Retail Sales and Inflation Took August Off: September 10 – 14

Retail sales and inflation moderated their trajectory as summer wrapped up. Here are the five things we learned from U.S. economic data released during the week ending September 14.  

Retail sales cooled a bit from their recent torrid pace during August. The Census Bureau estimates retail and food services sales totaled $509.0 billion, up 0.1 percent for the month and 6.6 percent ahead of its August 2017 sales levels. July’s sales were revised upward to 0.7 percent gain (had been reported previously as a 0.5 percent gain). Slumping were sales at car dealers, where activity fell 0.8 percent. Higher prices at the pump led to a 1.7 percent sales gain at gas stations. Net of auto dealers and gas stations, core retail sales edged up 0.2 percent following a 0.9 percent jump in July. Growing were sales at retailers focused on health/personal care (+0.5 percent), electronics/appliances (+0.4 percent), sporting goods/hobbies (+0.2 percent), and general merchandisers (+0.1 percent). Sales also grew 0.2 percent at bars/restaurants. August was not a strong sales month at apparel retailers (-1.7 percent), department stores (-1.0 percent), and furniture stores (-0.3 percent).

Core inflation slowed in August. The Consumer Price Index (CPI) grew 0.2 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. This matches July’s 0.2 percent gain and left CPI up 2.7 percent over the past year. Energy CPI grew for the first time in three months with a 1.9 percent gain—gasoline prices rose 3.0 percent in August and have surged 20.3 percent over the past year. Food CPI increased 0.1 percent. Net of energy and food, core CPI grew by 0.1 percent, its smallest gain since April. Rising were prices for used cars/trucks (+0.4 percent), shelter (+0.3 percent), transportation services (+0.3 percent). Prices fell for apparel (-1.6 percent), medical commodities (-0.3 percent), and medical care (-0.2 percent). Even with the slight slowdown, core CPI has risen 2.2 percent over the past year.

Final demand wholesale prices dropped 0.1 percent in August on a seasonally adjusted basis, the first decline in the Producer Price Index (PPI) since February 2018 and follows a flat report for July. The core PPI measure—which removed energy, food, and trade services—inched up 0.1 percent.  The former has grown 2.8 percent over the past year while the latter has a 12-month comparable of +2.9 percent. PPI for final demand goods was flat for August, including a 0.6 drop for PPI for final demand foods (including the impact of falling prices for fruits/melon, meats, and eggs) and a 0.4 percent gain for final demand energy (including rises for residential electricity and gasoline). Final demand PPI for services slipped 0.1 percent as trade services PPI (measuring wholesaler and retailer margins) slumped 0.9 percent and that for transportation/warehousing fell 0.6 percent.   

The number of job openings continued to rise this summer. There were a seasonally adjusted 6.939 million open jobs at the end of July, per the Bureau of Labor Statistics. This was up 117,000 from June, 11.9 percent ahead from a year earlier, and higher than the 6.234 million people that had indicated being unemployed. Private sector employers reported having 6.319 million job openings (+11.3 percent versus July 2017), with the industries enjoying the largest year-to-year percentage gains being manufacturing (+29.4 percent), leisure/hospitality (+21.1 percent), retail (+15.6 percent), and trade/transportation/utilities (+14.9 percent). Hiring was flat during July at 5.679 million (+3.3 percent versus July 2017 (+3.3 percent versus July 2017), with private sector hiring at 5.339 million. Hiring has grown the greatest over the past year on a percentage basis in manufacturing (+15.9 percent), retail (+14.2 percent), trade/transportation/utilities (+10.7 percent), and accommodation/food services (+7.7 percent). Also flat during the month were the number of separations as 5.534 million people left their jobs during the month (+2.4 percent versus July 2017). The number of people voluntarily departing their jobs continued to rise, growing by 106,000 during July to 3.583 million (up 10.6 percent over the past year) while layoffs dropped by 50,000 to 1.602 million (-11.8 percent versus July 2017).

Manufacturing output grew at a slower pace in August. The Federal Reserve reports that manufacturing output increased 0.2 percent on a seasonally adjusted basis during the month, down from gains of 0.7 percent and 0.3 percent during June and July, respectively. Production in the manufacturing sector has grown 3.1 percent over the past year. Production of durable goods jumped 1.0 percent, boosted by strong output increases for motor vehicles, primary metals, and machinery. Production of nondurables slumped 0.5 percent as only textiles were the only segment to report an output gain. Overall industrial production increased 0.4 percent during August, matching July’s gain but off from June’s 0.6 percent increase. Industrial production has soared 4.9 percent over the past year. The oil and gas sectors led a 0.7 percent bounce in mining output (+14.1 percent versus August 2017) while hotter weather pushed up utility output 1.2 percent (+4.8 percent versus August 2017).

Small business owner optimism rises to an at least 45-year high. The Small Business Optimism Index from the National Federation of Independent Business grew by 9/10^ths of a point in August to 108.8 (1986=100), up 3.5 points from the same month a year earlier and representing the highest reading for the index since its launch in 1983. Six of the 10 index components improved from their July readings, led by plans to expand inventories (up six points), plans to increase employment (up three points) and plans to make capital outlays (up three points). Falling were index components linked to expected real sales (down three points), expected credit conditions (down two points), and expectations for the economy to improve (down one point).

Other U.S. economic data released over the past week:
– Jobless Claims (week ending September 8, 2018, First-Time Claims, seasonally adjusted): 204,000 (-1,000 vs. previous week; -63,000 vs. the same week a year earlier, lowest since December 1969). 4-week moving average: 208,000 (-19.6% vs. the same week a year earlier).
– Import Prices (August 2018, All Imported Goods, not seasonally adjusted): -0.6% vs. July 2018, +3.7% vs. August 2017.  Nonfuel Imports: -0.1% vs. July 2018, +0.9% vs. August 2017.
– Export Prices (August 2018, All Exported Goods, not seasonally adjusted): -0.1% vs. July 2018, +3.6% vs. August 2017. Nonagricultural Exports: -0.2% vs. July 2018, +4.1% vs. August 2017.
– University of Michigan Surveys of Consumers (September 2018-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 100.8 (vs. August 2018: 96.2, vs. September 2017: 95.1).
– Business Inventories (July 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.950 trillion (+0.6% vs. June 2018, +4.3% vs. July 2017).
– Consumer Credit (July 2018, Outstanding Consumer Credit (Non-Real Estate) Balances, seasonally adjusted): $3.918 trillion (+$17.6 billion vs. June 2018, +4.6% vs. July 2017).
– Beige Book

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