Economy Watch: Consumer Sentiment Dips; Wholesale Prices Barely Budge

The preliminary Reuters/University of Michigan consumer sentiment index for July slipped to 72--the lowest reading of 2012. The Producer Price Index for finished goods increased 0.1 percent last month after rising 1 percent in May.

The preliminary Reuters/University of Michigan consumer sentiment index for July, which was reported on Friday, slipped to 72.0 from the June reading of 73.2. That was lower than economists had expected and was, in fact, the lowest reading of 2012. The usual suspects are probably to blame: persistent unemployment and slow all-around growth in the U.S. economy.

But it’s possible that the seeds of a turnaround in sentiment are within the report. The current conditions component of the index was up 1.7 points over the last two weeks to 83.2, which is lower than the readings early in the year, but still higher than in June. So it’s possible that by the end of July, consumer sentiment might eke out a gain. On the negative side, the expectations component was down 3 points to 64.8—the weakest reading of the year.

One category that could boost consumer sentiment in the coming weeks is continuing moderation in gasoline prices. A month ago, according to AAA, a gallon of regular gas cost about $3.52, on average, a year-over-year decline from $3.67; on Sunday the average price was $3.40 per gallon.

Wholesale Prices Barely Move in June

The Producer Price Index for finished goods increased 0.1 percent in June, the U.S. Bureau of Labor Statistics reported on Friday, marking a shift in direction for the PPI. Prices for finished goods had decreased 1 percent in May and 0.2 percent in April.

The movement of the PPI may be a preview of the impact of the dry summer weather in the Midwest (though the U.S. Department of Agriculture denies there’s much impact on food prices yet). Finished foodstuffs prices were up 0.5 percent in June, the largest jump since a 1 percent rise in November 2011. Intermediate food climbed 1 percent last month, the biggest increase since August 2011. More than half of June’s rise in intermediate foodstuffs stems from a 2.2 percent advance in prices for prepared animal feeds—which are mostly corn.

Interestingly, the index for crude foodstuffs and feedstuffs decreased 1.6 percent in June, according to the bureau. Lower prices for slaughter cattle also were a major factor in the decrease. Rather than feed their cattle ever more expensive animal feeds, many producers are selling their cattle now, thus augmenting the supply of meat.

Friday the 13th turned out to be a lucky day for investors; the equity markets enjoyed their largest spike in weeks, thanks largely to strong bank earnings, especially that reported by JPMorgan Chase & Co. The Dow Jones Industrial Average gained 203.82 points, or 1.62 percent, while the S&P 500 was up 1.65 percent and the Nasdaq advanced 1.48 percent.