Retail Sales Top Forecasts; PPI Rises

The Federal Reserve is likely to give close scrutiny to two economic reports dealing with the effect of interest rate cuts released Friday as it prepares to meet next week.

One report, issued by the Commerce Department, said U.S. retail sales rose more than expected in April while business rose at auto dealers and department stores.

Since the consumer sector makes up two-thirds of economic activity, and trucks have to haul goods from factories or ports to stock store shelves, a rise in sales will increase shipments.

In the other report, the Labor Department said U.S. wholesale prices rose an unexpected 0.3% due, in part, to rising gasoline prices, Bloomberg reported.

However, the so-called “core” producer price index, which excludes volatile energy and food prices, rose 0.2% in April, up from a 0.1% in March.

Although it is widely expected the Fed will cut rates next week for the fifth time this year, Reuters noted the retail sales report raises question about how much further it needs to go.

Sales rose 0.8% in April to $275.5 billion, the first jump since January, after falling a revised 0.4% in March. Analysts were expecting a 0.2% gain.

Increases in spending by consumers is usually a sign that consumers are more confident about their jobs and outlook.

That seems to be confirmed by the University of Michigan's May preliminary consumer sentiment index, which rose to 92.6 from 88.4 in April.

The index measures consumers' attitudes about the economy and their current financial picture. Economists had been expecting a fall to 87.6.

The May preliminary expectations index, which measures how consumers feel about the twelve months ahead, rose to 86.5 in May from 82.2 in April.

Any cuts in interest rates can help some truckers right away, by slicing variable-rate interest payments on equipment debt. But the greater hope is that these rate cuts will stimulate economic activity, in which freight shipments would grow.