Petroleum prices are heating up and industrial production is showing strength these days, but lackluster activity in housing and mixed reports for retails sales are putting a damper on a full-blown economic recovery.
Although inflation is at a standstill, the sharp price increase for petroleum imports raises a large red flag, and puts the squeeze on producers here in the US who are unable to pass on price increases to consumers at this point.
Here are the specifics:
The MBA Purchase Activity report led the pack today with a lackluster figure of -4.0 percent for mortgage applications for home purchases for the week of February 12. A decline in refinancing activity pulled the overall four-week average to -1.2 percent.
Retails sales fell for the same week according to the ICSC-Goldman Store Sales report, declining 1.6 percent from the previous week and still 0.7 percent below last year’s number. In a separate report, Redbook reported increasing strength for retail sales in the Feb 13 week, with a year-on-year rate of plus 1.8 percent. Both reports suggested the weather figured prominently in the results.
Housing starts for January showed a gain of 2.8 percent in groundbreaking, but permits fell. Notably, the largest gain was in multi-family starts up 9.2 percent after a 12.6 percent jump in December, a sign that residential housing continues to show weakness.
Petroleum prices drove up import prices for January by 1.4 percent, reflecting an overall rise in raw materials. The year-on-year petroleum increase of 95.5 percent is the largest in 10 years. Producers are absorbing the squeeze by keeping consumer pricing level on finished goods.
Industrial production gave a strong showing for January, showing a slightly better than expected increase of 0.9 percent. Again, cold weather and an increase in utilities output accounted for some of the change, but manufacturing increased a healthy 1.0 percent and capacity utilization rose to 72.6 percent from 71.9 percent in December.
The short-term outlook is always a bit cloudy and weather can play a major role. But what the economy doesn’t need at this point is a trend of sharply increasing petroleum prices.
What do all these tea leaves mean to you? Let us know in the comments section below …