Inflation Moderates While Business Sentiment Stays Hot: October 8 – 12

Consumer prices grew less quickly while wholesale prices firmed in September. Here are the five things we learned from U.S. economic data released during the week ending October 12.

#1Consumer prices cooled during the last days of summer. The Bureau of Labor Statistics tells us that the Consumer Price Index (CPI) inched up 0.1 percent on a seasonally adjusted basis in September following two consecutive months of 0.2 percent gains. Energy prices dropped 0.5 percent, pulled down by price decreases for utility delivered gas (-1.7 percent), electricity (-0.5 percent), and gasoline (-0.2 percent). Food prices were unchanged. Net of energy and food, core CPI increased 0.1 percent during the month. Falling were prices for vehicles—both used cars/trucks (-3.0 percent) and new vehicles (-0.1 percent)—and medical care commodities (-0.1 percent). Prices increased for apparel (+0.9 percent), transportation services (+0.5 percent), shelter (+0.2 percent), and medical care services (+0.2 percent). CPI has risen 2.3 percent over the past year while core CPI has a 12-month comparable of +2.2 percent.Consumer Prices Mar-Sep 18 101218

#2…But wholesale prices rebounded. The Producer Price Index (PPI) for final demand grew for the first time in three months with a seasonally adjusted 0.2 percent increase, per the Bureau of Labor Statistics. The core measure—PPI less energy, food, and trade services, jumped 0.4 percent for its largest increase since January. Final demand PPI for goods slipped 0.1 percent, pulled down by significant declines in both energy and food prices. PPI for goods net energy and food gained 0.2 percent. PPI for final demand services jumped 0.3 percent (its biggest gain since June), fueled by a 1.8 percent bounce in wholesale prices for transportation/warehousing services. Over the past year, the headline PPI measure had grown 2.6 percent while the 12-month comparable for core wholesale prices has surged 2.9 percent.

#3Small business owner optimism remained new record highs in September. The Small Business Optimism Index from the National Federation of Independent Business lost 9/10ths of a point during the month (giving back exactly what it had gained in August) to lead the index at a seasonally adjusted 107.9 (1986=100). Six of ten index components pulled back from their August readings, including a seven-point drop for plans to increase inventories and three-point decreases for indices tied to plans to increase employment and make capital outlays. Only three index components improved during the month: expected real sales (up three points), current inventories (up two points), and expected credit conditions. The press release noted that small business owners were indicating that “business is booming and prospects continue to look bright.

#4Wholesalers expanded their inventories more rapidly during August. The Census Bureau reports that merchant wholesalers inventories swelled 1.0 percent during the month to a seasonally adjusted $642.7 billion. This left wholesale inventories 5.3 percent larger than what it was a year earlier. Durable goods wholesale inventories grew 0.9 percent while that of nondurables rose 1.2 percent. The former was boosted by sharp increases in the automotive (+3.5 percent), computer equipment (+1.6 percent), and hardware (+1.0 percent) sectors. Wholesale inventories of nondurables expanded thanks to substantial increases for farm products (+4.9 percent), chemicals (+2.2 percent), and drugs (+2.1 percent). Wholesale sales rose 0.8 percent in August to a seasonally adjusted $511.1 billion (+9.2 percent versus August 2017). The resulting inventory-to-sales ratio of 1.26 matched that of July but was down four basis points from a year earlier.

#5Layoffs remained near multi-decade lows. The Department of Labor indicates the first-time claims for unemployment insurance benefits grew by 7,000 during the week ending October 6 to a seasonally adjusted 214,000. Even with the modest increase, initial jobless claims remained 27,000 below that of a year earlier. The four-week moving average inched up by 2,500 to 209,500 claims. This was 16.9 percent below the year-ago moving average and just above the 49-year low achieved just a few weeks ago. 1.422 million people were receiving some form of unemployment insurance benefits during the week ending September 22, 14.0 percent below the count from the same week a year earlier.

Other U.S. economic data released over the past week:
University of Michigan Surveys of Consumer (September 2018—preliminary, Index of Consumer Sentiment): 99.0 (vs. August 2018: 100.1, vs. September 2017: 100.7).
Import Prices (September 2018, Import Prices, not seasonally adjusted): +0.5 % vs. August 2018, +3.5% vs. September 2017. Nonfuel imports: Unchanged vs. August 2018, +0.6% vs. September 2017.
Export Prices (September 2018, Export Prices, not seasonally adjusted): Unchanged vs. August 2018, +2.7% vs. September 2017. Nonagricultural exports: +0.2% vs. August 2018, +3.3% vs. September 2017.

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

Retail Sales and Inflation Took August Off: September 10 – 14

Retail sales and inflation moderated their trajectory as summer wrapped up. Here are the five things we learned from U.S. economic data released during the week ending September 14.  

#1Retail sales cooled a bit from their recent torrid pace during August. The Census Bureau estimates retail and food services sales totaled $509.0 billion, up 0.1 percent for the month and 6.6 percent ahead of its August 2017 sales levels. July’s sales were revised upward to 0.7 percent gain (had been reported previously as a 0.5 percent gain). Slumping were sales at car dealers, where activity fell 0.8 percent. Higher prices at the pump led to a 1.7 percent sales gain at gas stations. Net of auto dealers and gas stations, core retail sales edged up 0.2 percent following a 0.9 percent jump in July. Growing were sales at retailers focused on health/personal care (+0.5 percent), electronics/appliances (+0.4 percent), sporting goods/hobbies (+0.2 percent), and general merchandisers (+0.1 percent). Sales also grew 0.2 percent at bars/restaurants. August was not a strong sales month at apparel retailers (-1.7 percent), department stores (-1.0 percent), and furniture stores (-0.3 percent).Retail Sales July-August 2018 091418

#2Core inflation slowed in August. The Consumer Price Index (CPI) grew 0.2 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. This matches July’s 0.2 percent gain and left CPI up 2.7 percent over the past year. Energy CPI grew for the first time in three months with a 1.9 percent gain—gasoline prices rose 3.0 percent in August and have surged 20.3 percent over the past year. Food CPI increased 0.1 percent. Net of energy and food, core CPI grew by 0.1 percent, its smallest gain since April. Rising were prices for used cars/trucks (+0.4 percent), shelter (+0.3 percent), transportation services (+0.3 percent). Prices fell for apparel (-1.6 percent), medical commodities (-0.3 percent), and medical care (-0.2 percent). Even with the slight slowdown, core CPI has risen 2.2 percent over the past year.

Final demand wholesale prices dropped 0.1 percent in August on a seasonally adjusted basis, the first decline in the Producer Price Index (PPI) since February 2018 and follows a flat report for July. The core PPI measure—which removed energy, food, and trade services—inched up 0.1 percent.  The former has grown 2.8 percent over the past year while the latter has a 12-month comparable of +2.9 percent. PPI for final demand goods was flat for August, including a 0.6 drop for PPI for final demand foods (including the impact of falling prices for fruits/melon, meats, and eggs) and a 0.4 percent gain for final demand energy (including rises for residential electricity and gasoline). Final demand PPI for services slipped 0.1 percent as trade services PPI (measuring wholesaler and retailer margins) slumped 0.9 percent and that for transportation/warehousing fell 0.6 percent.   

#3The number of job openings continued to rise this summer. There were a seasonally adjusted 6.939 million open jobs at the end of July, per the Bureau of Labor Statistics. This was up 117,000 from June, 11.9 percent ahead from a year earlier, and higher than the 6.234 million people that had indicated being unemployed. Private sector employers reported having 6.319 million job openings (+11.3 percent versus July 2017), with the industries enjoying the largest year-to-year percentage gains being manufacturing (+29.4 percent), leisure/hospitality (+21.1 percent), retail (+15.6 percent), and trade/transportation/utilities (+14.9 percent). Hiring was flat during July at 5.679 million (+3.3 percent versus July 2017 (+3.3 percent versus July 2017), with private sector hiring at 5.339 million. Hiring has grown the greatest over the past year on a percentage basis in manufacturing (+15.9 percent), retail (+14.2 percent), trade/transportation/utilities (+10.7 percent), and accommodation/food services (+7.7 percent). Also flat during the month were the number of separations as 5.534 million people left their jobs during the month (+2.4 percent versus July 2017). The number of people voluntarily departing their jobs continued to rise, growing by 106,000 during July to 3.583 million (up 10.6 percent over the past year) while layoffs dropped by 50,000 to 1.602 million (-11.8 percent versus July 2017).

#4Manufacturing output grew at a slower pace in August. The Federal Reserve reports that manufacturing output increased 0.2 percent on a seasonally adjusted basis during the month, down from gains of 0.7 percent and 0.3 percent during June and July, respectively. Production in the manufacturing sector has grown 3.1 percent over the past year. Production of durable goods jumped 1.0 percent, boosted by strong output increases for motor vehicles, primary metals, and machinery. Production of nondurables slumped 0.5 percent as only textiles were the only segment to report an output gain. Overall industrial production increased 0.4 percent during August, matching July’s gain but off from June’s 0.6 percent increase. Industrial production has soared 4.9 percent over the past year. The oil and gas sectors led a 0.7 percent bounce in mining output (+14.1 percent versus August 2017) while hotter weather pushed up utility output 1.2 percent (+4.8 percent versus August 2017).

#5Small business owner optimism rises to an at least 45-year high. The Small Business Optimism Index from the National Federation of Independent Business grew by 9/10ths of a point in August to 108.8 (1986=100), up 3.5 points from the same month a year earlier and representing the highest reading for the index since its launch in 1983. Six of the 10 index components improved from their July readings, led by plans to expand inventories (up six points), plans to increase employment (up three points) and plans to make capital outlays (up three points). Falling were index components linked to expected real sales (down three points), expected credit conditions (down two points), and expectations for the economy to improve (down one point).

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 8, 2018, First-Time Claims, seasonally adjusted): 204,000 (-1,000 vs. previous week; -63,000 vs. the same week a year earlier, lowest since December 1969). 4-week moving average: 208,000 (-19.6% vs. the same week a year earlier).
Import Prices (August 2018, All Imported Goods, not seasonally adjusted): -0.6% vs. July 2018, +3.7% vs. August 2017.  Nonfuel Imports: -0.1% vs. July 2018, +0.9% vs. August 2017.
Export Prices (August 2018, All Exported Goods, not seasonally adjusted): -0.1% vs. July 2018, +3.6% vs. August 2017. Nonagricultural Exports: -0.2% vs. July 2018, +4.1% vs. August 2017.
University of Michigan Surveys of Consumers (September 2018-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 100.8 (vs. August 2018: 96.2, vs. September 2017: 95.1).
Business Inventories (July 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.950 trillion (+0.6% vs. June 2018, +4.3% vs. July 2017).
Consumer Credit (July 2018, Outstanding Consumer Credit (Non-Real Estate) Balances, seasonally adjusted): $3.918 trillion (+$17.6 billion vs. June 2018, +4.6% vs. July 2017).
Beige Book

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

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.