A Not So Merry Retail Season: What We Learned During the Week of January 11-15

Retailers did not receive much holiday joy as 2015 was wrapping up. Here are the 5 things we learned from U.S. economic data released during the week ending January 15.

#1Holiday retail sales sputtered. According to the Census Bureau, retail sales slipped 0.1% during the month to a seasonally adjusted $448.1 billion. This was up a mere 2.2% from year ago levels. These figures are a disappointment as consumer sentiment survey and preliminary sales data seemed to have suggested a more robust sales season. Whatever the case, some of the weakness reflected a small 0.1% gain at car dealers and falling gas prices that led to a 1.1% drop in gas station sales. But net of sales at both car dealers and gas stations, core retail sales were flat for the month and up a moderate 3.2% from the December 2014 pace. Looking at the full holiday season, 4th quarter retail sales011516 were flat in comparison to Q3 sales and were up by only 1.2% from the Q4 2014. Retailers seeing the biggest sales gains during December were those focused on furniture/home furnishings (+0.9%), sporting goods/hobbies (+0.9%), building materials (+0.7%) and nonluxury department stores (+0.3%). Sales also jumped 0.8% at restaurants/bars and gained 0.3% at nonstore (e.g., internet) retailers. Meanwhile, moderate winter weather apparently put a check on sales at clothing stores (-0.9%).

#2Industrial production chilled during December. The Federal Reserve reports that industrial production fell for a 3rd consecutive month with a seasonally adjusted 0.4% decline. Output was 1.8% below year ago levels. Manufacturing declined 0.1% for a 2nd straight month with output up by only 0.8% over the past year. Durable goods production inched up 0.1% even as production of both automobiles and primary metals each fell by more than 1.5%. Electrical equipment/appliances and computers/electronics both enjoyed 1.5% output gains. Slower production for petroleum/coal products and for paper pulled down nondurable goods production 0.2%. Relatively moderate winter weather led to a 2.0% drop in production at utilities while a drop in coal mining pulled down mining output 0.8% (its 4th consecutive monthly decline). Capacity utilization dropped by 4/10ths of a percentage point to 76.5%. This was well below the 79.0% reading of a year ago, with much of the decline seen at utilities and mining (think oil). In the manufacturing sector, capacity utilization slipped 1/10th of a point to 76.0%. The same measure was at 76.3% in December 2014.

#3Job openings remained near post-recession highs in November as hiring picked up a bit. The Bureau of Labor Statistics estimates there were a seasonally adjusted 5.431 million job openings at the end of November, up 82,000 from October and 11.2% from the same month a year earlier. The private sector was responsible for 4.926 million of these job openings (+11.3% vs. November 2014), with the largest positive 12-month comparables seen in the health care/social assistance (+34.2%), accommodation/food services (+22.2%), professional/business services (+9.8%) and retail (+7.0%) sectors. Meanwhile, the number of open manufacturing job openings was 11.4% below year ago levels. There were 5.197 million hires made during November, up 29,000 from October and 3.4% from a year earlier. The biggest positive year-to-year hiring gains were in accommodation/food services (+14.2%), government (+10.6%) and construction (+10.1%). 4.930 million people left their jobs during the month (+6.5% vs. November 2014) with both voluntary quits (+6.3%) and layoffs (+6.0%) above year ago levels.

#4Lower oil prices led to the 4th monthly drop in wholesale prices over the past 5 months in December. The Bureau of Labor Statistics reports that the final demand Producer Price Index (PPI) declined 0.2% during the month and had dropped 1.0% over the previous 12 months. Wholesale prices for final demand goods fell 0.7% (-3.9% vs. December 2014), with the indices for both energy (-3.4%) and foods (-1.3%). The former included an 8.3% drop in PPI for gasoline while the latter was pulled down by falling prices for meat, eggs and fresh fruit. Net of both energy and food, core goods prices edged up 0.1%. PPI for final demand services increased 0.1%, even though the measures for final demand trade services and final demand transportation/warehousing each fell 0.4% during the month.

#5Despite concerns about future economic growth, small business owner optimism improved slightly in December. The Index of Small Business Optimism from the National Federation of Independent Business added 4/10ths of a point to a seasonally adjusted 95.2 (1986=100). Even with the increase, the index was below both the December 2014 reading of 100.4 and the 12-month average of 96.2. 6 of 10 index components gained during the month, led by healthy increases in indices for sales expectations (+9) and plans to increase employment (+4). Declining during the month were indices for expected economic conditions (-7), whether it is a good time to expand (-3) and expected credit conditions (-2).

Other data released over the past week that you might find of interest:                       
Jobless Claims (week ending January 9, 2016, seasonally adjusted): 284,000 (+7,000 vs. previous week; -20,000 vs. same week a year earlier). 4-week moving average: 278,750 (-4.9% vs. same week a year earlier).
University of Michigan Index of Consumer Sentiment (January 2016-preliminary, index (1966 Q1 = 100)): 93.3 (vs. December 2015=92.6, vs. January 2015=98.1).
Import Prices (December 2015): -1.2% vs. November 2015, -8.2% vs. December 2014.
Export Prices (December 2015): -1.1% vs. November 2015, -6.5% vs. December 2014.
Treasury Budget: (December 2015, Surplus/Deficit): -$14.4 billion (vs. November 2015: -$64.6 billion, vs. December 2014: +$1.9 billion).
Beige Book

The opinions expressed here are not necessarily those of Kevin’s current and previous employers. No endorsements are implied.

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