By John Nyaradi
The three disappointing economic reports released on Wednesday were close enough to expectations to avoid any shock to equities markets
The Commerce Department's Census Bureau had a busy day on Wednesday, with its release of both the May Retail Sales report and the April business inventories report. Although the advance report on Retail Sales for May indicated a 0.2% drop from April, the result was in line with economists' expectations.
From the report:
The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for May, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $404.6 billion, a decrease of 0.2% (±0.5%)* from the previous month, but 5.3% (±0.7%) above May 2011. Total sales for the March through May 2012 period were up 5.7 percent (±0.5%) from the same period a year ago. The March to April 2012 percent change was revised from 0.1% (±0.5)* to -0.2% (±0.2%)*
Retail trade sales were down 0.2% (±0.5%)* from April 2012, but 5% (±0.7%) above last year. Nonstore retailers sales were up 12.4% (±3.1%) from May 2011 and motor vehicles and parts dealers were up 10% (±2.1%) from last year.
The Commerce Department's Census Bureau also released its report on Manufacturing and Trade: Inventories and Sales for April (a/k/a the business inventories report) on Wednesday. The 0.4% increase in inventories slightly exceeded expectations for an increase of 0.3%, suggesting a slight slowdown in sales.
From the report:
Sales. The U.S. Census Bureau announced today that the combined value of distributive trade sales and manufacturers' shipments for April, adjusted for seasonal and trading-day differences but not for price changes, was estimated at $1,249.6 billion, up 0.2% (±0.2%)* from March 2012 and up 5.4% (±0.4%) from April 2011.
Inventories. Manufacturers' and trade inventories, adjusted for seasonal variations but not for price changes, were estimated at an end-of-month level of $1,575.1 billion, up 0.4% (±0.1%) from March 2012 and up 6% (±0.4%) from April 2011.
Inventories/Sales Ratio. The total business inventories/sales ratio based on seasonally adjusted data at the end of April was 1.26. The April 2011 ratio was 1.25.
Wednesday's third economic report, the Producer Price Index report for May, was released by the Bureau of Labor Statistics. The seasonally-adjusted 1% decline was relatively close to estimates, which ranged from a decline of 0.6% to 0.9% . The 0.2% increase in "core" producer prices (excluding food and energy) came in exactly as expected.
From the report:
The Producer Price Index for finished goods fell 1.0 percent in May, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Prices for finished goods moved down 0.2 percent in April and were unchanged in March. At the earlier stages of processing, prices received by manufacturers of intermediate goods decreased 0.8 percent in May, and the crude goods index fell 3.2 percent. On an unadjusted basis, prices for finished goods advanced 0.7 percent for the 12 months ended in May, the eighth straight month of slowing year-over-year increases following a 7.0-percent rise for the 12 months ended September 2011.
The major ETFs expected to respond to the Retail Sales Report are:
Consumer Discretionary Select Sector SPDR Fund ETF (XLY) -0.32%
Consumer Staples Select Sector SPDR Fund ETF (XLP) +0.32%
SPDR S&P Retail ETF (XRT) -0.86%
iShares Russell 2000 Index Fund ETF (IWM) -0.05%
SPDR Homebuilders ETF (XHB) -0.50%
Bottom line: Wednesday's three economic reports, although disappointing, brought no surprises to investors.
Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.