Daily Economic Update: Retail Sales, Jobless Claims, PPI

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights retail sales, the producer price index, and jobless claims.

• Retail sales inched up a tepid 0.1% in June, erasing a 0.1% decline in May.  Falling fuel prices were expected to drag the headline figures downward, but strength in auto sales as well as a 1.3% jump in sales at building materials and garden centers helped to offset.
• Sales on furnishings as well as appliances and electronics continue to be muted in 2011; down 0.8% and 0.2% for the month, respectively.  The declines are likely a reflection of last year’s tax credit when new home owners had $8,000 extra cash.  With tighter budgets, new owners are likely putting money into necessary home improvements and making due with furnishings and appliances.
• The producer price index (PPI) fell 0.4% in June for the first decline since June of last year.  The headline decline was anticipated as fuel prices, which drive the index, slipped in June.  However,  producer prices are still up by a large seven percent from one year ago, suggesting broader consumer inflation could still be around the corner.
• Jobless claims for the week ending July 9^th eased 22,000 to 405,000, the second consecutive decline.  The weekly decline brought the 4-week moving average down to 423,250.  The headline figure might have been lower were it not for 3,319 layoffs attributed to a state government shutdown in Minnesota.  Claims are above the critical 400,000 mark, the level at which more jobs are being created than cut, placing upward pressure on the unemployment rate, but headed in the right direction.
• Weak employment figures and high gas prices have weighed on consumers in recent months.  Moderation in gas prices in June gave consumers some breathing room aiding sales of goods and services.  Employment was weak in June, but this week’s measure of claims suggests that the employment outlook may be stronger when it is reported at the end of the month.  Both gas prices and employment need to improve further to drag consumer confidence out of its dull drum and to drive the economy out of its mid-year slump.  The economic weakness has helped to lower mortgage rates, but only marginally; confidence in the economy will do more to drive sales.
• Today's data suggest more weakness than prior forecasts.  The GDP this quarter is downgraded to less than 2%, a figure that will not help lower the unemployment rate in any meaningful way.