Economic Highlights For The Week Ahead

June 11, 2014

Last week:  The U.S. economy generated almost 200,000 new jobs in May, continuing a trend that is now more than a year old.  Indeed, consistently generating that many new jobs is slowly beginning to encourage some discouraged workers to start looking again.  As these developments continue, there will be less slack in the labor market and more instances of tightness in certain fields.  And that, in turn, would put upward pressure on wage growth.  How much and how soon will be big questions later in the second half of this year and into 2015.  Meanwhile, consumers, now a little more confident, will pick up the pace in spending.  And the economy, with a much better second quarter (after a weather-induced decline in the first quarter), will do even better this summer, as the third quarter begins.

Retail Sales, May (Bureau of the Census)

Vehicle sales (at a 16.5 million pace in May) reflect some continued catch up, as consumers continue to replace old vehicles for newer and more fuel efficient models.  Nonauto retail spending has been quite uneven - with a significant gain in March but a very slow April.  It would not be a surprise if May's data is more similar to March than April.  Retailers, still stuck with piled up inventory, are hoping that continued good news on the labor front enables consumers to put into action some long delayed plans, which in turn will bring the inventory-to-sales ratio back down to something closer to normal.  In fact, they have yet to resort to discounting in order to stimulate more in-store or web traffic.  If sales disappoint again, that could well be the next step in late spring.

Producer Price Indexes, May (Bureau of Labor Statistics)

Energy prices remain relatively stable.  Food prices are stable now, but could start to move a little higher.  "Core prices (which exclude food and energy) remain very low, rising by no more than 0.2 percent per month.  The concern has been more about prices slowing.  But if the economy is starting to gain some momentum, it could result in a little price acceleration, not in May but perhaps later this summer.

Source: The Conference Board