Higher Gas Prices Boost Inflation, For Now: October 9 – 13

Rising gas prices boosted not only overall inflation but also retail sales. Here are the five things we learned from U.S. economic data released during the week ending October 13.

#1Retail sales surged in September, but much of the advance reflected higher gas prices. The Census Bureau tells us that retail and food services sales jumped 1.6 percent during September to a seasonally adjusted $483.9 billion. This was the largest single-month gain since March 2015. Much of September sales surge was the result of higher gasoline prices leading to a 5.8 percent bump in sales at gas stations and a 3.6 percent sales increase at auto dealers (in part the result of people replacing cars damaged by recent hurricanes). Net of activity at both gas stations and auto dealers retail sales increased 0.5 percent. Sales grew at building materials retailers (+2.1 percent, boosted by hurricane preparation and recovery), grocery stores (+1.0 percent), restaurants/bars (+0.8 percent), and apparel retailers (+0.4 percent). Sales slowed at electronics/appliance stores (-0.8 percent), furniture retailers (-0.4 percent), department stores (-0.4 percent), health/personal care stores (-0.4 percent), and sporting goods/hobby retailers (-0.2 percent). Overall retail sales have grown 4.4 percent over the past year.Retail Sales September 2017-101317

#2Consumer prices roses in September, largely centered around the gas pump. The Bureau of Labor Statistics’ Consumer Price Index (CPI) jumped 0.5 percent during the month, its largest single monthly increase since February 2013. Much of the gain in CPI occurred at the gas pump as gasoline prices rose 13.1 percent (its largest month-to-month increase since June 2009). CPI for all energy goods surged 6.1 percent while that for food edged up by only 0.1 percent. Net of energy and food, core CPI increased 0.1 percent during September and was up 1.7 percent over the past year. The latter remained below the Federal Reserve’s two-percent inflation rate target. Prices grew for shelter (+0.3 percent), transportation services (+0.3 percent), and medical care services (+0.1 percent). Falling were prices for medical care commodities (-0.8 percent), new vehicles (-0.4 percent), used vehicles (-0.2 percent), and apparel (-0.1 percent).

#3Wholesale prices rose during September, thanks to higher prices for gasoline and services. Final demand Producer Price Index (PPI) grew 0.4 percent on a seasonally adjusted basis during the month, its biggest single-month increase since April. The core measure—final demand net of food, energy, and trade services—grew a more modest 0.2 percent, according to the Bureau of Labor Statistics. Over the past year, final demand PPI has increased 2.6 percent while the core measure’s 12-month comparable has grown 2.1 percent. Wholesale prices for final demand goods jumped 0.7 percent, pushed up by a 3.4 percent gain in energy prices (wholesale gasoline prices rose 10.9 percent). PPI for final demand goods was unchanged. Net of energy and food, final demand goods prices increased 0.3 percent, its largest gain since April. Prices for final demand service jumped 0.4 percent, with rises of 1.0 percent and 0.8 percent for transportation/wholesale services and trade services, respectively.

#4The count of job openings and the number of people hired slipped in August. Per the Bureau of Labor Statistics, there were a seasonally adjusted 6.082 million job openings at the end of August. This was down 58,000 from July but up 10.8 percent from the same month a year earlier. Private sector employers reported 5.566 million job openings at the end of the month, an 11.7 percent increase from August 2016. Among the industries with the largest percentage year-to-year gains in openings were construction (+34.2 percent), wholesale trade (+20.1 percent), manufacturing (+17.1 percent), transportation/wholesaling (+14.9 percent), health care/social assistance (+13.6 percent), and accommodation/leisure services (+13.1 percent). Companies hired a seasonally adjusted 5.430 million people during August, a drop of 79,000 from July but 2.7 percent above the August 2016 hiring pace. Private sector hiring totaled 5.105 million jobs, up 2.2 percent from a year earlier. Industries with the largest year-to-year percentage increases in hiring were manufacturing (+31.3 percent), construction (+14.2 percent), and financial activities (+13.3 percent). Industries with sharp year-to-year percentage declines in hiring included wholesale trade (-14.4 percent), government (-14.0 percent), and retail (-6.9 percent). 5.228 million people left their jobs during August, down 132,000 from July but 3.3 percent the year-ago pace. 3.194 million people quit their jobs during the month, up 2.5 percent from year earlier, while layoffs have increased 4.2 percent from a year earlier to 1.729 million.

#5Small business owner sentiment declined in September. The Index of Small Business, from the National Federation of Independent Business, shed 2.3 points during the month to a seasonally adjusted reading of 103.0. This was the measure’s lowest reading since last November. Six of the ten components of the index fell during the month, led by sharp declines in the indices for expected real sales (down 12 points), whether it is a good time to expand (down ten points), and on plans to make capital outlays (down five points). Only three index components increased from August: plans to increase inventories (up five points), current inventories (up two points), and plans to increase employment (up a point). The press release downplayed the impact of the recent hurricanes had on the lower index reading, noting that “[t]he drop-off was consistent around the country regardless of region.” 

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 7, 2017, First-Time Claims, seasonally adjusted): 243,000 (-15,000 vs. previous week; -5,000 vs. the same week a year earlier). 4-week moving average: 257,500 (+3.0% vs. the same week a year earlier).
University of Michigan Consumer Sentiment (October 2017-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 101.1 (+6.3% vs. September 2017, +15.9% vs. October 2016).
Business Inventories (August 2017, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.889 trillion (+0.7% vs. July 2017, +3.6% vs. August 2016).
FOMC Meeting Minutes

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

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