Prices and Job Openings Remain Firm: August 6 – 10

Inflation continued to take hold, albeit still at a moderate rate. Here are the five things we learned from U.S. economic data released during the week ending August 10.

#1Consumer prices have risen 2.9 percent over the past year. The Bureau of Labor Statistics indicates the Consumer Price Index (CPI) grew a seasonally adjusted 0.2 percent during July, up from June’s 0.1 percent bump but matching April and May gains of 0.2 percent. Energy prices pulled back for a second consecutive month (-0.5 percent), with declines reported for gasoline (-0.6 percent), utility delivered gas (-0.5 percent), and electricity (-0.4 percent). Food CPI inched up 0.1 percent. Net of energy and food, core CPI grew 0.2 percent for the fifth time in six months. Rising were prices for used cars/trucks (+1.3 percent), transportation services (+0.5 percent), new vehicles (+0.3 percent), shelter (+0.3 percent), and medical care services (+0.1 percent). Prices dropped for medical care commodities (-1.1 percent) and apparel (-0.3 percent). Over the past year, CPI has risen 2.9 percent, its largest 12-month comparable in more than six years. The core measure has jumped 2.4 percent since last July, its largest 12-month comparable since September 2008. Both increases portend the Federal Reserve raising its short-term interest rate target at its upcoming September meeting.CPI 2008-2018 081018.png

#2While pausing in July wholesale prices were 3.3 percent ahead of their year-ago levels. Final demand Producer Price Index (PPI) was unchanged during the month on a seasonally adjusted basis, according to the Bureau of Labor Statistics. This followed gains in May and June of +0.5 percent and +0.3 percent, respectively. The core measure of wholesale prices, removing the impact of energy, food, and trade services, gained 0.3 percent during July. PPI for final demand good eked out a 0.1 percent gain as prices for both energy (-0.5 percent) and food (-0.1 percent) both dropped. PPI for core goods increased 0.3 percent for the sixth time in seven months (pharmaceutical preparations jumped 0.7 percent). Losing ground during July was PPI for final demand services, slipping 0.1 percent. Trade services PPI, a measure of retailer and wholesaler margins, slumped 0.8 percent. Over the past year, final demand PPI has risen 3.3 percent (just under its biggest increase since 2011) while the core measure has a 12-month comparable of +2.8 percent (its highest mark since March).

#3There remained more job openings than people seeking work in June. Per the Bureau of Labor Statistics, employers had a seasonally adjusted 6.662 million job openings at the end of the month, essentially matching the count from the end of May and up 8.8 percent from the same month a year earlier. Further, this was greater than the 6.564 million people the BLS had estimated were unemployed during the same month. Private sector employers had 6.053 million job openings at the end of June, up 8.6 percent from June 2017. Industries with the particularly sizeable year-to-year percentage gains in job openings included construction (+30.2 percent), retail (+29.7 percent), transportation/wholesale (+25.3 percent), manufacturing (+17.3 percent), and accommodation/food services (+9.7 percent). Hiring slowed by 104,000 to 5.651 million workers, which paced 3.4 percent ahead of year-ago hiring. Private sector employers hired 5.303 million workers during June, up 3.4 percent from a year earlier. 5.502 million people left their jobs during the month, up 83,000 from May and 3.9 percent from June 2017. 3.402 million voluntarily departed their jobs during the month (+7.5 percent versus June 2017) while 1.723 million people were laid off (-2.8 percent versus June 2017).

#4Consumers slowed the rate of them taking on debt. The Federal Reserve estimates that the American public held a seasonally adjusted $3.908 trillion in outstanding debt (not counting mortgages or other real estate-backed debt) at the end of June, a $10.2 billion increase for the month and up 4.7 percent from a year earlier. As a matter of context, consumer debt holdings had grown by $24.3 billion during May. All June’s gain came in the form of nonrevolving debt (e.g., college loans, auto loans), rising by $10.4 billion to $2.869 trillion (4.7 percent versus June 2017). Revolving credit (i.e., credit card) balances essentially held steady at $1.039 trillion (+4.8 percent June 2017).

#5The federal budget deficit is more than 20 percent larger than what it was this time last year. The Bureau of the Fiscal Service, a part of the Department of the Treasury, reports that the U.S. government had a budget deficit of $76.9 billion during July. This was up $2.0 billion from June and 79.0 percent from the same month a year earlier. Tax receipts totaled $225.3 billion while outlays were at $302.1 billion.  More notable is that the budget deficit generated over the first ten months of FY2018—$684.0 billion—was 20.8 percent greater than that of the first ten months of FY2017. Receipts over this time period were up a mere 1.0 percent while expenditures rose 4.4 percent. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 4, 2018, First-Time Claims, seasonally adjusted): 213,000 (-6,000 vs. previous week; -39,000 vs. the same week a year earlier). 4-week moving average: 214,250 (-11.3% vs. the same week a year earlier).
Wholesale Trade (June 2018, Wholesale Inventories, seasonally adjusted): $632.4 billion (+0.1% vs. May 2018, +5.1% vs. June 2017).
Senior Loan Officer Opinion Survey on Bank Lending 

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

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