Retail Sales Ended 2017 on a Happy Note: January 9 – 13

The 2017 holiday season was merry for many members of the retail sector. Here are the five things we learned from U.S. economic data released during the week ending January 12.  

#1Retail sales ended 2017 on a high note. The Census Bureau estimates U.S. retail and food services sales grew 0.4 percent during the month to a seasonally adjusted $495.4 billion (+5.6 percent versus December 2016). This follows an upwardly revised 0.9 percent gain in November, signaling a healthy retail market during the just completed holiday season. Sales increased 1.2 percent at building material retailers, 0.7 percent at restaurant/bars, and 0.2 percent at auto dealers/parts stores while those at gas stations held firm during the month. Net of all four of those segments, core retail sales gained 0.3 percent during December following a 0.9 percent bump in November. Core retail sales have risen 5.6 percent over the past year. Sales gained in December at grocery stores (+0.7 percent), furniture retailers (+0.6 percent), health/personal care stores (+0.4 percent) but fell at sporting goods/hobby stores (-1.6 percent), department stores (-1.1 percent), apparel retailers (-0.3 percent), and electronics/appliance stores (-0.2 percent). Finally, sales at nonstore retailers (i.e., web retailers) jumped 1.2 percent during December and rose 12.7 percent over the past year. Nonstore retail sales have zoomed up 57.4 percent since December 2012, well above the five-year comparable for overall retail sales (+21.0 percent).December 2017 Retail Sales 011318

#2Core consumer prices grew at their fastest rate since last January. The Consumer Price Index (CPI) increased 0.1 percent on a seasonally adjusted basis during December, leaving the Bureau of Labor Statistics measure up 2.1 percent for all of 2017. Energy CPI declined 1.2 percent during the month, as gasoline prices fell 2.7 percent. Food CPI gained 0.2 percent, as prices for meats/poultry/fish/eggs jumped 0.9 percent. Net of energy and food, core CPI climbed 0.3 percent for the month and 1.8 percent over the past year. This was the largest single-month increase in core consumer prices in 11 months. Rising during the month were prices for used vehicles (+1.4 percent), medical commodities (+1.0 percent), new vehicles (+0.6 percent), shelter (+0.4 percent), transportation services (+0.3 percent), and medical services (+0.2 percent).

#3But wholesale prices chilled, thanks to decreases for food and trade services. Per the Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand declined 0.1 percent on a seasonally adjusted basis during December, following 0.4 percent increases during each of the two previous months. The core measure—final demand PPI net of energy, food, and trade services—grew 0.1 percent during the months, its smallest monthly increase since last August. Final demand goods wholesale prices held steady during November, with prices for food falling 0.7 percent and that for energy goods holding unchanged. Net of energy and food, wholesale goods prices grew 0.2 percent. PPI for final demand services declined 0.2 percent, its first decline since last February. PPI for trade services—measuring retailer and wholesaler margins—dropped 0.6 percent. Over the past year, final demand PPI has grown 2.6 percent while that net of food, energy, and trade services has increased 2.3 percent.

#4Counts of both job openings and people hired slowed slightly during November. The Bureau of Labor Statistics reports that there were a seasonally adjusted 5.879 million job openings at the end of November, down 46,000 from October but still up 4.4 percent from the same month a year earlier. The private sector had 5.360 million job openings at the end of November, a 6.0 percent increase from a year ago. The industries with the largest year-to-year percentage gains in job openings were manufacturing (+18.5 percent), construction (+18.0 percent), financial activities (+17.3 percent), leisure/hospitality (+13.0 percent), and retail (+11.8 percent). Employers hired 5.488 million people during November, off 104,000 for the month but 4.3 percent ahead of the year-ago pace. Private sector hiring has grown 4.0 percent over the past year to 5.110 million workers. Industries with the largest year-to-year percentage increases in hiring were manufacturing (+25.0 percent), financial activities (9.7 percent), professional/business services (+5.8 percent), and health care/social assistance (+4.9 percent). 5.202 million people left their jobs during November, down 49,000 for the month but up 2.5 percent from a year earlier. Voluntary quits have risen 3.9 percent over the past year while layoffs have inched up by a slower 1.6 percent rate.

#5Small business owners’ confidence slipped in December. The National Federation of Independent Business’ Index of Small Business Optimism shed 2.6 points during the month to a seasonally adjusted 104.9 (1986=100). While this reading was off 9/10ths of a point from a year earlier, it was just above the index’s 2017 average of 104.8 (which itself was a record for the measure). Only two of the index’s ten components improved during the month: measures for both plans to make capital outlays and current job openings added a point during December. Falling were measures for expectations for the economy to improve (-11), plans to increase inventories (-8), expectations for real sales (-6), earnings trends (-5), and plans to increase employment (-4).

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 6, 2018, First-Time Claims, seasonally adjusted): 261,000 (+11,000 vs. previous week; +16,000 vs. the same week a year earlier). 4-week moving average: 250,750 (-0.6% vs. the same week a year earlier).
Business Inventories (November 2017, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.895 trillion (+0.4% vs. October 2017, +3.2% vs. November 2016).
Import Prices (December 2017, All Imports, not seasonally adjusted): +0.1% vs. November 2017, +3.0% vs. December 2016. Nonfuel Imports: -0.1% vs. November 2017, +1.4% vs. December 2016.
Export Prices (December 2017, All Exports, not seasonally adjusted): -0.1% vs. November 2017, +2.6% vs. December 2016. Nonagricultural Exports: Unchanged vs. November 2017, +2.7% vs. December 2016.
Consumer Credit (November 2017, Outstanding Consumer Credit Balances-net of real estate-backed loans, seasonally adjusted): $3.827 trillion (+$27.9 billion vs. October 2017, +5.3% vs. November 2016).

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

Payrolls Expand Again, But at a Slower Rate: January 1 – 5

Payroll growth slowed in December, but purchasing managers indicate robust economic activity. Here are the five things we learned from U.S. economic data released during the week ending January 5.

#1Employers added fewer workers during December, but the unemployment rate remained at a 17-year low. Nonfarm payrolls expanded by a seasonally adjusted 148,000 during the month, the slowest pace of job creation since hurricanes dragged down hiring back in September. Bureau of Labor Statistics data finds that nonfarm employment grew by 2.055 million for all of 2017, the fewer number of jobs added in a year since 2010. Private sector employers added 146,000 workers during the month, split between 55,000 new goods-producing jobs and 91,000 new service sector workers. Industries adding the most workers during the month were construction (+30,000), health care/social assistance (+29,200), leisure/hospitality (+29,000), manufacturing (+25,000), and professional/business services (+19,000). Retail was a big drag as the industry shed 20,300 workers during December. The average workweek held firm at 34.5 hours (December 2016: 34.4 hours). Average weekly earnings grew by $3.11 during December to $918.74, up 2.8 percent from a year earlier.Job Creation 2005-2017--010518

Based on a separate survey of households, the unemployment rate was unchanged at 4.1 percent, where it has been for the past three months. Before that, the unemployment rate had not been this low since December 2000. 64,000 people entered the labor force during the month, but the labor force participation rate remained stuck at 62.7 percent. The median length of unemployment fell by 4/10ths of a month to 9.1 weeks (December 2016: 10.8 weeks). 4.915 million people were “involuntary” part-time workers (i.e., had a part-time position but were seeking a full-time opportunity), down from 5.514 million a year earlier. The broadest measure of labor underutilization from BLS (the “U-6” series) inched up by 1/10th of a percentage point to 8.1 percent. This same measure was at 9.1 percent a year earlier and was dramatically below its recession peak of 17.1 percent during both March and April 2010.

#2Both exports and imports grew during November as the trade deficit expanded. The Census Bureau and the Bureau of Economic Analysis report that exports increased by $4.4 billion during the month to a seasonally adjusted $200.2 billion (+8.3 percent versus November 2016) while imports surged $6.0 billion to $250.7 billion (+8.4 percent versus November 2016). The resulting trade deficit of -$50.5 billion was an increase of $1.6 billion from October, up 8.9 percent from a year earlier, and the largest trade deficit since January 2012. The goods deficit expanded by $1.7 billion to -$70.9 billion while the services surplus widened by $0.1 billion to +$20.4 billion. A closer look at the former finds exports of goods grew by $4.3 billion, led by a $2.5 billion increase in capital goods exports (including civilian aircraft), a $1.0 billion increase in automotive vehicles/parts/engines exports, and a $0.7 billion gain in consumer goods exports. Imports of goods grew by $6.0 billion, reflecting a $2.4 billion jump in consumer goods exports, a $2.2 billion hike in industrial supplies and materials exports (including crude oil), and a $1.6 billion increase in capital goods orders. The U.S. had its biggest goods trade deficits with China (-$33.5 billion), European Union (-$13.5 billion), Mexico (-$5.8 billion), and Japan (-$5.8 billion).

#3Purchasing managers report business activity growth continued during December. The Institute for Supply Management’s Purchasing Managers Index (PMI) increased by 1.5 points during the month to a seasonally adjusted 59.7. This was the 16th straight month in which the PMI was above a reading of 50.0—indicative of an expanding manufacturing sector—and its best reading since September. Four of the PMI’s five components improved during the month: new orders (up 5.4 points to 69.4), production (up 1.9 to 65.8), inventories (up 1.5 points to 48.5), and supplier deliveries (up 1.4 points to 57.9). The index tied to employment shed 2.7 points to a reading of 57.0. Sixteen of the 18 tracked manufacturing sectors expanded during December, led by machinery, computer/electronic products, and paper products. The press release noted that survey respondents’ comments “reflect[ed] expanding business conditions.”

The ISM’s measure for the service sector shed 1.5 points to a reading of 55.9. Even with the decline to its lowest point since August, the NMI has remained above a reading of 50.0 for 96 consecutive months. Only two of the NMI’s four components showed growth during November:  supplier deliveries (up 1.5 points to 55.5) and employment (up a full point to 56.3). Losing ground were index components for new orders (off 4.4 points to 54.3) and business activity/production (off 4.1 points to 57.3). Fourteen of 18 tracked service sector industries expanded during the month, led by retail, utilities, and entertainment/recreation. The press release noted commenters reported they had “finished the year on a positive note” and were optimistic about “business conditions and the economic outlook going forward.”

#4Factory orders gained during November. New orders for manufactured goods jumped 1.3 percent during the month to a seasonally adjusted $488.1 billion, per the Census Bureau This was the fifth increase in factory orders over the past six months, placing the measure 8.0 percent above its year-ago mark. Transportation goods orders increased 4.1 percent, reflecting gains for civilian and defense aircraft of 14.7 percent and 12.4 percent, respectively, and a 1.1 percent bounce in orders for motor vehicles. Net of transportation goods, factory orders rose 0.8 percent during the month and has gained 7.6 percent over the past year. Rising during the month were orders for furniture (+1.6 percent), primary metals (+0.9 percent) and electrical equipment/appliances (+0.6 percent) while new orders dropped for machinery (-1.0 percent), computer/electronics (-0.5 percent), and fabricated metal products (-0.2 percent). Shipments gained for the 11th time in 12 months, with a 1.2 percent increase to $491.2 billion. Unfilled orders rose eked out a 0.1 percent increase (its third consecutive advance) while inventories expanded 0.4 percent (its 12th gain over the past 13 months). 

#5Construction spending rose during November. The Census Bureau estimates the seasonally adjusted annualized value of construction put into place grew 0.8 percent during the month to $1.257 trillion. This represented a 2.4 percent increase from the same month a year earlier. Private sector construction spending jumped 1.0 percent to an annualized $964.3 billion (+2.6 percent versus November 2016). Residential expenditures also gained 1.0 percent to $530.8 billion (+7.9 percent versus November 2016) while nonresidential spending increased 0.9 percent to $433.5 billion (which was nevertheless off 3.1 percent from a year earlier). Public sector construction spending edged up 0.2 percent in November to an annualized $292.7 billion. This was up 1.8 percent over the previous year. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 30, 2017, First-Time Claims, seasonally adjusted): 250,000 (+3,000 vs. previous week; +9,000 vs. the same week a year earlier). 4-week moving average: 241,750 (-4.7% vs. the same week a year earlier).
Vehicle Sales (December 2017, Light Vehicle Retail Sales, seasonally adjusted annualized rate): 17.85 million (+1.8% vs. November 2017, -1.7% vs. December 2016).
FOMC minutes

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

As 2017 Ends, Jobless Claims Remain Low and Sentiment Eases: December 25 – 29

Employers issued relatively few pink slips during the final days of the year. Here are the five things we learned from U.S. economic data released during the week ending December 29.

#1First-time jobless claims remained near a 40+ year low as 2017 wrapped up. The Department of Labor reports that there were a seasonally adjusted 245,000 initial claims made for unemployment insurance benefits during the week ending December 23. This was unchanged from the week before and 13,000 below the number of first-time claims from the same week a year earlier. More remarkable, the jobless count has been below 300,000 claims every week since March 21,2015, with the measure remaining for much of 2017 near levels not consistently seen since 1973(!). The four-week average of first-time claims inched up by 1,750 to 237,750 claims. This was 7.2 percent below the moving average from a year ago. During the week ending December 9, 2.004 million people were receiving some form of unemployment insurance benefits, 6.4 percent below that a year earlier.First-Time Jobless Claims-2007-2017-122917

#2Another second measure of consumer sentiment eased during December. The Conference Board’s Consumer Confidence Index lost 6.5 points during the month to a seasonally adjusted 122.1 (1985=100). This was up from the 113.3 reading from December 2016. The decline occurred despite survey respondents growing slightly more confident about current business conditions—the present conditions index added 1.7 points during the month to 156.6. The expected conditions index, however, plummeted by 11.9 points to 99.1. 35.7 percent of survey respondents report that jobs are “plentiful” while 15.2 percent report them being “hard to get,” with the latter being a 16-year low. The press release noted that “consumers’ expectations remain at historically strong levels, suggesting economic growth will continue well into 2018.” During the previous week, we learned that the University of Michigan’s Index of Consumer Sentiment had lost 2.6 points to a seasonally adjusted reading of 95.9 (1966Q1=100).

#3Home purchase contract signings inched up during November. The Pending Home Sales Index (PHSI) from the National Association of Realtors added 2/10ths of a point during the month to a seasonally adjusted reading of 109.5. This was the PHSI’s highest point since June. The index jumped 4.1 percent in the Northeast and edged up 0.4 percent in the Midwest while pulling back modestly in both the West (-1.8 percent) and South (-0.4 percent). The PHSI has grown 0.8 percent over the past year, with positive 12-month comparables in the South (+2.0 percent), Northeast (+1.1 percent), and Midwest (+0.8 percent). Meanwhile, contract signings to purchase a previously owned home in the West were 2.3 percent below that of a year earlier. While the press release notes that the “housing market is closing the year on a stronger note,” it warned that potential buyers were being “stifled by tight supply and higher prices.”

#4Home prices continued to rise in October. The 20-city Case-Shiller Home Price Index grew 0.2 percent without seasonal adjusted and jumped 0.7 percent after adjustments for seasonal variation. The measure of home prices has risen 6.4 percent over the past year, putting the index just 1.3 percent below its pre-recession peak back in 2006. The index gained on a seasonally adjusted basis in all 20-tracked markets with increases greater than 1.0 percent in Las Vegas (+1.4 percent) and San Francisco (+1.2 percent). The press release states that rising home prices have been the result of “low interest rates, low unemployment and continuing economic growth” but also notes that higher prices are making renting “more attractive than buying.” 

#5Agricultural prices jumped in November. The Department of Agriculture reports that the prices received by farmers swelled 4.2 percent during the month, its first monthly gain since May. The measure has increased 9.1 percent since November 2016. The prices received for livestock production surged 8.1 percent (and was up 18.0 percent from the same month a year earlier), as poultry & egg prices jumped 15.0 percent and that of metal animals grew 7.2 percent. Dairy product prices increased 1.0 percent. Meanwhile, prices received for crop production slumped 1.0 percent during November but was still 1.1 percent above the prices received a year earlier. Prices fell for vegetables/melons (-6.1 percent) and grain/oilseed (-3.5 percent) but gained 1.4 percent for fruit/tree nuts.

The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.