This week’s economic data – What We Learned About the U.S. Economy Last Week

Gas Prices Rise, Core Prices Held in Check: April 8 – 12

April 13, 2019April 13, 2019Kevin Roth

Prices rose at the gas pump in March but moderated elsewhere. Here are the five things we learned from U.S. economic data released during the week ending April 12.

Headline consumer prices rose in March, core prices not so much. The Consumer Price Index (CPI) jumped 0.4 percent on a seasonally adjusted basis, per the Bureau of Labor Statistics. This was the biggest single-month increase for CPI in 14 months, leaving the measure up 1.9 percent over the past year. Energy CPI surged 3.5 percent as gasoline prices swelled 6.5 percent. Food prices gained 0.3 percent, including a 0.4 percent bounce in the price of food at home. Net of energy and food, core CPI inched up a modest 0.1 percent and has risen 2.0 percent over the past year. Prices increased during March for shelter (+0.4 percent), new vehicles (+0.4 percent), and medical care services (+0.3 percent). Falling were prices for apparel (-1.9 percent) and used cars/trucks (-0.4 percent).

Wholesale prices also jumped in March. The Bureau of Labor Statistics indicates that final demand Producer Price Index (PPI) grew a seasonally adjusted 0.6 percent, its largest one-month increase since last October. Core final demand PPI, which removes the impact of energy, food, and trade services, was unchanged, however. Sixty percent of the rise in headline PPI was because of the 16.0 percent surge in wholesale gasoline prices. Final demand energy PPI rose 5.6 percent while that for foods grew a far more modest 0.3 percent. Trade services PPI—measuring retailer and wholesaler margins—jumped 1.1 percent for its biggest gain since last October. Over the past year, headline final demand PPI has risen 2.2 percent while the 12-month comparable for the core measure was +2.0 percent.

The number of job openings contracted (yet remained near record highs) in February. The Bureau of Labor Statistics reports there were a seasonally adjusted 7.087 million nonfarm job openings on the final day of February, down 538,000 from January but still 8.5 percent ahead of the February 2018 count. Among the industries showing the most substantial year-to-year percentage increases in job opening were construction (+44.4 percent), professional/business services (+24.9 percent), manufacturing (+9.4 percent), and health care/social assistance (+8.5 percent). Hiring also pulled back slightly, dropping by 133,000 to 5.696 million (up 1.8 percent versus February 2018). Industries with the most significant 12-month percentage gains in hires were transportation/warehousing (+8.9 percent), wholesale trade (+7.5 percent), retail (+6.8 percent), and health care/social assistance (+5.7 percent). 5.556 million people left their jobs in February, essentially matching the 5.532 million that had done so in January and up 5.4 percent from a year earlier. Versus the previous year, the number of people who quit their job rose 9.6 percent to 3.480 million while the count of workers laid off was off 1.2 percent to 1.742 million

New factory orders fell for the fourth time in five months in February. The Census Bureau estimates new orders for manufactured goods declined 0.5 percent during the month to a seasonally adjusted $497.5 billion. Durable goods orders slumped 1.6 percent while those for nondurable goods gained 0.6 percent. New orders net of transportation goods increased 0.3 percent while those of civilian non-aircraft capital goods (a proxy for business investment) slipped 0.1 percent. Shipments grew for the first time in five months with a 0.4 percent gain to $505.5 billion, with increases of 0.2 percent and 0.6 percent for durable and nondurable goods, respectively. The value of unfilled orders fell for the fourth time in five months, off 0.3 percent to $1.178 trillion while inventories widened for the 27^th time in 28 months (up 0.3 percent to $687.8 billion).

Small business owner sentiment held steady in March. The Small Business Optimism Index, from the National Federation of Independent Business, eked out a 1/10^th of a point increase during the month to a seasonally adjusted reading of 101.8 (1986=100). While 2.9 points below its March 2018 reading, the index has been above a reading of 100.0 for 27 consecutive months. Four of the index’s ten components improved from their February readings (led by measures tracking both current job openings and plans to increase employment) while three declined in March (including a four-point drop for current inventories). The press release said the measures indicate the U.S. economy will enjoy “solid growth… with no signs of a recession in the near term.”

Other U.S. economic data released over the past week:
– Jobless Claims (week ending April 6, 2019, First-Time Claims, seasonally adjusted): 196,000 (-8,000 vs. previous week; -31,000 vs. the same week a year earlier; fewest since October 4, 1969). 4-week moving average: 207,000 (-7.6% vs. the same week a year earlier).
– Import Prices (March 2019, All Imports, not seasonally adjusted): +0.6% vs. February 2019, Unchanged vs. March 2018. Nonfuel Imports: -0.2% vs. February 2019, -0.8% vs. March 2018.
– Export Prices (March 2019, All Exports, not seasonally adjusted): +0.7% vs. February 2019, -2.3% vs. March 2018. Nonagricultural Exports: +0.7% vs. February 2019, +1.0% vs. March 2018.
– Monthly Treasury Statement (March 2019, Budget Deficit): First Six Months of FY2019: -$691.2 trillion (vs. First Six Months of FY2018: $599.7 billion).
– FOMC Minutes

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

Hiring Rebounded in March: April 1 – 5

April 6, 2019April 6, 2019Kevin Roth

Employers resumed hiring in March while consumers stayed away from stores in February. Here are the five things we learned from U.S. economic data released during the week ending April 5.

Job creation picked back up in March. Nonfarm payrolls grew a seasonally adjusted 196,000 during the month, per the Bureau of Labor Statistics. This was a big improvement from the upwardly revised, but still weak 33,000 jobs added in February. Private sector employers’ payrolls expanded a net 182,000 workers in March, with 170,000 new jobs in the service sector. Industries adding the most workers were health care/social assistance (+61.200), professional/business services (+37,000), leisure/hospitality (+33,000), and construction (+16,000). The same report places average hourly earnings at $27.70 and average weekly earnings at $955.65, both up 3.2 percent from a year earlier.

Based on a separate household survey, the unemployment rate held steady at 3.8 percent. The labor force shrank by 224,000 people during the month while the labor force participation rate slipped 2/10^ths of a percentage point to 63.0 percent. Holding steady, however, was the labor force participation rate for adults aged 25 to 54 at 82.5 percent. The median length of unemployment edged up by 3/10^ths of a week to 9.6 weeks while the number of part-time workers seeking a full-time opportunity expanded by 189,000 to 4.499 million. Still at its post-recession low was the broadest measure of labor underutilization (the “U-6” series) at 7.3 percent.

Retail sales disappointed in February. The Census Bureau estimates U.S. retail and food services sales declined 0.2 percent to a seasonally adjusted $506.0 billion. The same report upwardly revised January’s sales increase from +0.2 percent to +0.7 percent and left retail sales 2.2 percent ahead of that of February 2018. Sales at both auto dealers/parts stores (+0.7 percent) and gas stations (+1.0 percent) both surged during the month. Net of both, core retail sales sank 0.6 percent for the month but have grown 2.9 percent from a year earlier. In February, sales weakened at retailers focused on building materials (-4.4 percent), electronics/appliances (-1.3 percent), furniture (-0.5 percent), and apparel (-0.4 percent). Also losing track were sales at department stores, which decreased 0.5 percent. Retailers focused on health/personal care (+0.6 percent), hobbies/sporting goods (+0.5 percent), and restaurants/bars (+0.1 percent) each enjoyed sales increases. The shift to online stores continued as nonstore retailers’ sales grew 0.9 percent in February and were up 10.0 percent from a year earlier.

Durable orders slumped in February. The Census Bureau reports that new orders for manufactured durable goods fell 1.6 percent during the month to a seasonally adjusted $250.6 billion. Transportation goods orders declined 4.8 percent, hurt by a sharp 31.1 percent decrease in orders for civilian aircraft and a much smaller 0.1 percent drop in auto orders. Net of transportation goods, core durable goods orders inched up 0.1 percent. Growing were new orders for electrical equipment/appliances (+1.0 percent), primary metals (+0.7 percent), and fabricated metal products (+0.3 percent) while orders slowed 0.3 percent for both machinery and computers/electronics. Durable goods shipments grew for the third time in four months (+0.2 percent). Inventories expanded 0.3 percent while the value of unfilled orders shrank 0.3 percent.

Purchasing managers continued to report economic growth in March. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, added 1.1 points during the month to a reading of 55.3. This was the 31^st consecutive month in which the measure has been above a reading of 50.0, the threshold between a growing and contracting manufacturing sector. Three of the five PMI components improved from the February readings: employment (up 5.2 points to 57.5), new orders (up 1.9 points to 57.4), and production (up a full point to 55.8). Slipping, however, were measures tracking inventories (off 1.6 points to 51.8) and supplier deliveries (down 7/10^ths of a point to 54.2). Sixteen of 18 tracked manufacturing industries expanded during the month, led by printing, textiles, and food/beverages.

Meanwhile, the ISM’s measure of service sector activity lost 3.6 points in March to a reading of 56.1. Despite the decline, this was the 110^th straight month in which the NMI was above a reading of 50.0. Three of four NMI components pulled back during the month: business activity (down 7.3 points to 57.4), new orders (down 6.2 points to 59.0), and supplier deliveries (down a full point to 50.0). Sixteen of 18 tracked nonmanufacturing industries expanded in March, led by construction and professional/scientific/technical services. The press release characterized survey respondents’ comments as “mostly optimistic,” but noted that purchasing managers expressed “concerns about employment resources and capacity constraints.”

Construction spending rose again in February. The Census Bureau reports that the value of construction put in place jumped 1.0 percent during the month to a seasonally adjusted annualized rate (SAAR) of $1.320 trillion (+1.1 percent versus February 2018). Private-sector construction spending inched up 0.2 percent to an annualized $994.5 billion, which was nevertheless 1.9 percent below its February 2018 annualized pace. Private residential spending grew 0.7 percent in February while nonresidential expenditures declined 0.5 percent. Public sector construction spending soared 3.7 percent and has risen 12.1 percent over the past year.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending March 30, 2019, First-Time Claims, seasonally adjusted): 202,000 (-10,000 vs. previous week; -29,000 vs. the same week a year earlier; fewest since December 6, 1969). 4-week moving average: 213,500 (-4.2% vs. the same week a year earlier).
– Business Inventories (January 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.014 trillion (+0.8% vs. December 2018, +5.3% vs. January 2018).
– Consumer Credit (February 2019, Outstanding Consumer Credit (non-real estate) Balances, seasonally adjusted): $4.046 trillion (+$15.2 billion vs. January 2019, +5.0% vs February 2018).

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

A Slowdown in Growth: March 25 – 29

March 30, 2019March 30, 2019Kevin Roth

Economic activity was lukewarm in Q4 and early 2019. Here are the five things we learned from U.S. economic data released during the week ending March 29.

Q4 economic growth was less robust than previously believed. The Bureau of Economic Analysis’ third release of fourth quarter 2018 gross domestic product (GDP) finds the U.S. economy grew 2.2 percent on a seasonally adjusted annualized basis. This was a downward revision from the Q4 GDP report published a month ago that had indicated a 2.6 percent increase, and it was below Q3’s 3.4 percent annualized gain. Even with the downward revision, GDP grew 2.9 percent for all of 2018, ahead of increases of 2.2 percent and 1.6 percent for 2017 and 2016, respectively. The downward revision was the result of lower than previously believed levels of personal consumption expenditures, government spending, and business spending. The same report indicates that business profits slipped 0.4 percent from Q3 to an annualized $2.311 trillion. Corporate earnings for all of 2018 were $2.263 trillion, up 7.8 percent from 2017. The first view of Q1 2019 GDP comes out in late April, with early indications suggesting a weaker report (see next).

Meanwhile, economic activity appears to have been tepid in February. The Chicago Fed National Activity Index lost four basis points during the month to a reading of -0.29. This was the third consecutive month in which the CFNAI was negative, indicative of below-average economic growth. Of the 85 data points included in the CFNAI, only 38 made positive contributions, and just 37 indicators showed improvement from their January readings. Among the four major categories of indicators, two improved from the previous month: production (up 13-basis points to a contribution of -0.16) and sales/orders/inventories (up two-basis points to +0.02). Slipping in February were measures related to employment (down 17-basis points to a -0.10 contribution) and personal consumption/housing (down three-basis points to -0.03). The CFNAI’s three-month moving average fell to its lowest reading since October 2016, shedding 18-basis points to a reading of -0.18 (again, indicative of below-average economic growth).

Real personal spending slightly grew in January. Real personal consumption expenditures (PCE) increased 0.1 percent on a seasonally adjusted basis during the month following December’s 0.6 percent decline, per the Bureau of Economic Analysis. Spending grew for both nondurable goods (+0.5 percent) and services (+0.2 percent) but plummeted 1.6 percent for durable goods. Nominal (not inflation adjusted) spending also grew 0.1 percent. The modest gain in spending occurred despite a 0.1 percent drop in nominal personal income and with disposable income (both nominal and real) falling 0.2 percent. Over the past year, real disposable income has grown 3.0 percent while real PCE increased 2.3 percent. January’s saving rate of 7.5 percent was off 2/10^ths of a percentage point from December.

The trade deficit narrowed (but remained rather wide) in January. The Census Bureau and the Bureau of Economic Analysis reports that exports grew by $1.9 billion to $207.3 billion (+3.0 percent versus January 2018) during January while imports shrank by $6.8 billion to $258.5 billion (+1.6 percent versus January 2018). The resulting trade deficit of -$51.1 billion was down $8.8 billion from the previous month and 3.7 percent smaller than that of January 2018. The goods deficit plummeted by $8.2 billion to -$73.3 billion (down 2.8 percent from a year earlier) while the services surplus grew by $0.5 billion to +$22.1 billion (off 0.7 percent over the previous year). The former was the result in a $1.8 billion gain in exported goods (due to increased food and automotive exports) and a $6.5 billion decline in imported goods (due to a decrease in imports of capital goods and crude oil). The U.S. had its biggest goods deficits with China (-$33.2 billion), the European Union (-$13.1 billion), and Mexico (-$7.2 billion).

Differing stories from two measures of consumer sentiment. The Conference Board’s Consumer Confidence Index shed 7.3 points during March to a seasonally adjusted reading of 124.1 (1985=100). Also falling were indices for present conditions (slumping 12.2 points to 160.6) and expected conditions (off 4.0 points to 99.8). Dropping hard was the percentage of survey respondents who viewed current business conditions as “good,” declining from 40.6 percent to 33.4 percent. However, only 13.6 percent of consumers viewed current conditions as “poor.” The press release characterized sentiment as “volatile,” as consumers “have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report.”

Presenting a different story was the University of Michigan’s Index of Consumer Sentiment, which added 4.6 points during March to a seasonally adjusted reading of 98.4 (1966Q1=100). The present conditions grew by 4.8 points to 113.3 (March 2018: 121.2) while the expectations index rose by 4.4 points to 88.8 (which matched its reading from a year earlier). The press release noted that the improvement in the headline measure “was entirely due to households with incomes in the bottom two-thirds of the income distribution.”

Other U.S. economic data released over the past week:
– Jobless Claims (week ending March 23, 2019, First-Time Claims, seasonally adjusted): 211,000 (-5,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 217,250 (-1.6% vs. the same week a year earlier).
– New Home Sales (February 2019, New Houses Sold, seasonally adjusted annualized rate): 667,000 (+4.9% vs. January 2019, +0.6% vs. February 2018).
– Housing Starts (February 2019, Housing Starts, seasonally adjusted annualized rate): 1.162 million (-8.7% vs. January 2019, -9.9% vs. February 2018).
– Pending Home Sales (February 2019, Index (2001=100), seasonally adjusted): 101.9 (-1.0% vs. January 2019, -4.9% vs. February 2018).
– Case-Shiller Home Price Index (January 2019, 20-City Index, seasonally adjusted): +0.1% vs. December 2018, +3.6% vs. January 2018).
– FHFA Housing Price Index (January 2019, Purchase-Only Index, seasonally adjusted): +0.6% vs. December 2018, +5.6% vs. January 2018.

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

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