Retailers and Manufacturers Started 2019 in Different Directions: March 11 – 15

Retail sales improved in January but manufacturing output struggled in February. Here are the five things we learned from U.S. economic data released during the week ending March 15.  

#1Retail sales modestly rebounded in January. The Census Bureau estimates U.S. retail and food services sales grew 0.2 percent during the month to a seasonally adjusted $504.4 billion. This compares favorably to December’s 1.6 percent sales slump (revised from a previously reported 1.2 percent drop) and places sales 2.3 percent ahead of January 2018 levels. Sales fell a sharp 2.4 percent at auto dealers/parts stores and 2.0 percent at gas stations. Net of sales at auto dealers/parts stores and gas stations, core retail sales jumped 1.2 percent following a 1.6 percent drop in December and have grown 3.2 percent since January 2018. Growing during the month were sales at sporting goods/hobby retailers (+4.8 percent), building material/garden stores (3.3 percent), health/personal care stores (+1.6 percent), grocery stores (+1.2 percent), general merchandisers (+0.8 percent), and restaurants/bars (+0.7 percent). Sales declined at stores focused on apparel (-1.3 percent), furniture (-1.2 percent), and electronics/appliances (-0.3 percent).

#2Manufacturing production dropped for the second straight month in February. The Federal Reserve reports the manufacturing output fell 0.4 percent on a seasonally adjusted basis, following a 0.5 percent drop in January. Durable goods production slipped 0.1 percent (matching the modest decline in motor vehicle production) while nondurable goods output declined 0.7 percent as production fell for petroleum/coal products, apparel, and printing. Overall industrial production increased 0.1 percent as the manufacturing slowdown was counterbalanced by increased utilities (+3.7 percent) and mining (+0.3 percent) output. Over the past year, manufacturing output has grown a modest 1.0 percent while overall industrial production has risen 3.5 percent. 

#3Employers continued struggling to fill open jobs during January. There were a seasonally adjusted 7.581 million open nonfarm jobs at the end of January, up 102,000 from December and 15.0 percent above year-ago levels. Further, the Bureau of Labor Statistics’ count of open positions was well above the 6.535 million people who had reported being unemployed during the same month. Among the industries reporting large year-to-year percentage increases in job openings were wholesale trade (+32.5 percent), construction (+23.3 percent), health/social assistance (+21.0 percent), professional/business services (+19.5 percent), accommodation/food services (+19.1 percent), and financial activities (+15.3 percent). Lagging behind the growth in new job openings was hiring, which grew by 84,000 to 5.801 million workers. This was 5.0 percent ahead of the January 2018 pace of hiring. 5.550 million people left their jobs in January, up 81,000 for the month and 4.4 percent from a year earlier. Indicative of confident workers, 3.490 million quit their jobs voluntarily (+15.5 percent versus January 2018) while the count of people laid off—1.723 million—was 10.9 percent year-ago layoff activity

#4Inflation measures remained under control in February. The Bureau of Labor Statistics reports the Consumer Price Index (CPI) grew 0.2 percent on a seasonally adjusted basis during the month, its first increase since October. Pulling up the headline number were 0.4 percent gains for both food and energy. The latter included the first increase in gasoline prices since October (+1.5 percent). Net of food and energy, core CPI advanced 0.1 percent, its smallest increase since last August. While prices for shelter and apparel each grew 0.3 percent, falling were prices for medical care commodities (-1.0 percent), used cars/trucks (-0.7 percent), new vehicles (-0.2 percent), and transportation services (-0.1 percent). Over the past year, CPI has risen 1.5 percent while the core measure has a 12-month comparable of +2.1 percent.

Meanwhile, the Producer Price Index (PPI) for final demand grew for the first time in four months with a 0.1 percent seasonally adjusted increase in February, per the Bureau of Labor Statistics. The core measure of wholesale prices, which removes the impact of energy, food and trade services, also grew 0.1 percent for the month. Energy prices increased for only the third time in eight months with a 1.8 percent gain (including a 3.3 percent advance in wholesale gasoline prices). PPI for final demand food slumped 0.3 percent. PPI for final demand goods gained 0.4 percent while that for final demand services was unchanged. Final demand PPI has risen 1.9 percent, the first time since June 2017 in which the 12-month comparable has fallen under two percent. The core measure for wholesale prices has grown 2.3 percent over the past year.

#5Durable goods orders grew for a third straight month in January. The Census Bureau tells us that new orders for manufactured durable goods grew 0.4 percent to a seasonally adjusted $255.3 billion. Transportation goods orders rose 1.2 percent, with increases for civilian (+15.9 percent) and defense aircraft (+4.5 percent) and a 1.0 percent slowdown in motor vehicle orders. Net of transportation goods, durable goods orders slipped 0.1 percent. Rising were orders for computers (+7.6 percent), communications equipment (+3.8 percent), electrical equipment/appliances (+1.7 percent), and machinery (+1.4 percent). New orders for primary metals slumped 1.5 percent. New orders for civilian non-aircraft capital goods—a proxy for business investment—gained 0.8 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 9, 2019, First-Time Claims, seasonally adjusted): 229,000 (+6,000 vs. previous week; +3,000 vs. the same week a year earlier). 4-week moving average: 223,750 (+0.4% vs. the same week a year earlier).
Import Prices (February 2019, All Imports, not seasonally adjusted): +0.6% vs. January 2019, -1.3% vs. February 2018. Nonfuel Imports: Unchanged vs. January 2019, -0.6% vs. February 2018.
Export Prices (February 2019, All Exports, not seasonally adjusted): +0.6% vs. January 2019, +0.3% vs. February 2018. Nonagricultural Exports: +0.7% vs. January 2019, +0.3% vs. February 2018.
State Employment (January 2019, Nonfarm Payrolls, seasonally adjusted): Vs. December 2018: Payrolls grew in 13 states and were essentially unchanged in 37 states and the District of Columbia. Vs. January 2018: Payrolls grew in 26 states and were essentially unchanged 24 states and the District of Columbia.
New Home Sales (January 2019, New Homes Sold, seasonally adjusted annualized rate): 607,000 (-6.9% vs. December 2018, -4.1% vs. January 2018).
Business Inventories (December 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.995 trillion (+0.6% vs. November 2018, +4.8% vs. December 2017).
Small Business Optimism Index (February 2019, Index (1986=100), seasonally adjusted): 101.7 (vs. January 2019: 101.2, vs. February 2018: 107.6).
Construction Spending (January 2019, Value of Construction Put in Place, seasonally adjusted annualized rate): $1.279 trillion (+1.3% vs. December 2018, +0.3% vs. January 2018).
University of Michigan Surveys of Consumers (March 2019-preliminary, Index of Consumer Sentiment (100=1966Q1), seasonally adjusted): 97.8 (vs. February 2019: 93.8, vs. March 2018: 101.4).

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

Factories Slowed in January: February 11 – 15

Factories pumped out less output in January. Here are the five things we learned from U.S. economic data released during the week ending February 15.  

#1Manufacturing production fell in January. The Federal Reserve reports manufacturing fell a seasonally adjusted 0.9 percent during the month following a 0.8 percent gain in December. Durable goods production slumped 1.7 percent as motor vehicle output plummeted 8.8 percent. Nondurable goods output was unchanged for the month. Compared to a year earlier, manufacturing output has risen 2.9 percent. Overall industrial production fell 0.6 percent in January after having eked out a 0.1 percent increase in December. Industrial production has grown 3.6 percent over the past year. The rise in mining output slowed to a 0.1 percent gain in January after a 1.5 percent jump in December while output at utilities increased 0.4 percent. Factories were slightly less busy in January as capacity utilization dropped by 6/10ths of a percentage point to 78.2 percent. Manufacturing sector capacity utilization fell by 7/10ths of a point to 75.8 percent.Capacity Utilization 021519

#2Retail sales slumped in December (or at least the seasonally adjusted data had). The Census Bureau estimates retail and food services sales were at a seasonally adjusted $505.8 billion during the final month of 2018, down an unexpectedly sharp 1.2 percent from November. The drop appears, at least at first glance, to be a bit of an outlier to the negative side and may be the result of data issues tied to the recent partial federal government shutdown or other factors. A part of the drop was due to declining prices at the pump as sales at gas stations plummeted 5.1 percent. On the flip side, sales at auto dealers/parts stores grew 1.0 percent. Net of sales at both gas stations and auto dealers/parts stores, core retail sales fell 1.4 percent with sales off at most retail categories. Falling were sales at retailers focused on sporting goods/hobbies (-4.9 percent), health/personal care (-2.0 percent), furniture (-1.3 percent), apparel (-0.7 percent), groceries (-0.5 percent), and electronics/appliances (-0.1 percent), along with department stores (-3.3 percent) and restaurants/bars (-0.7 percent). One thing that also makes this report a bit suspect is the reported 3.9 percent slowdown at nonstore retailers (i.e., online retailers)

#32019 starts with little headline inflation, with core measures staying on target. The Consumer Price Index (CPI) was unchanged on a seasonally adjusted basis for a third consecutive month in January, per the Bureau of Labor Statistics. Energy CPI fell 3.1 percent, pulled down by gasoline prices slumping 5.5 percent. Food prices, however, gained 0.2 percent. Core CPI, which removes both energy and food, increased 0.2 percent for the fifth straight month. Rising were prices for apparel (+1.1 percent), shelter (+0.3 percent), medical care services (+0.3 percent), new vehicles (+0.2 percent), used cars/trucks (+0.1 percent), and medical care commodities (+0.1 percent). Transportation services prices slipped 0.2 percent. Over the past year, CPI has risen 1.6 percent while core inflation has grown 2.2 percent.

Meanwhile, wholesale prices slipped for a second straight month as final demand Producer Price Index (PPI) declined 0.1 percent on a seasonally adjusted basis. The core final demand measure of wholesale prices, which removes the impact of energy, food, and trade services, gained 0.2 percent. Falling were producer prices for both energy (-3.8 percent) and food (-1.7 percent). Rising was PPI for services, half of which resulted from wider margins at apparel/jewelry/footwear apparel retailers. Over the past year, headline PPI has risen 2.0 percent while the core wholesale price measure has a 12-month comparable of +2.5 percent

#4The number of job openings bloomed again to record levels as 2018 wrapped up. There were a seasonally adjusted 7.335 million job openings on the final day of 2018, up 166,000 for the month and a whopping 29.4 percent from a year earlier. The Bureau of Labor Statistics also indicates that private sector job openings totaled 6.707 million, up 30.4 percent from the end of 2017, with virtually every industry reporting double-digit percentage increases. Hiring also increased, although not at the same fast pace as employers continue to experience difficulty to find new employees. There were 5.907 million workers hired in December, up 95,000 for the month and 7.1 percent from December 2017. Private sector employers added 5.555 million workers, a 7.4 percent gain from a year earlier. 5.545 million people left their job during the month, off 18,000 from November but up 4.3 percent over the previous year. Voluntarily quits had risen 4.6 percent over the past year to 3.482 million while layoff activity was up 2.5 percent from December 2017 to 1.697 million.

#5Small business owner optimism fell for a fifth straight month in January. The Small Business Optimism Index from the National Federation of Independent Business shed 3.2 points during the month to a seasonally adjusted 101.2 (1986=100). This was the measure’s lowest mark since November 2016 when it was at 98.4. Seven of the index’s ten components declined in January, including sharp drops for indices tracking expected economic conditions, expected real sales, plans to increase inventories, plans to increase employment, and whether it is a good time to expand. The press release uses the word “shaky” to describe business owners expectations for business conditions, noting that “the political climate is affecting how they view the future.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 9, 2019, First-Time Claims, seasonally adjusted): 239,000 (+4,000 vs. previous week; +5,000 vs. the same week a year earlier). 4-week moving average: 231,750 (+0.8% vs. the same week a year earlier).
Import Prices (January 2019, All Imports, not seasonally adjusted): -0.5% vs. December 2018, -1.7% vs. January 2018. Nonfuel Imports: -0.2% vs. December 2018, -0.2% vs. January 2018.
Export Prices (January 2019, All Exports, not seasonally adjusted): -0.6% vs. December 2018, -0.2% vs. January 2018, Nonagricultural Exports: -0.3% vs. December 2018, -0.2% vs. January 2018.
University of Michigan Consumer Sentiment (February 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 95.5 (vs. January 2019: 91.2, vs. February 2018: 99.7).
Monthly Treasury Statement (December 2018, Deficit for first 3 months of FY19): -$318.9 billion (vs. first 3 months of FY18: -$225.0 billion).
Business Inventories (November 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.981 trillion (-0.1% vs. October 2018, +4.6% vs. November 2017).

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

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).
FOMC Minutes

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