Prices Rise, Retail Sales Fall: February 12 – 16

Inflation picked up in the new year. Here are the five things we learned from U.S. economic data released during the week ending February 16.

Consumer prices accelerated in January. The Consumer Price Index (CPI) rose 0.3 percent on a seasonally adjusted basis, up from consecutive November and December 0.2 percent gains. The Bureau of Labor Statistics measure has grown 3.1 percent over the past year.  Energy CPI fell 0.9 percent, pulled down by declining gasoline prices (-3.3 percent). Conversely, food CPI jumped 0.4 percent, with prices for food consumed away from home up 0.5 percent. Net of energy and food, core CPI surged 0.4 percent in January and 3.9 percent over the past 12 months. Rising were prices for transportation services (+0.8 percent), shelter (+0.5 percent), medical care commodities (+0.5 percent), and apparel (+0.1 percent). Prices fell for used cars/trucks (-1.5 percent) and medical care services (-0.3 percent).

Wholesale prices also jumped in January. The final demand Producer Price Index (PPI) increased a seasonally adjusted 0.3 percent, its largest gain since last August. PPI was up a modest 0.9 percent from a year earlier, reflecting the degree to which the Bureau of Labor Statistics gauge had mellowed in recent months. The core measure, which removes food, energy, and trade services, surged 0.6 percent in January (its greatest rise in a year) and was 2.6 percent above year-ago levels. PPI for energy (-1.7 percent) and food (-0.3 percent) declined, while core goods wholesale prices gained 0.3 percent. Services PPI rose 0.6 percent.

Retail sales disappointed in January. Retail and food services sales slumped 0.8 percent to a seasonally adjusted $700.3 billion. The Census Bureau measure was up only 0.6 percent from a year earlier, with sales over the past three months (including the 2023 holiday season) 3.1 percent ahead of their year-ago comparable. Lower gas prices pulled down sales at gas stations by 1.7 percent. Removing that and the 1.7 percent decline at motor vehicles/parts dealers leaves core retail sales down 0.5 percent for the month but up 2.2 percent from a year earlier. Sales increased at furniture retailers (+1.5 percent), grocery stores (+0.6 percent), restaurants/bars (+0.7 percent), and department stores (+0.5 percent). Sales fell at retailers focused on building materials (-4.1 percent), health/personal care (-1.1 percent), electronics/appliances (-0.4 percent), apparel (-0.2 percent), and sporting goods/apparel (-0.2 percent). 

Manufacturing output fell in January. The Federal Reserve estimates manufacturing output declined 0.5 percent following gains of 0.4 percent and 0.1 percent in November and December, respectively. While durables production inched up 0.1 percent, nondurables experienced a 1.1 percent drop. Overall industrial production slipped 0.1 percent after holding flat in December. Mining output plummeted 2.3 percent, while utilities output surged 6.0 in the face of cold winter weather. Manufacturing output was 0.9 percent below year-ago levels, while industrial output matched that of January 2023. Manufacturing factories were operating at 76.6 percent, down 4/10^ths of a percentage point from December and 1.6 percentage points below its 51-year average.

Consumer sentiment has held relatively steady in early February. The University of Michigan’s Index of Consumer Sentiment added 6/10^ths of a point to a seasonally adjusted 79.6 (1966Q1=100). The measure was up 19.0 percent from a year earlier. The current conditions index shed 4/10^ths of a point to 81.5 and the expectations index added 1.3 points to 78.4. The indices were up 15.3 percent and 21.6 percent, respectively, from their February 2023 readings. One-year inflation expectations inched up by 1/10^th of a percentage point to +3.0 percent, while the longer-term price growth held steady at +2.9 percent annually. The press release noted that consumers expect “the slowdown in inflation and strength in labor markets would continue.”

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

• Jobless Claims (Week ending February 10, 2024, First-Time Claims, seasonally adjusted): 212,000, -8,000 vs. the previous week, -4,000 vs. the same week a year earlier). 4-week moving average: 218,500 (+5.4% vs. the same week a year earlier).
• Import Prices (January 2024, All Imports, not seasonally adjusted): +0.8% vs. December 2023; -1.3% vs. January 2023. Nonfuel Imports: +0.7% vs. December 2023; -0.3% vs. January 2023.
• Export Prices (January 2024, All Exports, not seasonally adjusted): +0.8% vs. December 2023; -8.7% vs. January 2023. Nonagricultural exports: +0.9% vs. December 2023; -1.6% vs. January 2023.
• Housing Starts (January 2024, Privately-Owned Housing Starts, seasonally adjusted annualized rate): 1.331 million (-14.8% vs. December 2023; -0.7% vs. January 2023).
• Small Business Optimism (January 2024, Index (1986=100), seasonally adjusted): 89.9 (December 2023: 91.9; January 2023: 90.3).
• Business Inventories (December 2023, Manufacturer’s and Trade Inventories, seasonally adjusted): $2.556 trillion (+0.4% vs. November 2023; +0.4% vs. December 2023).
• Housing Market Index (February 2024, Index (>50 = More Homebuilders View Housing Market as “good” than “poor,” seasonally adjusted): 48 (January 2024: 44; February 2023: 42).
• Monthly Treasury Statement (1^st 4 Months of FY2024, Federal Budget Deficit): -$531.9 billion (+15.6% vs. 1^st 4 Months of FY2023).

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