Core Prices Chill, Job Openings Grow: May 6 – 10

Core inflation was on spring break in April, except at the gas pump.  Here are the five things we learned from U.S. economic data released during the week ending May 10.

#1Core consumer inflation was restrained (again) in April. The Bureau of Labor Statistics tells us that the Consumer Price Index (CPI) grew 0.3 percent on a seasonally adjusted basis during the month, following a 0.4 percent bounce in March. Energy prices jumped 2.9 percent, led by a 5.7 percent surge in gasoline prices. Food CPI, however, slipped 0.1 percent (including a 0.5 percent drop in the prices for food consumed at home). Core CPI, which nets out energy and food, edged up 0.1 percent for the third consecutive month. Rising were prices for medical care commodities (+0.9 percent), shelter (+0.4 percent), medical care services (+0.2 percent), transportation services (+0.1 percent), and new vehicles (-0.1 percent). Prices slumped for used cars/trucks (-1.3 percent) and apparel (-0.8 percent). CPI has risen 2.0 percent over the past year while the core price measure has a 12-month comparable of +2.1 percent.

#2Wholesale prices also moderated. Final demand Producer Price Index (PPI) grew at a seasonally adjusted 0.2 percent during April, down from the 0.6 percent burst a month earlier. The Bureau of Labor Statistics’ core wholesale price measure, which removes the impact of energy, food and trade services, jumped 0.4 percent. Both the headline and core PPI measures have risen 2.2 percent over the past year. During April, wholesale energy prices rose 1.8 percent (PPI for gasoline surged 5.9 percent) while food PPI slipped 0.2 percent. Net of energy and food, PPI for core goods was unchanged for the month (the first time it failed to increase since last December).

#3 Job openings rebounded in March. The Bureau of Labor Statistics reports that there were 7.488 million job openings on the final day of March (on a seasonally adjusted basis), up 346,000 from February, reversing January’s 483,000 contraction, up 8.6 percent from a year earlier, and well ahead of the 6.211 unemployed people during the month. Industries with large percentage year-to-year increases in job openings included construction (+53.8 percent), wholesale trade (+20.9 percent), professional/business services (+18.3 percent), and manufacturing (+11.7 percent). Hiring continued to lag, however, slipping by 35,000 jobs during the month to 5.660 million (up a measly 0.6 percent from a year earlier). Job separations fell by 142,000 to 5.434 million (essentially matching the March 2018 count). Voluntarily quits were 3.3 percent ahead of their year-ago pace (to 3.409 million) while layoffs slowed 4.0 percent over the same period to 1.700 million workers.

#4The trade deficit widened slightly in March. The Census Bureau and the Bureau of Economic Analysis indicates the U.S. trade deficit expanded by $0.7 billion to a seasonally adjusted -$50.0 billion as exports grew by $2.1 billion and imports expanded by $2.8 billion. Over the past year, exports have increased by 1.3 percent while imports have risen 2.1 percent. The goods deficit grew by $0.5 billion to -$72.4 billion while the services surplus narrowed by $0.2 billion to +$22.4 billion. The U.S. had its largest goods deficits with China, the European Union, and Mexico.

#5Consumer put away their credit cards in March. The Federal Reserve estimates consumer revolving credit balances shrank by $2.2 billion during the month to a seasonally adjusted $1.057 trillion. Over the past year, revolving credit balances have grown 3.2 percent. Non-revolving credit balances, which includes college and auto loans, increased by $12.4 billion during March (and 5.6 percent over the past year) to $2.995 trillion. In total, outstanding consumer credit balances (not including mortgages and other real estate backed loans) expanded by $10.3 billion during the month to $4.052 trillion, representing a 4.9 percent since March 2018.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 4, 2019, First-Time Claims, seasonally adjusted): 228,000 -2,000 vs. previous week; +17,000 vs. the same week a year earlier). 4-week moving average: 220,250 (+2.3% vs. the same week a year earlier).
Wholesale Trade (March 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $669.8 billion (-0.1% vs. February 2019, +6.7% vs. March 2018).
Monthly Treasury Statement (First 7 Months of FY2019, Federal Government Budget Deficit): -$530.9 billion (+37.8% vs. First 7 Months of FY2018).
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The Trade Deficit Narrowed in November as Exports and Imports Both Fell: Week of February 4 – 8

The trade deficit shrank in November, as had factory orders. Here are the five things we learned from U.S. economic data released during the week ending February 8.  

#1The trade deficit narrowed in November. The Census Bureau and the Bureau of Economic Analysis estimates export activity slowed $1.3 billion to $209.9 billion (+3.7 percent versus November 2017) while imports fell by $7.7 billion to $259.2 billion (+3.2 percent). The resulting trade deficit of -$49.3 billion was down $6.4 billion from October but 0.7 percent larger than that of a year earlier. The goods deficit contracted by $6.7 billion to -$71.6 billion while the services surplus shrank by $0.3 billion to +$22.3 billion. The former was the result a $7.9 billion drop in imported goods, including steep declines for consumer goods (including cell phones) and industrial supplies/oil. The U.S. had its biggest goods deficits in November with China (-$35.4 billion, down $2.8 billion from October), the European Union (-$13.8 billion), Mexico (-$6.8 billion), and Japan (-$5.7 billion).

#2Factory orders slowed for a second consecutive month in November. The Census Bureau estimates new orders for manufactured goods declined by $3.1 billion during the month to a seasonally adjusted $499.2 billion. This was 4.1 percent greater than the value of November 2017 factory orders. Transportation goods orders grew 3.0 percent, boosted by strong gains for ships/boats (+72.6 percent), defense aircraft (+31.2 percent), and civilian aircraft (+6.9 percent). Net of transportation goods, core factory orders dropped 1.3 percent following a 0.2 percent gain in October. While orders grew for fabricated and primary metals (+0.9 percent and +0.8 percent, respectively), they slowed for nondurable goods (-1.9 percent), machinery (-1.7 percent), electrical equipment/appliances (-1.1 percent), and computers/electronics (-0.3 percent). New orders for civilian capital goods orders net of aircraft (a proxy for business investment) slumped 0 6 percent in November. 

#3Service sector activity remained strong, but softened, in January. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business slipped by 1.3 points during the month to a reading of 56.7. Even with the pullback, the NMI has been above a reading of 50.0 for 108 consecutive months, indicative of an expanding service sector. Only one of the NMI’s four components grew during the month, with employment adding 1.2 points to 57.8. Shedding points from December were components for new orders (down 5.0 points to 57.7) and business activity/production (down 1.5 points to 59.7. Holding firm was the measure for supplier deliveries at a reading of 51.5. Only 11 of 18 tracked nonmanufacturing industries expanded during the month, however, with the most robust expansion reported in transportation/warehousing, health care/social assistance, and mining. The press released noted continued optimism but also stated that “[r]espondents are concerned about the impacts of the government shutdown.

#4Manufacturing sector productivity edged up during Q4 2018. The Bureau of Labor Statistics tells us that manufacturing productivity grew 1.3 percent on a seasonally adjusted annualized basis during the final three months of 2018, an improvement from Q3’s 1.1 percent gain. Manufacturing output had expanded 2.3 percent, supported by a 1.0 percent advance in hours worked. The productivity gain for the past year was much softer, with a 0.7 percent increase. During Q4, durable manufacturing productivity increased 2.6 percent while the productivity improvement for nondurable manufactured goods was 1.2 percent. (The BLS was unable to report on overall productivity for the U.S. economy due to the partial government shutdown.)

#5Consumers took on credit at a marginally slower pace in December. American households had $4.010 trillion in outstanding consumer debt (not including mortgages and other real estate-backed loans) in December, according to the Federal Reserve. This was up $16.5 billion from November (smaller than the prior month’s $22.4 billion gain) and a 12-month increase of 4.7 percent. Consumers had $1.045 trillion in outstanding revolving credit balances at the end of December, up $1.7 billion for the month and 2.0 percent from a year earlier. Nonrevolving credit balances expanded $14.9 billion to $2.966 trillion (+5.6 percent versus December 2017).

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 2, 2019, First-Time Claims, seasonally adjusted): 234,000 (-19,000 vs. previous week; +11,000 vs. the same week a year earlier). 4-week moving average: 224,750 (-1.4% vs. the same week a year earlier).
Senior Loan Officers Survey (January 2019)

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Gas Prices Dropped as 2018 Ended: January 7 – 11

Core consumer prices grew at a steady, moderate pace in December. Here are the five things we learned from U.S. economic data released during the week ending January 11.  

Note that the partial shutdown of the federal government has and will delay the release of certain economic data reports.

#1Consumer prices fell in December, but core prices inched up. The Consumer Price Index (CPI) declined 0.1 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. This was the first drop in consumer prices since last March, with gasoline prices being the main culprit. Energy CPI slumped by 3.5 percent (its third decline in four months) with gasoline prices plummeting 7.5 percent. Prices for both electricity (+1.8 percent) and utility delivered natural gas (+0.7 percent) both rose. Also rising were food prices (+0.4 percent—its biggest single-month gain since May 2014), pulled up by increased costs for fruit and vegetables. Net of energy and food, core CPI gained 0.2 percent. Rising were prices for medical care services (+0.4 percent) and shelter (+0.3 percent) while prices fell 0.2 percent for transportation services, used cars/trucks, and medical care commodities. Over the past year, CPI has increased by 1.9 percent while core consumer prices have risen 2.2 percent.CPI December 2018 111119.png

#2Even with a decline in November, there were more job openings than the number of unemployed people. The Bureau of Labor Statistics reports that there were 6.888 million open jobs on the final day of November, down 243,000 from October but 16.1 percent ahead of the November 2017 count. This was greater than the BLS’s estimate of 6.018 million unemployed people during the month. Private sector employers had 6.266 million open jobs in November, up 15.5 percent from a year earlier. Most industries reported double-digit percentage increases in job openings, with notable exceptions being retail (-6.2 percent), wholesale trade (+5.4 percent), and financial activities (+8.9 percent). Also dropping during the month was the number of people hired, declining by 218,000 to 5.710 million people (+3.7 percent versus November 2017). Industries reporting particularly large year-to-year percentage increases in hiring included wholesale trade (+31.7 percent), transportation/warehousing (+16.1 percent) health care/social assistance (+14.0 percent), financial activities (+10.9 percent), and manufacturing (+9.9 percent). 

#3Service sector activity chilled a bit as 2018 wrapped up. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, shed 3.1 points to a reading of 57.5. This was the measure’s lowest reading since July but also represented the 107th consecutive month in which it was higher than 50.0 (indicative of an expanding service sector). Three of the NMI’s four components lost ground relative to November: business activity/production (down 5.3 points), supplier deliveries (down 5.0 points), and employment (off 2.1 points). Eking a small gain was the component tied to new orders, which added 2/10ths of a point. Sixteen of 18 tracked nonmanufacturing industries reported growth during December, led by arts/entertainment/recreation, transportation/warehousing, and health care/social assistance. Whereas the comments from survey respondents were “mostly optimistic about overall business conditions,” highlighted comments noted potential adverse effects resulting from the tariffs.

#4Small business owner optimism slipped again in December but remained near post-recession highs. The Small Business Optimism Index shed 4/10ths of a point during the month to a seasonally adjusted 104.4 (1986=100). Even though this was the fourth straight monthly decline, the National Federation of Independent Business’s measure has been above a reading of 100.0 for 25 consecutive months. Four of the index’s ten components improved from their November readings: plans to increase inventories (up six points), current job openings (up five points), current inventories (up four points), and plans to increase employment (up a point). Of the six declining components, the largest decreases were for expected economic conditions (off six points), whether it is a good time to expand (off five points), and plans to make capital outlays (down four points). The press release emphasized that small businesses “need workers to generate more sales, provide services, and complete projects.”

#5Consumer borrowing rose in November. The Federal Reserve estimates consumers held a seasonally adjusted $3.979 trillion in outstanding non-real estate related debt (e.g., mortgages) at the end of November. This represented an increase of $22.2 billion from October and a 4.3 percent gain over the past year. Revolving credit (e.g., credit card) expanded by $4.8 billion to $1.042 trillion (+2.2 percent versus November 2017). Nonrevolving credit balances rose by $17.3 billion in November to $2.937 trillion. Nonrevolving consumer credit balances, which includes both college and auto loans, have increased by 5.1 percent over the past 12 months.

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 5, 2019, First-Time Claims, seasonally adjusted): 216,000 (-17,000 vs. previous week; -31,000 vs. the same week a year earlier). 4-week moving average: 221,750 (-9.4% vs. the same week a year earlier).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.