Consumer prices remained flat in June, reducing year-over-year growth to 1.6%. Weakness in clothing, communications and housing contributed to the mild report. Inflation has continued to linger below the Federal Reserve’s (Fed) 2% target, which could push the Fed to reconsider the timing of future rate increases. Producer prices crept up by 0.1% as lower energy costs mitigated upward pricing pressure in food and services.
- Retail sales fell by 0.2% in June as consumer spending remained weak. Economists blamed dwindling auto purchases and discretionary spending for the unexpected decline. A lackluster retail sales trend indicates that weak consumer spending — which accounts for 70% of the U.S. economy — could weigh on overall economic growth in the second quarter.
- The Department of Labor’s Job Openings and Labor Turnover Survey (JOLTS) showed that the gap between job openings and hirings in May reached its lowest level since February 2016, indicating a pick-up in the pace at which companies are filling positions. The quits rate inched up by 0.1%, a sign of workers’ increased confidence in their ability to find new jobs.
- The latest Fed Beige Book reflected continuing, but slower, economic expansion. Weak wage growth suggests that inflation will likely remain below the Fed’s 2% target for the near future.
- Initial jobless claims rose by 2,000 to 244,000 in the week ending June 24. The four-week moving average (considered a more reliable gauge of unemployment) moderated by 2,750 to 242,250. Continuing claims fell by 20,000, while the four-week moving average of continuing claims for the week ending June 17 grew by 10,000 to 1.949 million. Despite these increases, unemployment remains historically low due to continued strong demand for labor.
- The University of Michigan’s consumer sentiment reading sank in June. Consumer expectations of increased job and financial prospects declined to their lowest level since before the election, while the current-conditions assessment remained near a 17-year peak.
- Outstanding consumer credit (which measures non-mortgage debt) jumped 5.8% in May to a seven-month high after expanding by 2.6% in April, indicating confidence in near-term consumer spending and conflicting with May’s retail sales decline.
- Mortgage-purchase applications fell by 3% in the week ending July 7 as rising mortgage rates curbed purchase activity. Refinancing, which is highly rate-sensitive, dropped by 13% in the same period.
- The U.K. confirmed a financial settlement would be made to compensate the European Union for Brexit, likely to be paid over a number of years.
- Consumer prices in China fell by 0.2% in June, mainly within food; although prices grew by 1.5% year over year, in line with expectations. Producer prices dropped by 0.2% for the month, but rose by 5.5% in the year over year.
- Producer prices in Japan were unchanged in June and rose by 2.1% year over year. Petroleum and coal prices drove most of the increase; although iron, steel, chemicals and related products also contributed to growth.
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