Retail Sales
Total retail sales decreased 0.2% in May after growing by a revised 0.3% rate in April (originally reported as 0.5%). Gains were spread across a few retail categories, including miscellaneous store retailers (2.1%), building materials (1.2%), and nonstore retailers (1.2%). The largest decline came from auto and other motor vehicle dealers (-3.2%), followed by furniture and home furnishings (-0.1%) and food and beverage retailers (-0.5%). Sales are 7.7% above their year-ago level. Core sales, net of building materials, gas stations, and motor vehicle sales were up slightly by 0.2%. The weakness in the current report reflected the large decline in auto sales. The trend in core retail sales is consistent with slightly stronger personal consumption expenditures in the second quarter.

Industrial Production
Industrial production increased 0.1% in May following no change in April. The gains were mixed with motor vehicles and utilities dragging down growth and other areas of manufacturing and mining making up the slack. Production in manufacturing industries increased 0.4% in May, after April’s loss of 0.4%. Motor vehicle sales, a component of manufacturing, were down 1.5%, which was an improvement from April’s decline of 6.5%. Utilities declined 2.8% after rising by 2.4% in April. Finally, mining rose 0.5% after growing 0.8%. Capacity utilization, which has gradually improved over the past year, remained unchanged in May at 76.7%. Production remains solid even with high gas prices and concerns over the international outlook.

Consumer Price Index
The consumer price index rose 0.2% in May after rising 0.4% in April. The relative slowdown in headline inflation was driven by slower growth in food and energy prices. Energy prices fell 1.0% after rising 2.2% in April. Food prices increased 0.4%, the same rate as in April. Over the year the CPI is up to 3.4%. Core prices, net of food and energy prices increased 0.3% in May and are up 1.5% over the year. Food and energy prices have consistently applied pressure to headline inflation this year but there has finally been some retrenchment in energy prices at least. Core prices have also increased over the past few months, although the pace has been more gradual. We expect further price increases over the next few months as the economy gradually picks up.