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Investing Specialists

Plop, Plop, Fizz, Fizz, Oh What a Relief It Is

A week of worrying news ended on a high note.

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Monday I was really beginning to sweat, as oil prices reached almost $115 per barrel. On Wednesday, the ISM purchasing managers' report on non-manufacturing companies registered one of the biggest drops in its relatively short history. Then initial unemployment claims spiked on Thursday to a level higher than a year ago. Yikes!

But late-week statistics saved the day. Thursday's same-store retail sales reports came in 2 full percentage points ahead of expectations at an annual 8.5% increase. But much as I loved Thursday's retail sales report, I was left scratching my head about just where the consumer was finding all that extra cash. The answer came from Friday's stunningly strong employment report that showed robust job growth in April. Just as importantly, data for the two previous months were revised upward. From the same report, real wages finally flattened out after a breathtaking fall in the previous two months. The new data and the revisions will likely lead to a meaningful increase in consumer incomes and maybe even the GDP report itself.

Then came the best news of the week. By Friday, it looked like the commodities bubble may have had some of the air let out of it, as oil closed below $100 for the week. That is fantastic news for the economy, because commodities have been the largest contributor to the recent inflationary bubble that had been hurting consumers' attitudes and real wages. 

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.