Mixed Inflation Numbers: July 8 – 12

Core consumer prices rose, but core wholesale prices did not. Here are the five things we learned from U.S. economic data released during the week ending July 12.

#1Core inflation firmed in June. Consumer Price Index (CPI) gained 0.1 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. Growth in the headline CPI measure was modest as energy prices fell 2.3 percent (including gasoline CPI dropping 3.6 percent) and food prices held steady. Core CPI, which removes the impact of energy and food, jumped 0.3 percent, its most significant single-month increase since January 2018. Rising were prices for used cars/trucks (+1.6 percent), apparel (+1.1 percent), medical care services (+0.4 percent), shelter (+0.3 percent), and new vehicles (+0.1 percent). Over the past year, CPI has risen 1.6 percent while the core measure of consumer prices has a 12-month comparable of +2.1 percent.Consumer Prices 2017-9 071319

#2…While wholesale prices did not. The Producer Price Index (PPI) for final demand inched up by a seasonally adjusted 1/10th of a percentage point during June, matching its May increase. The core wholesale price measure, which nets out foods, energy, and trade services, was unchanged after having jumped 0.4 percent during the two prior months. PPI for final demand goods dropped for a second consecutive month with a 0.2 percent decline. Energy PPI plummeted 3.1 percent, pulled down by plunging wholesale gasoline prices (-5.0 percent), while food PPI grew 0.6 percent (corn prices: +19.9 percent). PPI for final demand services increased 0.4 percent, boosted by trade services PPI (i.e., margins at retailers and wholesalers) jumping 1.3 percent. Over the past year, final demand PPI has grown 1.7 percent (its smallest 12-month comparable since January 2017) while the year-to-year change in core wholesale prices was +2.1 percent.

#3Job openings softened (slightly) in May, hiring more so. The Bureau of Labor Statistics estimates there were a seasonally adjusted 7.323 million job openings at the end of May, off 49,000 from the previous month but up 2.8 percent from a year earlier and keeping it very near the data series high. Industries with sizeable year-to-year percentage increases in job openings included construction (+32.3 percent), accommodation/food services (+8.6 percent), manufacturing (+8.3 percent), and professional/business services (+7.1 percent). Hiring slowed 4.4 percent during May to 5.725 million workers (-2.3 percent vs. May 2018). Also falling were the number of people leaving their job as separations decreased by 192,000 to 5.495 million (May 2018: 5.495 million). The number of people quitting their job—3.425 million—was up 2.5 percent from a year earlier while those affected by a layoff—1.760 million—was down 2.8 percent from May 2018.

#4Small business owner sentiment took a step back in June. The Small Business Optimism Index from the National Federation of Independent Business lost 1.7 points during the month to a seasonally adjusted reading of 103.3. This followed a 1.5 point gain during the prior month. Only three of the index’s ten components advanced during the month: current inventories, expected credit conditions, and plans to increase inventories. Falling during June were index components linked to earnings trends, whether it was a good time to expand, real sales expectations, plans to make capital outlays, plans to increase employment, and current job openings. The press release noted increased “uncertainty” on weighing on business owner sentiment.

#5The U.S. budget deficit continued to track well ahead of last year’s pace. The Bureau of the Fiscal Service reports that the U.S. government had collected $2.609 trillion over the first nine months of FY2019, a 2.7 percent increase over the comparable nine months during the prior fiscal year. Meanwhile, outlays totaled $3.356 trillion during those same nine months, 6.7 percent ahead of the previous year’s total. As a result, the U.S. government has run up a budget deficit totaling -$747.1 billion from the period of October 2018 to June 2019, well ahead of the year-to-date deficit for the first nine months of FY18 of -$607.1 billion. The Bureau currently forecasts a budget deficit for FY19 of -$1.092 trillion

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 6, 2019, First-Time Claims, seasonally adjusted): 209,000 (-13,000 vs. previous week; -3,000 vs. the same week a year earlier). 4-week moving average: 219,250 (-0.7% vs. the same week a year earlier).
FOMC MinutesConsumer Credit (May 2019, Outstanding Consumer Credit (not mortgages) Balances, seasonally adjusted): $4.088 trillion (+$17.1 billion vs. April 2019, +5.2% vs. May 2018).
Wholesale Trade (May 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $679.1 billion (+0.4% vs. April 2019, +7.7% vs. May 2018).

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

October Was Better for Retailers: November 12 – 16

Retail sales regained strength in October.  Here are the five things we learned from U.S. economic data released during the week ending November 16.

#1Retail sales expanded in October following declines during the two previous months. The Census Bureau estimates U.S. retail and food services sales were at a seasonally adjusted $511.5 billion during the month, up 0.8 percent from September and 4.6 percent from a year earlier. This follows declines of 0.2 percent and 0.1 percent in August and September, respectively (both representing downward revisions from their previously reported sales levels). Much of October gain came in the form of strong sales at auto dealers/parts stores (+1.1 percent) and gas stations (+3.5 percent, mostly due to higher prices at the pump). Net of both, core retail sales gained 0.3 percent in October following a flat month in September. Core retail sales have risen 4.7 percent over the past 12 months. Experiencing sales increases were department stores (+1.3 percent) and retailers focused on building materials (+1.0 percent), electronics/appliances (+0.7 percent), apparel (+0.5 percent), sporting goods (+0.5 percent), and groceries (+0.2 percent). Sales slowed at furniture retailers (-0.3 percent) and restaurants/bars (-0.2 percent).Retail Sales 2017-8 11162018

#2Manufacturing production gains in October matched that of September. The Federal Reserve indicates that manufacturing output grew 0.3 percent on a seasonally adjusted basis during the month, matching September’s increase and just off August’s 0.4 percent gain. Production of durables increased 0.5 percent (even as that of automobiles declined 2.5 percent) while nondurables output rose 1.8 percent (boosted by chemicals, textiles, and paper). Manufacturing output has expanded 2.7 percent over the past year. Overall industrial production inched up by only 0.1 percent, its smallest gain since May (when industrial output had contracted by 0.8 percent) but still 4.1 percent ahead of the year-ago pace. Output fell at both the utilities (-0.5 percent) and mining (-0.3 percent) sectors.

#3Consumer prices firmed in October. The Consumer Price Index (CPI) rose 0.3 percent on a seasonally adjusted basis during the month, the biggest jump for the Bureau of Labor Statistics measure since January and following a more modest 0.1 percent increase in September. Energy prices gained 2.4 percent, boosted by higher prices for fuel oil (+3.7 percent), gasoline (+3.0 percent), and electricity (+2.3 percent). Food prices slipped 0.1 percent, pulled down by declines for fruits/vegetables, cereals/bakery products, and dairy goods. Net of energy and food, core CPI grew 0.2 percent, following two consecutive 0.1 percent increases. Rising were prices for used cars/trucks (+2.6 percent), shelter (+0.2 percent), medical care services (+0.2 percent), apparel (+0.1 percent), and transportation services (+0.1 percent). Headline CPI has risen 2.5 percent over the past year, while the 12-month comparable for core CPI is +2.1 percent).

#4Small business owners remained chipper about business conditions in October. The Small Business Optimism Index from the National Federation of Independent Business lost a half point during the month to land at a seasonally adjusted 107.4 (1986=100). Even with the decline, the measure of small business owners’ sentiment was 3.8 points above its year-ago reading and places the index above a reading of 100 for 23 consecutive months. Only one of the index’s ten components improved during the month: plans to expand inventories. Taking a step back during October were index components related to whether it is a good time to expand, earning trends, plans to increase employment, expected sales, and current inventories.

#5The U.S. government ran up a huge budget deficit during the first month of FY2019. The Bureau of the Fiscal Service reports that U.S. government receipts totaled $252.7 billion in October (+7.4 percent versus October 2017) while outlays were $353.2 billion (+18.3 percent versus October 2017). The resulting deficit of -$100.5 billion was 59.0 percent larger than that of October 2017. Among the areas driving the rise in expenditures were Social Security, interest payments on the debt, defense, and Veteran Affairs. Note that the timing of receipts and spending can vary sharply month-to-month and some of the difference with year-to-year comparisons may reflect when certain days fall on the calendar (e.g., a certain day is on a weekend).

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 10, 2018, First-Time Claims, seasonally adjusted): 216,000 (+2,000 vs. previous week; -34,000 vs. the same week a year earlier). 4-week moving average: 215,250 (-9.8% vs. the same week a year earlier).
State Employment (October 2018, Nonfarm Employment, seasonally adjusted): Payrolls grew in 9 states and were essentially unchanged in 41 states and the District of Columbia vs. September 2018. Payrolls grew in 36 states and were essentially unchanged in 14 states and the District of Columbia vs. September 2018.
Import Prices (October 2018, All Imports, not seasonally adjusted): +0.5% vs. September 2018, +3.5% vs. October 2017. Nonfuel Imports: +0.2% vs. September 2018, +0.7% vs. October 2017.
Export Prices (October 2018, All Exports, not seasonally adjusted): +0.4% vs. September 2018, +3.1% vs. October 2017. Nonagricultural Exports: +0.5% vs. September 2018, +3.9% vs. October 2017
Business Inventories (September 2018, Manufacturer’s and Trade Inventories, seasonally adjusted): $1.968 trillion (+0.3% vs. August 2018, +4.4% vs. September 2017).
Senior Loan Officer Opinion Survey (October 2018) 

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

A Record Number of Job Openings: October 15 – 19

Employers continued to have difficulty filling job openings in August. Here are the five things we learned from U.S. economic data released during the week ending October 19.

#1The number of job openings jumped to another record high in August. Nonfarm employers had a seasonally adjusted 7.136 million job openings on the final day of August, up 59,000 for the month and 18.1 percent from a year earlier. (By comparison, there were 6.234 million people unemployed during the same month.) Among the industries that the Bureau of Labor Statistics reported having the biggest year-to-year percentage gains in job openings were construction (+38.6 percent), financial activities (+28.7 percent), wholesale trade (+19.6 percent), accommodation/food services (+19.4 percent), retail (+18.0 percent), and manufacturing (+17.3 percent). Employers continued to struggle in filling these jobs as 5.784 million people were hired during August. While lagging the number of job openings, the number of people hired was up 71,000 for the month and 5.0 percent from August 2017. Industries with the greatest year-to-year percentage increases in hiring were retail (+18.6 percent), wholesale trade (+10.9 percent), and accommodation/food services (+6.2 percent). 5.706 million people left their jobs during August, up 110,000 for the month and 6.8 percent from a year earlier. 3.577 million workers voluntarily departed their jobs during the month, 12.7 percent ahead of a year-ago and indicative of workers confident about their job marketplace. Layoffs affected 1.622 million people, down 10.1 percent from the count of 12 months earlier.JOLTS August 18 101918

#2Manufacturing output grew modestly in September. The Federal Reserve reports that manufacturing output grew 0.2 percent on a seasonally adjusted basis during the month, following matching 0.3 percent gains in both July and August. Manufacturing output has increased 3.5 percent over the past 12 months. Durable goods manufacturing jumped 0.6 percent (led by motor vehicles, wood products, primary metals, and aerospace). Nondurable goods output slipped 0.1 percent, pulled down by textiles and apparel. Overall industrial production gained 0.3 percent in September and has risen 5.1 percent over the past year. Mining output jumped 0.5 percent for the month and 13.4 percent since September 2017, boosted by continued strength in both oil and gas extraction. Output at utilities was unchanged during September but has a 12-month comparable of +5.4 percent over the past year.

#3September was a weak month for retail sales. The Census Bureau estimates U.S. retail and food services sales inched up 0.1 percent during the month to a seasonally adjusted $509.0 billion. Even with the modest increase during September, sales have grown 4.7 percent over the past year. Sales at auto dealers/parts stores jumped 0.8 percent while gas station sales slowed 0.8 percent. Net of both, core retail sales were unchanged during September but have expanded 5.0 percent over the past 12 months. Sales improved during the month at retailers focused on furniture (+1.1 percent), electronics/appliances (+0.9 percent), sporting goods/hobbies (+0.7 percent), apparel (+0.5 percent), and building materials (+0.1 percent). Sales slumped, however, at restaurants/bars (-1.8 percent), department stores (-0.8 percent), and grocery stores (-0.1 percent).

#4Existing home sales sputtered again in September. The National Association of Realtors reports that sales of previously owned homes fell 3.4 percent during the month to a seasonally adjusted annualized rate of 5.15 million homes. This was not only a 4.1 percent drop from the same month a year earlier, it also was the measure’s seventh consecutive decline and the slowest pace of existing home sales in nearly three years. Sales failed to increase in all four Census regions, although transaction volume managed to hold even with August levels in the Midwest. All four Census regions had negative 12-month comparables: West (-12.2 percent), Northeast (-5.6 percent), Midwest (-1.5 percent), and the South (0.5 percent). A part of the problem remained a lack of homes on the market—there were 1.88 million homes available for sale at the end of September, down 1.6 percent from August but up 1.1 percent from a year earlier. This was the equivalent to a paltry 4.4 month supply of homes. The resulting median sales price has risen 4.2 percent over the past year to $258,100. NAR’s press release also ties recent sales weakness to “a decade’s high mortgage rates” that it says were “preventing consumers from making quick decisions on home purchases.”

#5The U.S. budget deficit surged 17.0 percent during the just-completed fiscal year. The U.S. Treasury Department reports that the federal government collected $3.329 trillion in receipts during the just completed FY2018, up 0.4 percent from FY2018. Outlays, however, jumped 3.2 percent during the same 12 months to $4.108 trillion. The resulting budget deficit of -$778.996 billion represented a 17.0 percent jump from FY2017. A closer look at receipts finds individual tax collections surged 6.1 percent during FY2018 while corporate tax receipts plummeted 31.1 percent. The U.S. government had accumulated a total debt of $21.460 trillion by September 30, 2018.

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 13, 2018, First-Time Claims, seasonally adjusted): 210,000 (-5,000 vs. previous week; -20,000 vs. the same week a year earlier). 4-week moving average: 211,750 (-13.9% vs. the same week a year earlier).
Housing Market Index (October 2018, Index (>50= Greater Percentage of Homebuilders Viewing Housing Market as “Good,” seasonally adjusted): 68 (vs. September 2018: 67, vs. October 2017: 68).
Housing Starts (September 2018, Starts, seasonally adjusted annualized rate): 1.201 million units (-5.3% vs. August 2018, +3.7% vs. September 2017).
State Employment (September 2018, Nonfarm Payrolls, seasonally adjusted): Payrolls declined significantly vs. July 2018 in 3 states and were essentially unchanged in 47 states and the District of Columbia. Payrolls grew significantly vs. August 2017 in 37 states.
Treasury International Capital Flows (August 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$77.1 billion (vs. July 2018: +$32.4 billion, vs. August 2017: +$40.6 billion).
FOMC minutes

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