During the final days of 2016, consumer prices continued to firm while factory output increased. Here are the 5 things we learned from U.S. economic data released during the week ending January 20.
Gasoline and shelter pulled up consumer prices during December. The Consumer Price Index (CPI) jumped 0.3% on a seasonally adjusted during the month and was 2.1% above year ago levels, per the Bureau of Labor Statistics. Energy prices increased for the 4th consecutive month with a 1.5% gain as gasoline prices surged 3.0%. Holding steady for a 6th straight month were food prices. Net of energy and food, core CPI grew 0.2% during the month with a year-to-year comparable just above the Federal Reserve’s target with a 2.2% gain. Increasing during the month were prices for transportation services (+0.6%), used cars/trucks (+0.5%), medical care services (+0.4%), shelter (+0.3%), new vehicles (+0.1%), and medical care services (+0.1%). Apparel prices, on the other hand, fell for the 3rd time in 4 months with a 0.7% decline.
Manufacturing activity edged up during December. The Federal Reserve estimates manufacturing sector output grew 0.2% during the month, leaving it 0.2% above its year ago level. The output of durable goods increased 0.5%, with “sizable” gains in the production of automobiles (+1.8%) and primary metals (+1.4). Nondurable goods production fell 0.3%, pulled down by substantial output declines for textiles (-3.0%) and chemicals (-1.0%). Overall industrial production grew 0.8% during the month and was 0.5% above its December 2015 level. Mining output was unchanged during the month while utility production jumped 6.6% as winter weather increased heating demand. Factory usage also grew during December with capacity utilization increasing by 6/10ths of a percentage point to 75.5% while factory utilization in the manufacturing sector edged up 1/10th of a percentage point to 74.8%.
Thanks to a boost in the multi-family sector, housing starts rebounded in December. The Census Bureau reports that housing starts jumped 11.3% during the month to a seasonally adjusted rate of 1.226 million units (+5.7% vs. December 2015). Starts grew in the Midwest, West, and Northeast, but declined in the South. Starts of single-family homes declined for a 2nd straight month: -4.0% to 795,000 units (SAAR, +3.9% vs. December 2015). On the flip side, starts of multi-family units (5+ units) surged 53.9% during the month to 417,000 units (SAAR, +10.3% vs. December 2015). Looking towards future activity, the count of issued building permits slipped 0.2% during December to a SAAR of 1.210 million permits (+0.7% vs. December 2015). Finally, the SAAR of completed homes dropped 7.9% during the month to 1.123 million units. This was 8.7% above the pace of completions in December 2015.
Homebuilders’ confidence slipped slightly in January but nevertheless stayed strong. The Housing Market Index (HMI), from the National Association of Home Builders, shed 2 points during the month to a seasonally adjusted reading of 67. This was the 31st straight month in which the index was above a reading of 50, indicative of a greater percentage of homebuilders describing the housing market as “good” versus seeing it as being “poor.” The HMI contracted in 3 of 4 Census regions: West (down 9 points to 75), Northeast (down 5 points to 52), and South (down 3 points to 67). The HMI held steady at 66 in the Midwest. Also falling were indices for current sales of single-family homes (down 3 points to 72), expected sales (down 2 points to 76), and traffic of prospective buyers (off a point to 51). Per the press release, the trade group expects construction of new single-family homes to increase 10% during 2017.
Industries that made the largest contributions to Q3 2016 GDP growth were finance/real estate, wholesale trade, and professional/business services. As reported previously, Gross Domestic Product (GDP) grew 3.5% on a seasonally adjusted annualized basis during the quarter. The Bureau of Economic Analysis released a report that provides detail the contributions to economic by industry groups. The industry sectors making the largest contributions GDP growth were finance/insurance (64-basis point contribution), wholesale trade (48-bassi point contribution), professional/business services (47-basis point contribution), durable goods manufacturing (32-basis points), and the government (25-basis points). Overall, the private service sector added 286-basis points to Q3 GDP growth while the private goods-producing side of the economy was responsible for 41-basis points of GDP growth.
Other U.S. economic data released over the past week:
– Jobless Claims (week ending January 14, 2017, First-Time Claims, seasonally adjusted): 234,000 (-15,000 vs. previous week; -57,000 vs. the same week a year earlier). 4-week moving average: 246,750 (-12.9% vs. the same week a year earlier).
– Treasury International Capital Flows (November 2016, Domestic Securities Purchased by Foreign Investors, not-seasonally adjusted): +$13.3 billion (vs. -$6.0 billion in October 2016, vs. +$44.3 billion in November 2015).
– Beige Book
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What We Learned About the U.S. Economy Last Week 