Tame Inflation in September: October 7 – 11

The running theme of last week’s economic data was softness. Here are the five things we learned from U.S. economic data released during the week ending October 11.

#1Consumer prices held steady in September. The Consumer Price Index (CPI) failed to increase for the first time since January and was up by “only” 1.7 percent over the past year, per the Bureau of Labor Statistics. Food prices edged up 0.1 percent while energy prices fell 1.4 percent (gasoline prices: -2.4 percent versus September 2018). Net of food and energy, core CPI grew 0.1 percent, its smallest increase since May. Despite the softness, the core measure has risen 2.4 percent over the past year. Prices jumped 0.4 percent for health care services and 0.3 percent for shelter and transportation services. Prices slumped for used trucks/cars (-1.6 percent), health care commodities (-0.6 percent), apparel (-0.4 percent), and new vehicles (-0.1 percent).

#2…While wholesale prices slid. The Producer Price Index (PPI) for final demand fell 0.3 percent on a seasonally adjusted basis in September, its biggest decline since January. The Bureau of Labor Statistics’ core measure—which removes food, energy, and trade services—held steady during the month after rising 0.4 percent in August. Wholesale energy prices fell 2.5 percent versus August (gasoline: -7.2 percent), while food prices increased (boosted in part by higher meat prices). Core goods prices slipped 0.1 percent. Over the past year, PPI has risen 1.4 percent while the core measure also remained below the two percent target at +1.7 percent.

#3The number of available jobs fell to a 1.5-year low in August. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 7.051 million open jobs at the end of the month, down 123,000 from July and 4.0 percent from a year earlier. (Some context: even with the drop, the number of openings remained quite strong by historical standards.) The private sector was responsible for 6.320 million job openings, off 4.4 percent from August 2018 levels. Weighing down the number of job openings were year-to-year drops in wholesale trade (-17.9 percent), financial activities (-16.3 percent), accommodation/food services (-10.7 percent), professional/business services (-8.4 percent), retail (-8.2 percent), and manufacturing (-3.4 percent). Hiring also slowed—falling by 199,000 jobs to 5.779 million (-0.8 percent versus August 2018)—as did separations, with 228,000 fewer people departing their jobs in August (and off 2.4 percent from a year earlier). The count of people leaving their jobs—a proxy for workers’ confidence in the labor market—slowed by 142,000 during the month (but still 1.5 percent ahead of the year-ago pace) to 3.526 million. Layoffs, however, were essentially unchanged for the month at 1.787 million (-1.2 percent versus August 2018).

#4Small business owner sentiment moderated slightly in September. The Small Business Optimism Index, from the National Federation of Independent Business, shed 1.3 points during the month (after losing 1.8 points in August) to a seasonally adjusted 104.7 (1986=100). The measure was 6.1 points below its year-ago mark. Seven of the ten index’s components fell during the month, led by declines on whether it is a good time to expand, plans to increase employment, and expectations for the economy to improve. The press release noted that the index remained at high levels but that the tariffs were “adversely affecting many small firms.”

#5Growth in consumer credit slowed as summer ended. The Federal Reserve reports that consumer had a seasonally adjusted $4.141 trillion in outstanding debt balances at the end of August, up $17.9 billion for the month and 5.0 percent over the past year. This was down from the $23.0 billion increase in July. (These figures do not include mortgages and other real estate-backed debt). Outstanding balances of nonrevolving credit (e.g., auto and student loans) expanded by $19.9 billion to $3.062 trillion (+5.5 percent versus August 2018). Contracting, however, were revolving credit balances (e.g., credit cards), which shrank by $2.0 billion to $1.079 trillion (+3.8 percent versus August 2018).

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 5, 2019, First-Time Claims, seasonally adjusted): 210,000 (-10,000 vs. previous week; -2,000 vs. the same week a year earlier). 4-week moving average: 213,750 (+0.1% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (October 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 96.0 (vs. September 2019: 93.2, vs. October 2018: 98.6).
Import Prices (September 2019, All Imports, not seasonally adjusted): +0.2% vs. August 2019, -1.6% vs. September 2018. Nonfuel Imports: -0.1% vs. August 2019, -1.1% vs. September 2018.
Export Prices (September 2019, All Exports, not seasonally adjusted): -0.2% vs. August 2019, -1.6% vs. September 2018. Nonagricultural Exports: -0.1% vs. August 2019, -1.9% vs. September 2018.
Wholesale Trade (August 2019, Merchant Wholesalers Inventories, seasonally adjusted): +0.2% vs. July 2019, +6.2% vs. August 2018.
FOMC Minutes

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

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