Higher Gas Prices Boost Inflation, For Now: October 9 – 13

Rising gas prices boosted not only overall inflation but also retail sales. Here are the five things we learned from U.S. economic data released during the week ending October 13.

#1Retail sales surged in September, but much of the advance reflected higher gas prices. The Census Bureau tells us that retail and food services sales jumped 1.6 percent during September to a seasonally adjusted $483.9 billion. This was the largest single-month gain since March 2015. Much of September sales surge was the result of higher gasoline prices leading to a 5.8 percent bump in sales at gas stations and a 3.6 percent sales increase at auto dealers (in part the result of people replacing cars damaged by recent hurricanes). Net of activity at both gas stations and auto dealers retail sales increased 0.5 percent. Sales grew at building materials retailers (+2.1 percent, boosted by hurricane preparation and recovery), grocery stores (+1.0 percent), restaurants/bars (+0.8 percent), and apparel retailers (+0.4 percent). Sales slowed at electronics/appliance stores (-0.8 percent), furniture retailers (-0.4 percent), department stores (-0.4 percent), health/personal care stores (-0.4 percent), and sporting goods/hobby retailers (-0.2 percent). Overall retail sales have grown 4.4 percent over the past year.Retail Sales September 2017-101317

#2Consumer prices roses in September, largely centered around the gas pump. The Bureau of Labor Statistics’ Consumer Price Index (CPI) jumped 0.5 percent during the month, its largest single monthly increase since February 2013. Much of the gain in CPI occurred at the gas pump as gasoline prices rose 13.1 percent (its largest month-to-month increase since June 2009). CPI for all energy goods surged 6.1 percent while that for food edged up by only 0.1 percent. Net of energy and food, core CPI increased 0.1 percent during September and was up 1.7 percent over the past year. The latter remained below the Federal Reserve’s two-percent inflation rate target. Prices grew for shelter (+0.3 percent), transportation services (+0.3 percent), and medical care services (+0.1 percent). Falling were prices for medical care commodities (-0.8 percent), new vehicles (-0.4 percent), used vehicles (-0.2 percent), and apparel (-0.1 percent).

#3Wholesale prices rose during September, thanks to higher prices for gasoline and services. Final demand Producer Price Index (PPI) grew 0.4 percent on a seasonally adjusted basis during the month, its biggest single-month increase since April. The core measure—final demand net of food, energy, and trade services—grew a more modest 0.2 percent, according to the Bureau of Labor Statistics. Over the past year, final demand PPI has increased 2.6 percent while the core measure’s 12-month comparable has grown 2.1 percent. Wholesale prices for final demand goods jumped 0.7 percent, pushed up by a 3.4 percent gain in energy prices (wholesale gasoline prices rose 10.9 percent). PPI for final demand goods was unchanged. Net of energy and food, final demand goods prices increased 0.3 percent, its largest gain since April. Prices for final demand service jumped 0.4 percent, with rises of 1.0 percent and 0.8 percent for transportation/wholesale services and trade services, respectively.

#4The count of job openings and the number of people hired slipped in August. Per the Bureau of Labor Statistics, there were a seasonally adjusted 6.082 million job openings at the end of August. This was down 58,000 from July but up 10.8 percent from the same month a year earlier. Private sector employers reported 5.566 million job openings at the end of the month, an 11.7 percent increase from August 2016. Among the industries with the largest percentage year-to-year gains in openings were construction (+34.2 percent), wholesale trade (+20.1 percent), manufacturing (+17.1 percent), transportation/wholesaling (+14.9 percent), health care/social assistance (+13.6 percent), and accommodation/leisure services (+13.1 percent). Companies hired a seasonally adjusted 5.430 million people during August, a drop of 79,000 from July but 2.7 percent above the August 2016 hiring pace. Private sector hiring totaled 5.105 million jobs, up 2.2 percent from a year earlier. Industries with the largest year-to-year percentage increases in hiring were manufacturing (+31.3 percent), construction (+14.2 percent), and financial activities (+13.3 percent). Industries with sharp year-to-year percentage declines in hiring included wholesale trade (-14.4 percent), government (-14.0 percent), and retail (-6.9 percent). 5.228 million people left their jobs during August, down 132,000 from July but 3.3 percent the year-ago pace. 3.194 million people quit their jobs during the month, up 2.5 percent from year earlier, while layoffs have increased 4.2 percent from a year earlier to 1.729 million.

#5Small business owner sentiment declined in September. The Index of Small Business, from the National Federation of Independent Business, shed 2.3 points during the month to a seasonally adjusted reading of 103.0. This was the measure’s lowest reading since last November. Six of the ten components of the index fell during the month, led by sharp declines in the indices for expected real sales (down 12 points), whether it is a good time to expand (down ten points), and on plans to make capital outlays (down five points). Only three index components increased from August: plans to increase inventories (up five points), current inventories (up two points), and plans to increase employment (up a point). The press release downplayed the impact of the recent hurricanes had on the lower index reading, noting that “[t]he drop-off was consistent around the country regardless of region.” 

Other U.S. economic data released over the past week:
Jobless Claims (week ending October 7, 2017, First-Time Claims, seasonally adjusted): 243,000 (-15,000 vs. previous week; -5,000 vs. the same week a year earlier). 4-week moving average: 257,500 (+3.0% vs. the same week a year earlier).
University of Michigan Consumer Sentiment (October 2017-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 101.1 (+6.3% vs. September 2017, +15.9% vs. October 2016).
Business Inventories (August 2017, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.889 trillion (+0.7% vs. July 2017, +3.6% vs. August 2016).
FOMC Meeting Minutes

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

Industrial Production and Retail Sales Take a Pause: September 11 – 15

Even though the storm hit Texas during the final days of August, the impact of Hurricane Harvey was already showing up in economic data. Here are the five things we learned from U.S. economic data released during the week ending September 15.

#1Hurricane Harvey slowed industrial production at the end of August. The Federal Reserve indicates that industrial production fell for the first time in seven months with a 0.9 percent decline. Manufacturing output dropped 0.3 percent after holding steady in July. The Fed estimates both measures dropped by 3/4ths of a percentage point due to storm-related effects. Durable goods output grew 0.3 percent during the month while that of nondurables fell 0.9 percent. Automobile and aerospace production boosted the former while drops in the output of chemicals and petroleum/coal products pulled down the latter. Also falling were outputs at utilities (-5.5 percent) and in mining (-0.8 percent), with the latter the result of large declines in oil and gas well drilling and servicing. Capacity utilization also fell, shedding 8/10ths of a percentage point to 76.1 percent (its lowest reading since March). Manufacturing sector capacity utilization dropped by 3/10ths of a percentage point to 75.3 percent.Industrial Production Aug17-091517.png

#2Retail sales slipped in August, although it is unclear how much of that drop was due to Harvey. The Census Bureau estimates U.S. retail and food services sales were at a seasonally adjusted $474.8 billion, off 0.2 percent from the previous month. Hurting the headline number was softer sales at auto dealers (and parts stores), which saw sales drop 1.6 percent. Net of auto dealers/parts stores, retail sales grew 0.2 percent—although this figure is pulled up by a 2.5 percent rise in gas station sales (largely due to higher gasoline prices). Sales also grew at furniture retailers (+0.4 percent), restaurants/bars (+0.3 percent), grocery stores (+0.3 percent), and general merchandisers (+0.2 percent). August was not a particularly good month for apparel retailers (-1.0 percent), electronics/appliance stores (-0.7 percent), building materials retailers (-0.5 percent), and department stores (-0.1 percent). The Census Bureau statement included comments about possible retail sales impacts resulting from Hurricane Harvey, noting that they received “indications from the companies that the hurricane had both positive and negative effects on their sales data while others indicated they were not impacted at all.”

#3Higher gasoline prices led to firmer consumer and wholesale prices in August. The Consumer Price Index (CPI) jumped 0.4 percent on a seasonally adjusted basis during the month, the largest single-month increase in the Bureau of Labor Statistics measure in seven months. Energy and shelter were responsible for much of the gain in consumer prices. Energy CPI jumped 2.8 percent, pulled up by a 6.3 percent gain in gasoline prices and a 2.9 percent increase in fuel oil. (Note that these figures largely do not reflect the impact of the sharp rise in gas prices caused refineries temporary closing along the Gulf Coast following Hurricane Harvey.) Food CPI inched up 0.1 percent. Net of energy and food, core CPI increased 0.2 percent, its largest single-month gain since February. Growing were prices for shelter (+0.5 percent), transportation services (+0.4 percent), medical care services (+0.2 percent), and apparel (+0.1 percent). Prices fell for used cars (-0.2 percent) and medical care commodities (-0.1 percent) while new car prices did not change from July. Over the past year, CPI has grown 1.9 percent while the core CPI measure has increased 1.7 percent.

The final demand Producer Price Index (PPI) grew 0.2 percent during August following a 0.1 percent decline in July. Net of food, energy, and trade services, core final demand PPI increased 0.2 percent during August after holding firm in July. The former has jumped 2.4 percent over the past year while the 12-month comparable for the core index was at +1.9 percent. Wholesale prices for final demand goods leaped 0.5 percent (its biggest month-to-month since April), led by a 3.3 percent jump in PPI for final demand energy goods (gasoline PPI surged 9.5 percent). Food PPI fell 1.3 percent, pulled down by lower meat prices. Net of energy and food, wholesale prices for core goods increased 0.2 percent (its biggest gain since April). Final demand services PPI eked out a 0.1 percent gain.

#4The number of job openings and people hired both edged up during July. Per the Bureau of Labor Statistics, there were a seasonally adjusted 6.170 million job openings at the end of the July, up 54,000 from a month earlier and up 3.3 percent from a year earlier, and its highest reading in the 17-year history of the data series. Private sector employers had 5.657 million job openings at the end of the month, up 4.4 percent from the July 2016 count. Among the industries with large year-to-year percentage gains in job opening were mining/logging (+130.8 percent), wholesale trade (+20.2 percent), leisure/hospitality (+12.9 percent), and financial activities (+9.9 percent). Employers hired 5.501 million people during July, up 69,000 from June and 3.2 percent from a year earlier. Private sector employers hired 5.164 million people, up 4.4 percent from a year earlier. The largest percentage year-to-year increases in hiring occurred in mining/logging (+47.8 percent), manufacturing (+20.1 percent), financial activities (+10.4 percent), and construction (+9.3 percent). 5.332 million people left their jobs during July, up 23,000 for the month and 6.6 percent from July 2016. 3.164 million people voluntarily quit their jobs during the month (+4.4 percent versus July 2016) while layoffs totaled 1.783 million (+10.8 percent versus July 2016).

#5Employers expect to continue hiring during the final months of 2017. Twenty-one percent of the 11,500 companies surveyed by Manpower indicated plans to hire more workers during the third quarter of 2017 while six percent expect to shed workers. The resulting difference—the Net Employment Outlook—of +15 increases to +17 after seasonal adjustments. This matched the Net Employment Outlook reading from three months earlier but slipped a point from a year earlier. The measure was positive for all 13-tracked industries, with the highest readings for leisure/hospitality (+28), professional/business services (+22), and transportation/utilities (+20). Similarly, there were positive seasonally adjusted Net Employment Outlooks in all four Census regions: Northeast (+18), Midwest (+16), South (+18), and West (+18).

Other U.S. economic data released over the past week:
Jobless Claims (week ending September 9, 2017, First-Time Claims, seasonally adjusted): 284,000 (-14,000 vs. previous week; +26,000 vs. the same week a year earlier). 4-week moving average: 263,250 (+1.7% vs. the same week a year earlier).
Small Business Optimism Index (August 2017, Index (1986=100), seasonally adjusted): 105.3 (vs. July 2017: 105.2; August 2016: 94.4).
University of Michigan Index of Consumer Sentiment (September 2017-preliminary, Index (1966Q1=100), seasonally adjusted):  95.3 (vs. August 2017: 96.8; September 2016: 91.2).
Manufacturers’ and Trade Inventories (July 2017, Business Inventories, seasonally adjusted): $1.874 trillion (+0.2% vs. June 2017, +3.0% vs. July 2016).
Regional and State Employment (August 2017, Nonfarm Payrolls, seasonally adjusted): vs. July 2017: payrolls grew significantly in 6 states and declined significantly in 3 states; vs. August 2016: payrolls increased significantly in 29 states and in the District of Columbia. No state suffered a significant year-to-year decline.
Federal Government Treasury Statement (August 2017, Surplus/Deficit): -$107.7 billion (vs. July 2017: -$42.9 billion; vs. August 2016: -$107.1 billion).

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

Job Openings Hit a New Record: August 7 – 11.

Employers have many unfilled jobs while inflation remains subdued. Here are the five things we learned from U.S. economic data released during the week ending August 11.

#1Even with a record level of job openings, the pace of hiring sputtered in June as employers are unable to fill Thomas roles. There were a seasonally adjusted 6.163 million job openings on the final day of June, up 461,000 from May, 11.3 percent from a year earlier, and the most reported in the 17-year history of the Bureau of Labor Statistics data series. This included 5.588 million private sector job openings, which represented a 12.0 percent increase from June 2016. Industries reporting the largest percentage gains in job openings over the past year include construction (+31.6 percent), wholesale trade (+28.5 percent), financial activities (+22.6 percent), professional/business services (+16.0 percent), and accommodation/food services (+11.9 percent). Yet, employers were struggling to fill those positions. Hiring declined by 103,000 during the month to 5.356 million. This was up 3.5 percent from the number of people hired during June 2016. Private sector employers hired 5.026 million people during the month, up 4.3 percent from a year earlier. The industries with the largest year-to-year percentage increases in hiring included manufacturing (+25.2 percent), construction (+15.0 percent), and professional/business services (+14.6 percent). 5.224 million people left their job during June, off by 21,000 for the month, but 5.7 percent the year ago count. 3.314 million people voluntarily quit their jobs (+5.2 percent versus June 2016) while the 1.701 million people laid off was up 5.7 percent from the same month a year earlier.Nonfarm Job Openings 2007-2017 081117

#2Consumer prices eke out a small gain during July. The Bureau of Labor Statistics reports that the Consumer Price Index (CPI) increased 0.1 percent during the month, after having been unchanged during June. Energy CPI declined for the fifth time in six months, albeit with a small 0.1 percent drop. Gasoline prices were unchanged during July while electricity prices grew 0.4 percent. Food prices gained 0.2 percent during July, the fifth time over the past six months with a monthly increase of at least 0.2 percent. Net of energy and food, core CPI gained 0.1 percent for a fourth consecutive month. Growing were prices for medical care commodities (+1.0 percent), medical care services (+0.3 percent), apparel (+0.3 percent), and transportation services (+0.2 percent). Meanwhile, prices for both new and used cars/trucks dropped 0.5 percent. Both headline and core CPI have grown 1.7 percent over the past year, each under the Federal Reserve’s two-percent target rate for inflation.

#3Wholesale prices declined during July. The final demand Producer Price Index (PPI) slipped 0.1 percent during the month, following a 0.1 percent increase in June. The core measure, which nets out energy, food, and trade services, held steady during the month. PPI for final demand goods edged down 0.1 percent. The measure for wholesale energy goods decreased 0.3 percent (wholesale gasoline prices fell 1.3 percent) while that for food was unchanged during July. Meanwhile, final demand PPI for services dropped 0.2 percent, pulled down by declines for transportation/warehousing (-0.8 percent) and trade (i.e., retailer and wholesaler margins, -0.5 percent). Over the past year, both the headline and core measure of final demand PPI has grown just under the Federal Reserve’s target with a 1.9 percent increase.

#4Productivity growth was soft during Q2, which was an improvement over Q1’s stagnation. The Bureau of Labor Statistics finds nonbusiness labor productivity edged up 0.9 percent on a seasonally adjusted annualized basis during April, May, and June, a gain from the productivity being unchanged during the first quarter. Output grew 3.4 percent during the quarter while hours worked gained 2.5 percent. Unit labor costs edged up 0.6 percent during the quarter. Over the past year, nonfarm productivity grew by a tepid 1.2 percent. The manufacturing sector presented a bright picture with a 2.5 percent productivity gain, led by a sharp 3.8 percent surge in durable goods manufacturing productivity. Productivity of nondurable manufacturing slipped 0.1 percent during Q2.

#5Small Business Owner Sentiment Rebounded During July. The Small Business Optimism Index from the National Federation of Independent Business improved for the first time in six months with a 1.6 point increase to a seasonally adjusted 105.2 (1986 = 100). This was the measure’s best reading since February and up 10.6 points from a year earlier. Seven of the index’s ten components improved from their June readings, led by measures for current job openings (up five points), expected real sales (up five points), plans to increase employment (up four points), and expected future economic conditions (up four points). Only two of the index components declined during the month: plans to make capital outlays (down two points) and expected credit conditions (off a point). The press release noted that “Main Street was buoyed by stronger customer demand despite the dysfunction in Washington, D.C.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 5, 2017, First-Time Claims, seasonally adjusted): 244,000 (+3,000 vs. previous week; -19,000 vs. the same week a year earlier). 4-week moving average: 241,000 (-8.2% vs. the same week a year earlier).
Consumer Credit (June 2017, Outstanding Consumer Credit Balances (net of mortgages and other real-estate backed debt, seasonally adjusted): $3.856 trillion (+$12.4 billion vs. May 2017, +5.7% vs. June 2016).
Federal Government Treasury Budget (June 2017, Surplus/Deficit): -$42.9 billion (vs. June 2016: -$90.2 billion, July 2017 -$112.8 billion). 1st ten months of FY2017: -$566.0 billion (vs. 1st ten months of FY2016: -$512.0 billion).
Wholesale Inventories (June 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $599.4 billion (+0.7% vs. May 2017, +2.8% vs. June 2016).

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