May 12, 2017
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. So, let's take a closer look at the most important economic news:
On Friday, the Commerce Department announced that retail sales rose 0.4% in April, below economists' estimates for a 0.6% increase. Sales and gas stations surged 12.3% in April. Excluding vehicle sales and gas stations, retail sales still rose 0.3%. Meanwhile, March's sales were revised to reflect a 0.1% gain, which was an improvement from the previously reported 0.2% decline. Due to March's upward revision, retail sales have risen three out of the first four months this year. Overall, April's retail sales report was very encouraging, and first-quarter GDP will likely be revised higher.
On Thursday, the Labor Department reported that the Producer Price Index (PPI) rose 0.5% in April. This was well above economists' consensus estimate of a 0.2% gain. Breaking it down, wholesale energy prices rose 0.8%, while food prices rose 0.9%. The core PPI, which excludes wholesale food, energy and trade prices, jumped 0.7% in April. This is especially alarming, in my opinion. Over the past 12 months, the core PPI has jumped 2.1%. By comparison, the annual rate of wholesale inflation was 1.7% in March. Meanwhile the headline PPI is running at a 2.5% annual pace, up from March's 2.3% annual pace.
Now that wholesale inflation is running at the highest annual pace on over five years (since February 2012), I expect that the Fed may be forced to raise key interest rates at its June Federal Open Market Committee (FOMC) meeting.
On Friday, the Labor Department reported that the Consumer Price Index (CPI) rose 0.2% in April. This was in line with economists' consensus estimate. The primary culprit was energy prices, which surged 1.1% in April. Excluding food and energy prices, the core CPI rose just 0.1% in April, which was lower than economists' consensus estimate of 0.2%. Over the past 12 months, the core CPI has risen 1.9%, while headline CPI has risen 2.2%. To put this into perspective, the CPI was running at a 2.7% annual pace just two months. So, despite the recent surge in wholesale inflation, inflation at the consumer level is cooling off a bit.
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,