Deller's two cents: This week its the news on inflation which is tied almost exclusively to gasoline and food prices. Oil prices are coming down (the political uncertainty in the Middle East is abating a bit and some of the speculation is dying down) but will it be enough to bring gas prices down a bit? Will this derail the recovery? Probably not.
Economic Week in Review: Nation feels pinch at the pump
May 13, 2011
Steep gasoline prices impacted key indicators this week as major sectors of the economy felt the squeeze of high fuel costs. Prices paid by producers and consumers rose at their fastest 12-month clip in more than two years while retailers also endured the impact of high energy costs. Economists are thus keeping a sharp eye on inflation, though upward pressure shows some signs of easing. For the week ended May 13, the S&P 500 Index fell 0.2% to 1,338 (for a year-to-date total return-including price change plus dividends-of about 7.1%). The yield of the 10-year U.S. Treasury note fell 1 basis point to 3.18% (for a year-to-date drop of 12 basis points).
Prices rise for producers and consumers
The Producer Price Index, which measures price changes before they hit consumers, rose 0.8% in April. The Labor Department report said the latest increase pushed producer costs 6.8% higher over the last 12 months, the largest gain in almost three years, owing to increased demand for commodities and higher gas prices.
Consumers also paid the price for high gas and food costs as the Consumer Price Index was up 0.4% in April, though it increased at a slower pace than in the prior two months. Consumer prices now are up 3.2% over the past 12 months, the highest 12-month gain since October 2008. Higher costs for cars, clothing, and medical care also pushed up the index. Analysts said that despite higher costs, retailers are reluctant to raise prices as shoppers remain wary of spending their discretionary income.
Retail sales modestly up
Retail sales rose at the slowest pace in nine months at 0.5%. The increase was down from 0.9% in March, reflecting sales of higher-priced gasoline but stalled spending across the broader economy. Analysts suggested that flat wages caused by the weak labor market also may be restraining spending. However, sales are more than 7% higher than a year ago.
Business inventories slightly higher
A Commerce Department report said business inventories increased 1.0% in March, spurred primarily by an unexpectedly high build of retail inventories. Auto inventories posted the strongest gain at 1.2% above the prior month, and total inventories are 9.7% higher than a year ago. Analysts said businesses may be increasing previously lean inventories to meet a higher demand in sales.
Trade deficit shows mixed numbers
The U.S. trade deficit jumped to $48.2 billion in March, as the spike in oil prices overshadowed the nation's highest export levels since their 2008 peak. The Commerce Department report said exports increased to $172.7 billion on a weaker dollar and growth in developing countries.
U.S. companies exported more autos, chemicals, and agricultural goods, and the trade deficit with China dropped to $18.1 billion. But oil imports soared 18% to $39.3 billion, as the average price for a barrel of crude oil was $93.76 in March.
The economic week ahead
Reports on new residential construction and industrial production are due on Tuesday, followed by minutes of the Federal Open Market Committee on Wednesday. Thursday wraps up the week with reports on existing-home sales along with leading indicators from the Conference Board.
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Steven C. Deller
Professor and Community Development Economist
Department of Agricultural and Applied Economics
515 Taylor Hall --- 427 Lorch Street
University of Wisconsin-Madison/Extension
Madison, WI 53706
608-263-6251
"I started out with nothing and I still have most of it left."
Seasick Steve
