Hitting More Speed Bumps: October 14 – 18

Last week’s data characterize an economy without much forward momentum. Here are the five things we learned from U.S. economic data released during the week ending October 18.

#1Retail sales sputtered in September. The Census Bureau places U.S. retail and food services at a seasonally adjusted $525.6 billion down 0.3 percent for the month but 4.1 percent ahead from a year earlier. This followed sales jumping 0.6 percent during August. Sales fell 0.9 percent at auto dealers and parts stores and decreased 0.7 percent at gas stations (as gas prices mellowed). Net of auto dealers/parts stores and gas stations, core retail sales held steady in September and were up 4.5 percent from a year earlier. Sales grew during the month at stores focused on apparel (+1.3 percent), health/personal care (+0.6 percent), and furniture (+0.6 percent). Sales declined at department stores (-1.4 percent), building materials/garden retailers (-1.0 percent), grocery stores (-0.1 percent), and sporting goods/hobby retailers (-0.1 percent).

#2Manufacturing output dropped in September. The Federal Reserve reports that manufacturing production slowed by a half-percentage point on a seasonally adjusted basis during the month, taking back most of August’s 0.6 percent gain. Production of durable goods fell 0.7 percent (hurt by the now tentatively settled GM strike) while nondurables output suffered a smaller 0.2 percent drop. Manufacturing production was 0.9 percent below year-ago levels. Overall industrial production fell 0.4 percent during the month and was 0.1 percent under that of a year earlier. Mining output slumped 1.3 percent as crude oil extraction and well drilling slowed. Production at utilities bloomed 1.4 percent as warm weather increased electricity demand. 

#3Forward-looking economic indicators suggest weakness in the U.S. economy. The Conference Board’s Leading Economic Index (LEI) shed 1/10th of a point during September to a reading of 111.9 (2016=100). This left the LEI up a mere 0.4 percent for the past 12 months. Five of ten LEI improved during the month, led by stock prices, but measures tied to manufacturing orders, building permits, and the interest rate spread weighed on the measure. The coincident index held steady during the month at 106.4, up 1.5 percent from September 2018. Three of four coincident index components improved during the month, led by nonfarm payrolls. The lagging index added 1/10th of a point to 108.3, leaving the measure 3.2 percent ahead of its year-ago mark, as three of seven components advanced in September. The press release noted that “[t]he LEI reflects uncertainty in the outlook and falling business expectations” and predicts slow growth into 2020.

#4 Housing starts slowed in September. The Census Bureau estimates housing starts dropped 9.4 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.256 million. Even with the decline, starts remained 1.6 percent ahead of the year-ago pace. The slump was on the multi-family unit side, where starts plummeted 28.3 percent. Single-family home starts grew 0.3 percent in September for its fourth straight monthly increase. Looking towards the future, the annualized count of issued housing permits fell 2.7 percent during the month to 1.387 million, although permits for single-family homes inched up 0.8 percent. Housing completions slumped 9.7 percent during the month to an annualized 1.139 million units.

#5…But homebuilders grew more confident in October. The National Association of Homebuilder’s Housing Market Index (HMI) added three points in October to a seasonally adjusted reading of 71, its highest mark since February 2018. The HMI has remained above a reading of 50—indicative of more homebuilders seeing the housing market as “good” versus being “poor”—for 64 consecutive months. The HMI rose in the South and West, but lost ground in the Northeast and Midwest. Rising during October were HMI components for current sales of single-family homes (up three points to 78), expected sales (up six points to 76), and traffic of prospective buyers (up four points to 54). The press release linked recent improvements in sentiment to “low mortgage rates, solid job growth and a reduction in new home inventory.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 12, 2019, First-Time Claims, seasonally adjusted): 214,000 (+4,000 vs. previous week; -1,000 vs. the same week a year earlier). 4-week moving average: 214,750 (+0.2% vs. the same week a year earlier).
State Employment (September 2019, Nonfarm Payrolls, seasonally adjusted): Vs. August 2019: Payrolls grew in 3 states, decreased in 2 states, and essentially remained the same in 45 states and the District of Columbia. Vs. September 2018: Payrolls grew in 27 states and essentially remained the same in 23 states and the District of Columbia.
Business Inventories (August 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.042 trillion (unchanged vs. July 2019, +4.2% vs. August 2018).
Treasury International Capital Flows (August 2019, Net Foreign Purchases of Domestic Securities, not seasonally adjusted): -$41.9 billion (vs. July 2019: +$72.2 billion, vs. August 2018: +$77.1 billion).
Beige Book

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

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