The economic data this week were once again fairly positive so the general story of a moderately strong economic recovery remains in place. I will editorialize a bit here to say that compared to the expectations of many 8-12 months ago, we are having a much stronger recovery than projected.
April Industrial Production
My personal favorite coincident indicator as it is the proxy for determining the demand for goods. Manufacturers will not produce if they do not think that there is a market for their goods. The one wrinkle in this is that inventory trends can be a short term driver of the industrial production index, making it unclear how much growth is due to restocking of inventories and how much is actually because of growing end-demand. Industrial production is released by the Fed right about the middle of the month every month.
In line with what we have been seeing out of the manufacturing diffusion indices, industrial production showed strong growth in April with 0.8% growth on the headline number. Below the surface, business equipment grew 1.0% and construction supplies 2.8%. March and January were revised higher, February lower. The diffusion indices also showed broad based growth.
Here's a look at the manufacturing index subset (does not include utilities and mining):
Yes, we are still far below the peak, but the pattern of recovery remains firmly intact. There are not even signs of wheezing at this moment.
April Retail Sales
While all of the weekly chain store sales updates are nice, the Census Bureau does provide the final word on retail sales. Markets pay very close attention to this number due to its timeliness and scope. It breaks down several different categories of retail sales that help us to determine where consumer spending trends are at any given time.
April was a decent month considering the Easter shift and the fact that March was a very strong 2.1%. 0.4% growth in April beat expectations, but general merchandise was somewhat weak. It's hard to determine exactly why this may have been, but consumers do remain under pressure so periodic weak months in general merchandise sales are to be expected. Autos were roughly flat. Total retail sales are up around 9% y/y, which is actually fairly remarkable, all things considered.
Once again, not telling us a whole lot at 444,000, down from an upwardly revised 448,000 last week. As before, it is hard to tell when this is indicating job growth and when it is not these days. Some astute analysts have pointed out that jobless claims can remain high after recessions such as in 1981-82 and job growth can be quite robust. Even so, they seem to be coming down more slowly than they should be. However, if these levels correlate to +290,000 non-farm payrolls, this is a large victory.
March International Trade
Not hugely important to the markets, but interesting from an economic perspective. The only way that it tends to influence the markets is that rapid deterioration in the trade balance does put pressure on the dollar.
The March data indicated the continued trend of a widening trade deficit with the current recovery. During the recession, the trade deficit narrowed markedly. Now it seems to be reemerging, largely due to oil imports. None of this is particularly surprising. However, the non-oil trade deficit is actually quite low at just 1% of GDP on an annualized basis. Compared to four or five years ago, this is a large improvement.
Weekly retail sales were reasonably strong while consumer sentiment and inventories continue to bounce back slowly. All of that can be found at the Bloomberg Economic Calendar.