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Economic Week in Review: Auto sales fuel retail sales

June 14, 2013

Sparked by the Federal Reserve's ongoing monetary stimulus policy that's keeping borrowing rates at low levels, consumer spending on automobiles was the primary driver for better-than-expected retail sales in May. Nevertheless, investors have been warily eyeing a slow increase in bond yields.

For the week ended June 14, 2013, the S&P 500 Index fell 1% to 1627 (for a year-to-date total return of about 16%). The yield on the 10-year U.S. Treasury note fell 3 basis points to 2.14% (for a year-to-date increase of 36 basis points).

Retail sales beat forecast

Paced by strong demand for autos, retail sales in May exceeded expectations. Retailers saw a 0.6% gain for the month, the largest increase in three months, following a modest 0.1% increase in April. Excluding the 1.8% increase from autos, retail sales increased 0.3%. Building materials sales also improved, rising 0.9% on the heels of a 3.6% increase in April.

Retail sales

Business inventories rebound

After a slight decline in March, business inventories rose by 0.3% in April. Retail inventories rose 0.4% following a 0.6% decrease in March. Furniture, electronics, and appliance stores were the only segments that registered an inventory reduction. Analysts had expected businesses to be cautious about adding to inventories because of prior weak sales. However, as noted above, retail sales have bounced back a bit.

Producer prices end two-month slide

After declining for the past two months, producer prices increased 0.5% in May. The index had fallen a combined 1.3% in April and March. Gas and food prices were the primary reason for the overall increase, as food prices climbed 0.6% and energy prices were up 1.3% for the month. Wholesale prices excluding food and energy, also referred to as the core PPI, saw a slight increase of 0.1%.

Industrial production flat

Industrial production was unchanged for May. Utility production fell 1.8%, its second consecutive monthly decline. A modest 0.1% rise in manufacturing and a 0.7% bump in mining production were the notable increases for the month.

"Capacity utilization numbers from the industrial production release show a slight dip in the use of total industrial capacity to 77.6%," said Vanguard economist Andrew J. Patterson. "While greater than recession lows of around 67%, it still shows signs of slack in the sector when compared with the pre-recession average of 81%."

The economic week ahead

Reports on the consumer price index and new residential construction are slated for release on Tuesday, while minutes from the Federal Reserve Monetary Policy Committee are scheduled to be released on Wednesday. Existing home sales numbers and the Conference Board's report on leading economic indicators are scheduled for release on Thursday.

Summary of major economic reports
Date Report Actual
expected value
10-year note yield S&P 500 Index
June 10       +5 bp 0.0%
June 11


    –2 bp –1.0%
June 12       +5 bp –0.8%
June 13 Initial Jobless Claims (week ended June 8)
Source: Labor Department
334,000 345,000 –6 bp +1.5%
  Retail Sales (May)
Source: Commerce Department
+0.6% +0.4%    
  Business Inventories (April)
Source: Commerce Department
+0.3% +0.3%    
June 14 Producer Price Index (May)
Source: Labor Department
+0.5% +0.1% –5 bp –0.6%
  PPI, except food and energy (May)
Source: Federal Reserve Board
+0.1% +0.1%  
  Industrial Production (May)
Source: Federal Reserve Board
0.0% +0.2%    
      Weekly change –3 bp –1.0%

bp=basis points. 100 basis points equal 1%. For example, if a bond's yield rises from 5.0% to 5.5%, the increase is 50 basis points.


  • The economic statistics presented in this report are subject to revision by the agencies that issue them. For more information on the reports mentioned in this article, read our Guide to major U.S. economic reports.
  • All investing is subject to risk, including possible loss of the money you invest.
  • Past performance is no guarantee of future returns. The performance of an index is not an exact representation of any particular investment, as you cannot invest directly in an index.
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