We’re wrapping up the final 2013 economic data, and I have to say—it’s clear that the recovery in the U.S. continues. So as we do every week, let’s take a look at some of the most important economic headlines.
Retail Sales Up, Particularly Core Sales
In December, retail sales rose 0.2%, above economists’ estimates for sales to be flat. As for core sales, which exclude vehicle and gasoline sales and correspond more closely with the consumer spending component of GDP, they increased a strong 0.7%, ahead of expectations for a 0.4% rise.
This was a positive development for retail sales over the holiday shopping season. We’ll continue to keep a close eye on consumer spending because it makes up about two-thirds of U.S. economic activity, but the holiday sales numbers suggest some stability in the retail industry.
Inflation Remains in Check
In December, the PPI—the price of goods at the wholesale level for the past month, and a first sign of inflation—climbed 0.4%, higher than economists’ expectations for a 0.3% rise. Core prices, which strip out volatile energy and food components, climbed 0.3% and were above the consensus expectation for a 0.1% rise.
In addition, the CPI rose 0.3% from the prior month. This was in line with economists’ consensus estimates, and core CPI, which excludes food and energy prices, rose 0.1% in December, slightly under estimates of a 0.1% rise.
So inflation pressures simply aren’t that significant. In the past 12 months, producer prices have increased 1.2% and consume prices rose 1.5% after climbing 1.7% in 2012. Both remain substantially lower than both the 10-year average of 2.4% and the Fed’s target of 2% inflation.
Job Market Keeps Improving From December Drop
Last week, initial claims for unemployment dropped 2,000 to 326,000, falling from the previous week’s revised figure of 328,000. Economists were expecting 333,000 in initial claims. In addition, the four-week moving average dropped to 335,000 last week, down 13,500 from the previous week.
Jobless claims have been improving since late December—dropping for the last three weeks—as we saw some volatility in December due to the seasonal adjustment that the Labor Department does this time of year.
Housing Posts Best Year Since 2007
In December, housing starts fell 9.8% to a seasonally adjusted annual pace of 999,000, following their big November surge. This was a bit higher than the consensus estimate, which called for a 986,000 annual pace. At the same time, building permits declined 3% in December to an annual rate of 986,000, which was under economists’ estimates of a 1,000,000-unit pace.
This was a sharp drop in both starts and permits, but it was still enough to give builders their best year since 2007. All told, about 923,400 homes and apartments were started last year, more than 18% above the 2012 figure of 780,600. So it’s clear that the housing market remains fully in recovery mode.