(+) The highest-profile economic release of the week, May retail sales, were a bit higher than expected with a gain of +0.6% versus a forecasted +0.4% (including seasonal adjustments that first lowered April retail sales from +0.5%, to -0.1%, then revised them upward again to +0.2%).  ‘Core’ retail sales, which removes the more volatile components and is used by the government in GDP calculations for consumer expenditures, gained +0.3%, which was as expected.  Overall, the report was fairly balanced, with contributions from ‘general merchandise’ and online sales, while electronics and apparel declined a bit.  Contributing to the headline number were gains in autos/auto parts and building materials.

(0) Wholesale inventories rose +0.2% for the month of April, matching estimates.  Durable goods rose to a slightly higher degree than non-durables, but the differences were minor. Overall business inventories, which include manufacturing, wholesale and retail, rose +0.3%—matching expectations—while March’s number was revised lower by a tenth of a percent.

(+) Import prices fell -0.6% for May, versus an expectation of a flat result—bringing the year-over-year number to a -1.9%.  As is often the case, the May decline was related to a fall in oil prices, but a few other components also declined in unison.  Consumer prices fell -0.3% for the month (the biggest monthly drop in three years) due to a decline in health care product costs, and may translate into downward pressure on CPI.

(0) The Producer Price Index (PPI) rose +0.5% for May, which outgained expectations of a +0.1% increase.  Core PPI rose +0.05% for the month, compared to a forecasted +0.1% figure, so not too far out of line.  As seen by the differences in two measures, higher food and energy prices were the primary reason for the headline increase, while ‘core intermediate goods’ prices fell.

As seen by this measure and in the trend of prior months, inflationary pressures continue to be quite subdued—a positive for the ‘hawks’ worried about the potentially inflationary effects of continued monetary stimulus, but a mixed blessing for the ‘doves,’ who believe too little inflation is the byproduct of insufficient economic growth and has the potential for spiraling conditions negatively.  This has been the battle for some time—as it always is.

(0) Industrial production was flat for May, compared to an expected +0.2% increase; a decline in utilities output explained the bulk of the difference.  The manufacturing production component came in as expected with a slight gain—led by autos/auto parts and computers/electronics (both up around 1%), while machinery fell off about half a percent.  Capacity utilization was also slightly lower than expected, coming in at 77.6% vs. 77.8%.  The monthly industrial releases continue to show growth.  Not as great as we’d like, but consistent with related data.

(-) The preliminary release of the University of Michigan consumer sentiment index fell a bit in June to 82.7, versus an expected 84.5.  Consumer assessments of current conditions fell several points; however, future expectations improved somewhat (not an uncommon trend from the past year).  Interestingly, lower-income households represented the bulk of the negativity.  Inflation expectations for the coming year rose a bit to +3.2%, as did 5- to 10-year forward expectations—to +3.0%—but both figures are fairly ‘sticky’ and in line with long-term historical norms.

As a side note about this particular metric, it was reported this last week that the Univ. of Mich. provides co-sponsor Thompson Reuters the new data five minutes before its official release time of 10:00 AM local time—so that the figures can be selectively shared with certain paying clients (in fact, trading activity of the high-speed variety has been shown to increase dramatically around this time).  Apparently, the university receives a million dollar a year for the advance detail and claims this is needed to keep the research coming.  In conclusion, to quote many an economist:  ‘There is no free lunch.’

(+) The NFIB small business optimism index rose 2.3 points in May to 94.4, which bested expectations of a 92.1 reading.  The index is now within a fraction of a percent of its post-crisis high point, although it remains low from historical measures.  Respondents expecting the economy to improve represented the biggest upward movement in the index, while optimism insofar as sales growth and expansion plans also improved.  On the negative side, continued frustration with taxes, ‘red tape,’ and poor overall sales topped the list of complaints—few of which have changed in quite some time.

(+) The government JOLTs report for April showed gains in hiring rates (overall rate to 3.3%, and private sector rate to 3.6%) and the separation rate (to 3.2%), but job openings that were lower than expected (at 3,757k vs. 3,875k).  The quits rate, rose a bit to 1.7%.  However, all employment-oriented measures remain low compared to the more normal pre-recession levels.  Hiring rates overall remain depressed—weaker than other employment indicators.

(+) Initial jobless claims for the June 8 week fell more than expected, to 334k, relative to the forecasted figure of 346k, with no special factors mentioned that contributed positively/negatively to the report.  The four-week moving average trended down to 345k.  Continuing claims for the June 1 week came in at 2,973k, which was a bit lower than the 2,978k expected—continuing their downward slide.