News & Events

Economic Advisor: April 19, 2017
April 19, 2017


 

Consumer and retail activity was a key newsmaker last week with both retail sales and consumer prices falling. Regardless, consumers reported they had a positive outlook on the economy.

Retail Sales

Retail sales for March dipped 0.2 percent to $470.8 billion, the second monthly drop in a row, according to last week’s report from the Census Bureau. This was slightly worse than the 0.1 percent loss that the market had predicted. That said, retail sales remained on an overall upward trend, with March’s performance 5.2 percent higher than March 2016’s sales.

Key performers for the month were electronics and appliance stores, which saw sales rise 2.6 percent; the catch-all miscellaneous category, which was up 1.8 percent; and clothing and accessories stores, which enjoyed a 1 percent gain. Categories that had trouble included building material and garden supply stores, which were off 1.5 percent; motor vehicle and parts dealers, which were down 1.2 percent; and gas stations, which saw sales drop 1 percent.

“Consumers have retrenched a bit in terms of their spending in recent months,” Jim Baird, chief investment officer for Plante Moran Financial Advisors, said last week in an interview with Business Insider. “With labor market conditions as tight as they are, we do expect to see some upward pressure on wages.”

Consumer Price Index

While retail sales stumbled, consumer prices dropped with the Consumer Price Index for All Urban Consumers (CPI-U) decreasing 0.3 percent in March, according to last week’s report from the Bureau of Labor Statistics. While the market had expected no change, March’s downturn was the first monthly decline since February 2016.

The bureau attributed March’s decline mainly to a decline in the gasoline index, with a drop in wireless telephone service prices also contributing. Overall, the energy index fell 3.2 percent, with gas prices dropping 6.2 percent. Meanwhile, the food index rose 0.3 percent, and the index for food at home gained 0.5 percent, its largest monthly gain since May 2014.

The index for all items less food and energy — known as core inflation — declined 0.1 percent in March, its first drop since January 2010.

Consumer Sentiment

While retail performance might have been middling, consumers appeared to have a confident outlook. The University of Michigan Surveys of Consumers reported last week that consumers had a more favorable opinion of current economic conditions, with consumer sentiment growing 1.1 percent to hit 98, which outpaced market expectations of a 96.3.

In fact, UMI’s Current Economic Conditions Index grew 1.8 percent to hit 115.2. This was its highest level since 2000, and near its all-time peak of 121.1, which was set in 1999. The Index of Consumer Expectations saw a small gain, growing 0.5 percent to hit an 86.9.

Tracking consumer’s views on the current state of the economy, as well their expectations for the economy are important as it can help predict their buying and borrowing trends.

“It can be anticipated that optimism will commingle with uncertainty, causing uneven spending patterns across months,” wrote Richard Curtin, chief economist for the Surveys of Consumers. “Moreover, differential price trends for assets, products, and imports will cause uneven trends in incomes, wealth, and spending across products as well as economic subgroups.”

This week, we can expect:

  • Monday — The National Association of Home Builders housing market index for April.
  • Tuesday — Industrial production and capacity utilization for April from the Federal Reserve; building permits and housing starts for March from the Census Bureau.
  • Thursday — Leading economic indicators for March from The Conference Board; initial jobless claims for last week from the Employment and Training Administration.
  • Friday — Existing home sales for March from the National Association of Realtors.

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