Inflation Measure Falls, Retail Sales Rebound, Job Market Still Healthy, Confidence Still Subdued

- The Import Price Index for March fell .4% versus estimates of a .2% increase and a .5% decline in February.
- Advance Retail Sales for March rose .6% versus estimates of a .4% increase and a .8% decline in February.
- Retail Sales Less Autos for March rose .4% versus estimates of a .5% increase and a .3% decline in February.
- Initial Jobless Claims for last week rose to 313K versus estimates of 305K and 301K the prior week.
- Continuing Claims fell to 2424K versus estimates of 2450K and 2428K prior.
- Preliminary Univ. of Mich. Consumer Confidence for April rose to 89.2 versus estimates of 89.0 and a reading of 88.9 in March.

BOTTOM LINE: Prices of goods imported into the US unexpectedly fell in March, held back by cheaper natural gas, oil and industrial supplies, Bloomberg said. Excluding petroleum, prices still fell .3%. Less expensive consumer goods from China and other Asian countries helped bring prices down. I still believe most measures of inflation will continue to decelerate through year-end.

Retail Sales in the US rose more than forecast in March as an improving labor market sparked demand for cars, building materials and furniture, Bloomberg reported. The strong employment picture is bolstering confidence among American consumers, helping them weather higher prices at the pump. Consumer spending is projected to grow 3% this quarter, slowing from a 4.7% gain in the first quarter. I continue to believe consumer spending will slow to average levels from robust rates through year-end.

First-time claims for US unemployment benefits rose to a level that still signals strength in the labor market, and the total number of Americans on jobless rolls fell to a five-year low, Bloomberg said. The four-week moving-average of claims fell to 307,500 from 309,000 the prior week. The US economy has generated 590,000 new jobs in the first quarter of the year. The unemployment rate among those eligible for benefits, which tracks the unemployment rate, remained at 1.9%. I still expect the job market to remain healthy without generating substantial unit labor cost increases over the intermediate-term.

Americans grew more confident for a second month in April as rising wages and job growth muffled the impact of higher gas prices, Bloomberg said. The expectations component of the index fell to 75.1 from 76.0 in March. The current conditions gauge, which measures consumer perceptions regarding the perception of their financial situation and if it’s a good time to buy large items, increased to 111.1 from 109.1. I continue to believe consumer sentiment is irrationally low and will rebound to cycle highs by year-end as employment remains healthy, interest rates fall, energy prices decline and stocks rise.