Daily Economic Update: Retail Sales, PPI

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights retail sales and the producer price index.

• 

  Retail sales slipped 0.2% in May after a solid gain in April.  The decline was no surprise as it followed a sustained period of high fuel costs and weak economic news, which have weighed on consumer demand since March, especially for large goods like automobiles.  Excluding automobiles, sales were a positive 0.3% in May.
• Sales at building materials and garden centers jumped 7.0% over the 12-months ending in May 2011, while sales of home furnishings rose just 0.4% over this period. Like sales on furnishings, sales of appliances and electronics have also been muted in 2011.  The difference is likely a reflection of last year’s tax credit when new home owners had $8,000 extra cash.  With tighter budgets, new owners are likely putting money into necessary home improvements and making due with furnishings and appliances.
• The producer price index (PPI) rose 0.2% in May, which was lower than the 0.8% rate reported a month earlier.  But prices are rising fast for producers when compared to one year ago; they have jumped 7% in 12 months on finished products and 10% on intermediate products.  Fuel prices peaked recently and while they remain strong, crude fuel prices have begun to moderate which could bring down the PPI.
• High gas prices and weak economic news have taken a toll on consumer spending this spring.  However, gas prices have begun to ebb.  Continued uncertainty in the Middle East will likely create a high floor on fuel prices in the near term, which will drag on consumer demand, but consumer demand will improve from this spring’s weakness.  Falling prices will help real estate agents whose gas costs will decline and moderate core prices will help to keep long-term mortgage rates stable and affordable, while the economy retrenches for a continued expansion later this year.