Almost every day a major government agency or private organization releases new information covering the status of some pocket of the economy.
Let’s sift through the barrage of economic data out there and determine what this will mean for your stocks.
Retail Sales
What It Measures: Through this report, the Commerce Department announces total receipts of retail stores for the past month. Retail sales do not include spending on services, which makes up over half of total consumption. The report also covers retail sales ex-autos, removing the most volatile consumer purchases. The changes in retail sales are followed closely and are a good indicator of broad consumer spending patterns.
The Breakdown: In December, U.S. retail sales declined 0.9%; economists had expected a 0.1% dip. Much of this was due to falling gasoline prices; gas stations saw sales plunge 6.5%—the most since December 2008. Excluding energy, food, auto and building material sales, core retail sales pulled back 0.4%. At the same time, furniture stores and restaurant sales grew.
The Bottom Line: To say the least, the December retail sales data was a disappointment. However, economists are still largely optimistic about consumer spending over the long term. In fact, even when accounting for the latest drop, core sales are up 3.2% over a year ago.
Business Inventories
What It Measures: The Commerce Department’s business inventories report includes sales and inventory statistics from all three stages of the manufacturing process (manufacturing, wholesale and retail). The retail inventory number is an important part of this report as it can move the market. The report also can affect the Gross Domestic Product outlook.
The Breakdown: In November, U.S. business inventories increased 0.2%, right in line with economists’ expectations. Retail inventories, which exclude autos, climbed 0.1%. Business sales dipped 0.2% in November, and at the current sales pace, it would take 1.31 months for business to empty their shelves.
The Bottom Line: Again, business inventories weren’t as strong as wholesale inventories (up 0.8% in November), these were still strong results. In the past year, business inventories have increased 4.4%, while business sales have risen 2.2%.
Initial Claims for Unemployment
What It Measures: It is an indicator of the direction of the job market. Increases in jobless claims show slowing job growth; decreases in claims signal accelerating job growth. On a week-to-week basis, jobless claims are volatile, so one of the best ways to track this measure is to look at the four-week moving average. It usually takes a jump or decline of at least 30K claims to signal a meaningful change in job growth.
The Breakdown: For the week ending January 3, jobless claims fell by 4,000 to a 294,000 annual rate. Economists were looking for a decline to 290,000. The four-week moving average dipped to 290,500, down from 290,750 in the previous week.
The Bottom Line: While last week’s jobless claims didn’t fall as far as economists had expected, first-time jobless claims remain below 300,000, which is the benchmark of normal economic activity.
Producer Price Index (PPI)
What It Measures: This is the price of goods at the wholesale level for the past month, and a first sign of inflation.
The Breakdown: The Producer Price Index slipped 0.3% in December, marking the steepest decline since October 2011. Economists had expected prices to dip 0.4% last month. Excluding food and energy, prices increased 0.3% in December, which was well above economists’ expectations for a 0.1% rise.
The Bottom Line: Falling oil prices is helping keep inflation in check, as producer prices have only climbed 1.1% in the past year. And as long as oil prices remain low, inflation should remain under control.
Consumer Price Index (CPI)
What It Measures: The price level of a fixed market basket of goods and services purchased by consumers. CPI is the most popular inflation indicator, so this is a very important report that can move the market.
The Breakdown: The Labor Department announced today that the Consumer Price Index (CPI) declined 0.4% in December, which represents the biggest monthly decline in six years. Energy prices plunged 4.7% in December, led by a 9.4% decline in gasoline prices. Excluding food and energy prices, the core CPI was unchanged in December.
The Bottom Line: For 2014, CPI rose only 0.8%, which is the smallest annual rise in the past 50 years. So inflation is still not a threat, which will help support the Fed in keeping interest rates ultralow in 2015.
Industrial Production
What It Measures: The index of industrial production measures the amount of output from the manufacturing, mining, electric and gas industries—several huge industries that literally power our economy. Manufacturing production, the largest component of the total, is derived from using the manufacturing hours worked from the employment report.
The Breakdown: Industrial production dipped 0.1% in December, while November’s figure was revised to a 1.3% gain, up from 1.1%. Capacity utilization decreased to 79.7%, down from 80% in November and below economists’ projections for 79.9%.
The Bottom Line: Even with the dip last month, industrial production climbed at a 5.6% annual rate in the fourth quarter, and overall industrial output in December was up 4.9% year-over-year. So, the U.S. economy continues to show strength.
Louis Navellier is a renowned growth investor. He is the editor of five investing newsletters: Blue Chip Growth, Emerging Growth, Ultimate Growth, Family Trust and Platinum Growth. His most popular service, Blue Chip Growth, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.
