The Fed pauses, as do headline consumer and producer prices. Here are the five things we learned from U.S. economic data released during the week ending June 16.
No rate hike this time around. The statement released following this past week’s Federal Open Market Committee (FOMC) meeting said the economy “continued to expand at a modest pace,” with “robust” job gains but also “elevated inflation.” It also stressed the banking system was “sound and resilient.” With that economic view, the FOMC unanimously voted to keep the fed funds rate at a range between 5.00 and 5.25 percent while continuing to shed assets from its vast Treasuries and mortgage-backed securities portfolio. The statement also reaffirmed the Fed’s commitment to return inflation to two percent. With that in mind, the accompanying economic forecast suggests this would be a momentary pause in short-term interest rate hikes. The median fed funds target rate forecast among the FOMC members indicates two more quarter rate hikes will occur before the end of the year.
Beyond energy and food, consumers continued to experience substantial inflation in May. The Consumer Price Index (CPI) increased by a mere 0.1 percent on a seasonally adjusted basis. This followed April’s 0.4 percent jump but matched March’s pace. Keeping the headline Bureau of Labor Statistics measure in check was a 3.6 percent drop in energy CPI (gasoline: -5.6%) and a relatively modest 0.2 percent gain in food prices. Net of energy and food, core CPI surged 0.4 percent (the sixth straight month of a gain of at least that size). Rising were prices for used cars/trucks (+4.4 percent), transportation services (+0.8 percent), shelter (+0.6 percent), medical care commodities (+0.6 percent), and apparel (+0.3 percent). Prices slipped 0.1 percent for new vehicles and medical care services. Over the past year, CPI has risen 4.0 percent and core CPI has swelled 5.3 percent.
Meanwhile, wholesale prices declined for the fourth time in six months. The Producer Price Index (PPI) for final demand dropped a seasonally adjusted 0.3 percent in May. The Bureau of Labor Statistics indicates PPI was up a moderate 1.1 percent over the past year. The core PPI measure, which removes energy, food, and trade services, was flat during the month but up 2.8 percent from a year earlier. Goods PPI plummeted 1.6 percent, pulled down by lower prices for energy (-6.8 percent) and food (-1.6 percent). Core goods PPI eked out a 0.1 percent gain. Services PPI increased 0.1 percent.
May was a solid month for retailers. Retail and food services sales grew 0.3 percent to a seasonally adjusted $686.6 billion. The Census Bureau measure was 1.6 percent ahead of year-ago levels. Declining prices led to lower sales at gas stations (this data series does not adjust for price changes.). After removing the 2.6 percent drop at gas stations and a 1.3 percent rise at auto dealers/parts stores, core retail sales were up 0.4 percent in May and 4.1 percent above year-ago levels. Sales rose at retailers focused on building materials (+2.2 percent), furniture (+0.4 percent), sporting goods/hobbies (+0.3 percent), electronics/appliances (+0.2 percent), and groceries (+0.2 percent). Restaurants/bars saw a 0.4 percent improvement in sales, while apparel retailers reported flat sales.
Manufacturing output grew slowly in May. The Federal Reserve estimates manufacturing production inched up a seasonally adjusted 0.1 percent after April’s 0.9 percent advance. While production of durable goods grew 0.3 percent, nondurables suffered a 0.1 percent decline. Vehicle production increased 0.2 percent. Overall industrial production dropped 0.2 percent, as mining (-0.4 percent) and utilities (-1.8 percent) output fell. Relative to a year earlier, manufacturing output was off 0.3 percent, whereas industrial production was up 0.2 percent. Manufacturing factory capacity utilization held steady at 78.4 percent, while overall capacity utilization slipped 2/10ths of a percentage point to 79.6 percent. The 50-year averages for the two sectors were 78.2 percent and 79.7 percent, respectively.
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending June 10, 2023, First-Time Claims, seasonally adjusted): 262,000, Unchanged vs. the previous week, +45,000 vs. the same week a year earlier). 4-week moving average: 246,750 (+15.4% vs. the same week a year earlier).
- Import Prices (May 2023, All Imports, not seasonally adjusted): -0.6% vs. April 2023; -5.9% vs. May 2022. Nonfuel Imports: -0.1% vs. April 2023; -1.6% vs. May 2022.
- Export Prices (May 2023, All Exports, not seasonally adjusted): -1.9% vs. April 2023; -10.1% vs. May 2022. Nonagricultural Exports: -1.8% vs. April 2023; -10.5% vs. May 2022.
- University of Michigan Index of Consumer Sentiment (June 2023-preliminary, Index (1966Q1=100), seasonally adjusted): 63.9 (May 2023: 59.2; June 2022: 61.3).
- State Employment (May 2023, Nonfarm Payrolls, seasonally adjusted): Increased in 5 states and held steady in 45 states and the District of Columbia vs. April 2023. Increased in 42 states and held steady in 8 states and the District of Columbia vs. May 2022.
- Monthly Treasury Statement (May 2023, Federal Budget Deficit): -$1.165 trillion over the first 8 months of FY23 (+273.3% vs. the same 8 months in FY22).
- NFIB Small Business Index (May 2023, Index (1986=100), seasonally adjusted): 89.4 (vs. April 2023: 89.0; vs. May 2022: 93.1).
- Treasury International Capital Flows (April 2023, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +97.6 billion (March 2023: +188.9 billion; April 2022: +$50.9 billion).
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What We Learned About the U.S. Economy Last Week 