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Last Week’s Economic News In Review – September 21st, 2016

Market-Update-E Jansen

Retail sales fell further than anticipated, while consumer prices crept up, and still-low layoffs notched up slightly.

Retail Sales

Retail sales for August fell 0.3 percent to $456.3 billion, according to last week’s report from the Census Bureau. The fall-off in performance was greater than market expectations, which had anticipated a 0.1 percent decline. Compared to last year, August’s sales were 1.9 percent higher than August 2015’s sales.

August’s poor sales performance was shared across nearly every major retail sales category. Notable losses included miscellaneous store retailers, which dropped 2.4 percent; sporting goods, music, hobby and book stores, which fell 1.4 percent; building material and garden supply stores, which also declined 1.4 percent; and auto and other vehicle dealers, which saw sales contract 1 percent.

Why did retail sales taper off? Jim Baird, chief investment officer at Plante Moran Financial Advisors, chalked it up to a conservative financial outlook on the part of consumers.

“Stronger income growth should put consumers in a position to be able to spend more,” Baird told the Wall Street Journal. “But budget-conscious households appear content to balance their spending habits with a greater commitment to their long-term financial health.”

Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) grew 0.2 percent in August, the Bureau of Labor Statistics reported last week. Over the past 12 months, the all items index rose 1.1 percent.

The driver for last month’s price increase was largely due to core inflation, which constitutes all retail sales items except the usually volatile categories of food and energy. The Bureau’s index for all items less food and energy increased 0.3 percent in August, while the energy and food indexes were both unchanged for the month.

The 0.3-percent growth in the index for all items less food and energy was the largest gain since February. Key drivers for that gain in core inflation included prices for shelter; medical care; motor vehicle insurance; apparel; and communication.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly laid off during the week ending September 10 ticked up to 260,000, a slight gain of 1,000 claims over the prior week’s total of 259,000, the Employment and Training Administration reported. The gain was lower than market expectations, which had predicted a rise to 263,000.

Economists consider lay-off levels below 300,000 jobless claims indicative of a growing job market. Last week’s report marked the 80th straight week of sub-300,000 claims, which is the longest such stretch since 1970.

“Claims remain low, consistent with a still-strong trend in employment growth,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics, in a note to clients.

The four-week moving average — considered a more stable measure of lay-offs — skirted down to 260,750 claims, a slight drop of 500 claims from the preceding week’s average of 261,250.

This week we can expect:

  • Tuesday — Housing starts and building permits for August from the Census Bureau.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration; existing home sales for August from the National Association for Realtors.