The latest Commerce Department report shows that US retail sales were up a lower-than-expected 0.5 percent in February. However, January sales were revised to show a rise of 0.3 percent instead of a fall of 0.3 percent as previously announced.
Meanwhile, China's industrial output rose 16.9 percent in the first two months of the year compared to last year, according to a National Bureau of Statistics announcement yesterday. Zhang Xueying, a senior economist with the State Information Centre, said: "This means the government's macro-control measures have little impact on the speed of the economic development, although the measures helped cool down the investment."
Sure enough, today, the National Bureau of Statistics reported that China's fixed asset investment grew 24.5 percent in the first two months of the year, far ahead of the government's forecast for 2005.
What the US retail sales and Chinese industrial output figures indicate to me is that the respective economies remain relatively resilient. It also suggests that fears of a pick-up in inflation cannot be dismissed yet.
Barry Ritholtz at The Big Picture, though, thinks that inflation is unlikely to run away.
Higher commodity prices tend to suck out discretionary spending that might go elsewhere, potentially bidding up prices. While that may be bad for retailers (especially discounters), it reduces the prospect for inflation increases . . .
The inflation outlook remains an important question mark. It will have a major impact on interest rates, which, of course, have a major impact on stocks. Rising interest rates, especially at this stage of the economic cycle, is often fatal to stocks.