Week In Review
The consumer price index rose 0.2% in February. Year-over year, consumer prices have risen 2.2%. February producer prices also rose 0.2% and have increased 2.8% over the past year.
Realized inflation remains relatively tame and close to the Fed’s target. Expectations of more rapidly rising inflation have yet to be met. Continued mild inflation reports may temper the Fed’s 2018 rate hike projection.
February retail sales fell 0.1% versus an expected increase of 0.3%. January sales were revised higher, from -0.3% to -0.1%.
February marked the second straight monthly decline in retail sales, signaling that the U.S. economy may not be as strong as previously believed. As household debt reached a new peak in 4Q17 and wage increases have been modest, consumers appear to be feeling pinched. A continuation of this trend would not bode well for 2018 GDP growth.
New Jersey’s newly elected Democratic Governor Phil Murphy released his fiscal 2019 budget plan this week. Murphy’s proposal includes an increase in the sales tax and a tax hike for the wealthy. Legalizing and taxing recreational marijuana is also included in the budget plan. Murphy proposed spending increases, along with an increase in the minimum wage and additional funding for education. Murphy’s budget follows through on many campaign promises made during his run for office.
Lawmakers will begin debate on Governor Murphy’s proposal and the final budget may look different from Murphy’s initial plan. There are still hurdles that the state must overcome, including the potential that increased taxes may drive businesses out of New Jersey and the underfunded pension. Lawmakers have a lot of work to do between now and the July 1 deadline.