The Jim Bakker Show

Weak U.S. inflation, retail sales data dim rate hike prospects

FILE PHOTO - Prices are seen on replica Statues of Liberty figures in a shop window in New York City, November 14, 2011. REUTERS/Mike Segar

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and soft domestic demand that diminished prospects of a third interest rate increase from the Federal Reserve this year.

Still, the economy likely regained speed in the second quarter after a sluggish performance at the start of the year. Other data on Friday showed industrial production picked up in June, driven by a surge in oil and gas drilling.

“Today’s reports imply that the Fed will go very slowly normalizing rates, but it also means that businesses will have to really hustle to find ways to keep earnings growing strongly,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

The Labor Department said the unchanged reading in its Consumer Price Index came as the cost of gasoline and mobile phone services declined further. The CPI dropped 0.1 percent in May and the lack of a rebound in June could trouble Fed officials who have largely viewed the recent moderation in price pressures as transitory.

Policymakers are confronted with benign inflation and a tight labor market as they weigh a third rate hike and announcing plans to start reducing the central bank’s $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities.

In the 12 months through June, the CPI increased 1.6 percent – the smallest gain since October 2016 – after rising 1.9 percent in May. The year-on-year CPI has been retreating since February, when it hit 2.7 percent, which was the biggest increase in five years.

The so-called core CPI, which strips out food and energy costs, edged up 0.1 percent in June, rising by the same margin for three straight months. The core CPI increased 1.7 percent year-on-year after a similar gain in May.

The Fed has a 2 percent inflation target and tracks a measure which is currently at 1.4 percent.

Financial markets were pricing in a 47 percent chance of a 25 basis point rate hike in December, down from 55 percent before the data, according to CME Group’s FedWatch program.

As a result, the dollar fell, briefly touching a 10-month low against a basket of currencies. Prices for U.S. government bonds rose and stocks on Wall Street edged higher.

Fed Chair Janet Yellen told lawmakers on Wednesday that the recent cool-off in inflation was partly the result of “a few unusual reductions in certain categories of prices” that would eventually drop out of the calculation.

“We expect a little more cautious language from Fed officials on the inflation outlook going forward,” said Michael Hanson, chief economist at TD Securities in New York.

BROAD WEAKNESS

In June, gasoline prices fell 2.8 percent, decreasing for a second straight month. Food prices were unchanged after rising for five consecutive months. The cost of cellular phone services fell 0.8 percent, extending their decline amid price competition among service providers.

There were also decreases in airline fares and prices for apparel, household furnishings, new motor vehicles, and used cars and trucks. But rental costs rose, with owners’ equivalent rent of primary residence increasing 0.3 percent after advancing 0.2 percent in May.

Americans also paid more for hospital visits and prescription medication, as well as motor vehicle insurance.

Low prices are hurting retailers. A second report from the Commerce Department showed retail sales fell 0.2 percent last month, weighed down by declines in receipts at service stations, clothing stores and supermarkets.

Sales at restaurants and bars, as well as at sporting goods and hobby stores fell. May’s retail sales were revised to show a 0.1 percent dip instead of the previously reported 0.3 percent drop. Retail sales rose 2.8 percent year-on-year in June.

Excluding automobiles, gasoline, building materials and food services, retail sales slipped 0.1 percent last month after being unchanged in May. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Despite two straight months of decreasing retail sales, consumer spending likely gained steam in the second quarter after a helping to restrict economic growth to a 1.4 percent annualized rate in the first quarter. However, that could negatively impact third-quarter GDP.

“The weak trajectory of consumer spending at the end of second quarter adds some challenges to the third-quarter consumption outlook, which reinforces our view that growth will step down modestly in the current quarter,” said Michael Feroli, an economist at JPMorgan in New York.

That was supported by a third report showing a measure of consumer sentiment fell to a reading of 93.1 in early July from 95.1 in June. It has declined from a high of 98.5 in January.

The Atlanta Federal Reserve lowered its second-quarter growth estimate by two-tenths of a percentage point to a 2.4 percent rate following the inflation and retail sales data.

Still, growth in the second quarter likely got a lift from the industrial sector of the economy.

In a fourth report on Friday, the Fed said industrial production increased 0.4 percent in June amid robust gains in oil and gas drilling after nudging up 0.1 percent in May.

Industrial production increased at a 4.7 percent rate in the second quarter.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Andrea Ricci)

U.S. retail sales post biggest drop in 16 months

A shopper passes a window display at the Beverly Center mall in Los Angeles, California November 8, 2013. REUTERS/David McNew

WASHINGTON, June 14 (Reuters) – U.S. retail sales recorded their biggest drop in more than a year in May amid declining purchases of motor vehicles and discretionary spending, which could temper expectations for a sharp acceleration in economic growth in the second quarter.

The Commerce Department said on Wednesday retail sales fell 0.3 percent last month after an unrevised 0.4 percent increase in April. May’s decline was the largest since January 2016 and confounded economists’ expectation for a 0.1 percent gain.

Retail sales rose 3.8 percent in May on a year-on-year basis. Some of the drop in monthly retail sales reflected lower gasoline prices, which weighed on receipts at service stations.

Excluding automobiles, gasoline, building materials and food services, retail sales were unchanged last month after an upwardly revised 0.6 percent rise in April.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product and were previously reported to have increased 0.2 percent in April.

Growth is expected to pick up this quarter after being held back by a near stall in consumer spending and a slower pace of inventory investment at the start of the year.

The economy grew at a 1.2 percent annualized rate in the first quarter after notching a 2.1 percent pace in the October-December period.

The Atlanta Fed is forecasting the economy growing at a 3.0 percent annualized rate in the second quarter, but this estimate could be trimmed following the weak core retail sales.

May’s surprise sluggishness in consumer spending, which accounts for more than two-thirds of the U.S. economy, could worry Federal Reserve officials who have previously attributed the slowdown in domestic demand to transitory factors.

Still, the U.S. central bank is expected to raise interest rates by 25 basis points later on Wednesday, the second increase this year. Further rate hikes are likely to depend on the outlook for inflation and economic growth.

Auto sales fell 0.2 percent after rising 0.5 percent in April. Receipts at service stations dropped 2.4 percent, the largest decline since February 2016. Sales at building material stores were unchanged, while receipts at clothing stores rose 0.3 percent.

Department store sales tumbled 1.0 percent, the largest drop since July 2016. Department store sales are being undercut by online retailers, led by Amazon.com <AMZN.O>. That has led some retailers, including Macy’s <M.N>, Sears <SHLD.O> and Abercrombie & Fitch <ANF.N> to announce shop closures.

Sales at online retailers increased 0.8 percent last month after rising 0.9 percent in April. Sales at electronics and appliance stores plunged 2.8 percent, the largest drop since March 2010.

Receipts at restaurants and bars dipped 0.1 percent, while sales at sporting goods and hobby stores fell 0.6 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. retail sales weakest in six months; inflation firming

Shoppers ride escalators at the Beverly Center mall in Los Angeles, California November 8, 2013. REUTERS/David McNew

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales recorded their smallest increase in six months in February as households cut back on motor vehicle purchases and discretionary spending, the latest indication that the economy lost further momentum in the first quarter.

Other data on Wednesday showed a steady increase in inflation, with the consumer price index posting its biggest year-on-year increase in nearly five years in February. Firming inflation could allow the Federal Reserve to raise interest rates on Wednesday despite signs of slowing domestic demand.

“Nothing here to suggest the Fed shouldn’t raise interest rates at the policy meeting that concludes later today,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

The Commerce Department said retail sales edged up 0.1 percent last month, the weakest reading since August. January’s retail sales were revised up to show a 0.6 percent rise instead of the previously reported 0.4 percent advance.

Sales were likely held back by delays in issuing tax refunds this year as part of efforts by the government to combat fraud. Compared to February last year retail sales were up 5.7 percent.

February’s retail sales gain was in line with economists’ expectations. Excluding automobiles, gasoline, building materials and food services, retail sales rose 0.1 percent after an upwardly revised 0.8 percent jump in January.

These so-called core retail sales, which correspond most closely with the consumer spending component of gross domestic product, were previously reported to have increased 0.4 percent in January.

In a separate report, the Labor Department said its Consumer Price Index ticked up 0.1 percent last month as a drop in gasoline prices offset increases in the cost of food and rental accommodation. That was the weakest reading in the CPI since July and followed a 0.6 percent jump in January.

In the 12 months through February, the CPI accelerated 2.7 percent, the biggest year-on-year gain since March 2012. The CPI rose 2.5 percent in the year to January. Inflation is firming in part as the 2015 drop, which was driven by lower oil prices, fades from the calculation.

The so-called core CPI, which strips out food and energy

costs, increased 0.2 percent last month as new motor vehicle prices fell and apparel prices moderated after spiking in January. The core CPI increased 0.3 percent in January.

In the 12 months through February, the core CPI increased

2.2 percent after advancing 2.3 percent in January. It was the 15th straight month the year-on-year core CPI remained in the 2.1 percent to 2.3 percent range.

The Fed has a 2 percent inflation target and tracks an inflation measure which is currently at 1.7 percent.

ECONOMY SLOWING

The U.S. central bank is expected to raise its overnight benchmark interest rate by 25 basis points to a range of 0.75 percent to 1.00 percent on Wednesday. It increased borrowing costs last December and has forecast three rate hikes in 2017.

U.S. financial markets were little moved by the data as traders awaited the outcome of the Fed’s meeting. The Fed will announce its decision on interest rates at 2 p.m. (1800 GMT)

February’s retail sales added to January’s weak reports on trade, construction and business spending that have pointed to sluggish economic growth in the first quarter.

The Atlanta Fed is forecasting GDP rising at a 1.2 percent annualized rate in the first quarter. With the labor market near full employment, slowing growth probably understates the health of the economy. In addition, GDP growth tends to be weaker in the first quarter because of calculation issues that the government has acknowledged and is working to resolve.

Tightening labor market conditions, which are steadily lifting wages, continue to underpin consumer spending.

In February, motor vehicle sales fell 0.2 percent after declining 1.3 percent the prior month. Receipts at service stations slipped 0.6 percent, reflecting lower gasoline prices.

Sales at electronics and appliances stores fell 2.8 percent, the biggest decline since December 2011, after climbing 1.1 percent in January. Receipts at building material stores increased 1.8 percent.

Sales at clothing stores fell 0.5 percent. Retailers including J.C. Penney Co Inc <JCP.N>, Abercrombie & Fitch <ANF.N> and Macy’s Inc <M.N> are scaling back on brick-and-mortar operations amid increased competition from online retailers, led by Amazon.com <AMZN.O>.

Sales at online retailers jumped 1.2 percent last month after increasing 0.5 percent in January. Receipts at restaurants and bars dipped 0.1 percent, while sales at sporting goods and hobby stores fell 0.4 percent.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. retail sales beat expectations in January

WASHINGTON, Feb 15 (Reuters) – U.S. retail sales rose more than expected in January as households bought electronics and a range of other goods, pointing to sustained domestic demand that should bolster economic growth in the first quarter.

The Commerce Department said on Wednesday retail sales increased 0.4 percent last month. December’s retail sales were revised up to show a 1.0 percent rise instead of the previously reported 0.6 percent advance.

Last month’s fairly upbeat sales came despite motor vehicle purchases recording their biggest drop in 10 months.

Compared to January last year retail sales were up 5.6 percent.

Excluding automobiles, gasoline, building materials and food services, retail sales increased 0.4 percent after an upwardly revised 0.4 percent gain in December.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

Economists polled by Reuters had forecast retail sales ticking up 0.1 percent and core sales gaining 0.3 percent last month.

January’s fairly solid retail sales supported views that economic growth will accelerate in the first quarter.

The economy grew at a 1.9 percent annualized rate in the fourth quarter.

Consumer spending is being supported by a tightening labor market, which is gradually boosting wage growth.

That in turn is underpinning economic growth, paving the way for at least two interest rate increases from the Federal Reserve this year.

Fed Chair Janet Yellen told lawmakers on Tuesday that “waiting too long to remove accommodation would be unwise.”

The U.S. central bank has forecast three rate increases this year.

The Fed hiked its overnight interest rate last December by 25 basis points to a range of 0.50 percent to 0.75 percent.

Last month, sales at electronics and appliances stores jumped 1.6 percent, the biggest rise since June 2015, after falling 1.1 percent in December.

Receipts at building material stores increased 0.3 percent.

Sales at clothing stores jumped 1.0 percent, the largest rise in nearly a year.

Department store sales climbed 1.2 percent, the biggest increase since December 2015.

Department store sales have been undercut by online retailers, led by Amazon.com <AMZN.O>.

That has led to some retailers, including Macy’s <M.N>, Sears <SHLD.O> and Abercrombie & Fitch <ANF.N> announcing shop closures.

Sales at online retailers were unchanged last month after soaring 1.9 percent in December.

Receipts at restaurants and bars rose 1.4 percent, while sales at sporting goods and hobby stores shot up 1.8 percent.

Receipts at auto dealerships, however, fell 1.4 percent after vaulting 3.2 percent in December.

Last month’s drop was the biggest since March 2016.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

((Lucia.Mutikani@thomsonreuters.com; 1 202 898 8315; Reuters

Messaging: lucia.mutikani.thomsonreuters.com@reuters.net))

U.S. retail sales slow in November; producer prices increase

A woman sits in Herald Square with bags of shopping during Black Friday sales in Manhattan, New York,

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales barely rose in November as households cut back on purchases of motor vehicles, suggesting some loss of momentum in economic growth in the fourth quarter.

Other data on Wednesday pointed to steadily rising inflation pressures, with producer prices notching their largest increase in five months in November. The moderation in retail sales came after two straight months of strong gains. With incomes rising and household wealth at record highs, the cool-off in retail sales is likely to be temporary.

Against the backdrop of a tightening labor market and perking inflation, the Federal Reserve is expected to raise interest rates later on Wednesday. The U.S. central bank hiked its overnight benchmark interest rate last December for the first time in nearly a decade.

“There is still strong support for consumer spending, namely steady job growth and wages heading higher. Santa will still be coming to town this year.” said Jennifer Lee, a senior economist at BMO Capital Markets in Toronto.

Retail sales edged up 0.1 percent last month after rising 0.6 percent in October, the Commerce Department said. Sales were up 3.8 percent from a year ago. Excluding automobiles, gasoline, building materials and food services, retail sales also nudged up 0.1 percent last month after gaining 0.6 percent in October.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic

product. Economists had forecast overall retail sales increasing 0.3 percent and core sales also gaining 0.3 percent last month.

In a separate report, the Labor Department said its producer price index for final demand increased 0.4 percent last month, the largest gain since June, after being unchanged in October.

In the 12 months through October, the PPI rose 1.3 percent, the biggest gain since November 2014. The PPI rose 0.8 percent in the 12 months through October.

A 0.5 percent increase in the cost of services accounted for more than 80 percent of the rise in the final demand PPI last month. The increase, which followed a 0.3 percent decline in October, was the largest since January.

With producer prices pushing higher, overall inflation is expected to steadily move toward the Fed’s 2 percent target.

The dollar fell to a session low against the yen on the retail sales data, while prices for longer-dated U.S. government bonds rose. U.S. stock index futures fell slightly.

The softer-than-expected retail sales numbers last month suggest a slowdown in consumer spending in the fourth quarter, which could see economists trim their GDP forecasts for the period. Still, consumers should continue to support the economy in the fourth quarter.

The Atlanta Fed is forecasting GDP rising at a 2.6 percent annualized rate in the fourth quarter. The economy grew at a 3.2 percent pace in the third quarter.

Last month, auto sales fell 0.5 percent, the largest decline since March, after increasing 0.5 percent in October. Sales at building material stores rose 0.3 percent.

Receipts at clothing stores were flat, suggesting a weak start to the holiday shopping season. Department stores like Macy’s <M.N> and Kohl’s <KSS.N> are facing intense competition from online retailers such as Amazon <AMZN.O>, which have snatched a large chunk of the market share.

Sales at online retailers gained 0.1 percent last month after surging 1.4 percent in October. Receipts at restaurants and bars increased 0.8 percent, while sales at sporting goods and hobby stores fell 1.0 percent. Receipts at service stations gained 0.3 percent after jumping 2.5 percent in October.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

U.S. Retail sales strongly boost economic outlook

A man in short sleeves carries shopping bags near Herald Square during unseasonably warm weather in Manhattan

By Lucia Mutikani

WASHINGTON (Reuters) – U.S. retail sales in April recorded their biggest increase in a year as Americans stepped up purchases of automobiles and a range of other goods, suggesting the economy was regaining momentum after growth almost stalled in the first quarter.

The jump in sales reported by the Commerce Department on Friday is a boost for the sector that has been hit by sluggish demand. It comes days after major retailers, including Macy’s and Nordstrom, reported sales tumbled in the first quarter and lowered their full-year profit forecasts.

“The retail sales report shows that recent claims of the demise of the U.S. consumer have been greatly exaggerated,” said Steve Murphy, a U.S. economist at Capital Economics in Toronto.

Retail sales surged 1.3 percent last month, the largest gain since March 2015, after dropping 0.3 percent in March. Excluding automobiles, gasoline, building materials and food services, retail sales shot up 0.9 percent last month after an upwardly revised 0.2 percent gain in March.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

They were previously reported to have gained 0.1 percent in March. Economists had forecast retail sales rising 0.8 percent and core retail sales gaining 0.3 percent last month.

Signs of an acceleration in consumer spending keep an interest rate hike from the Federal Reserve next month on the table.

“Today’s data materially strengthen the hand of those within the Fed for a rate increase in June but we remain doubtful as to whether this view will prevail, barring an especially robust employment report in early June,” said Anthony Karydakis, chief economic strategist at Miller Tabak in New York.

Consumer spending prospects got a boost from a separate report showing sentiment among households jumped to an 11-month high in early May.

The University of Michigan said its consumer sentiment index surged 6.8 points to 95.8 early this month, the highest reading since June. Sentiment increased among all income and age groups, with big gains among lower-income and younger households.

Last month’s strong core retail sales increase could prompt economists to raise their second-quarter GDP, currently hovering around a 2 percent annualized rate. Economic growth braked to a 0.5 percent pace in the first three months of the year after expanding at a 1.4 percent pace in the fourth quarter.

But another report from the Commerce Department on Friday showing a 0.4 percent increase in business inventories in March suggest growth was much higher than initially estimated.

Data on retail sales, construction spending and factory orders have already implied that the advance GDP growth estimate could be raised to a 0.9 percent rate when the government publishes its revision later this month.

The dollar rose against the euro and the yen after the data, while prices for U.S. government debt fell. U.S. stocks were trading lower.

Retail sales have been sluggish in part because the strengthening labor market has not generated strong wage growth.

Economists also say that some of the savings from cheaper gasoline over the past year-and-a-half have been absorbed by rising rents and medical care costs.

Macy’s, the largest department chain, said this week same-store sales fell 5.6 percent in the first quarter, and expected full-year sales to decline 3-4 percent.

Nordstrom reported that sales at stores open at least a year fell 1.7 percent in the first quarter. It cut its profit forecast for the year to $2.50-$2.70 per share from $3.10-$3.35.

The Commerce Department report showed retail sales in April rose across all categories, with the exception of building materials and garden equipment. Auto sales advanced 3.2 percent, the largest increase since March 2015, after slumping 3.2 percent in March.

Receipts at service stations increased 2.2 percent, reflecting recent increases in gasoline prices. Sales at clothing stores surged 1.0 percent, the largest increase since May 2015.

Online retail sales jumped 2.1 percent, the biggest gain since June 2014. Receipts at sporting goods and hobby stores rose 0.2 percent last month.

Sales at electronics and appliance outlets increased 0.5 percent. Building materials and garden equipment store receipts, however, fell 1.0 percent last month, the largest decline since August. Sales at restaurants and bars rose 0.3 percent.

In a separate report, the Labor Department said its producer price index climbed 0.2 percent last month after slipping 0.1 percent in March. In the 12 months through April, the PPI was unchanged after dipping 0.1 percent in March.

Inflation continues to be restrained by the lingering effects of the dollar’s surge and oil price plunge. The greenback gained 20 percent against the currencies of the United States’ trading partners between June 2014 and December 2015.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

Sign up for Jim Bakker Show