WASHINGTON (AFX) - Data released today on the U.S. economy are likely to cut first quarter GDPslightly, and leave room for the Federal Reserve to cut interest rates before the scheduled May 15 policymeeting, analysts said.
March retail sales and PPI, and weekly jobless claims, were "definitely on the soft side," said Carol Stone,economist at Nomura Securities International.
"We have a softening trend in retail sales, a weakening job market," Stone said, adding that if other indicatorsshow pronounced weakness, it will build a case for "early Fed action."
"I viewed them as soft reports," agreed Mike Moran, chief economist at Daiwa Securities America in NewYork.
The Commerce Department earlier reported that retail sales fell 0.2 pct in March from the previous month,while sales excluding autos fell 0.1 pct.
The Labor Department reported that the March PPI fell 0.1 pct from February. Excluding volatile food andenergy prices, the PPI core rate rose 0.1 pct.
Weekly jobless claims, meanwhile, rose unexpectedly by 9,000 to a seasonally adjusted 392,000 for theweek ended April 7 from the previous week, the Labor Department said. This is the highest level forweeklyjobless claims since the week ended March 30, 1996.
The decline in retail sales "is consistent with consumer spending slowing down noticeably," Moran said,indicating that first quarter GDP could be weaker than expected.
After a large gain in retail sales in January, when price discounting helped stimulate consumption,"demand isnow dead in the water," Stone said.
Moran said the report will "probably force us to dampen our Q1 forecast," from Daiwa's current estimate thatU.S. GDP will rise 0.5 pct.
Stone also said "this would likely shave a little off our GDP forecast," which currently stands at a 0.1 pctcontraction for the first quarter.
The upward movement in jobless claims shows continued weakness in the labor market, after the loss of86,000 non-farm payroll jobs last month, analysts said.
The jobless claims report "showed signs that the labor market is deteriorating -- marginally so, but heading inthat direction," Stone said.
The decline in producer prices, meanwhile, shows no price pressures for the Fed to be concerned about,analysts said.
Gary Thayer, senior economist at AG Edwards, said he expects to see continued moderation in priceindicators, with energy price declines holding down prices.
While analysts did not think today's releases would independently raise the possibility of an inter-meeting Fedrate cut, they do not prevent the Fed from early action should upcoming reports on industrial production andhousing starts show pronounced weakness.
The reports "show the economy is growing below potential, and there is more room (for the Fed) to cutrates," Thayer said, although "they don't suggest an urgent need for action."
--- by CHRISTOPHER ANSTEY ---