Thursday, May 12, 2011

Economic Data Continue to Point to Slowdown

There was a bevy of data out this morning, and for the most part it points to at best tepid growth.

First weekly unemployment claims.  Last week saw a major spike into the upper 400Ks but some of that was apparently one time adjustments.  Hence this week's "drop" was more or less in line with what weekly claims would have been last week without the adjustments - 434,000.   The less volatile four week moving average is up to 436,750 The key here is we had seen this measure move below 400,000 for a period earlier this year, and now has jumped back over.  Some layoffs in the public sector might be contributing for the recent upswing.  Whatever the case, Janet Yellen's model of quantitative easing creating millions of jobs for Americans seems to be another useless ivory tower fiction.

Second, retail sales.  While the headline figure seems ok at 0.5% gasoline prices and food prices seem to be the main driver, so the data can be misconstrued if only focusing on the headline.

  • Sales at U.S. retailers posted their smallest gain in nine months in April as high food and gasoline prices drew spending away from other areas.  Total retail sales increased 0.5%. 
  • Receipts at gasoline stations, which accounted for about 10.5% of overall retail sales in April, rose 2.7%.  Sales at food and beverage stores rose 1.2%. 
  • Excluding gasoline, retail sales were up 0.2%.
Hence, if you believe inflation in the U.S. is anywhere near 2-3%, retail sales are in essence just moving along with inflation.

Third, producer prices continue their steady upward move.

  • Wholesale costs in the U.S. rose more than forecast in April, led by higher prices for food and fuel.  The 0.8% increase in the producer-price index compares with the 0.6 percent median estimate of economists.  The core measure, which excludes volatile food and energy costs, climbed 0.3%.
  • Compared with a year earlier, companies paid 6.8% more for goods last month, the most since September 2008, after a 5.8% rise in March. 

The best news of the morning is that crude oil prices are falling again.  Yesterday gasoline futures plunged 8%.  In a country where most live paycheck to paycheck these are the 'economic indicators' amongst the most important.

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