Economic Week in Review: Hoping spring delivers a break March 14, 2014 The severe winter has presented challenges for the sluggish U.S. economy. Although this was a light week for economic reports, winters impact has been evident on retail sales, business inventories, and the Producer Price Index. As of Friday afternoon, the S&P 500 Index was down 1.9% for the week to 1,843. The yield on the 10-year U.S. Treasury note was down 14 basis points for the week to 2.65%. Final figures will be posted here after the markets close. Mixed results for retail sales After two straight monthly declines, retail sales increased 0.3% in February and slightly exceeded economists forecasts. Still, the latest data reflected some weakness. Sales were up only 1.5% compared with February 2013. And the declines for December and January were downwardly revised. Harsh winter weather was at least partly to blame for the two-month retreat as well as the weak annual growth as consumers ventured outside less and had less to spend because of higher utility bills. Among the retailers participating in the monthly rebound were department, auto parts, sports and hobby, clothing, drug, and home improvement stores. Restaurants and nonstore retailers, which include online sales, were also up. Monthly sales fell slightly at electronics, general merchandise, and grocery stores. Economists expect retail sales to improve further, recovering from the negative impacts of the unseasonably cold winter as the weather turns warmer, a trend that began in the second half of February. Pent-up demand has potential to increase in upcoming months after weaker sales in recent winter months, said Vanguard economic analyst Vytas Maciulis. Typically over history, after unseasonably cold weather, there is a tendency for activity to bounce back a bit once the weather improves. In the longer term, as deleveraging cycle continues, consumption should continue to get stronger as consumers require lesser amounts of their income for debt payments. Business inventories continue climb Business inventories increased 0.4% in January, rising for the eighth straight month and meeting economists expectations. Retail inventories advanced 0.4%, manufacturer inventories 0.2%, and wholesaler inventories 0.6%. The inventory-to-sales ratio, a gauge of the number of months it would take to deplete existing inventories at the current rate of sales, rose to 1.32 from 1.30. Economists attributed the increase in inventories to Januarys frigid weather (inclement weather can prevent shipments) and a decline in sales following the holiday season. Clothing and general merchandise inventory growth also led to the January gains. Producer prices dip The Producer Price Index (PPI), a measure of wholesale prices and a leading indicator for consumer inflation, dropped 0.1% in February. A decline in prices signals low inflation and potential weakening demand in the economy. Demand for services dropped 0.3%. Januarys PPI rose 0.2%, and economists had been expecting a similar increase. Excluding food and energy goods, prices rose 0.2%, slowing from 0.4% increase in the previous month. Compared to a year ago, prices were up a modest 0.9% and, excluding food and energy, 1.2%. The economic week ahead Economists will be focused on the Federal Open Market Committees monetary policy statement, scheduled to be released Wednesday after the Feds regularly scheduled two-day meeting. There are indications the Fed will revamp the 6.5% U.S. unemployment rate that’s been used as a threshold for considering increases in short-term interest rates. The Fed’s statement release is sandwiched among reports on industrial production (Monday), the consumer price index and new residential construction (Tuesday), and existing-home sales and the Conference Board’s leading indicators (Thursday). -- Steven C. Deller Professor and Community Development Economist Department of Agricultural and Applied Economics 515 Taylor Hall --- 427 Lorch Street University of Wisconsin-Madison/Extension Madison, WI 53706 608-263-6251 linkedin/pub/steven-deller/12/26a/b75/ aae.wisc.edu/faculty/scdeller/ I started out with nothing and I still have most of it left. Seasick Steve
Posted on: Tue, 18 Mar 2014 14:08:03 +0000
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