U.S. claims for unemployment aid fell sharply last week but slightly less than analysts expected after a surprisingly big rise the prior week, a government report showed on Thursday.
Sales at U.S. retailers posted their smallest gain in nine months in April as high food and gasoline prices drew spending away from other areas, but upward revisions to March's data suggested consumer spending in the first quarter might have been stronger than initially thought.
U.S. producer prices rose 0.8 percent in April.
JOHN CANALLY INVESTMENT STRATEGIST AND ECONOMIST, LPL FINANCIAL, BOSTON
The global slowdown fears are slightly exaggerated. The action in commodity prices is probably more exchange specific rather than economic specific because the U.S. economy is still in the early innings of a recovery. The global economy is still in the same boat.
This morning's data shows that you have pretty strong retail sales, upward revision to prior months. Claims dropped as we expected them to do because of some distortions -- although still some distortions from those storms in the South. On the PPI, you are running a little bit hot on headline PPI at 6.8 percent but Chairman Bernanke's note of these increases in prices as transitory is being proven correct thus far.
So overall, the market just has to differentiate between selling in commodities as a result of margin requirements or exchange requirements against the overall backdrop of the global and U.S. economy -- those two are fine. And we will see what happens when the commodity price shake-out occurs. If you get lower rates, you get lower oil prices, lower gasoline prices, that is better for consumer spending and actually a plus for the U.S. economy in the months ahead. But all this data kind of just helps people to reinforce the economy is not falling off a cliff and the recovery is still intact.
DAVID RESLER, CHIEF ECONOMIST, NOMURA SECURITIES, NEW YORK
We've been looking for a reason why jobless claims were up such a large amount last week. We learned only that state of New York had a big increase in layoffs of 24,000.
However, two of the 11 states that had large layoffs reported a week ago cited layoffs in the auto industry, those states being Indiana and Ohio. We think that those are likely related to supply chain disruptions from problems in Japan.
I would view them to be fairly temporary. However, layoffs in other industries could be a derivative of that, so we're a little concerned.
(Jobless claims) are at 434,000. We've been over 400,000 five or six weeks , after it looked like we were trending lower, that's not a good thing.
EUGENIO ALEMAN, SENIOR ECONOMIST, WELLS FARGO SECURITIES, CHARLOTTE, NORTH CAROLINA RETAIL SALES:
The rise in retail sales were basically related to higher gasoline prices. It's also clear that the housing market is struggling with the drop in furniture sales.
Overall the report was good because it was positive, but the economy and consumers are still having trouble.
LINDSEY PIEGZA, ECONOMIST, FTN FINANCIAL, NEW YORK
We knew that PPI was going to be a little to the upside because it's the same old story with energy prices, but retail sales, they look good.
It's really suggesting that the consumer did not slow down at the end of the quarter and continued to spend right through that supposed March low. Overall, it's showing significant strength in the consumer sector despite very elevated fuel costs. We thought this was going to translate into a pullback in spending overall.
This certainly supports the idea that the consumer is not slowing down. This is fueling the argument that the sustainability of the recovery is well founded since we are a consumer-based economy.
VIMOMBI NSHOM, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS RETAIL SALES
The revision -- indicating more than double the consumption than previously thought (in March) -- leads for consumer consumption to make a stronger contribution to Q1 GDP, with sales now having been stipulated as growing 3 percent in the first three months (March's data reported Q1 growth of 2.3 percent).
RUDY NARVAS, SENIOR ECONOMIST, SOCIETE GENERALE, NEW YORK
I think the most important one was the retail sales data. Even though it came out as expected for April, upward revisions for February and March suggest that Q1 PCE should be revised upwards and it also suggests there should be pretty good momentum going into the current quarter.
PPI came in higher than expected and continuing claims were higher than expected, so overall it was a mixed bag of data.
ANDREW WILKINSON, SENIOR MARKET ANALYST, INTERACTIVE BROKERS GROUP, GREENWICH, CONNECTICUT
Probably the key thing here is the ongoing weakness in initial claims. A reading above 400,000 on the four-week average verifies what the Fed has been saying about the weakness in the labor market and therefore the recovery. That seems to be coming home to roost across the global economy, with manufacturing starting to struggle. I expect weakness in commodities to continue.
DAVID SLOAN, ECONOMIST, IFR ECONOMICS, A UNIT OF THOMSON REUTERS
On jobless claims:
The latest number is close to the 431k seen 2 weeks ago, though still elevated. The 431k number of 2 weeks ago was seen as above trend at the time of the release, so the near reversal of last week's surge is not particularly impressive. A big rise in claims in Alabama was noted, a consequence of recent tornadoes. We have no precise figure from Alabama this week but it is very unlikely that without the tornadoes claims would have returned to the sub-400k levels seen from March 12 to April 2. Next week's claims data will cover May's payroll survey week, and without a significant fall in claims forecasters may be inclined to project some slowing in payroll growth.
The breakdown does look consistent with there having been some recent acceleration in underlying inflationary pressure, implying that the Fed has no room for complacency, even if the rise was led by a surge in energy that appears to have peaked.
Recent declines in oil prices should bring substantial drops in PPI energy prices by June, which should reduce worries about the energy-led increase in April's headline PPI. However it is clear in the breakdown that there has been some pick up in inflationary pressures even outside energy. The Fed hawks and doves are likely to have a lively debate on whether this pick up is too much, or whether inflationary pressures are now simply returning toward an appropriate pace as the recovery finds itself on a more solid footing.
STOCKS: U.S. stock index futures remained lower on the day.
BONDS: U.S. bond prices were steady at slightly higher levels.
FOREX: The dollar reaction was choppy but it remained higher on the day versus the euro