MONTHLY ECONOMIC REVIEW: LINGERING WINTER CHILLS ECONOMY, STRONGER SPRING EXPECTED

Posted on March 30, 2015December 2, 2015 by Jack Kleinhenz

he pattern of adverse cold weather and snowfall in a large swath of the United States looks very similar to last year. The weather is again at play and could well account for downward revisions to estimates for economic growth.

However, this year’s economic factors are substantially different and provide a stronger foundation for consumer spending in the months ahead. Job growth and openings have risen, energy prices have declined along with inflation, and wages and salaries are stronger. First quarter activity is soft, but the economy remains on firm tracks and is expected to pick up in the coming months.

This month’s full report includes these highlights:

Retail Sales

The outlook remains positive as households are benefiting from low gas prices, job gains and rising home prices.

Consumer Sentiment

Households cited weaker finances compared with last year. Nevertheless looking forward, the tightening of the job market should bring about stronger wage growth in the months ahead.

Consumer Prices

Core inflation is expected to be driven by the push and pull of import prices related to the stronger U.S. dollar along with wage and salary gains as slack in the labor market is reduced.

Gross Domestic Product

It is not clear what has caused the economy to slow but a number of factors could be at play. The composition of GDP, however, with the current revisions indicates a more positive outlook.

Housing

February home sales are the strongest since February 2008 and are well above expectations. The pace of January and February new home sales is in sharp contrast to the tepid sales registered in 2013 and 2014.

Employment

February’s payroll growth remained on solid footing with a gain of 288,000 jobs. Overall employment — public and private sectors combined — increased 295,000 in February.

Retail Jobs and Openings

The churn or turnover in the job market is another good sign of a strengthening job market as workers are becoming confident about job prospects.

Personal Income and Spending

The wage and salary component of income rose 0.6 percent after rising 0.1 percent in December. Wage growth is stronger, registering at nearly a 4.6 percent year-over-year rate for the same month a year earlier.

Chicago Fed National Activity Index

Further reduction in unemployment is needed to push inflation toward the Federal Reserve’s targeted levels.

MONTHLY ECONOMIC REVIEW: INDICATORS MATCH EXPECTATIONS FOR YEAR OF THE GOAT

Posted on February 24, 2015December 2, 2015 by Jack Kleinhenz

The Year of the Goat is a hot topic among retailers and those who celebrate the Chinese New Year. Experts in Chinese astrology say that the outlook for finance and wealth is favorable but exercise caution as there will continue to be volatile political situations causing economic activity and prices to fluctuate.

The indicators outlined in February’s Monthly Economic Review suggest the same outlook. The economy is recovering but continues to be characterized by fits and starts and highs and lows; while I remain optimistic about overall growth for the retail industry in 2015, recently released economic data have come in weaker than expected — puzzling, as the latter half of 2014 showed rapid growth in several areas.

Retail sales came in January lower than expected, but it remains unclear if it is due to seasonal issues like the weather or weaker consumer demand. Consumer sentiment remains strong but continues to fluctuate, reflecting a skittish American consumer. On the other hand, January registered another solid gain in payrolls, and if the rebound in wages isn’t a one-off wonder, there is much to look forward to.

This month’s full report includes these highlights:

Retail Sales

The extra money coming from lower gas prices may be going toward savings, paying off debt or spending on services rather than retail goods and merchandise.

Retail Sales and Consumer Sentiment

The softening in retail sales and consumer sentiment poses some downside risk for consumer spending in the first quarter of 2015.

E-commerce

E-commerce sales continued to grow but the pace of growth slowed from 3.6 percent in the previous quarter to 2.3 percent in the fourth quarter.

Gross Domestic Product and Unemployment

GDP is expected to increase 2.7 percent in the first quarter of 2015 and the unemployment rate is set to decrease from 5.7 to 5.6 percent.

Housing Market

Attractive mortgage rates and easier credit conditions along with stronger job and income growth are reinforcing expected growth in the housing market in 2015.

Employment

As the labor market continues to expand, the unemployment rate should drop, enabling wage growth to slowly begin to increase. Wages should pick up between 2.5 and 3 percent on an annual rate in late 2015 and early 2016.

Retail Jobs and Openings

Total retail employment across all industry segments increased 45,900 to 15.6 million in January. There were 434,000 job openings in the retail industry on the last business day of December.

Personal Income and Spending

The wage and salary component of personal income improved a meager 0.1 percent in December and seems to be at odds with the strong December employment report. Nonetheless, wage growth is stronger than last year and is trending modestly higher despite December’s weak growth.

Chicago Fed National Activity Index

The index is well above zero, indicating the economy is growing above its historical trend; some inflationary pressure in the coming months is expected.

MONTHLY ECONOMIC REVIEW: FEBRUARY 2015

Posted on February 1, 2015December 2, 2015 by Jack Kleinhenz

In the February 2015 Monthly Economic Review, NRF Chief Economist Jack Kleinhenz provides in-depth analysis on the latest government economic indicators, such as wages and income change, retail sales and consumer sentiment. Additionally, the report looks at retail employment. Employment, according to NRF, which excludes automobiles, gas stations and restaurants, increased 34,800 in January to 2.76 million jobs seasonally adjusted, a gain of 215,600 from the same month last year. Total retail employment across all industry segments increased 45,900 to 15.6 million in January.

NRF’s Monthly Economic Review is a report for NRF and its communities’ members that includes the latest information on industry sales, providing a thorough overview of the current retail and economic climate.