Consumer prices increase. As expected, we saw a steady climb in consumer prices, with headline inflation up by 0.2 percent for the month and 1 percent for the year. The headline number continues to be low, as gasoline price declines from 2015 remain in the annual data.
The core inflation number, which excludes food and energy, also performed as expected, with a 0.2-percent increase on the month but growing 2.3 percent on the year. The difference reflects the drop in gas prices over the past year; as that rolls out of the data, we should see the two numbers converge, which should start to increase pressure on the Federal Reserve to raise interest rates.
Retail sales beat expectations substantially. Retail sales numbers were very strong, increasing by 0.6 percent, well above the expected 0.1-percent gain for the headline figure and up from the already strong figure of 0.5 percent for May. The 0.7-percent increase for core retail sales, which excludes gasoline and autos, was even stronger, up from the May number of 0.2 percent (as revised down slightly) and well above expectations of a 0.3-percent increase. This strength suggests that consumers continue to be willing and able to drive the economy through shopping, and that as demand continues to increase, price pressures will likely continue to intensify.
Industrial production shows significant improvement. Also beating expectations, industrial production moved from a decline of 0.4 percent in the previous month (revised up slightly to 0.3 percent) to a gain of 0.6 percent, bolstered by a strong rebound in manufacturing.
Manufacturing moved from a decline of 0.4 percent to a gain of 0.4 percent, largely on a recovery in motor vehicle production, which had dropped as a result of supply chain problems associated with the Japanese earthquake. The recovery of industry and manufacturing to positive growth is one more signal that this sector is stabilizing.
This week is largely about housing. Here are three reports to watch:
Have a great week!