Traders spent much of last week contemplating the impact of the latest inflation data and the first batch of first-quarter bank earnings. The process of disinflation continued, and retail sales softened in March, which are developments that could influence interest-rate decisions to be made by the Federal Reserve in the coming months. The stock market closed out the week with gains across the board, despite a couple of rough patches. The Global Dow increased 1.6%, followed by the Russell 2000 (1.5%), the Dow (1.2%), the S&P 500 (0.8%), and the Nasdaq (0.3%). Ten-year Treasury yields moved up 24 basis points. The dollar weakened against a basket of currencies, oil prices dipped, and gold prices were little changed.
Last Week’s Economic News
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Consumer prices inched up in March after advancing 0.4% in February, according to the latest Consumer Price Index. Over the last 12 months, the CPI has risen 5.0%, a decrease of 1.0% from the 12 months ended in February. This is the smallest 12-month increase since the 12 months ended in May 2021. While the March data is encouraging, it may not be enough to forestall another interest-rate hike when the Federal Open Market Committee next meets at the beginning of May.
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Producer prices declined 0.5% in March after being unchanged in February. The March decrease was the largest monthly drop since April 2020. For the 12 months ended in March, producer prices have increased 2.7%, the smallest 12-month increase since January 2021.
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March saw inflationary pressures subside at the international trade level.
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Retail sales fell 1.0% from the previous month in March but were up 2.9% since March 2022. Total sales for January 2023 through March 2023 were up 5.4% from the same period last year. Retail trade sales fell 1.2% from February but were up 1.5% year over year. Nonstore retailers were up 12.3% in March from the previous year, while food services and drinking places were up 13.0%.
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Industrial production rose 0.4% in March after increasing 0.9% and 0.2% in January and February, respectively. In March, manufacturing and mining output each fell 0.5%. The index for utilities jumped 8.4%, as the return to more seasonal weather after a mild February boosted the demand for heating. Total industrial production in March was 0.5% higher than a year earlier.
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The monthly government deficit expanded by $115.6 billion in March over the previous month, and $185.4 billion over the March 2022 deficit. For the current fiscal year, the government deficit sits at $1,100.7 trillion, $432.5 billion higher than the deficit over the comparable period in the previous fiscal year. In March, government receipts increased by $51.1 billion over February receipts, while expenditures rose by $166.8 billion.
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The national average retail price for regular gasoline was $3.596 per gallon on April 10, $0.099 per gallon more than the prior week’s price. The U.S. Energy Information Administration forecasts that regular retail gas prices in the U.S. will average $3.49 per gallon during this summer (April through September). Household expenditures on gasoline are consistently the most expensive category of household spending directly related to energy. In 2021, the most recent year data was available in the U.S., the Bureau of Labor Statistics’ Consumer Expenditure Survey indicated that average annual household spending on gasoline totaled $2,148 — slightly more than electricity, natural gas, and fuel oil combined.
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For the week ended April 8, there were 239,000 new claims for unemployment insurance, an increase of 11,000 from the previous week’s level. According to the Department of Labor, the advance rate for insured unemployment claims for the week ended April 1 was 1.2%, a decrease of 0.1 percentage point from the previous week’s rate. The advance number of those receiving unemployment insurance benefits during the week ended April 1 was 1,810,000, a decrease of 13,000 from the previous week’s level.
Eye on the Week Ahead
We begin to get the latest data on the housing sector this week with the release of reports on housing starts and existing-home sales. Sales of existing homes soared in February, climbing over 14.0% from the previous month’s total. However, sales remained 22.6% under their February 2022 pace. Issued building permits and housing starts rose notably in February, a good sign for new-home construction heading into the spring.
Have a nice week!
Sincerely,
Robert G. Carpenter