April 13, 2018
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…
On Tuesday, the Commerce Department revealed a major build up in Wholesale Inventories. In fact, the metric rose 1.0% in February, which was the biggest jump since October 2013. January was also revised up to 0.9%. In fact, year-over-year, wholesale inventories are up 5.5%.
These numbers point to the possibility that wholesale inventories could contribute to economic growth in the first quarter. Even if they have been a drag on prior output periods.
Machinery and electrical goods as well as primary metals have built up strongly already this year. However, metals of special note will be going into the March tariffs. We'll simply have to wait and see if wholesalers were able to stockpile steel and aluminum in anticipation of higher prices and possible scarcity coming down the pike.
Consumer Price Index
Consumer prices fell in March, led mainly by a drop in gas prices. Overall, the metric came in at a 0.1% decline. However, excluding energy, the core rate hit expectations with a modest 0.2% gain. Overall, the year-over-year rate rose 0.3 points to 2.1%. These numbers were in line with expectations.
However, the year-over-year gain merely reflects a comparison with a drop in wireless rates during March of last year. In fact, there's only limited downward pressure, coming mainly from apparel, as well as education and communications.
The weakest factor this month was energy. It came down 2.8%, with gasoline prices down 4.9%. Medical rose 0.4%, and housing had a second straight month of a 0.3% monthly gain.
This report was in line with the Federal Reserve's predictions of slowly building, modest pressure. Remember though, the Fed's 2% inflation goal is tied to the PCE index, not the CPI. Both indexes, however, tend to run in similar directions, which currently has been slightly higher.
University of Michigan's Consumer Sentiment Index
This morning, the University of Michigan's Consumer Sentiment Index registered below estimates at only 97.8 points for the preliminary April index. This is significantly weaker than March's score of 121.2 points, which hints at trouble for April's consumer spending. It may, in fact, even be an indicator of negative signals in this month's labor market as a whole.
Inflation, however, drew back a little bit. It's now at only 2.7% for the year-ahead outlook and 2.4% for the 5-year outlook. Now, although, this report had been strong during the month of March, other confidence readings had been lagging, and those are the factors primarily influencing today's report.
That's all I have for you this week. I'll be in touch again next week with the latest ratings out of Portfolio Grader.
Until next week,