Inventory issues challenged retail sales in December. Here are the five things we learned from U.S. economic data released during the week ending January 14.
Retail sales fell in December. The Census Bureau estimates retail and food services sales dropped 1.9 percent during the month to a seasonally adjusted $626.8 billion. Even with the decline, retail sales were up a startling 16.9 percent from December 2020 and transactions during the final three months of 2021 were 17.1 percent ahead of the comparable three months in 2020. Sales dropped at both auto dealers/parts stores (-0.4 percent) and gas stations (-0.7 percent)—the former due to a lack of inventory and the latter the result of lower prices. Net of both, core retail sales slumped 2.5 percent in December but remained 16.5 percent ahead of their year-ago pace. Sales fell at virtually every retail segment, except for building materials/garden and health/personal care retailers.
Consumer inflation surged to a 40-year high in December. The Consumer Price Index (CPI) grew by a seasonally adjusted 0.5 percent during the month. Even though this was smaller than recent 0.9 percent (October) and 0.8 percent (November) gains, CPI has risen 7.0 over the past year. Not since June 1982 has the Bureau of Labor Statistics measure had such a large 12-month comparable. Energy prices declined 0.4 percent (gasoline: -0.5 percent), while food prices jumped 0.5 percent. Net of both, core CPI jumped 0.6 percent in December and was up 5.5 percent over the past year (its highest point since 1991). Rising during the month were prices for used cars/trucks (+3.5 percent), apparel (+1.7 percent), new vehicles (+1.0 percent), shelter (+0.4 percent), and medical care services and commodities (+0.3 percent and +0.1 percent, respectively).
Wholesale prices also rose at a near-record pace. The Producer Price Index (PPI) for final demand increased 0.2 percent on a seasonally adjusted basis in December. This was the smallest single-month increase for the Bureau of Labor Statistics measure in over a year. At the same time, PPI has surged 9.7 percent over the past year (just under the record-high +9.8 percent 12-month comparable reported for November). Wholesale prices fell for energy (-3.3 percent with gasoline down 6.1 percent) and food (-0.6 percent). Net of energy, food, and trade services, core PPI increased 0.4 percent in December and had a record-high +6.9 percent 12-month comparable.
Manufacturing output dropped in December. The Federal Reserve indicates that manufacturing production declined 0.3 percent on a seasonally adjusted basis during the month, its first drop since September. Durable and nondurable goods output fell 0.4 percent and 0.2 percent, respectively. Experiencing drops of at least 1.0 percent were motor vehicles, aerospace, fabricated metals, apparel, paper, printing, petroleum, and plastics/rubber. Overall industrial production slipped 0.1 percent, with mining reporting a 2.0 percent gain (thanks to growth in oil and gas extraction) and utilities signaling output had declined 1.5 percent (due to unseasonably warm weather). Over the past year, manufacturing output has risen 3.5 percent and that for overall industrial production has advanced 3.7 percent.
Small business owner sentiment remains stuck in neutral. The Small Business Optimism Index from the National Federation of Independent Business added a half-point in December to a seasonally adjusted 98.9. The measure has failed to top a reading of 100 in all but two months of 2021. Eight of ten index components improved in December, led by plans to increase employment, expectations for the economy, and earnings trends. Two measures suffered declines: current inventories and plans to increase inventories. Twenty-two percent of survey respondents said that “inflation was their single most important problem encountered in operating their business.”
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending January 8, 2022, First-Time Claims, seasonally adjusted): 230,000, +23,000 vs. the previous week, -674,000 vs. the same week a year earlier). 4-week moving average: 210,750 (-74.1% vs. the same week a year earlier).
- University of Michigan Surveys of Consumers (January 2022-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 68.8 (vs. December 2021: 70.6; January 2021: 79.0)
- Import Prices (December 2021, All Imports, not seasonally adjusted): -0.2% vs. November 2021; +10.4% vs. December 2020. Nonfuel Imports: +0.5% vs. November 2021; +6.4% vs. December 2021.
- Export Prices (December 2021, All Exports, not seasonally adjusted): -1.8% vs. November 2021; +14.7% vs. December 2020. Nonagricultural Exports: -2.1% vs. November 2021; +13.8% vs. December 2020.
- Business Inventories (November 2021, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.158 trillion (+1.3% vs. October 2021; +8.7% vs. November 2020).
- Wholesale Inventories (November 2021, Merchant Wholesalers Inventories, seasonally adjusted): +1.4% vs. October 2021; +15.9% vs. November 2020.
- Monthly Treasury Report (December 2021, Deficit for the First 3 Months of Fiscal Year 2022): -$377.7 Billion (-34.1% vs. First 3 Months of FY2021).
- Beige Book (January 2022)
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