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Retail May Not Be Dead...Yet

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Retail sales rebounded in April, bringing a sigh of relief to economists who feared consumers had lost their appetite for spending money. Not only did April sales increase 0.4 percent, but March sales were revised higher. The look back means spending was not as weak in the first quarter as initially expected. The delay in tax refunds most likely stalled spending. It may also mean spending will continue to improve this year. Sales increased in nine of the 13 major categories. The categories posting negative sales were furniture, food and beverage, clothing, and general merchandise stores. The decline in general merchandise stores falls in line with the weak earnings reports from major department store companies this week. While consumers may not be shopping at the traditional department stores, there is enough activity in internet shopping, electronic goods stores and building material stores to keep the economy alive.

Other Key Indicators this Week:

Jobs – The Job Openings and Labor Turnover Survey (JOLTS) report for March backed up the improvement we have seen in the monthly payroll reports. Job openings increased 61,000 in March, confirming employers' optimism for continued growth. The rate of hiring remained unchanged at 3.6 percent, just shy of the cyclical high of 3.8 percent. The measure suggests there is still room for job growth this year. The quits rate, which measures how willing people are to leave their job for a better one, is stable at 2.1 percent. The construction industry has a higher quits rate, as the demand for skilled workers continues to grow to meet housing demands. On the other hand, the financial industry is experiencing a lower quits rate, as the industry continues to recover from the financial crisis and tougher regulations.

Inflation – The inflation reports for April presented a mixed picture. In the end, most economists agree that inflation remains stable. Producer prices surged 0.5 percent, erasing declines from the prior month. The increase in prices was broad-based. There is concern that commodity prices could continue to rise as global demand increases. Consumer prices also were higher in April, reversing the declines posted in March. Yet, it if had not been for an increase in tobacco taxes, the core CPI number would have been unchanged rather than up 0.1 percent. On a year-over-year basis, both the headline and core inflation indices were lower. In fact, the core rate fell to 1.9 percent, the first time below 2.0 percent since October 2015. Energy prices rose 9.3 percent, compared to 12.3 percent in the first quarter.

Strategically for Credit Unions:

The financial markets had a difficult time finding stability this week. Yields moved up and down in conjunction with equity price changes. The firing of FBI Director James Comey caused a little uncertainty in the markets, forcing small flight to safety moves. By the end of the week, most financial market experts believe the activity in Washington has little impact on Wall Street. The economic data this week reinforces the probability of a rate increase at the June FOMC meeting.

Sarina Freedland – Senior Investment Officer

Although this information has been obtained from sources we believe to be reliable, we do not guarantee its accuracy, and it may be incomplete or condensed. This is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. All herein listed securities are subject to availability and change in price. Past performance is not indicative of future results. Changes in any assumption may have a material effect on projected results.