Prices and Job Openings Remain Firm: August 6 – 10

Inflation continued to take hold, albeit still at a moderate rate. Here are the five things we learned from U.S. economic data released during the week ending August 10.

#1Consumer prices have risen 2.9 percent over the past year. The Bureau of Labor Statistics indicates the Consumer Price Index (CPI) grew a seasonally adjusted 0.2 percent during July, up from June’s 0.1 percent bump but matching April and May gains of 0.2 percent. Energy prices pulled back for a second consecutive month (-0.5 percent), with declines reported for gasoline (-0.6 percent), utility delivered gas (-0.5 percent), and electricity (-0.4 percent). Food CPI inched up 0.1 percent. Net of energy and food, core CPI grew 0.2 percent for the fifth time in six months. Rising were prices for used cars/trucks (+1.3 percent), transportation services (+0.5 percent), new vehicles (+0.3 percent), shelter (+0.3 percent), and medical care services (+0.1 percent). Prices dropped for medical care commodities (-1.1 percent) and apparel (-0.3 percent). Over the past year, CPI has risen 2.9 percent, its largest 12-month comparable in more than six years. The core measure has jumped 2.4 percent since last July, its largest 12-month comparable since September 2008. Both increases portend the Federal Reserve raising its short-term interest rate target at its upcoming September meeting.CPI 2008-2018 081018.png

#2While pausing in July wholesale prices were 3.3 percent ahead of their year-ago levels. Final demand Producer Price Index (PPI) was unchanged during the month on a seasonally adjusted basis, according to the Bureau of Labor Statistics. This followed gains in May and June of +0.5 percent and +0.3 percent, respectively. The core measure of wholesale prices, removing the impact of energy, food, and trade services, gained 0.3 percent during July. PPI for final demand good eked out a 0.1 percent gain as prices for both energy (-0.5 percent) and food (-0.1 percent) both dropped. PPI for core goods increased 0.3 percent for the sixth time in seven months (pharmaceutical preparations jumped 0.7 percent). Losing ground during July was PPI for final demand services, slipping 0.1 percent. Trade services PPI, a measure of retailer and wholesaler margins, slumped 0.8 percent. Over the past year, final demand PPI has risen 3.3 percent (just under its biggest increase since 2011) while the core measure has a 12-month comparable of +2.8 percent (its highest mark since March).

#3There remained more job openings than people seeking work in June. Per the Bureau of Labor Statistics, employers had a seasonally adjusted 6.662 million job openings at the end of the month, essentially matching the count from the end of May and up 8.8 percent from the same month a year earlier. Further, this was greater than the 6.564 million people the BLS had estimated were unemployed during the same month. Private sector employers had 6.053 million job openings at the end of June, up 8.6 percent from June 2017. Industries with the particularly sizeable year-to-year percentage gains in job openings included construction (+30.2 percent), retail (+29.7 percent), transportation/wholesale (+25.3 percent), manufacturing (+17.3 percent), and accommodation/food services (+9.7 percent). Hiring slowed by 104,000 to 5.651 million workers, which paced 3.4 percent ahead of year-ago hiring. Private sector employers hired 5.303 million workers during June, up 3.4 percent from a year earlier. 5.502 million people left their jobs during the month, up 83,000 from May and 3.9 percent from June 2017. 3.402 million voluntarily departed their jobs during the month (+7.5 percent versus June 2017) while 1.723 million people were laid off (-2.8 percent versus June 2017).

#4Consumers slowed the rate of them taking on debt. The Federal Reserve estimates that the American public held a seasonally adjusted $3.908 trillion in outstanding debt (not counting mortgages or other real estate-backed debt) at the end of June, a $10.2 billion increase for the month and up 4.7 percent from a year earlier. As a matter of context, consumer debt holdings had grown by $24.3 billion during May. All June’s gain came in the form of nonrevolving debt (e.g., college loans, auto loans), rising by $10.4 billion to $2.869 trillion (4.7 percent versus June 2017). Revolving credit (i.e., credit card) balances essentially held steady at $1.039 trillion (+4.8 percent June 2017).

#5The federal budget deficit is more than 20 percent larger than what it was this time last year. The Bureau of the Fiscal Service, a part of the Department of the Treasury, reports that the U.S. government had a budget deficit of $76.9 billion during July. This was up $2.0 billion from June and 79.0 percent from the same month a year earlier. Tax receipts totaled $225.3 billion while outlays were at $302.1 billion.  More notable is that the budget deficit generated over the first ten months of FY2018—$684.0 billion—was 20.8 percent greater than that of the first ten months of FY2017. Receipts over this time period were up a mere 1.0 percent while expenditures rose 4.4 percent. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 4, 2018, First-Time Claims, seasonally adjusted): 213,000 (-6,000 vs. previous week; -39,000 vs. the same week a year earlier). 4-week moving average: 214,250 (-11.3% vs. the same week a year earlier).
Wholesale Trade (June 2018, Wholesale Inventories, seasonally adjusted): $632.4 billion (+0.1% vs. May 2018, +5.1% vs. June 2017).
Senior Loan Officer Opinion Survey on Bank Lending 

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

Home Sales Remain Firm, Moderate Economic Growth on Target for 2017: June 19 – 23

Home sales improved during May while forward-looking economic indicators suggest moderate economic growth during the rest of this year. Here are the 5 things we learned from U.S. economic data released during the week ending June 23.

#1Existing home sales crept up during May. The National Association of Realtors reports that sales of previously owned homes grew 1.1 percent during the month to a seasonally adjusted annualized rate (SAAR) of 5.62 million homes. This was 2.7 percent above the year ago annualized sales pace and just below its post-recession sales peak. Sales grew in three of four Census regions during May: Northeast (+6.8 percent), West (+3.4 percent), and South (+2.2 percent). Sales fell 5.9 percent in the Midwest. The 12-month comparables followed the same pattern, with sales growing in the Northeast, South, and West, but falling in the Midwest. There remained a dearth of homes on the market. A mere 4.2 month supply of homes were available for sale at the end of May, with the 1.96 million homes on the market representing 8.4 percent decline from a year earlier. As a result, the median sales price of existing home sales jumped 5.8 percent from a year earlier to $252,800. The press release noted that “[t]he job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level.”

#2New home sales also bounced up during May. The Census Bureau estimates the seasonally adjusted annualized sales rate for new homes was at 610,000 units, up 2.9 percent for the month and 8.9 percent from a year earlier. Sales surged in both the West and South by 13.3 percent and 6.2 percent, respectively, but cooled in both the Midwest (-25.7 percent) and Northeast (-10.8 percent). Homebuilders had 268,000 new homes available for sale at the end of May, up 1.5 percent from the previous month and 11.2 percent from a year earlier. This translated into a still tight 5.3 month supply of new homes. The median sales price for new homes jumped 16.8 percent over the past year, although some of the “increase” reflects larger (and therefore more expensive) homes sold.

#3Leading economic indicators point to 2017 economic growth of two percent or more. The Conference Board’s Leading Economic Index grew 0.3 percent during May to a seasonally adjusted reading of 127.0 (2010 = 100). This was up 3.5 percent from a year earlier. Eight of the leading index’s components made positive contributions to the measure during May, led by the interest rate spread, new orders for manufactured goods, and consumers’ expectations for business conditions. The coincident economic index edged up 1/10th of a point to 115.3 (+2.2 percent vs. May 2016) as three of four index components making positive contributions (personal income net of transfer payments, nonfarm payrolls, and manufacturing/trade sales). The lagging economic index also added 1/10th of a point to 124.2 (+2.1 percent vs. May 2016) with only three of seven index components making a positive contribution during the month. The press release noted that the leading indicators suggest “the economy is likely to remain on, or perhaps even moderately above, its long-term trend of about 2 percent growth for the remainder of the year.”

#4Layoff activity remained light during mid-June. Per the Department of Labor, there were a seasonally adjusted 241,000 first-time claims made for unemployment insurance benefits during the week ending June 17, up 3,000 for the week but 21,000 below the number of claims from the same week a year earlier. The jobless claims count has been below 300,000 for 120 consecutive weeks, a feat not seen since 1970(!). The four-week moving average of first-time claims of 244,750 was 8.3 percent below that of a year earlier. 1.817 million people were receiving some form of unemployment insurance benefits during the week ending June 3, 10.2 percent below the count of a year ago.

#5Americans’ household debt service remained relatively low in early 2017. The Federal Reserve indicates that financial obligations represent 15.47 percent of households’ disposable personal income during the first quarter of 2017. The financial obligations ratio was down one basis point from the previous quarter but up a basis point from a year earlier. This ratio has been consistently below 16 percent since 2011 (contrasting with ten years ago when the percentage was consistently nearly 18 percent) and has stayed near 30-year lows. The debt service ratio held steady at 10.04 during Q1 and was up two basis points from a year earlier. By comparison, this measure was above 13 percent ten years ago. Nondebt financial obligations (e.g., rent, leases) represented 5.43 percent of disposable income, down 1-basis point from the previous quarter but keeping the measure near its highest levels in 30 years.Financial Obligations Ratio--06232017

Other U.S. economic data released over the past week:
FHFA House Price Index (April 2017, Purchase-only Index, seasonally adjusted): +0.7% vs. March 2017, +6.8% vs. April 2016.

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

A Widening Trade Deficit: What We Learned During the Week of October 5 – 9

In a rather light week for economic data, we saw the trade deficit zoom up but jobless claims fall to a 42-year low.  Here are the 5 things we learned from U.S. economic data released during the week ending October 9.

#1A jump in imports and a drop in exports in August led to the largest trade deficit since March. The Census Bureau and the Bureau of Economic Analysis estimate exports declined by $3.7 billion to $185.1 billion (-6.2% vs. August 2014) and that imports increased by $2.8% billion to $233.4 billion (-2.2% vs. August 2014). The resulting seasonally adjusted trade deficit of -$48.3 billion was 17.1% larger than the deficit in August 2014. The goods deficit zoomed up $6.6 billion to -$67.9 billion while the services surplus inched up $0.1 billion to +$19.6 billion. Exports of industrial supplies and materials (including fuel, plastic materials and crude oil) declined by $2.2 billion while imports of consumer goods grew by $2.1 billion. The average price of imported crude oil—$49.33—was down $4.87 a barrel from July and 46.7% 100915from a year earlier.  The U.S. had its largest goods deficits with China (-$32.9 billion), European Union (-$14.5 billion), Germany (-$6.8 billion), Mexico     (-$5.3 billion) and Japan (-$5.2 billion). Using 2009 dollars, the “real” deficit expanded by $7.3 billion to -$63.4 billion, its largest since March.

#2There were fewer first-time jobless claims made during early October than seen in any week since 1973. The seasonally adjusted estimate of first-time claims for unemployment insurance benefits of 263,000 for the week ending October 3rd was the 31st consecutive week in which the Department of Labor data series has been below 300,000. The 4-week moving average for the week dropped by 3,000 to 267,500 claims. A year earlier, the moving average was at 291,250. There were 2.204 million people receiving some form of unemployment insurance benefits during the week ending September 26, up 9,000 from the previous week. The 4-week moving average for the continuing claims measure of 2.222 million was down 8.7% from the same week a year earlier.

#3The service sector grew at a slower pace during September. The headline index from the Non-Manufacturing Report on Business from the Institute for Supply Management shed 2.1 points during the month to a seasonally adjusted 56.9. This was the 68th straight month in which the measure was above a reading of 50.0, the threshold between an expanding and contracting service sector. Two index components fell during the month (business activity, new orders), 1 was unchanged (supplier deliveries) and 1 improved (employment). Thirteen of 18 tracked service sector industries improved during the month, led by education, construction, finance/insurance and health care/social assistance. The press release noted that survey “respondents continue to remain positive about current business conditions.”

#4Import prices fell for the 11th time in 13 months during September. The Bureau of Labor Statistics estimates import prices slipped 0.1% during the month and were 10.7% below prices of a year earlier. (Note that unlike the BLS reports on consumer and wholesale prices, this data series is not adjusted for typical seasonal variations.) The price of imported fuel grew for the 1st time in 3 months with a 1.4% gain (but nevertheless was 44.7% below year ago levels). Prices for imported natural gas blossomed 9.3% while those for imported petroleum increased 1.1%. Net of fuel, import prices contracted 0.3%, which was the 15th straight month the nonfuel metric did not increase and resulted in a 12-month comparable of -3.1%. Among the product categories pushing down nonfuel import prices were nonfuel industrial supplies, foods/feeds/beverages and capital goods.

Meanwhile, export prices declined 0.7% for the month and were 7.4% below that of a year earlier. Falling during the month were prices for exported agricultural goods, nonagricultural industrial supplies, consumer goods and automotive vehicles.

#5Consumer debt grew in August at its slowest pace since January. The Federal Reserve’s estimate of outstanding non-real estate backed consumer debt grew by $16.0 billion during the month to $3.470 trillion. This was up 6.8% from a year earlier. Slowing has been the growth rate of outstanding nonrevolving debt (e.g., college loans, car loans), with outstanding balances growing $12.0 billion to $2.551 trillion (+$12.0 for the month and +7.7% vs. August 2014 levels). The latter was the smallest 12-month comparable since March 2014. Meanwhile, consumers are slowly using their credit cards more. Revolving credit balances expanded by $4.0 billion to $918.5 billion (+4.2% vs. August 2014, its biggest 12-month comparable since August 2008).

Other data released over the past week that you might find of interest:
Wholesale Inventories  (August 2014, seasonally adjusted): $583.7 billion, +0.1% vs. July, +4.1% vs. August 2014.
Minutes from the September meeting of the Federal Open Market Committee

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