News & Events

Economic Advisor: April 18, 2018
April 18, 2018


 

 

Consumer prices ticked down, but core inflation increased. Meanwhile, consumer sentiment slipped while layoffs declined.

Consumer Prices

The Bureau of Labor Statistics’ Consumer Price Index (CPI), which tracks prices on all consumer items, ticked down 0.1 percent for March. Over the past 12 months, the index has increased 2.4 percent, the Bureau reported last week.

March’s CPI drop was chiefly driven by gasoline prices, which shrank a whopping 4.9 percent. As a whole, energy prices were down 2.8 percent for the month. The price drop at the pump countered gains in other categories, such as healthcare (0.5 percent), shelter (0.4 percent), transportation (0.2 percent), and food (0.1 percent).

While gas prices were down for March, they increased 11.1 percent for the year and energy prices as a whole climbed 11.3 percent over the past 12 months.

While the CPI was down, core inflation, which removes the volatile price categories of food and energy, increased 0.2 percent for March. For the year, it was up 2.1 percent.

Inflation is important to watch both via the CPI and core inflation because the Federal Reserve adjusts interest rates to keep prices in check.

“U.S. inflation is warming up rather than heating up,” BMO Capital Markets Senior Economist Sal Guatieri told the Reuters news service. “Still, the upward trend could suffice to nudge the Fed three more times this year.”

Consumer Sentiment

How consumers look at the economy has dipped. The Consumer Sentiment Index dropped 3.6 percent to 97.8 in April, down from March’s 101.4, reversing two consecutive months of increases, according to last week’s report from the University of Michigan’s Surveys of Consumers.

“The small decline was widely shared by all age and income subgroups and across all regions of the country,” Surveys of Consumers Chief Economist Richard Curtin wrote in his research comments. “Importantly, confidence still remains relatively high, despite the recent losses that were mainly due to concerns about the potential impact of Trump’s trade policies on the domestic economy. Uncertainty surrounding the evolving trade policy has caused many small (and at times inconsistent) changes in expectations.”

Curtin added that 29 percent of consumers surveyed spontaneously mentioned trade policies in their feedback.

The Current Economic Conditions Index, which tracks how consumers feel about the present state of the economy, dropped 5.1 percent to 115 from March’s 121.2. The Index of Consumer Expectations fell 2.3 percent to 86.8 from March’s 88.8.

Initial Jobless Claims

First-time claims for unemployment benefits filed by the newly unemployed during the week ending April 7 dropped to 233,000, a decrease of 9,000 claims from the prior week’s total of 242,000, according to last week’s report from the Employment and Training Administration.

The four-week moving average, which is considered a more stable measure of jobless claims, notched up to 230,000, a gain of 1,750 claims from the preceding week’s average of 228,250 claims.

This latest report marked the 162nd straight week that initial claims have come in below the 300,000-claim level, which economists consider an indicator of a growing job market. The Administration added that it continues to experience hurricane-related reporting difficulties in the Virgin Islands and Puerto Rico.

This week, we can expect:

  • Monday — Retail sales for March and business inventories for February from the Census Bureau.
  • Tuesday — Housing starts for March from the Census Bureau; industrial production and capacity utilization for March from the Federal Reserve.
  • Thursday — Initial jobless claims for last week from the Employment and Training Administration.

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