A Robust Start to the Holiday Shopping Season: December 16 – 20

Consumer spending and sentiment were solid in November. Here are the five things we learned from U.S. economic data released during the week ending December 20.

#1Consumer spending signaled strength in November. The Bureau of Economic Analysis estimates real personal consumption expenditures (PCE) grew 0.3 percent on a seasonally adjusted basis during the month, its largest increase since July. Spending on goods increased 0.5, split between gains for durables and nondurables of +1.2 percent and 0.1 percent, respectively. (It is worth noting that just last week, Census Bureau data pointed to modest retail sales during the same month.) Expenditures on services crept up 0.2 percent. Nominal (not inflation-adjusted) PCE rose 0.4 percent in November, funded by 0.5 percent gains for both nominal personal income and nominal disposable income. Real disposable income expanded 0.4 percent. The savings rate edged up 1/10th of a point to 7.9 percent. Over the past year, real personal spending has risen 2.4 percent funded by a 3.1 percent jump in real disposable income.

#2Manufacturing output grew for the second time in five months in November. The Federal Reserve estimates manufacturing production jumped 1.1 percent during the month. Output of durable goods surged 2.2 percent, boosted by a post-GM strike rise in automobile manufacturing and sizable increases for both primary metals and computers/electronics. Nondurable goods output grew 0.1 percent. Overall industrial production gained 1.1 percent. Mining output slipped 0.2 percent as gas/oil drilling slowed. Cold weather in parts of the U.S. led to a 2.9 percent rise in utility output. Even with their November gains, both overall industrial production and manufacturing output have declined 0.8 percent over the past year.

#3The latest revision to Q3 GDP has the U.S. economy growing at a moderate rate. The third estimate of Q3 Gross Domestic Product keeps the seasonally adjusted annualized growth rate at a good but not great +2.1 percent. The Bureau of Economic Analysis’ revision reflects higher than previously believed levels of consumer spending and business investment, offset by lower levels of inventory accumulation. The only sectors of the economy making positive contributions to GDP growth were consumer spending, government spending, fixed residential investment, and exports. The same report finds corporate profits slipping 0.2 percent during the quarter. We will see our first snapshot of Q4 GDP on January 30.

#4Employers continued having difficulty finding people to fill open jobs. The Bureau of Labor Statistics reports that there were a seasonally adjusted 7.267 million open jobs at the end of October, up 235,000 for the month but off by 326,000 from a year earlier (but still near a record high for the data series). (By comparison, the BLS estimates that there were “only” 5.855 million unemployed adults during the same month.) Private-sector employers had 5.515 million open jobs, down 6.2 percent versus October 2018. Employers were unable to fill these jobs as hiring declined by 213,000 to 5.764 million (-1.9 percent versus October 2018). 5.636 million people departed their jobs, down 162,000 from September but essentially matching that of a year earlier. This included a small rise in workers voluntarily quitting their jobs (up 41,000 to 3.512 million, +1.2 percent versus October 2018). Meanwhile, the count of layoffs plummeted by 198,000 to 1.769 million (-4.6 percent versus October 2018).

#5Consumer confidence ends 2019 on a high note. The December Index of Consumer Sentiment reading of 99.3 (seasonally adjusted), essentially matched the preliminary mark reported a few weeks earlier and was up by 2.5 points from November and a full point over the previous year. The University of Michigan also notes that its current conditions index jumped 3.9 points to 115.5 (December 2018: 116.1) while the expectations index added 1.6 points to 88.9 (December 2018: 87.0). The press release stated that the impeachment hearings “had a barely noticeable impact on economic expectations,” with only two percent of survey respondents mentioning it.

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 14, 2019, First-Time Claims, seasonally adjusted): 234,000 (-18,000 vs. previous week; +14,000 vs. the same week a year earlier). 4-week moving average: 225,500 (+0.7% vs. the same week a year earlier).
Leading Indicators (November 2019, Index (2016=100)): 111.6 (Unchanged vs. October 2019, +0.1% vs. November 2018).
Existing Home Sales (November 2019, Sales, seasonally adjusted annualized rate): 5.35 million (-1.7% vs. October 2019, +2.7% vs. November 2018).
Housing Starts (November 2019, Housing Starts, seasonally adjusted annualized rate): 1.365 million units (+3.2% vs. October 2019, +13.6% vs. November 2018).
Housing Market Index (December 2019, Index (>50=Greater Percentage of Homebuilders View the Housing Market as Being “Good” versus Being “Poor,” seasonally adjusted): 76 (vs. November 2019: 71, vs. December 2018: 56).
State Employment (November 2019, Nonfarm Payrolls, seasonally adjusted): Vs. October 2019: Payrolls grew in 6 states, decreased in 1 state, and were essentially unchanged in 43 states and the District of Columbia. Vs. November 2018: Payrolls grew in 25 states and were essentially unchanged in 25 states and the District of Columbia.

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

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