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.

Retail Shines, Factory Activity Does Not: December 10 – 14

Consumers started the holiday season with gusto, while manufacturing took another break.  Here are the five things we learned from U.S. economic data released during the week ending December 14.  

#1Retail sales were solid in November. U.S. retail and food services sales totaled a seasonally adjusted $513.5 billion, according to the Census Bureau. This was up a modest 0.2 percent for the month, but one should note that the headline figures were pulled down by falling gasoline prices (sales at gas stations plummeted 2.3 percent). Net of sales at gas stations and car dealers/parts stores (where sales increased 0.2 percent), core retail sales gained 0.5 percent for the month and were up 4.6 percent over the past year. Rising during the month were sales at retailers focused on electronics/appliances (+1.2 percent), furniture (+1.2 percent), health/personal care (+0.9 percent), and groceries (+0.4 percent), and at department stores (+0.4 percent). Sales slowed at restaurants/bars (-0.5 percent), building material stores (-0.3 percent), and apparel retailers (-0.2 percent). Nonstore retailers (e.g., internet retailers) saw sales jump 2.3 percent during the month, with a year-to-year sales increase of 10.8 percent).Retail Sales 2012-2018 121418

#2Manufacturing output failed to grow for a second consecutive month. The Federal Reserve’s report on industrial production finds manufacturing output was unchanged (on a seasonally adjusted basis) in November, following a 0.1 percent drop during the prior month. Durable goods output inched up 0.2 percent, boosted by a 2.5 percent increase for primary metals. Nondurable output slowed 0.2 while that of “other manufacturing” (which includes publishing and logging) slumped 0.9 percent. Overall industrial production jumped 0.6 percent during November (its biggest gain since August) and has increased 2.5 percent over the past year. Rising during the month were output both in mining (+1.7 percent) and at utilities (+3.3 percent, boosted by cold weather driving demand for utility-delivered natural gas).

#3Job openings remained at near-record levels in October. The Bureau of Labor Statistics estimates there were 7.059 million (seasonally adjusted) available nonfarm jobs at the end of October, up 119,000 from September and 16.8 percent from the same month a year ago. Private sector job openings have risen 17.7 percent over the past 12 months to 6.489 million. The industries with the largest double-digit year-to-year percentage increases in job openings were wholesale trade (+52.0 percent), manufacturing (+27.3 percent), accommodation/food services (+26.0 percent), construction (+25.3 percent), and retail (+22.4 percent). Hiring picked up in October, rising by 196,000 to 5.892 million hires (+5.2 percent versus October 2017), with larger 12-month comparables in transportation/warehousing (+49.5 percent), retail (+14.0 percent), and manufacturing (+12.0 percent). Even though dropping by 85,000 during October, the number of people leaving their jobs was up 5.4 percent over the past year to 5.556 million. This included 3.514 million people who quit their jobs (+9.0 percent versus October 2017) and 1.691 million layoffs (-1.2 percent versus October 2017).

#4Consumer prices failed to rise in November. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) held steady during the month on a seasonally adjusted basis, the first month not to show a rise since March. Energy CPI slumped 2.2 percent as gasoline prices fell 4.1 percent. On the flip side, food CPI gained 0.2 percent, its largest single-month increase since June (boosted by higher prices for cereals/bakery and meat). Net of both energy and food, core CPI grew 0.2 percent, matching its October increase. Rising were prices for used cars/trucks (+2.4 percent), medical commodities and services (both +0.4 percent), and shelter (+0.3 percent). Prices fell for apparel (-0.9 percent) and transportation services (-0.3 percent). Both the headline and core CPI measures have risen 2.2 percent over the past year.

#5Wholesale prices also moderated in November. The Producer Price Index (PPI) for final demand grew by a seasonally adjusted 0.1 percent during the month following a 0.6 percent surge in October. At the same time, the Bureau of Labor Statistics’ core measure (netting out prices for energy, food and trade services) gained 0.3 percent, greater than October’s 0.2 percent increase. PPI for final demand goods dropped 0.4 percent, pulled down a 5.0 percent decline in energy PPI (final demand gasoline PPI: -14.0 percent). PPI for final demand food jumped 1.0 percent (pulled up by rising prices for fresh/dry vegetables). Net of energy and food, final demand goods PPI gained 0.3 percent. Final demand PPI for services also increased 0.3 percent, with rising margins at gas stations a significant factor. Final demand PPI has risen 2.5 percent over the past year (the smallest 12-month comparable since last December) while core final demand PPI has expanded 2.8 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 8, 2018, First-Time Claims, seasonally adjusted): 206,000 (-27,000 vs. previous week; -23,000 vs. the same week a year earlier). 4-week moving average: 224,750 (-4.6% vs. the same week a year earlier).
Import prices (November 2018, All Imports, not seasonally adjusted): -1.6% vs. October 2018, +0.7% vs. November 2017. Nonfuel imports: -0.3% vs. October 218, +0.3% vs. November 2017.
Export prices (November 2017, All Exports, not seasonally adjusted): -0.9% vs. October 2018, +1.8% vs. November 2o17. Nonagricultural Exports: -1.0% vs. October 2018, +2.2% vs. November 2017.
Business Inventories (October 2018, Manufacturing and Trade Inventories, seasonally adjusted): $1.982 trillion (+0.6% vs. September 2018, +5.2% vs. October 2017).
NFIB Small Business Optimism (November 2018, Index (1986=100), seasonally adjusted): 104.8 (vs. October 2018: 107.4, vs. November 2017: 107.5.
Monthly Treasury Statement (November 2018, Federal Budget Surplus/Deficit): (first two months of FY2019) -$306.4 billion (vs. first two months of FY 2018: -$201.8 billion). 

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.