14 May May 14, 2021
Week in Review
Inflation
Consumer prices rose 0.8% in April and have risen 4.2% year-over-year. Producer prices posted a 0.6% gain for the month and a 6.2% increase over the past year.
Our Take: All indications from the Fed are that they believe current inflation is transitory in nature and will subside later in the year. Some of that reasoning is due to base effects as pandemic-affected decreases in inflation drop out of year-over-year calculations. However, these base effects have nothing to do with April price increases, which are due in part to supply bottlenecks making their way into prices. There is a chance that the Fed is right and that inflation will recede once the bottlenecks clear. There is also a chance that inflation will be difficult to control if it proves to be longer-lasting and gains a foothold as the Fed sits on its hands.
Retail Sales
Retail sales were unchanged in April. March sales were revised from up 9.8% to up 10.7%.
Our Take: April sales were expected to have risen by 1.0%, so the headline of unchanged sales was disappointing. However, revisions to March sales made up the difference. Retail sales growth has been strong as the economy has been reopening and stimulus checks are being spent. One key to sustained growth will be if sales can continue to grow once the stimulus stops.
Municipals
State and local municipal issuers have issued close to $65 billion in municipal debt for new projects during the first four months of 2021 according to Bloomberg. This marks a 31% increase compared to 2020 issuance for new projects during the same time period.
Our Take: Municipal issuers continue to take advantage of low interest rates and strong demand for municipal bonds. In addition, some municipalities have started revisiting projects that were delayed or cancelled due to the pandemic.
All expressions of opinions are subject to change without notice in reaction to shifting market conditions. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Neither the information nor any opinion expressed herein constitutes a solicitation for the purchase or sale of any securities and should not be relied on as financial advice.