RETAILING

Weak Consumer Spending Presents a Puzzle The U.S. job market is booming and workers’ paychecks are growing thanks to a tax cut and raises. But Americans hunkered down on spending last month, a puzzle for an economy that leans heavily on their willingness to consume.

Sales at U.S. retailers fell 0.1% in February, marking a three-month slide. Much of the decline was tied to lower sales of cars and weak gasoline prices. Americans also reduced shopping for furniture, health products, groceries and electronics.

February was when many Americans saw the first tangible evidence of the $1.5 trillion tax cut that President Donald Trump signed into law late last year. Tax withholdings fell, increasing take-home pay. (…)

The lower spending has led economists to downgrade expectations for economic growth in the first quarter. J.P. Morgan now expects gross domestic product to grow at an annual rate of 2% this quarter, while the Atlanta Fed’s GDPNow model projects 1.9% growth. Each previously projected 2.5% growth. (…)

When excluding cars and gasoline—for which spending can swing wildly month to month—retail sales climbed 0.3% last month. Americans boosted spending on building supplies, clothing and restaurant outings. Despite weakness in recent months, retail sales have grown 4% over the past year. (…)

Haver Analytics provides the breakdown:

How could retail employment rise 50k in February as per the recent payroll numbers? What is wrong? Payrolls or retail sales? Or maybe inventories are rising and profit margins are getting squeezed?

• Here is the ‘control group’ retail sales chart. (The Daily Shot)

  

  Source: Capital Economics

• U.S. Treasurys Strengthen After Disappointing Retail Sales Report

(Bespoke)

Autos, retail and housing have been pretty weak in recent months…

U.S. Producer Prices Continue Upward Trend

The headline Final Demand Producer Price Index using new methodology increased 0.2% in February following a 0.4% gain in January. The year-on-year (y/y) growth edged up to 2.8%. The PPI excluding food & energy also increased 0.2% in February, in line with the Actions Economics median forecast. Year-on-year gains accelerated to 2.5% from 2.2% in January. This is the fastest y/y growth rate in six years. An updated measure of core producer price inflation — the overall index excluding food, energy and trade services jumped 0.4% for the second consecutive month. This took the y/y increase to 2.7%, the strongest reading since the series began in August 2013.

Using the old methodology for the Producer Price Index, prices fell -0.3% (+2.7% y/y) in February reversing some of January’s 0.7% gain. Excluding food & energy, the index was unchanged (1.9% y/y).

Final demand goods prices edged down 0.1% (+3.0% y/y) following a 0.7% gain. The goods price index excluding food & energy increased 0.2% for the third consecutive month (2.1% y/y). (…)

Prices for intermediate demand goods strengthened 0.7% (4.8% y/y). This is the seventh consecutive month of gains of 0.5% or greater. (…)

U.S. import prices rise more than expected in February U.S. import prices rose more than expected in February as the largest increase in the cost of capital goods since 2008 offset a drop in petroleum prices, bolstering views that inflation will pick up this year.

The Labor Department said on Thursday that import prices increased 0.4 percent last month after a downwardly revised 0.8 percent surge in January. Economists polled by Reuters had forecast import prices climbing 0.2 percent in February after a previously reported 1.0 percent jump in January.

In the 12 months through February, import prices increased 3.5 percent after rising 3.4 percent in the 12 months through January. (…)

Prices of imported consumer goods excluding automobiles rose 0.5 percent, the largest gain since January 2014, after edging up 0.1 percent in the prior month. These price increases likely reflected the dollar’s depreciation against the currencies of the United States’ main trading partners.

These higher prices will eventually filter through to core producer and consumer inflation. Imported petroleum prices fell 0.5 percent, the first drop in seven months, after rising 3.0 percent in January. Import prices excluding petroleum surged 0.5 percent after a similar gain in January. (…)

• Import, Export Prices Signal China Now Exporting Inflation

U.S. Home Prices Rise Almost 9%, the Biggest Gain in Four Years

Home prices in the U.S. surged 8.8 percent in February — the biggest monthly gain in four years — as buyers battled for an increasingly scarce resource: homes.

While sales were little changed amid the thin inventory, the median price across 172 large metropolitan areas jumped to $285,700, according to a report Thursday from brokerage Redfin Corp. It was the 72nd straight month of year-over-year increases since the market bottomed in 2012.

U.S. home prices are now 6.3 percent higher than their peak in July 2006 and 46 percent above their trough in February 2012, according to the S&P CoreLogic Case-Shiller national home-price index.

A strong job market is fueling the price increases even as the number of homes for sale fell 11.4 percent in February from a year earlier — and as mortgage rates hit four-year highs.

A Familiar if Ominous Sign in the US IPO Market

Kudlow Accepts Post as White House Economic Adviser, Replacing Cohn

(…) Mr. Kudlow, who grew up in a Republican family in northern New Jersey’s upwardly mobile suburbs, became a leader of the antiwar movement during the Vietnam War. He earned a bachelor’s degree in 1969 from the University of Rochester, where he majored in history. He later studied politics and economics in a graduate program at Princeton University’s Woodrow Wilson School.

He didn’t finish his degree but landed a job as an assistant to Paul Volcker, then the president of the New York Federal Reserve, before jumping to Wall Street. At 28, he became chief economist at Paine Webber, a prominent brokerage firm, and later took the same position at Bear Stearns, even though he lacked an economics degree.

After a turn through government—he served as the top economist to Reagan budget director David Stockman—he returned to Bear Stearns. In 1994, he resigned and subsequently acknowledged a drug and alcohol addiction. It isn’t clear whether that episode could complicate efforts to obtain security clearances.

For the last 17 years, he has appeared as a commentator and host on various CNBC and radio programs, and he has toyed with running for the Senate as a Republican. (…)

• Desperately Seeking Larry (Kudlow) By David Stockman.

• TV economist Kudlow to translate Trump’s vision Pundit might be short on fiscal training, but can spread free-market message (FT)