Retail Sales Up, Industrial Production Down: January 13 – 17

Retail sales ended 2019 on a positive note while job openings fell sharply. Here are the five things we learned from U.S. economic data released during the week ending January 17.

#1Holiday retail sales were decent. The Census Bureau estimates retail and food services sales grew 0.3 percent in December to a seasonally adjusted $529.6 billion. Sales slowed 1.3 percent at auto dealers/parts stores but rose 2.8 percent at gas stations. Net of sales at auto dealers/parts stores and gas stations, core retail sales bloomed 0.5 percent in December and were 5.7 percent of the year-ago pace. A quick look at combined November-December sales—a proxy for the recent holiday season—finds core retail sales were a solid 4.2 percent ahead of that of the prior year. In December, sales rose at retailers focused on apparel (+1.6 percent), building materials (+1.4 percent), sporting goods/hobbies (+0.9 percent), groceries (+0.4 percent), and furniture (+0.1 percent). Restaurant sales eked out a 0.2 percent improvement. Sales fell 0.8 percent at department stores.

#2Industrial production slowed for the third time in four months in December. The Federal Reserve estimates industrial production dropped a seasonally adjusted 0.3 percent, following a 0.8 percent increase in November and two consecutive 0.5 percent decreases in September and October. The headline index drop occurred despite a 0.2 percent improvement in manufacturing output (following a 1.0 percent bounce in November). Durable goods production slowed 0.2 percent (including a 4.6 percent slump in motor vehicle/parts output). In contrast, the output of nondurables expanded by 0.6 percent. Mining output advanced for the first time since August with a 1.3 percent gain while utilities production fell 5.6 percent due to moderate winter weather. Industrial production was 1.0 percent below that of a year earlier while manufacturing output was 1.3 percent behind the year-ago pace. 

#3Job openings shrank in November. The Bureau of Labor Statistics states that there were a seasonally adjusted 6.800 million job openings at the end of the month, down 561,000 from October and 10.8 percent from the year earlier. Even with the decline, there were more job openings than the number of unemployed adults (5.753 million). Private-sector job openings were off 12.7 percent from the same month a year earlier, with sizable year-to-year percentage declines in retail (-32.5 percent), construction (-23.3 percent), manufacturing (-22.6 percent), financial activities (-11.7 percent), accommodations/food services (-9.5 percent), and professional/business services (-7.8 percent). The number of job hires grew by 39,000 in November to 5.821 million, which matched the November 2018 count. 5.648 million people left their jobs in November, down a mere 4,000 from October and up a modest 0.9 percent from a year earlier. 3.536 million people quit their jobs during the month (+39,000 vs. October 2019 and +4.6 percent vs. November 2018) while the number of people laid off declined 46,000 to 1.749 million (-7.4 percent vs. November 2018).

#4Inflation took a holiday in December. The Bureau of Labor Statistics indicates that the Consumer Price Index (CPI) increased 0.2 percent on a seasonally adjusted basis during the month, down from gains of 0.4 percent and 0.3 percent in October and November, respectively. Food CPI grew 0.2 percent while energy CPI jumped 1.4 percent, the latter growing due to gasoline prices jumping 2.8 percent. Net of food and energy, core CPI increased 0.1 percent, its smallest gain since September. Rising were prices for medical care commodities (+1.5 percent) and services (+0.4 percent), apparel (+0.4 percent), shelter (+0.2 percent), and new vehicles (+0.1 percent). Prices fell for used cars/trucks (-0.8 percent) and transportation services (-0.3 percent). Both headline and core CPI have risen 2.3 percent over the past year.

Final demand Producer Price Index (PPI) inched up a seasonally adjusted 0.1 percent in December after holding steady during the prior month. The core measure of wholesale prices, which nets out of food, energy, and trade services, had a matching 0.1 percent increase. PPI for goods grew 0.3 percent. Prices jumped 1.5 percent for wholesale energy (gasoline: +3.7 percent) but fell 0.3 percent for wholesale food. PPI for final demand services held steady in December even as trade services PPI (measuring retailer and wholesaler margins) decreased 0.3 percent. Over the past year, final demand PPI has risen a modest 1.3 percent. In contrast, the 12-month comparable for the core measure has gained 1.5 percent.

#5Housing starts rose to a 13-year high in December. The Census Bureau reports housing starts jumped 16.9 percent during the month to a seasonally adjusted annualized rate of 1.375 million units. This was 40.8 percent ahead of the year-ago starts rate and the measure’s highest mark since October 2006. Starts surged for both single-family (+11.2 percent vs. November 2019, +29.6 percent vs. December 2018) and multi-family units (+32.0 percent vs. November 2019, +74.6 percent vs. December 2018). Looking towards the future, the annualized count of issue housing permits declined 3.9 percent in December to 1.416 million (+5.8 percent vs. December 2018). The annualized count of housing completions grew 5.1 percent during the month to 1.277 million homes, up 19.6 percent from the same month a year earlier. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 11, 2020, First-Time Claims, seasonally adjusted): 204,000 (-10,000 vs. previous week; -13,000 vs. the same week a year earlier). 4-week moving average: 216,250 -3.0% vs. the same week a year earlier).
Import Prices (December 2019, All Imports, not seasonally adjusted): +0.3% vs. November 2019, +0.5% vs. December 2018. Nonfuel Imports: Unchanged vs. November 2019, -1.4% vs. December 2018.
Export Prices (December 2019, All Exports, not seasonally adjusted): -0.2% vs. November 2019, -0.7% vs. December 2018. Non-Agricultural Exports: -0.1% vs. November 2019, -0.6% vs. December 2018.
University of Michigan Surveys of Consumers (January 2020-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted):  99.1 (vs. December 2019: 99.3, January 2019: 91.2.
Housing Market Index (January 2020, Index (>50=More homebuilders view the housing market as “good” versus “poor,” seasonally adjusted): 75 (vs. December 2019: 76, January 2019: 58).
Small Business Optimism Index (December 2019, Index (1986=100), seasonally adjusted): 102.7 (vs. November 2019: 104.7, vs. December 2018: 104.4).
Business Inventories (November 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.037 trillion (-0.2% vs. October 2019, +2.8% vs. November 2018.
Treasury International Capital Flows (November 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$7.3 billion (vs. October 2019: +$4.3 billion, November 2018: -$3.0 billion.
Beige Book

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