Retail Sales Bounce Back, Federal Budget Deficit Expands: What We Learned During the Week of October 10 – 14

Retail sales rebounded in September while the federal budget expanded by a third during FY2016. Here are the 5 things we learned from U.S. economic data released during the week ending October 14.

#1Retail sales bounced back in September. The Census Bureau puts the value of retail and food services sales at a seasonally adjusted $459.8 billion, up 0.6% for the month and 2.7% above the year ago pace. This followed a 0.2% slowdown in August. Sales at auto dealers (and parts stores) gained 1.1% during the month. Net of auto dealers and parts stores, retail sales gained 0.5% during the month and 2.7% from a year earlier. Sales grew at a number of different retail segments, led by a 2.4% jump at gas stations (reflective of gasoline prices not falling as much as they typically do in September). Other retail sectors enjoying sales increases were sporting goods/hobby stores (+1.4%), building material retailers (+1.4%), furniture stores (+1.1%), restaurants/bars (+0.8%), and grocery stores (+0.2%). But other retailers were not as fortunate. Sales fell at electronics/appliance stores (-0.9%), department stores (-0.7%), and health/personal care retailers (-0.5%). Nonstore retailers (e.g., internet retailers) saw sales grow 0.3% during the month, putting activity 10.6% above their year ago pace.retail-sales-september16-101416

#2While the number of job openings fell during August, the pace of hiring held steady. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 5.443 million job openings at the end of August, down 388,000 from July and its lowest point in 8 months. Even with the decline, the count of job openings was 2.5% above that from a year earlier. Roughly 57% of the drop in job openings was centered in professional/business services, although a number of other industries suffered significant declines too (including, wholesale trade, manufacturing, construction, and the government). On the flip side, the largest year-to-year percentage gains in job openings were in construction (+21.9%), transportation/warehousing/utilities (+21.0%), and retail (+9.3%). Nonfarm employers hired 5.210 million people during August, down 48,000 from July but up 3.0% from a year earlier. Industries with the largest 12-month percentage gains in hiring including professional/business services (+10.4%), mining/logging (+7.4%), government (+5.1%), financial activities (+4.9%), and manufacturing (+4.5%). Separations slipped by 37,000 to 4.954 million (essentially unchanged from August 2015). Of this, the count of people who voluntarily quit their jobs was up 5.1% from a year earlier while the pace of layoffs was 6.5% below that of August 2015.

#3Wholesale prices rose at their fastest pace since June, but year-to-year gains remain in check. The Producer Price Index (PPI) for final demand goods and services grew 0.3% during September and were 0.7% above prices in September 2015. The Bureau of Labor Statistics also reports that its core measure for final demand PPI (net of energy, food, and trade services) increased 0.3% during the month and was 1.5% above its year ago levels. PPI for final demand goods jumped 0.7%, which included gains of 2.5% and 0.7% for energy and food goods. A 5.3% increase in gasoline prices boosted the former while higher prices for fresh and dry vegetables pulled up the latter. Net of energy and food, PPI for core final demand goods increased 0.3%. PPI for final demand services inched up 0.1% despite a 0.4% decline in the price measure for trade services (which tracks retailer and wholesaler margins).

#4The U.S. budget deficit grew by a third during FY 2016. The Treasury Department’s Bureau of the Fiscal Service reports that the budget deficit for the just completed FY2016 was -$587.4 billion, up from the $439.1 billion deficit during FY2015 (+33.8%). The deficit equaled 3.2% of the GDP, up from 2.5% for FY2015. Receipts totaled $3.249 trillion for the full year, a mere 0.5% increase from FY2015. What did grow significantly were outlays—FY2016’s total of $3.854 trillion was 4.9% above the previous fiscal year’s spending. The biggest sources of spending increases were in Health & Human Services, the Social Security Administration, Veteran Affairs, and on the interest paid to service Treasury debt securities.

#5Small business owner confidence slipped slightly during September. The National Federation of Independent Business’ Small Business Optimism Index lost 3/10ths of a point to a seasonally adjusted 94.1 (1986 = 100). This was down 1.9 points from a year earlier, keeping the index in the low-to-mid 90s range that where it has been every month since the winter of 2015 and more or less over the past few years. Just 4 of the index’s 10 components improved during the month, led by a robust 12 point jump in the measure for expected economic conditions. Also improving from August were indices for expected real sales, earnings trends, and plans to add workers. Falling were indices for plans to increase inventories, current job openings, current inventories, expected credit conditions, whether it is a good time expand, and plans to make capital outlays. The press release lays blame for the weakened sentiment on the “divisive” presidential election that “offers little promise of a bipartisan effort” to solve critical issues.

Other data released over the past week that you might find of interest:
Jobless Claims (week ending October 8, 2016, First-Time Claims, seasonally adjusted): 246,000 (Unchanged vs. previous week; -16,000 vs. the same week a year earlier). 4-week moving average: 249,250 (-7.4% vs. the same week a year earlier).
FOMC minutes
Import Prices (September 2016, not seasonally adjusted): +0.1% vs. August 2016, -1.1% vs. September 2015. Nonfuel imports: unchanged vs. August 2016, -0.7% vs. September 2015.
Export Prices (September 2016, not seasonally adjusted): +0.3% vs. August 2016, -1.5% vs. September 2015.
University of Michigan Index of Consumer Sentiment (October 2016-preliminary, Index (1966Q1=100), seasonally adjusted): 87.9 (-3.3 points vs. September 2016, -2.1 points vs. October 2015).
Business Inventories (August 2016, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.817 trillion (+0.2% vs. July 2016, +0.7% vs. August 2015).

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

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