Import Prices Rise More Than Estimates, Retail Sales Fall More Than Estimates, Confidence Surges, Business Sales Jump

- The Import Price Index for June rose 1.0% versus estimates of a .7% increase and an upwardly revised 1.1% gain in May.

- Advance Retail Sales for June fell .9% versus estimates of a .1% decline and an upwardly revised 1.5% increase in May.

- Retail Sales Less Autos for June fell .4% versus estimates of a .2% increase and an upwardly revised 1.6% gain in May.

- Preliminary Univ. of Mich. Consumer Confidence for July rose to 92.4 versus estimates of 86.0 and a reading of 85.3 in June.

- Business Inventories for May rose .5% versus estimates of a .3% increase and a .4% gain in April.

BOTTOM LINE: Prices of goods imported into the US rose for a fifth straight month in June on higher fuel costs, Bloomberg reported. Prices excluding petroleum rose .2%. The cost of imported capital goods increased .2% last month, the first gain this year, while falling .1% from a year earlier. Costs for imported consumer goods excluding autos were unch. for the third consecutive month. I expect import prices to head meaningfully lower during the fourth quarter as energy prices fall substantially.

Retail Sales in the US fell in June, Bloomberg reported. Filling station sales fell 1.1% last month after a 4.1% increase the prior month. A drop in gas prices towards the end of June contributed to the decline. I still expect retail sales to accelerate from below-average levels to above-average levels this fall as stocks rise further, housing sales stabilize at relatively high levels, unemployment remains low, wages continue to substantially outpace inflation, interest rates head back down, energy prices fall substantially, inflation decelerates further and consumer sentiment improves.

Confidence among US consumers unexpectedly jumped the most since October this month, helped by an unemployment rate close to its lowest in six years and gains in incomes, Bloomberg said. Rising confidence bodes well for predictions that consumer spending will accelerate from a second-quarter trough. Rising stock prices are also boosting confidence. The S&P 500 hit a new record on July 12. The Expectations component of the index, which is a gauge of future spending, jumped to 83.9 from 74.7 the prior month. The Current Conditions component increased to 105.7 from 101.9 the prior month. Consumers said they expect inflation to rise 3.3% in 12 months, down from 3.4% the prior month. I continue to believe both main measures of consumer sentiment will hit new cycle highs over the intermediate-term for the above-mentioned reasons.

US businesses in May increased inventories by .5%, however sales surged almost three times as much, Bloomberg said. Businesses had enough goods on hand in May to last 1.26 months at the current sales pace, the lowest in a year. The gain in purchases was led by increasing demand at auto dealers and clothing stores. Inventory rebuilding should help US GDP growth to come in around 3%+ in 2Q. I still expect growth to decelerate modestly in 3Q.