Category: This week’s economic data

This article contains a summary of this week’s economic data; including, GDP, employment, manufacturing, and consumer sentiment data.

The Fed Moves, Likely to Repeat Twice More in 2018: June 11 – 15

The Fed Moves, Likely to Repeat Twice More in 2018: June 11 – 15

Kevin Roth

The Fed raises its target for short-term interest rates as inflation moves ever so closer to targeted levels. Here are the five things we learned from U.S. economic data released during the week ending June 15.  

#1The Fed boosts short-term interest rates and appears ready to do so twice more again this year. The policy statement released following this past week’s meeting of the Federal Open Market Committee (FOMC) characterized economic activity as “rising at a solid rate” and that the labor market “continued to strengthen” with core inflation moving closer to the Fed’s two-percent target rate. The statement also noted that risks to future economic activity as being ”roughly balanced.” As a result, the committee voted unanimously to boost the fed funds rate by 25-basis points to a range between 1.75 and 2.00 percent. This was the FOMC’s second rate hike of 2018 but keeps the short-term interest target in a range the committee views as “accommodative.”

Accompanying the policy statement were the updated economic projections of Federal Reserve Board members and Federal Reserve Bank presidents, which highlight a more optimistic view of near-term conditions. For example, the median forecast for 2018 economic growth increased by 1/10th of a percentage point to +2.8 percent and the expected unemployed rate dropped by 2/10ths of a percentage point to 3.6 percent. The forecasters also see a greater firming of inflation with the core PCE deflator (the Fed’s preferred measure of inflation) at +2.1 percent, up from the prior forecast of +1.9 percent. As a result, the median forecast for the fed funds target rate suggests two more quarter-point rate hikes this year (up from a single additional rate bump previously anticipated). Further, the median forecast points to three quarter-point hikes in 2019 and one rate hike in 2020.FOMC Fed Funds Forecast--2018-2020

#2Inflation continued to build steadily in May. The Consumer Price Index (CPI) grew 0.2 percent on a seasonally adjusted basis for the third time in four months, per the Bureau of Labor Statistics. Energy prices jumped 0.9 percent, as gasoline prices gained 1.7 percent. Food CPI held steady during the month. Net of energy and food, core CPI increased 0.2 percent and has grown 2.2 percent over the past year. (The 12-month comparable for the headline index was +2.8 percent). Jumping during the month were prices for medical commodities (+1.3 percent), new vehicles (+0.3 percent), and shelter (+0.3 percent) while prices declined during the month for used cars/trucks (-0.9 percent) and medical care services (-0.1 percent).

Meanwhile, the Producer Price Index (PPI) for final demand soared 0.5 percent (seasonally adjusted), its fastest rate of growth since January. The core measure, which nets out energy, food, and trade services, grew at a more modest 0.1 percent for a second consecutive month. Wholesale prices for final demand goods swelled 1.0 percent, led by the 4.6 percent surge in wholesale energy prices (PPI for gasoline: +9.8 percent). Final demand food PPI eked out a 0.1 percent increase.  Net of energy and food, core final demand goods PPI gained 0.3 percent. PPI for final demand services increased 0.3 percent for the fourth time in five months, which included the impact of a 0.9 percent advance in prices for trade services (reflecting larger retailer and wholesaler margins). Over the past year, final demand PPI has jumped 3.1 percent during which the core wholesale price measure (net of energy, food, and trade services) has risen 2.6 percent.

#3Retail sales surged in May. The Census Bureau estimates retail and food sales were at a seasonally adjusted $502.0 billion, up 0.8 percent from April and 5.9 percent from a year earlier. Motor vehicle sales jumped 0.5 percent while higher prices at the pump resulted in a 2.0 percent rise in gas station sales. Net of sales at auto dealers/parts stores and gas stations, core retail sales rose 0.8 percent to $443.1 billion (+5.1 percent versus April 2017). May was a good month for building material/garden supplies stores (+2.4 percent), department stores (+1.5 percent), apparel retailers (+1.3 percent), restaurants/bars (+1.3 percent), and health/personal care retailers (+0.5 percent). Sales slowed during the month at furniture stores (-2.4 percent) and sporting goods/hobby retailers (-1.1 percent).

#4Manufacturing decelerated in May. Per the Federal Reserve’s Industrial Production report, manufacturing output slumped 0.7 percent on a seasonally adjusted basis, leaving it 1.7 percent ahead of its year-ago pace. The report links much of the decline to a “major fire at a parts supplier” that had disrupted truck assemblies. Net of vehicle production, manufacturing slowed by a more modest 0.2 percent. Output of durables fell 1.2 percent (motor vehicles production plummeted 6.5 percent) while that of nondurable slipped 0.1 percent. Overall industrial production decreased 0.1 percent during the month but was up 3.5 percent over the past 12 months. Mining output grew for the fourth straight month (+1.8 percent versus April 2018 and +12.6 percent versus May 2017), led by increased oil and gas extraction. Higher demand for electricity led to a 1.0 percent increase in output at utilities.

#5Small business owners’ optimism blossomed during the spring. The National Federation of Independent Business’ Index of Small Business Optimism jumped by 3.0 points to a seasonally adjusted reading of 107.8. Not only was this a post-recession high for the sentiment measure, it also was its second-best reading in the index’s second-best reading ever (a 45-year history). Eight of the index’s ten components improved from their April readings, led by expected real sales (+10 points), expectations for the economy (+7 points), on whether it is a good time to expand (+7 points), and earning trends (+4 points). While noting difficult in their ability to find qualified workers to hire, the press release stated employers “now have more resources to commit to attracting candidates.” 

Other U.S. economic data released over the past week:
– Jobless Claims (week ending June 9, 2018, First-Time Claims, seasonally adjusted): 218,000 (-4,000 vs. previous week; -22,000 vs. the same week a year earlier). 4-week moving average: 224,250 (-8.1% vs. the same week a year earlier).
– Import Prices (May 2018, All Imports, not seasonally adjusted): +0.6% vs. April 2018, +4.3% vs. May 2017. Nonfuel imports: +0.2% vs. April 2018, +1.9% vs. May 2017.
– Export Prices (May 2018, All Exports, not seasonally adjusted): +0.6% vs. April 2018, +4.9% vs. April 2018, Nonagricultural Exports: +0.5% vs. April 2018, +4.9% vs. May 2017.
– University of Michigan Consumer Sentiment (June 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 99.3 (vs. May 2018: 98.0, June 2017: 95.0).
– Business Inventories (April 2018, Manufacturing and Trade Inventories, seasonally adjusted): $1.930 trillion (+0.3% vs. March 2018, +4.4% vs. April 2017).
– Monthly Budget Statement (May 2018, U.S. Budget Surplus/Deficit): -$146.8 billion (vs. May 2017: -$88.4 billion). Deficit over first 8 months of FY 2019: -$532.2 billion (vs. +23.0% vs. first 8 months of FY 2018).

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

Job Creation, Consumer Spending Rise: May 28 – June 1

Job Creation, Consumer Spending Rise: May 28 – June 1

Kevin Roth

The labor market continued to chug along this spring. Here are the five things we learned from U.S. economic data released during the week ending June 1.

#1Job creation accelerated while the unemployment rate fell to another post-recession low in May. The Bureau of Labor Statistics reports that nonfarm payrolls expanded by a seasonally adjusted 223,000 jobs during the month, its largest single-month increase in three months and its 92 consecutive monthly gain. Public sector employers added 218,000 workers to their payrolls during the month while public sector payrolls expanded by 5,000. Industries adding the most jobs during May were health care/social assistance (+31,700), retail (+31,100), construction (+25,000), leisure/hospitality (+21,000), transportation/warehousing (+18,700), and manufacturing (+18,000). The average workweek held steady at 34.5 hours (May 2017: 34.4 hours) while the average for weekly earnings of $928.74 represented a 3.0 percent increase from that of a year earlier.

Nonfarm Payrolls 2014-2018-060118

Based on a separate survey of households, the unemployment rate slipped by 1/10th of a percentage point to 3.8 percent. The unemployment rate has not been this low since April 2000. The size of the labor force grew by a mere 12,000 while the labor force participation rate dropped by 1/10th of a percentage point to 62.7 percent (near its lowest reading in 40+ years). The labor force participation rate of adults aged 25-54 also declined by 1/10th of a percentage point to 81.9 percent. The typical length of unemployment was 9.2 weeks, down from 9.8 weeks in April and 10.4 weeks a year earlier. The broadest measure of labor underutilization—the U-6 series—shrank by 2/10ths of a percentage point to 7.6 percent. The same measure was at 8.4 percent a year earlier.

#2GDP growth slightly less robust during Q1 than previously thought. The Bureau of Economic Analysis estimates the Gross Domestic Product (GDP) for the first three months of 2018 was at $19.957 trillion on a seasonally adjusted annualized rate (SAAR). After adjusted for inflation, real GDP grew 2.2 percent (SAAR) during Q1, just below the 2.3 percent increase reported a month earlier and under the 2.9 percent growth rate achieved during the final three months of 2017. The biggest positive contributors to Q1 GDP growth were (in descending order) nonresidential fixed investment (adding 105-basis points to GDP growth), personal spending (+71-basis points), government expenditures (+20-basis points), change in private inventories (+13-basis points), and net exports (+8-basis points). Residential fixed investment cost eight-basis point of GDP growth during the quarter. Corporate profits slipped 0.6 percent during Q1 but were 4.3 percent ahead of that from Q1 2017. The BEA will revise its Q1 GDP estimate again later this month.

#3Personal spending rose for a second straight month in April. Real personal consumption expenditures (PCE) grew 0.4 percent on a seasonally adjusted basis following a 0.5 percent bump in March. The Bureau of Economic Analysis reports that spending on goods and services each gained 0.4 percent, with the increases for the former split by +0.3 percent and +0.4 percent for durable and nondurable goods, respectively. The increase in spending outpaced the 0.2 percent gain in real disposable income. Funding the difference was a contraction in the savings rate (down 2/10ths of a percentage point +2.8 percent). Over the past year, real PCE has grown 2.7 percent while real disposable income has expanded 1.9 percent. The same report finds inflation—as measured by the PCE deflator—growing 0.2 percent during April and rising 2.0 percent over the past year. The same comparbles for the core deflator (which removes both energy and food) were +0.2 percent and +1.8 percent, respectively.

#4Purchasing and supply executives report manufacturing activity accelerated in May. The Institute for Supply Management’s Purchasing Managers Index (PMI) added 1.4 points during the month to a seasonally adjusted reading of 58.7. This was the 21st straight month in which the PMI was above a reading of 50.0, indicating an expanding manufacturing sector. Four of five components of the index improved from their April readings: production (up 4.3 points to 61.5), new orders (up 2.5 points to 61.2), employment (up 2.1 points to 56.3), and supplier deliveries (up 9/10ths of a point to 62.0). The inventories index lost 2.7 points to 50.2. Sixteen of 18 tracked manufacturing sectors expanded during the month, led by textiles, nonmetallic mineral productions, and electrical equipment. The press release noted that survey respondents indicated that demand was “robust” but that tightness in both the labor market and supply chain are weighing on activity.

#5The private sector drove April construction spending. The Census Bureau places the seasonally adjusted annualized rate (SAAR) of construction put in place at $1.310 trillion, up 1.8 percent for the month and 7.6 percent from a year earlier. Private sector construction spending rose 2.8 percent to an annualized $1.014 trillion (+7.6 percent versus April 2017). Private sector residential construction spending jumped 4.5 percent, even though single-family home construction was flat during the month. Nonresidential spending increased 0.8 percent during April. Public sector construction spending slowed 1.3 percent during the month to an annualized $296.1 billion. Even with the decline, public sector spending has grown 7.7 percent over the past year. 

Other U.S. economic data released over the past week:
– Jobless Claims (week ending May 26, 2018, First-Time Claims, seasonally adjusted): 221,000 (-13,000 vs. previous week; -32,000 vs. the same week a year earlier). 4-week moving average: 222.250 (-7.9% vs. the same week a year earlier).
– Vehicle Sales (May 2018, Light Vehicle Retail Sales, seasonally adjusted annualized rate): 16.91 million units (-1.5% vs. April 2018, +0.7% vs. May 2017).
– Conference Board Consumer Confidence (May 2018, Index (1985=100), seasonally adjusted): 128.0 (vs. April 2018: 125.6).
– Pending Home Sales (April 2018, Index (2001=100), seasonally adjusted): 106.4 (vs. March 2018 = 107.8, vs. April 2018 = 108.7).
– Agricultural Prices (April 2018, Prices Received by Farmers, not seasonally adjusted): -2.2% vs. March 2018, -3.1% vs. April 2017).
– Beige Book

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

Economic Growth Continued, Housing Slowed a Bit: May 21 – 25

Economic Growth Continued, Housing Slowed a Bit: May 21 – 25

Kevin Roth

Home sales edged down in April. Here are the five things we learned from U.S. economic data released during the week ending May 25.

#1Sales of previously owned homes slowed in April. The National Association of Realtors reports that existing home sales declined 2.5 percent to a seasonally adjusted annualized rate of 5.46 million units. This was 1.4 percent below the year-ago sales pace. Sales failed to grow in any of the four Census regions, with declines in three of the regions: Northeast (-4.4 percent), West (-3.3 percent), and South (-2.9 percent). Over the past year, sales increased only in the South (+2.2 percent). Tight inventories remained the primary culprit, although the number of homes available for sales expanded 9.8 percent during April to 1.80 million units. This was nevertheless 6.3 percent fewer than the number of homes available for sale a year ago and translated into a mere 4.0 month supply. As a result, the median price of homes sold has risen 5.3 percent over the past year to $257,900. The press release warns that “[t]he current pace of price appreciation far above incomes is not sustainable in the long run.”

#2…As did those of new homes. Sales of new single-family homes slipped 1.5 percent during April to 662,000 on a seasonally adjusted annualized basis, per the Census Bureau. Even with April’s drop, new home sales tracked 11.6 percent ahead of its year-ago pace. Much of the decline occurred in the West, where new home sales slumped 7.9 percent during the month. Sales improved 11.1 percent in the Northeast and 0.3 percent in the South. All four Census regions enjoyed positive year-to-year new home sales gains. There were 300,000 new homes available for sale at the end of April, up 0.7 percent for the month and 12.4 percent from a year earlier. This was the equivalent to a 5.4 month supply. 

#3Economic growth appears to have been solid in April. The Chicago Fed National Activity Index (CFNAI) added two-basis points during the month to a seasonally adjusted +0.34. The CFNAI is a weighted index of 85 economic indicators adjusted such that a reading of 0.00 is indicative of the U.S. economy expanding at its historical rate. Fifty of the 85 indicators made positive contributions to the CFNAI. Among the four major categories of CFNAI components, two made positive contributions: those related to production (up eight basis points to +0.27) and employment (up six basis points to +0.10). The other two major groupings of components made smaller contributions: sales/orders/inventories (down six basis points to +0.02) and personal consumption/housing (down seven basis points to -0.05). The CFNAI’s three-month moving average rose by 23 basis points to +0.46, its best reading since last November.

#4Outside of civilian aircraft, durable goods orders rose in April. The Census Bureau reports that new orders for manufactured durable goods were at a seasonally adjusted $248.5 billion, down 1.7 percent from March. Much of the decline can be tied to the 29.0 percent drop in new orders for civilian aircraft, which had pulled down transportation goods orders 6.1 percent during the month. Net of transportation goods, new orders jumped 0.9 percent to $161.4 billion. Rising during the month were new orders for electrical equipment/appliances (+2.6 percent), fabricated metals (+2.0 percent), motor vehicles (+1.8 percent), primary metals (+1.3 percent), and computers/electronics (+1.1 percent). Durable goods shipments slipped 0.1 percent during March to $246.7 billion but jumped 1.0 percent after netting out transportation goods.

#5Consumer sentiment slightly eased in May. The University of Michigan Index of Consumer Sentiment lost 8/10ths of a point to 98.0. The same measure of consumer confidence was at 97.1 a year earlier. The current conditions index pulled back by 3.1 points to 111.8 (May 2017: 111.7) while the expectations index moved up by 7/10ths of a point to 89.1 (May 2017: 87.7). The press release stated that the survey results suggest real personal consumption will rise 2.6 percent over the next year. The Conference Board will publish its May consumer confidence survey results during the upcoming week.

Other U.S. economic data released over the past week:
– Jobless Claims (week ending May 19, 2018, First-Time Claims, seasonally adjusted): 234,000 (+11,000 vs. previous week; -3,000 vs. the same week a year earlier). 4-week moving average: 219,750 (-7.9% vs. the same week a year earlier).
– FHFA House Price Index (March 2018, Purchase-Only Index, seasonally adjusted): +0.1% vs. February 2018, +6.7% vs. March 2017.
– FOMC Minutes

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