Core Producer Prices Unchanged, Advance Retail Sales Decline, Business Inventories Decline on Rising Sales

- The Producer Price Index for April rose .7% versus estimates of a .6% gain and a 1.0% increase in March.
- The PPI Ex Food & Energy for April was unch. versus estimates of a .2% increase and unch. in March.
- Advance Retail Sales for April fell -.2% versus estimates of a .4% gain and an upwardly revised 1.0% increase in March.
- Retail Sales Less Autos for April were unch. versus estimates of a .5% increase and a 1.1% gain in March.
- Business Inventories for March fell -.1% versus estimates of a .3% gain and a downwardly revised .2% increase in February.

BOTTOM LINE: Core US wholesale prices were unexpectedly unchanged for the second month in a row, a sign that inflation pressures may diminish, Bloomberg reported. The last time core prices went two consecutive months without a rise was in the fourth quarter of 2005. Core prices rose 1.5% year-over-year versus a 1.7% rise in March. I continue to believe inflation concerns have peaked for this cycle and that inflation will continue to decelerate in the second half of the year.

Retail sale in the US unexpectedly fell last month, a sign that higher gas prices and falling home values are taking a toll on consumers, Bloomberg said. The recent increase in gas prices diverted spending from other goods and services in April. As well the coldest April in a decade, the 14^th snowiest and the East calendar shift impacted sales greatly. Stores selling building materials and garden supplies showed a 2.3% decrease in sales, the largest drop since February 2003. I expect retail sales to bounce back into the summer on more seasonal weather and lower gas prices.

Sales at US businesses jumped and inventories unexpectedly dropped in March, showing companies may no longer have to pare stockpiles in coming months, Bloomberg said. Business sales surged 1.4%, the most since May 2006. At the current sales pace, the amount of goods on hand declined to 1.27 months, the lowest since August of last year. I continue to believe inventory rebuilding will begin adding to US growth this quarter as company gain confidence in the sustainability in the current expansion.