Weekly Economic Review: Consumer Prices Drop for the First Time in a Year

Posted by Laine Smith on 4/14/17 9:57 AM

Topics: Economy Housing Market

In this week’s economic review, job openings were up considerably but hiring lagged, consumer sentiment continued to increase, mortgage rates declined, and consumer prices dropped significantly.

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The Labor Market

While the unemployment rate dropped in March to its lowest level since April 2007, the highlight of the March employment report didn’t give much lift to the Labor Market Conditions Index. The index for March was 0.4, down 0.2 points from February.

According to the February Job Openings and Labor Turnover Survey, job openings were up 2.1 percent to the highest level since July 2016. Meanwhile, hiring totaled 5.314 million but is still down 2.4 percent year-over-year.

Hirings have failed to close the spread with openings for the last two years as employers struggle to find qualified workers. In February, that gap stood at 429,000, which is the widest since September 2016, according to Bloomberg.

Consumer Sentiment

After losing steam in February and March, the preliminary April report rebounded 1.1 points to a level of 98.0. Highlights of the report included the current assessment, which is at a 17-year high and points to growth in consumer spending. The expectations component also gained traction with a 0.4-point gain, signaling confidence in the labor market.

Retail Sales

March retail sales decreased by 0.2 percent after dropping 0.3 percent in February, the biggest decline in nearly a year. Retail sales minus automobiles, gasoline, food services and building materials, sales recovered 0.5 percent from February.

Though sales were down in six of 13 major retail categories, the biggest impact on the report was the continuing descent of auto sales, which was down 1.2 percent in March after a 1.5 percent drop in February.

Consumer Price Index

Consumer prices fell 0.3 percent in March, making it the first decline in over a year and the largest drop in more than two years. The decline was mostly due to a large descent in gasoline and energy prices (-3.2 percent), but the CPI minus food and energy was still down 0.1 percent for the month.

This week in the economy:

  • The 30-year fixed-rate fell yet again as of April 13th with the average standing at 4.08 percent with 0.5 points, according to Freddie Mac.
  • Purchase applications rose a seasonally adjusted 3 percent the week of April 7 but refinance applications decreased another 1 percent, according to MBA Mortgage Applications. The refinance share of mortgage activity is down to its lowest level since September 2008.
  • Initial jobless claims came in at 234,000 in the April 8 week, according to Bloomberg. The 4-week average fell 3,000 to 247,250 for a second week of declines.
  • The Bloomberg Consumer Comfort Index is back to its strongest level, climbing 0.8 points in the week of April 9 to a level of 51.

The economic calendar for the week of April 17th, 2017:

  • Monday Housing Market Index
  • Tuesday – Housing Starts
  • Wednesday – MBA Mortgage Applications
  • Thursday – Jobless Claims, Bloomberg Consumer Comfort Index
  • Friday – Existing Home Sales

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