Landaas & Company newsletter March edition now available.
No major announcements or releases
The broadest measure of inflation stayed below the Fed’s 2% target in February. The core Consumer Price Index, which excludes volatile food and energy prices, rose 1.8% from the year before. It was the fourth time in five months at 1.8%. The Bureau of Labor Statistics said overall inflation was up 2.2% including food and energy, with gasoline prices up 12.6% from February 2017. Categories pushing prices higher in the latest month included shelter, apparel and car insurance.
The Bureau of Labor Statistics said wholesale inflation in February rose to its highest rate since August 2014. The core Producer Price Index, excluding costs of food, energy and trade services, rose 2.7% from February 2017. For February, the overall price of goods declined, with drops in both food and energy costs. Service costs rose in February.
February retail sales fell unexpectedly for the third month in a row. According to a Commerce Department report, just six of 13 categories increased sales from January, led by building supply and garden centers. Year-to-year, overall sales rose 4%, below the long-term average of 4.3%. Twelve-month movements ranged from a 3.5% decline in sales from sporting goods stores to a 10.1% gain for online retailers.
In a sign that companies are struggling again to try to keep supplies in closer alignment with demand, business inventories rose 0.6% in January while sales decreased 0.2%. As a result, the ratio between inventories and sales increased after a long trend of declines since early 2016. Rising inventories help elevate gross domestic product, but if they are out of balance with sales, they can cause bumpy movements in production and employment. Commerce Department data showed year-to-year growth of 3.7% for inventories and 5.7% for sales.
The moving four-week average for initial unemployment claims declined for the third time in four weeks, after recently reaching its lowest point since late 1969. Labor Department data show the average level of jobless applications 38% below the 51-year average, which it has been under for more than five years. The indicator suggests continued reluctance by employers to let go of workers in a strong hiring market.
The housing industry got mixed news from a Commerce Department report that cited declines in housing starts and building permits in February. The annual rate of new houses starting construction fell behind both the month-ago and year-ago levels, while the rate of building permits dropped to its lowest point since September. The silver lining is that starts and permits for single-family housing remained relatively strong, which could help alleviate longstanding shortages of houses for sale.
The Federal Reserve reported that industrial production rose 1.1% in February following a decline in January that was wider than initially estimated. Manufacturing registered its highest output since October, and mining production rose because of a record high levels of oil and gas extraction. Warmer-than-usual weather caused a decline in output from utilities. Capacity utilization also rose, reaching the highest level since January 2015. Utilization, which tends to rise in advance of inflation, still was below the 46-year average, which was last reached in April 2008.
Demand for workers rose to a record in January with nearly 6.3 million job openings posted by employers. The gap between openings and hires grew, according to the Bureau of Labor Statistics. The number of hires has fallen short of openings each month since the beginning of 2016, a sign of a mismatch between employer requirements and worker experience. Another indicator of the tight labor market is the elevated rate at which workers are quitting their jobs, presumably confident of better opportunities.
The University of Michigan said its preliminary consumer sentiment index for March reached the highest point in 14 years. Optimism toward current economic conditions hit a record high for the 52-year-old survey. Concerns about inflation and trade wars weighed on the outlooks for many consumers, particularly those in the upper third of income, which a survey economist said could signal more tight-fisted consumer spending.