Import Prices Decelerate, Retail Sales Surge, Jobless Claims Rise, Inventories Gain

- The Import Price Index for May rose 2.3% versus estimates of a 2.5% increase and an upwardly revised 2.4% gain in April.

- Advance Retail Sales for May rose 1.0% versus estimates of a .5% gain and an upwardly revised .4% increase in April.

- Retail Sales Less Autos for May rose 1.2% versus estimates of a .7% gain and an upwardly revised 1.0% increase in April.

- Initial Jobless Claims for this week rose to 384K versus estimates of 370K and 359K the prior week.

- Continuing Claims rose to 3139K versus estimates of 3118K and 3081K prior.

- Business Inventories for April rose .5% versus estimates of a .3% gain and a .2% rise in March.

BOTTOM LINE: Prices of goods imported into the US rose less than forecast in May as smaller increases in the costs for autos and other consumer goods from abroad cushioned record energy expenses, Bloomberg said. Prices, excluding fuels, rose .5%, the smallest rise this year. The price of imported petroleum and petroleum products rose 7.8% versus a 5.9% gain the prior month. The cost of imported capital goods rose .3% from a month earlier. Prices of imported automobiles, parts and engines were unch. in May versus a .4% gain the prior month. Costs of imported consumer goods excluding autos rose .2% versus a .7% gain the prior month. I expect import prices to show a more meaningful deceleration beginning next quarter.

Retail sales in the US rose twice as much as forecast in May, and the most since November, as tax-rebate checks spurred Americans to shop at electronics and department stores, Bloomberg reported. Even excluding gasoline sales, retail purchases rose .8% last month. $56 billion, or just over half, of the tax rebates have been distributed thus far. Morgan Stanly economists raised their estimate for 2Q economic growth from a .2% contraction to a .5% gain. Purchases of electronics increased .7% and sales at department stores rose 1.2%, the most since March of last year. Sales at auto dealerships and parts stores increased .3% after dropping 2.1% in April. Excluding autos, gas and building materials, the retail group the govt. uses to calculate GDP, sales rose .8%, versus a 1% increase in April. The bulk of the tax rebates will probably be spent from July through September, giving 3Q growth a boost. I still expect retail sales to accelerate back to average rates in the second half of the year.

The number of Americans filing first-time claims for unemployment benefits last week rose more than forecast, Bloomberg reported. Weekly claims figures in the past two weeks have been more volatile than usual because of difficulties in making seasonal adjustments for the May 26 Memorial Day holiday, a Labor spokesman said. The four-week moving average for initial claims rose to 371,500 versus 369,000 the prior week. The unemployment rate among those eligible for benefits, which tracks the US unemployment rate, rose to 2.4% from 2.3% the prior week. I still expect jobless claims to trend modestly lower through year-end. The 10-year yield is rising 13 basis points and the US Dollar Index is surging 1.0% on today’s reports. The 10-year TIPS spread, a good gauge of inflation expectations, is stable at 2.51%, which is down from a 52-week high of 2.68% on March 13^th.