April’s CPI Research Notes

by Jim Baird on May 17, 2016

CPIConsumer prices surge by 0.4% in April on sharp increase in energy

Headline CPI in April rose by 0.4%, stronger than expectations of a 0.3% increase based on the Bloomberg survey. The core index also edged higher by 0.2%, in line with expectations. The increase in the headline rate was the largest monthly jump since April 2013.

Over the past year, the headline index increased by 1.1%, with falling energy costs acting as the primary contributor that kept costs in check over much of that period. Core inflation, which excludes the impact of food and energy costs, increased by a more pronounced 2.1% over the preceding twelve months.

With oil prices finding a floor and pushing higher in recent months, the stiff headwind that energy prices provided to inflation has now reversed. In April, energy prices rose 3.4%, with gasoline specifically up 8.1%. The strength of those price increases were the primary catalyst behind the surge in the headline number.

As has been the case in recent months, the bifurcation between the respective price trends for goods and services became more pronounced last month. The prices of goods, particularly durable goods, continue to be negatively impacted by low oil prices and the stronger U.S. Dollar. In contrast, the prices of a broad swathe of services – as well as housing prices – have been increasing at a more rapid rate for some time.

Even as core CPI remains above the Fed’s long-term target of 2% year-over-year, the committee remains focused on growth concerns both domestically and abroad. The slowdown in the U.S. economy that began late last year and extended into the first quarter has not been lost on the Fed. Recently softening data on nonfarm payrolls and jobless claims won’t prompt the Fed to move more aggressively either.

The Fed has hinted in the past that it would be willing to let inflation run moderately above its 2.0% target for some time if necessary to balance its inflation and employment mandates, and it seems unlikely that anything in today’s report will change that stance. As wage growth accelerates (particularly if productivity gains remain limited) and core measures of inflation edge higher, the potential for the Fed to feel greater pressure to move will increase. In the meantime, it appears that the status quo is intact.

Market Perspectives (May 2016)

by Jim Baird on May 17, 2016

Executive Summary

  • Building on momentum from the previous month, April continued to bring relief from the heightened volatility experienced earlier in the year. U.S. stocks continued their rebound, with small caps outpacing mid and large caps by a small margin.
  • Overseas stocks also enjoyed a positive month, with equities in developed markets posting the largest monthly gains, while emerging markets lead the pack year to date.
  • Most fixed income indices experienced positive returns in April, with high yield bonds delivering the strongest results.
  • GDP figures for Q1 confirmed that the U.S. economy’s growth had slowed, though expectations point to continued economic expansion through the remainder of the year.
  • The Fed indicated that it will take a more cautious approach to future rate hikes. This dovish stance was not a surprise, and as such, elicited little reaction from the markets.

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Jobless Claims (week of 5.7.16) Research Notes

May 12, 2016

Claims surge unexpectedly to highest point since February 2015 Initial jobless claims rose to 294,000 for the week ended May 7, lifting the 4-week average to 268,250.  Today’s release was well above the previous week’s print of 274,000 and bucked economists’ expectations for claims to subside modestly. Generally, a claims level below 300,000 is viewed as […]

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April’s Employment Situation Research Notes

May 6, 2016

April job creation falls short of expectations; unemployment rate holds steady at 5.0% Job market conditions slipped in April as the economy produced 160,000 new jobs, well below expectations of 200,000 or more. February and March payrolls were revised downward by an additional 19,000, pushing the net increase for the month even further below the […]

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Special Commentary

May 4, 2016

EXECUTIVE SUMMARY Puerto Rico recently defaulted on $422 million of debt backed by the Government Development Bank. Solutions are being considered by the United States to allow relief for Puerto Rico to restructure some of its outstanding debts, but no solutions have been reached. Given the continuing challenges to its economy and tax base, the […]

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Consumer Sentiment Research Notes

April 29, 2016

Sentiment slips in April for fourth consecutive month The mood of the U.S. consumer faltered in April, as their outlook for future economic conditions dimmed further. The University of Michigan Consumer Sentiment Index dipped to 89.0 in April, declining moderately from a 91.0 reading in March. The result reinforced a similar downward trend in the […]

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Q1 GDP Research Notes

April 28, 2016

US economy slows sharply in Q1; consumer spending leads the way The first report on the economy for 2016 confirmed that it faltered as widely believed, growing by a modest 0.5% during the quarter. Spending in the consumer sector slowed, but remained the strongest contributor to growth and exceeded expectations. At a 1.9% increase, consumer […]

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Market Perspectives (April 2016)

April 15, 2016

Executive Summary ​March brought relief from the relatively high level of volatility that characterized market activity through the first half of Q1. U.S. stocks responded positively, with mid-caps leading the way, followed closely by small caps and large caps. International equities were also up last month, led by a strong surge in emerging market equities. […]

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March’s CPI Research Notes

April 14, 2016

Consumer prices rise less than expected in March Headline CPI in March rose by a modest 0.1%, below expectations for a 0.2% increase based on the Bloomberg survey of economists. The core index edged higher by 0.1%, also falling short of an expected rise of 0.2%. Over the past year, the headline index increased by […]

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March Retail Sales Research Notes

April 13, 2016

Retail sales drop 0.3% in March vs. expected 0.1% gain Retail sales declined by 0.3% in March, falling short of expectations for a 0.1% increase. Updated February retail sales were flat – a weak result, but still representative of a modest upward revision to the originally reported decline of 0.1%. Over the past year, sales […]

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