Retail sales rose by a slightly stronger than expected 0.1% M/M in June following a slightly upwardly revised 0.1% M/M drop in May. Gasoline station sales dropped by 1.3% M/M, which was a surprisingly small decline given the decline in gasoline prices. Car sales increased by 0.8% M/M in June, the first increase in four months, and a sign that the supply problems linked to the Japanese earthquake are gradually resolved. However, core sales which excluding both gasoline station and car sales, increased by a very modest and disappointing 0.2% M/M (expected 0.4% M/M) while the May figure was revised down to 0.2% M/M from 0.3% M/M previously. These results suggest that real PCE growth grew by a disappointing 0.6% (annualized) following a 2.2% increase in Q1. Q2 real GDP will probably by inferior to the already disappointing 1.9% growth in Q1. Consumption carries little momentum going into Q3.
Initial claims fell by a bigger-than expected 22 000 to 405 000, which compares to expectations for a drop to 415 000, while continuing claims rose unexpectedly to
3 727 000 from 3712000 in the previous week. The less volatile 4W average fell slightly by 3750 to 423 250. However, as claims remain above the 400 000 mark for the fourteenth week, one shouldn’t be too enthusiastic about the decline, especially not as some temporary factors may have pushed claims lower in the most recent week. .
PPI fell 0.4% M/M in June, the first decline this year, to be up 7% Y/Y, well below the 0.2% M/M decline and 7.4% Y/Y increase expected. As expected, the decline was mainly driven by a 1.3% M/M decline in energy prices. Core PPI on the contrary rose by 0.3% M/M and 2.4% Y/Y, slightly above consensus. The outcome was close to expectations and neutral for markets. The decline in energy prices was well-flagged, while the rise in core PPI was modest, but also show that there are current no downward price pressures, which would have raised the alarm at the Fed.