Weekly Economic Update

  • U.S. retail sales growth was up slightly, but one of the better performances since the fall of last year.  It continues to appear that a ‘weather’ effect has taken place, but perhaps lessened in recent weeks.
  • Concerns over the Ukraine/Russia conflict continue, and held back market sentiment over the week as bonds outperformed stocks.  Additionally, slower growth numbers from China didn’t help the pessimistic undertone and added to commodity volatility.

(0) Retail sales numbers for February came in similar to expected, gaining +0.3% relative to consensus estimates calling for a +0.2% increase (and the first positive reading since November).  The core component of the report also rose +0.3% compared to an expected +0.2%.  However, January and December core retail sales were revised downward by -0.2% to -0.3%, which cast more of a negative tone to the neutral result.  For February specifically, sporting goods and non-store retailers (we can just call this ‘online retail’ for simplicity’s sake, as that’s what it is mostly comprised of) led with gains of a few percentage points and rebounded from January.  All-in-all, considering the revisions, the overall report was neutral—neither terrible nor outstanding.  In related news, same-store sales, per Johnson/Redbook, rose 2.5% on a year-over-year basis with consumer traffic increasing.

(-) Import prices gained +0.9% in February, which surpassed the expected +0.5% figure.  Much of this was the result of a +4% gain in petroleum prices during the month (a major factor in this series), while other segments, such as autos and capital goods were generally flat, which provided a better indicator of core conditions.  Prices over the past twelve months are down -1.1% on the headline level and -0.6% ex-fuel, which is obviously the opposite of an inflationary issue.

(0) The February producer price index came in weaker than expected, falling -0.1% compared to an anticipated increase of +0.2%.  Core PPI, excluding food and energy, fell -0.2% relative to an expected +0.1% increase.  The primary downward driver was from the trade services group—an indirect measure of wholesaler/retailer margins—which fell by -1%.  Notably, this was centered on the apparel margins area, which may or may not have been weather-related (we would assume it was).  Over the past twelve months, headline and core have increased +0.9% and +1.1%, respectively, which is below CPI and is an obvious indicator of low inflationary influences in the producer process.

(0) Total business inventories for January rose +0.4%, on par with expectations, and December growth was revised upward by tenth to an equivalent amount.  The more sporadic segments of autos and drugs both gained over +2% and contributed to the largest gains.

(-) The NFIB small business optimism survey for February came in at 91.4, which was a drop from the prior month’s 94.1 and underwhelmed the consensus estimate of 93.8.  Expectations for real sales, economic improvement and plans to boost employment were all down by several points.  Then again, bad weather may have played a role in this, but we’ll have to see next month’s report to confirm.

(-) The Univ. of Michigan sentiment survey for March fell to 79.9 from February’s 81.6 and underperformed the forecast of 82.0.  Consumer assessments of current conditions rose a bit, while future expectations worsened.  Inflation expectations for the near and longer-term were generally unchanged from a few tenths hovering around the 3% level.

(-) The government JOLTS report for January showed 3,974k job openings, which underperformed the expected 4,015k.  The hiring rate was an unchanged and generally low-for-the-business-cycle 3.3%.  The layoff/discharge rate rose a tick to 1.3%. and quit rate fell a tenth to 1.7%—both of which being in the opposite direction of desired.

(+) Initial jobless claims for the Mar. 8 ending week fell 9k to 315k, better than the estimate of 330k.  Continuing claims for the Mar. 1 week also fell to 2,855k from 2,903k the prior week and expected result this week.  It appears winter-type disruptions are minimizing.

Period ending 3/14/2014

1 Week (%)

YTD (%)

DJIA

-2.29

-2.53

S&P 500

-1.91

0.07

Russell 2000

-1.77

1.75

MSCI-EAFE

-3.06

-2.13

MSCI-EM

-3.00

-6.48

BarCap U.S. Aggregate

0.56

2.01

 

U.S. Treasury Yields

3 Mo.

2 Yr.

5 Yr.

10 Yr.

30 Yr.

12/31/2013

0.07

0.38

1.75

3.04

3.96

3/7/2014

0.06

0.38

1.65

2.80

3.72

3/14/2014

0.05

0.36

1.55

2.65

3.59

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