Monday Moneybeat: Three economic reports

MARY REICHARD, HOST: Coming next on The World and Everything in It, the Monday Moneybeat.

NICK EICHER, HOST: Three economic data points to report from the previous week, all of them modestly positive.

The most telling is the report on retail sales. According to the Commerce Department, American consumers increased retail purchases 0.5 percent in May. And the same report revised April from a negative number to a positive.

Retail sales is a closely watched indicator because what consumers spend out in the marketplace accounts for 70 percent of overall economic activity in the country.

Consumer purchases had been uneven earlier this year, but with April’s revision, sales have now increased for three straight months. Economists have reason to believe the trend will continue: Remember, unemployment is at a five-decade low 3.6 percent, and wages are rising faster than the inflation rate.

REICHARD: Industrial production rebounded in May. This is economic data point number two, and it comes from a report by economists at the Federal Reserve. In May, overall output increased 4/10s of a percent month on month, and that’s good because it fell by a like amount in April.

One component of the report is the manufacturing sector and that increased last month, slightly. But the trade war with China is having its effect. Even with that small rise in May, factory production is down 1.5 percent since the end of 2018.

EICHER: Economic data point number three, inflation. I mentioned that wages are easily outpacing inflation, and that’s thanks to solid wage growth, but we can also credit a very tame consumer price index. According to the Labor Department, inflation grew just 1/10th of a percent in May over the previous month, and year-on-year it’s just 1.8 percent.

Here’s the significance: the Federal Reserve, which sets the benchmark for interest rates, has a target inflation rate of no more than 2 percent. If it goes over that, the Fed is likely to hike up interest rates in response. When it’s lower, the central bank is freer to let rates fall and help the economy grow.

Economists and Wall Street are concerned that the trade dispute between the United States and China might hamper overall growth, and so they’re hoping the Fed will cut rates and spur the economy.

What’s expected is the Fed will wait until the second week of July to act, because by then we’ll know the results of a meeting between President Trump and Chinese President Xi Jinping, and whether they make progress on trade-war peace talks.

REICHARD: A mixed week on Wall Street: Three of the major stock indexes finished down—the Dow Jones Industrials, the Nasdaq, and the Russell 2000, all of them off less than a percentage point. The Standard & Poor’s 500 index gained half a percentage point.

EICHER: And that’s today’s Monday Moneybeat.

(AP Photo/Richard Drew, File) In this June 6, 2019, file photo specialist John Parisi, left, works with traders on the floor of the New York Stock Exchange. 

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