Consumer Price Index
The consumer price index rose 0.5% in March after rising 0.5% in the previous month. The increase in headline inflation was driven by particularly strong energy prices. Energy rose 3.5% after rising 3.4% in February. Food prices increased at a 0.8% rate, up a bit from February’s 0.6% rate. Over the year the CPI is up to 2.7%. Food prices rose 2.9% over the past year while energy prices were up 15.5%. Core prices, excluding food and energy costs, rose 0.1% in March. Over the year the core CPI is up 1.2 %. Food and energy prices have consistently applied pressure to headline inflation this year and there does not appear to be much respite over the next few months. Core prices have also increased over the past few months, although the pace has been more stable. We expect inflation to continue firming over the next few months as the economy picks up momentum. 

Retail Sales
Total retail sales rose for the ninth straight month, increasing 0.4% in March following an upwardly revised 1.1% increase for February. Excluding autos, growth was 0.8%, the fastest pace since November. Gains were spread across many retail categories, gasoline prices boosted gas station sales while hurting auto sales. The highest gains were seen in the furniture & home furnishings sector at an increase of 3.6%. The largest decline came from miscellaneous store retailers (-2.1%), followed by motor vehicles and parts (-1.7%), and general non-store retailers (-0.3%). Sales are 7.1% above their year-ago level. Core sales, net of building materials, gas station, and motor vehicle sales) were up 5.1%. Consumer spending was a bit stronger in the first quarter than previously known, and continued growth should bring improvements in the overall economy this year. 

International Trade Balance
The U.S. trade deficit in goods and services narrowed to $45.8 billion in February from a revised $47.0 billion in January. Exports decreased 1.4% to $165.1 billion and imports fell by 1.7% to $210.9 billion. The trade deficit in goods narrowed by 1.4% to $59.3 billion and the trade surplus in services widened to $13.6 billion in January. Despite the modest decline in the trade deficit it remains wider than at the end of 2010 and we do not expect as much support from this sector of the economy. 

Industrial Production
Industrial production increased 0.8% in March after rising by 0.1% in February. March’s gain was the strongest improvement since the end of 2010. The gains were spread throughout, led by motor vehicles and utilities. Production in manufacturing industries increased 0.7% in March, after February’s gain of 0.6%. Motor vehicle sales, a component of manufacturing, were up 3.0%, which was slightly below February’s rate of 4.6%. Utilities rose 1.7% after declining by 3.6% in February. Finally, mining rose 0.6% after growing 0.3%. Capacity utilization, which has gradually improved over the past year, slightly increased to 77.4% from 76.9% in March. Production remains solid even as concerns over gas prices increase and problems on the international stage remain.