increased 1.1 percent, and non-store retailers (such as market stands, online stores, and any locations outside traditional brick-and-mortar stores), which grew 1.3 percent. Meanwhile nearly every other retail segment was down, with sizable losses seen by gas stations, which fell 2.7 percent; sporting goods, hobby, book, and music stores, which dropped 2.2 percent; and grocery stores, which were down 0.9 percent.

Retail sales are a closely watched indicator, because consumer spending drives roughly 70 percent of the U.S. economy.

Producer Prices

Producer prices recorded their biggest drop in nearly a year, with the Producer Price Index for final demand (items destined for consumers) falling 0.4 percent in July, the Bureau of Labor Statistics reported last week. The drop was a surprising turn given that final demand prices grew 0.4 percent in May and 0.5 percent in June.

July’s decline in the final demand index was led by prices for final demand services, which shrank 0.3 percent. Also, final demand goods dropped 0.4 percent.

Shrinking producer prices point to little change in consumer prices. Paired with July’s flat retail receipts, it’s a good chance that the Federal Reserve will hold off on raising for the near term.

Initial Jobless Claims

Finally, lay-offs essentially held steady, with new claims for unemployment benefits filed by the recently unemployed during the week ending August 6 notching down to 266,000, a decline of 1,000 claims from the prior week’s total of 267,000, the Employment and Training Administration reported last week.

This marked the 75th straight week of initial claims sitting below the 300,000-claim mark — a level that economists consider indicative of a growing job market.

The four-week moving average, which is considered a more reliable measure of initial jobless claims, ticked up to 262,750, a gain of 3,000 claims from the preceding week’s average of 259,750.

This week we can expect:

  • Tuesday — July building permits and housing starts from the Census Bureau; July consumer price index from the Bureau of Labor Statistics; capacity utilization and industrial production for July from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; leading economic indicators for July from The Conference Board.