Economic Update: Mixed Story on Inflation and Retail Sales

By at 16 April, 2017, 8:20 am

by Raymond J. Keating-

Two pieces of economic data were released on Friday, April 14. Taken together, they contribute to the mixed picture on our economy, which hopefully can be left behind for robust growth soon with significant policy changes in Washington, D.C.

CPI Inflation Settles Down

First, the latest Consumer Price Index report released by the Bureau of Labor Statistics showed that CPI inflation actually declined in March by 0.3 percent. Following on a small increase of 0.1 percent in February, this was a welcome combination given the big jump in January (0.6 percent) and notable monthly increases among the previous four months.

While the Fed needs to get far more serious about reining in its loose money policies being run since 2008, faster economic growth also works against inflation (contrary to Keynesian thinking on a so-called “overheating” economy). After all, inflation, ultimately, is about too much money chasing too few goods. Producing more goods and services is anti-inflationary.

Soft Retail Sales

Second, the news from the U.S. Census Bureau on retail sales was discouraging. Retail sales fell by 0.2 percent in March, which followed on a decline of 0.3 percent in February. That was the worst back-to-back monthly performance since early 2015. Retail sales excluding autos were flat in each month.

The Mixed Economy

Soft retail sales in early 2017 obviously raise additional questions about growth in the first quarter, along with some indications that business investment and exports remained sluggish. Those concerns, however, are contrasted against some positives numbers, for example, as we’ve seen on jobs and manufacturing output.

Economic growth has performed poorly for the past decade. Indeed, it truly has been a lost decade. And since the recovery began in 2009, real GDP growth of 1.6 percent in 2016 tied for the worst annual performance (along with 2011) during this period.

However, if the Trump administration and Congress move forward with a bold, substantial pro-growth agenda on, for example, tax relief and reform, regulatory relief and reform, and reining in government spending, then incentives will be re-established for entrepreneurship, investment, business development and job creation to accelerate.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.


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