An Inflationary Rebound: January 8 – 12

Inflation ticked up at the end of 2023. Here are the five things we learned from U.S. economic data released during the week ending January 12.

Consumer prices grew at a quicker pace in December. The Consumer Price Index (CPI) jumped a seasonally adjusted 0.3 percent, following a flat October and a tiny 0.1 percent bump in November. The Bureau of Labor Statistics measure was up 3.4 percent from a year earlier. Energy prices gained 0.4 percent (its first increase since September), while food CPI advanced 0.2 percent. Net of energy and food, core CPI increased 0.4 percent (matching November’s gain) and was up 3.9 percent from a year earlier. Prices grew for medical care services (+0.7 percent), used cars/trucks (+0.5 percent), shelter (+0.5 percent), new vehicles (+0.3 percent), apparel (+0.1 percent), and transportation services (+0.1 percent). Medical care commodity prices slipped 0.1 percent.

Wholesale prices fell for the third straight month. Final demand Producer Price Index (PPI) declined a seasonally adjusted 0.1 percent. This matched the Bureau of Labor Statistics measure’s November drop and followed October’s 0.4 percent decrease. Core PPI, which removes energy, food, and trade services, grew 0.2 percent for its biggest gain since September. Goods PPI fell 0.4 percent, pulled down by declining prices for energy (-1.2 percent) and food (-0.4 percent). Services PPI was unchanged for a third consecutive month. Headline PPI has risen 1.0 percent over the past year, while the core wholesale price measure has a +2.5 percent 12-month comparable.

Trade activity slowed in November. Exports ($253.7 billion) and imports ($316.9 billion) both declined 1.9 percent during the month, leaving the trade deficit down 2.0 percent to -$63.2 billion. The Census Bureau/Bureau of Economic Analysis indicates that the trade deficit over the first 11 months of 2023 (-$718.0 billion) was 18.4 percent below that of the 2022 comparable months. The goods deficit narrowed by $0.6 billion to -$89.4 billion and the services surplus swelled by $0.7 billion to +26.2 billion. The former reflects sharp declines in exports of industrial supplies/materials (nonmonetary gold, crude oil, and organic chemicals), automotive vehicles, and consumer goods, nearly counterbalanced by a sharp decrease in consumer goods imports (cell phones and pharmaceuticals). The U.S. had its largest goods deficits with China, the European Union, Mexico, and Vietnam.

Wholesale trade shrank in November. The Census Bureau estimates wholesale inventories contracted 0.2 percent to a seasonally adjusted $896.2 billion. Inventories have declined 3.0 percent over the past year. Durable wholesale inventories held steady at $562.6 billion, while that for nondurables fell 0.5 percent to $333.7 billion. Wholesale sales matched October levels at $666.6 billion (+0.5 percent versus October 2022). While durable wholesale sales improved by 0.3 percent, nondurable wholesale sales decreased by 0.3 percent. The resulting inventory-to-sales (I/S) dropped a basis point to 1.34 (November 2022: 1.39). The I/S ratios for durable (1.83) and nondurables (0.93) each held steady.

Small business owners’ sentiment slightly improved in December. The Small Business Optimism Index from the National Federation of Independent Business added 1.3 points to a seasonally adjusted 91.9 (1986=100). This was the index’s best reading since July, representing a 2.1-point improvement from a year earlier. Five of ten index components improved during the month: earnings trends, economic expectations, expected real sales, expected credit conditions, and plans to make capital outlays. Declining were measures for current inventories, plans to increase inventories, and expectations to increase employment. The press release notes, “inflation and labor quality have consistently been a tough complication for business owners.”  

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending January 6, 2024, First-Time Claims, seasonally adjusted): 202,000, -1,000 vs. the previous week, -3,000 vs. the same week a year earlier). 4-week moving average: 207,750 (-0.6% vs. the same week a year earlier).
• Consumer Credit (November 2023, Outstanding Non-Real Estate Backed Consumer Credit Balances, seasonally adjusted): $5.010 trillion (+$23.7 billion vs. October 2023; +2.8% vs. November 2022).
• Monthly Treasury Statement (December 2023, Federal Government Budget Deficit): -$509.9 billion over the first three months of FY2024 (+21.0% vs. comparable FY2023 months).

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