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GASOLINE ALLEY: RETAIL SALES, JOBLESS CLAIMS, IMPORT PRICES

Economic offerings on Thursday included deceptively strong retail sales (consumers did much of their spending at the pump), low jobless claims amid a listless labor market, and a surge in import prices (also largely due to gasoline).

Receipts at U.S. retailers USRSL=ECI increased by 0.5% in April, nailing consensus, and marking a sharp deceleration from March's 1.6% jump.

Drilling deeper into the data, a 2.8% jump in spending at the gasoline pump, while a welcome deceleration from the prior month's 13.7% surge, still points to rising energy costs resulting from supply constraints due to the war with Iran. Year-on-year, gasoline stations have seen a whopping 20.9% increase in receipts. Excluding gasoline, retail sales rose by a more sedate 0.3%.

Spending on autos/parts slipped 0.4%, while the woebegone department store segment slipped by 3.2%. Non-store retail sales, which include online shopping, rose 1.1%.

Sales of home furnishings and clothing/accessories dropped by 2.0% and 1.5%, respectively.

The "control" figure, which excludes autos, gasoline, building supplies and food services - and is most closely correlated with the personal expenditures element of GDP - grew by 0.5%, a tad more robust than the 0.4% growth analysts anticipated.

However, adjusted for inflation, so-called "real" retail sales "have moved sideways since April 2021," writes Troy Ludtka, senior U.S. economist at SMBC Nikko Securities. "This points to a consumer base that is struggling to keep pace with rapid price growth."

Referring to recent PCE and consumer credit data, Ludtka adds, "The personal savings rate sits at an ultra-low 3.6% with limited room to adjust, while delinquencies across the consumer credit landscape are also elevated."

Turning to the labor market, last week, 211,000 U.S. workers joined the queue outside the unemployment office USJOB=ECI, a 6.0% increase from the previous week and 6,000 more than economists predicted.

Ironing out weekly volatility, the four-week moving average of initial claims is moving nearly exactly sideways, shuffling along the lower end of the range associated with healthy labor market churn.

The most recent JOLTS report showed a drop in job openings, which typically indicates dampening labor demand. The report also showed an uptick in hiring and firing, a potential signal that the labor market is beginning to break out of low-hire/low-fire mode.

With employers idling in wait-and-see mode in the face of the Iran war and other uncertainties, and with signs that inflation is once again on the rise, where does that leave our friends at the Fed?

Ongoing jobless claims USJOBN=ECI, which are reported on a one-week lag, increased by 1.4% to 1.782 million, 8,000 shy of consensus.

That jibes with recent consumer survey data which, despite recent, nominal improvement still suggests laid-off workers are finding it difficult to find replacement gigs.

"Hiring indicators remain very weak, suggesting a high share of new claimants will struggle to find new work quickly," writes Samuel Tombs, chief U.S. economist at Pantheon Macroeconomics. "The hiring intentions indexes of the NFIB and regional Fed business surveys also have deteriorated since the start of the year, while the Conference Board’s survey shows that households still think jobs are difficult to find."

Lastly, the cost of goods imported to the United States USIMP=ECI (excluding tariffs) rose by 1.9% in April, per Labor Department data, sailing past the expected 1.0% gain.

This follows March's upwardly revised 0.9% growth.

Diving below the surface, the 19.0% jump in imported gasoline prices is the eye-grabber, coming on the heels of the prior month's 14.0% increase and notching up to 22.0% year-on-year. Again, the surge is unsurprising due to war-related disruption. Excluding petroleum, import prices rose by 0.7%.

The 6.7% rise in the cost of imported industrial supplies is also largely a result of halted traffic through the Strait of Hormuz, a crucial shipping waterway.

Year-over-year, import prices have risen by 4.2%.

Import/export prices differ from other major inflation indicators with things like currency exchange rates, foreign demand and geopolitical developments thrown into the mix.

Here's a chart that shows annual import/export price growth against the dollar index, which tracks the greenback against a basket of world currencies.

(Stephen Culp)

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