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Last Week’s Economic News In Review March 23, 2016

 

Retail sales took a fall, as did consumer prices, while housing starts posted solid gains.
Retail Sales

Retail sales fell 0.1 percent in February to hit $447.3 billion, according to last week’s report from the Census Bureau. February’s performance was slightly below projections of a 0.2 percent decline and not as large as January’s 0.4 percent tumble.

The big driver for February’s poor retail showing was gas station sales, which dropped 4.4 percent. Other notable drops included miscellaneous retailers, which were down 1.1 percent; furniture and home furnishings, which fell 0.5 percent; and department stores, which were down 0.4 percent.

For retail sales watchers, February’s sales results were reason for concern, as this followed the Bureau’s downgrading of January’s performance to a 0.4 percent drop after initially reporting January enjoyed a 0.2 percent increase.

“The state of the retail sector is now starting to look altogether shakier,” Chris Williamson, chief economist for financial information firm Markit, noted in a client statement.

Consumer Price Index

In related news, consumer prices for February also fell with the Consumer Price Index for All Urban Consumers (CPI-U) for the month declining 0.2 percent, the Bureau of Labor Statistics reported last week.

Once again, energy was a dominant factor. The energy index fell 6 percent in February, marking its third consecutive decline. And once again, prices at the pump skewed the energy sector with the gasoline index falling 13 percent for the month.

Take away energy from the equation, and core inflation, as captured in the index for all items less food and energy, actually increased 0.3 percent. Compared to a year ago, core inflation was up 2.3 percent over February 2015, the largest year-over-year gain since May 2012.

“The rise in underlying inflation implies lower real interest rates, which boosts household and consumer spending,” Neil Dutta, head of U.S. Economics for investment firm Renaissance Macro, explained in a statement to clients. “Firmer core prices also suggests corporate pricing power is offsetting the squeeze on margins from a tighter labor market. The Fed will welcome this inflation news and continue to pursue a gradual course of action.”

Permits and Housing Starts

In real estate, building permits issued for the construction of private housing in February dropped 3.1 percent to an annual rate of 1,167,000, the Census Bureau reported. That said, permits issued for single-family homes grew 0.4 percent to hit an annual rate of 731,000. Compared annually, February’s housing construction permits were 6.3 percent higher than February 2015.

Starts on construction of private housing in February grew 5.2 percent, reaching an annual rate of 1,178,000. Compared to last year, this was a whopping 30.9 percent higher than February 2015’s rate of 900,000. Starts on single-family homes grew 7.2 percent in February to hit a rate of 822,000.

This week we can expect:

  • Monday — Existing home sales for February from the National Association of Realtors.
  • Tuesday — New home sales for February from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; durable goods orders for February from the Census Bureau.
  • Friday — Third estimate for fourth quarter gross domestic product from the Bureau of Economic Analysis.