Key Measures Signal Cooling Economy

​Last week, several key indicators indicated cooling in the US economy. Primarily led by consumer-focused indicators, other softening indicators included small business optimism, which hinted at decreasing confidence of an improving economy. Inflation also ticked up, but the increase was largely driven by plunging wireless services prices in the year-ago period.

• After reaching 45-year highs in February, small business optimism, measured by the NFIB Small Business Optimism Index, cooled in March. The National Federation of Independent Business (NFIB) reported the Index decreased to 104.7 in March, down from February’s 107.6, and missed consensus estimates of 107.0. Eight of the Index’s 10 components trended downward, with expectations that the economy will improve leading the decline. Despite the decline, March survey results still ranked in the top 5% of survey readings.

• Last week, the Bureau of Labor Statistics reported core inflation, the measure of inflation for all goods less food and energy, increased 0.2% from the previous month and 2.1% from the previous year in March. Apparel and education & communications showed a downward pull on the Index, while medical care and housing weighed on increases.

• According to the Labor Department, jobless claims decreased 9,000 in the April 7 week to 233,000. Despite the decrease, claims are trending higher, with the four-week average moving 10,000 higher from last month to 230,000. 
  

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• Consumer sentiment is down in April, according to preliminary readings from the University of Michigan. Michigan’s Index, which surveys 500 households each month on their financial conditions and attitudes, fell to 97.8 from 101.4 and missed the consensus estimate of 101.0. Leading the decline was consumers’ thoughts on current conditions, which fell to 115.0 from 121.2 in March. The weakness in the current conditions reading may hint at weakness in consumer spending as well as jobless claims in April.