Economy | timiacono.com - Part 5

The Fed’s Not-So-Hot Growth Forecasts

Via Deutsche Bank and this item from Pawel Morski’s Twitter feed comes a rather embarrassing summary in chart form of the Federal Reserve’s dismal record at predicting growth for the U.S. economy in recent years. About the only nice thing one could say about this is that they’re at least moving in the right direction.

Let’s just hope that central bank economists don’t underestimate future inflation as badly as they overestimated growth, something we may get a first hint at with tomorrow’s inflation report following today’s big upside surprise for wholesale prices as detailed here earlier.

Today’s report on producer prices from the Labor Department has certainly heightened the anticipation for tomorrow’s reading on consumer prices, but, in some ways, that’s a lot like saying “one is greater than zero” as few seem worried about inflation these days.

After rising 0.5 percent in March, wholesale prices were expected to increase just 0.2 percent in April but, instead, they jumped 0.6 percent, the most since September 2012. Gains were paced by a surge of 2.7 percent in food prices and the second straight increase of 1.4 percent for trade services. The so-called “core rate”, excluding food and energy prices, rose 0.5 percent  following an increase of 0.6 percent in March.

Recent history is replete with examples of producer prices surging, but having little effect on consumer prices as retailers have found ways to deal with the increases without having to pass them along to their customers. But, with the general view that the U.S. economy is improving, that could be changing and, if so, the first signs of that could be seen tomorrow.

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U.S. Retail Sales in April Disappoint

The Commerce Department reported(.pdf) that retail sales rose far less than expected last month, up just 0.1 percent in April after big upwardly revised gains during the prior two months and a sharp slowdown over the winter.

The consensus of analysts was for a gain of 0.4 percent in the headline figure, but the miss was even worse when excluding automobiles and gasoline as expectations were higher but sales were even lower, flat and down 0.1 percent, respectively.

Sales rose for 8 of the 13 major categories, but big declines in a few groups offset nearly all of the modest gains elsewhere. Sales at both miscellaneous stores and electronics & appliance stores tumbled 2.3 percent while sales at non-store retailers and restaurants & bars both fell 0.9 percent to pace the declining categories.

Clothing store sales rose 1.2 percent, gasoline station receipts were 0.8 percent higher, and automobile sales were up 0.7 percent to lead the rising categories.

If not for the huge upward revision to prior months – the March increase was adjusted up from 1.2 percent to 1.5 percent for the biggest gain in four years and February’s 0.7 percent gain rose to 0.9 percent – this report would have been even worse.

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Graduation Day Gallows Humor

Well, maybe the term gallows humor is overstating things just a bit since the job prospects for college graduates these days are much better than they were just a few years ago. Nonetheless, there are still an awful lot of kids with no better place to hang up their sheepskin than on one of the basement walls in their parents’ house.

From the Drew Sheneman archives at NJ.com.

On a related note, this story at USA Today recounts some of the most entertaining commencement speeches of recent years including the following quip from Stephen Colbert:

At his alma mater, Northwestern, in 2011, he started off by thanking the university president, the board … “and thank you, parents! Of course, if you don’t thank them now, you’ll have plenty of time to thank them tomorrow when you move back in with them.”

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