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Ca-Ching – we are shopping again!

Retail sales exploded in June, surpassing even the highest estimates. Sales surged 0.6 percent from a revised 0.2 percent level in May. Even with the downward revision for May, the average monthly sales rate for the second quarter is the highest since third quarter 2012. Eleven of the 13 major categories posted increases in sales. The two categories experiencing a decline were clothing stores and restaurants. Sales at building material and garden stores soared 3.9 percent, a significant turnaround from declining sales in May. Internet shopping rose 1.1 percent with auto sales posting a dismal 0.1 percent increase. From the June data, one might conclude that consumers remained busy with home and yard work, resorted to shopping online for convenience and were too tired to go out to eat.

Other Key Indicators this Week:

Inflation – Prices rose at both the wholesale and consumer levels in June. In both cases, a rebound in gasoline prices accounted for much of the increase. Headline wholesale prices increased 0.5 percent, making this the third consecutive month of higher prices. Gasoline prices were up 9.9 percent. Food prices also contributed to the rise in prices, increasing 0.9 percent. The core rate of inflation rose to 1.3 percent from a year ago, marking the fourth month this year above 1.00 percent.

Consumer prices increased 0.2 percent, matching the gain in May. Gasoline prices rose 3.1 percent. Unlike prices at the wholesale level, food prices fell 0.1 percent for the second consecutive monthly decline. Auto prices were flat or lower for the fourth month in a row. The gap between goods and services inflation continues to widen as service prices move higher and goods prices decline. Core year-over-year prices rose 2.3 percent, matching the highest level since September 2008.

Beige Book – The latest report from the 12 Federal Reserve districts portrays the economy as little changed. Most districts reported spending activity anywhere from "disappointing" to "modest." Price pressures appear to be "slight" to "little movement." Manufacturing conditions were mixed, with auto and aerospace activity the strongest. The one area that appeared to be consistently good across the country was real estate. Residential construction and sales activity was largely positive.

Industrial Production – Industrial production rebounded in June after a dismal May. Production rose 0.6 percent from -0.3 percent the prior month. All three categories posted gains. Activity at factories and utilities rebounded, while the mining sector was just slightly behind May’s level. Capacity utilization increased 75.4 percent.

Strategically for Credit Unions:

Bond yields got a boost this week by favorable economic data and a soaring stock market. The resurgence of retail and manufacturing activity was enough to create optimism among stock investors. The three key U.S. stock indices are poised to close higher for the third week in a row. Additionally, the Bank of England left interest rates unchanged at its monthly meeting. This move helped relieve some of the concern that has been driving the flight to safety move the past couple of weeks. The fed funds futures market has moved up bets for a first rate increase from September 2017 to March 2017.

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.

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