Retail prices in the U.S. posted their biggest gain in three years during April, while industrial production increased the most in more than a year, as e-commerce and housing starts remain healthy.
The 0.4% jump in the Labor Department's Consumer Price Index from the month before is slightly more than a consensus forecast by analysts. The latest report puts the annual inflation rate at 1.1%, up from a 12-month rate of 0.9% in March. The last time the monthly CPI number increased at least this much was in February 2013.
The April hike was mainly driven by higher gasoline prices, which rose 8.1% from March, the biggest jump in nearly four years. When prices for gasoline and food are removed, so-called “core inflation” increased by 0.3% in April, with the annual rate at 2.1%.
Core inflation has been at or above the Federal Reserve’s 2% objective for the last six months, the longest such streak since 2012, according to Josh Nye, economist with RBC Economics.
“Based solely on inflation and the labor market, the Fed would likely have little hesitation raising [interest] rates again in June," he said. "However, risks from global economic and financial developments have led to a cautious approach to further tightening. Unless the minutes of the April Federal Open Market Committee meeting (set to be released on Wednesday) or upcoming speeches indicate less widespread concern surrounding those risk factors, we expect the Fed’s patient approach will preclude a June rate hike.”
Industrial Production Rebounds
Meantime, a Federal Reserve report also released on Tuesday shows U.S. industrial production increased 0.7% in April after decreasing in the previous two months – the biggest increase since November 2014. The improvement was far better than a 0.3% expected estimate by analysts.
Manufacturing output rose 0.3% after declining the same amount in March, due mainly to increased production of autos and machinery. Compared to a year earlier, manufacturing is up 0.4%.
Utilities jumped 5.8% in April, the biggest surge since 2007, as the demand for electricity and natural gas returned to a more normal level after being suppressed by warmer-than-usual weather in March.
Mining production fell 2.3% in April, and it has decreased more than 1.5% per month on average over the past eight months.
At 104.1% of its 2012 average, total industrial production in April was still 1.1% below its year-earlier level. Capacity utilization for the industrial sector increased 0.5 of a percentage point in April to 75.4%, a rate that is 4.6 percentage points below its 1972–2015 average, but higher than March’s level.
The report is welcome news following an overall slowdown in the U.S. economy during the first quarter of the year, with GDP growth estimates at an annual rate of 0.5%, partly blamed on lackluster manufacturing levels compared to the year before. The latest reports give rise to hopes that overall economic growth rate could be at a 2% to 2.5% annual rate for the current quarter.
E-Commerce Sales Continue Booming
Also released on Tuesday was a report showing how much more e-commerce is playing a role in the economy and is remaking the trucking industry, according to a recent Wall Street Journal story.
The Commerce Department’s estimate of U.S. retail e-commerce sales for the first quarter of 2016 increased 3.7% from the fourth quarter of 2015. This happened as total U.S. retail sales for the first quarter of 2016 fell 0.2% from the final quarter of last year.
The first quarter 2016 e-commerce estimate increased 15.2% from the first quarter of 2015; total retail sales increased 2.2% in the same period. E-commerce sales in the first quarter of 2016 accounted for 7.8% of total retail sales.
This follows a Wall Street Journal story earlier this year in which it examined how trucking companies, especially less-than-truckload operations, are seeing increased residential business as customers turn more to online sites when it comes to purchasing big-ticket and often heavy items.
Housing Continues Gains
Nationwide housing starts rose 6.6% in April from the month before to a seasonally adjusted annual rate of 1.17 million in April, according to the Commerce Department, but fell 1.7% from the same time a year ago.
Overall permit issuance, an indicator of future home building, also moved 3.6% higher in April from March’s revised figure to a seasonally adjusted annual rate of 1.12 million. However, it's still down 5.3% from April 2015.
“This month’s modest rise in housing production is consistent with builder sentiment, which has remained steady and in positive territory in recent months,” said National Association of Homebuilders Chairman Ed Brady.
Single-family and multifamily production each registered gains in April. Single-family housing starts rose 3.3% to a seasonally adjusted annual rate of 778,000 units while multifamily starts increased 13.9% to 394,000 units.
“Though housing construction data is relatively flat for the beginning of 2016, we anticipate a ramping up of housing production during the rest of the year, given a strengthening job market, low mortgage interest rates and favorable demographics,” said NAHB Chief Economist Robert Dietz.