Week In Review 2.15.2019

Inflation–For the third consecutive month, headline consumer prices (CPI) remained unchanged in January due in large part to lower energy prices. Core inflation, however, which excludes volatile food and energy prices, trended higher for the fifth consecutive month, up 0.2%. Y/Y, core inflation is up a modest 2.2%. Overall, consumer prices remain contained and in-line with the Fed’s target. Similarly, headline producer prices (PPI) dipped -0.1% on softer energy prices, but rose an incremental and contained 0.3% at the core level.

Retail Sales dropped an unexpected -1.2% in December. Control group sales, which factor into GDP also declined by -1.7%. While these weak numbers present several concerns about consumer spending, they likely contain a fair amount of unrelated noise considering that the recently ended government shutdown materially altered the data collection process.

Industrial Production fell a weaker-than-expected -0.6% in January, due to a -0.9% drop in manufacturing production.

NFIB Small Business Optimism Index fell -3.2 points in January, the lowest level since 2016, which was likely caused by increased market volatility and the government shutdown.

Consumer Sentiment, conversely, rebounded in February from the January dip as the government reopened.

Jobless Claims rose 4K to 239K, but the 4-week average, reflecting the shutdown effects, rose a sizable 6.8K to 232K. Firming jobless claims could be signaling a moderation in labor market strength.