Manufacturing Rebounds in April, Leading Indicators Point Up: May 15 – 19

Manufacturing output bounced up in April, led by a boost in automobile production. Leading indicators suggest economic growth in the coming months. Here are the 5 things we learned from U.S. economic data released during the week ending May 19.

#1Manufacturing output jumped in April. The Industrial Production report from the Federal Reserve tells us that manufacturing output gained 1.0 percent during the month, following a 0.4 percent decline in March. This was the measure’s biggest single-month increase since February 2014. Production of durable and nondurable goods each grew at a 1.0 percent rate during April. The former was led by a 5.0 percent bump in motor vehicles output and 1.8 percent gain in the production of electrical equipment and appliances. Nondurables production benefited from higher output of food/beverage/tobacco products, textiles, and printing. Manufacturing output has risen 1.7 percent over the past year. Overall industrial production also gained 1.0 percent during April and has grown by 2.2 percent over the past year. Mining output rose 1.2 percent during the month, thanks to increased coal mining. Increased air conditioning usage boosted utility production 0.7 percent. Overall factory capacity utilization jumped by 6/10ths of a percentage point to 76.7 percent (its highest reading since August 2015). Manufacturing sector capacity utilization grew by 7/10ths of a percentage point to 75.9 percent, its best reading since December 2014.Increased Manufacturing Output-April2017-051917

#2Forward-looking indicators point to economic expansion over the coming months. The Conference Board’s Leading Economic Indicators grew by 4/10ths of a point during April to a seasonally adjusted 126.9. This was 3.2 percent above its year-ago reading. Eight of the ten components of the leading index made positive contributions to the leading index, led by the interest rate spread, jobless claims, and consumers’ expectations for the economy. The coincident index added 3/10ths of a point to 115.2 (+2.0 percent versus April 2016) as all four index components made positive contributions (including, industrial production and nonfarm payrolls). The lagging economic index increased by 4/10ths of a point to 124.1 (+2.5 percent versus April 2016) as five of seven components improved during the month (including the average length of unemployment and the prime interest rate charged by banks). The press release said that the data suggest that Q1 weak GDP report was “temporary hiccup as the economy returns to its long-term trend of about [a] 2 percent” growth rate.

#3Housing starts cooled slightly during April. The Census Bureau reports that starts of new housing construction fell 2.6 percent during the month to a seasonally adjusted annualized rate of 1.172 million units. Even with the decline, this was 0.7 percent above its year-ago pace and the 25th straight month in which the measure was above an annualized rate of 1 million units. Starts of single-family homes sped up slightly during the month (0.9 percent) and were 8.9 percent above their pace of starts in April 2016. Starts of multifamily residences (those with at least five units) dropped 9.6 percent during the month and were 14.6 percent below the starts rate of a year earlier. Looking towards the future, the annualized rate of issued building permits was at 1.172 million. While this was off 2.5 percent from March, it remained 5.7 percent above April 2016’ SAAR of issued permits. Finally, the annualized rate of housing completions dropped 8.6 percent during April to 1.106 million homes. This was 15.1 percent above the April 2016 pace.

#4Homebuilders remain optimistic. The Housing Market Index (HMI) grew by two points during May to a seasonally adjusted reading of 70, according to the National Association of Home Builders. The measure of homebuilder sentiment has remained above a reading of 50—indicative of a greater percentage of builders characterizing the housing market as “good” as opposed to being “poor—ever since July 2013. This also was the HMI’s second best reading since before the last recession (the best being only two months earlier). The HMI grew in three of four Census regions: Northeast (up five points to 50), West (up three points to 80), and South (up two points to 72). The measure slipped by two points in the Midwest to 65. Also growing was the indices for single-family home sales (up two points to 76) and the expected sales index (up four points to 79, its best reading since 2005). Meanwhile, the measure of the traffic of prospective buyers slipped by a point to a reading of 51. The press release noted the results indicated a housing market that was “solidifying.”

#5Nonfarm payrolls grew in nine states during April . Per state-level employment data released by the Bureau of Labor Statistics, nonfarm payrolls increased significantly in nine states during April, led by increases in Texas (+30,400), Minnesota (+15,100), and Wisconsin (+14,800). Only one state—Indiana—had suffered a significant decrease in nonfarm payrolls (-11,300). Versus a year earlier, 28 states enjoyed significant payrolls gains, with the largest year-to-year percentage gains in Utah (+3.3 percent), Florida (+2.6 percent), Georgia (+2.6 percent), and Idaho (+2.6 percent each). Similarly, 19 states saw significant declines in their unemployment rates, with the biggest declines occurring in Illinois, Oregon, West Virginia, and Wyoming. No state had a significantly higher employment rate in April versus what it had a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 13, 2017, First-Time Claims, seasonally adjusted): 232,000 (-4,000 vs. previous week; -45,000 vs. the same week a year earlier). 4-week moving average: 243,500 (-12.5% vs. the same week a year earlier).
Treasury International Capital Flows (March 2017, Net Purchase of Domestic Securities by Foreign Investors, not seasonally adjusted): +$30.8 billion (vs. February 2017: +$35.7 billion, March 2016: +$65.3 billion).

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

Inflation Perking Up, Retail Sales Firm: What We Learned During the Week of February 13 – 17

Inflation made its presence felt in January while manufacturing output grew despite a decline in automobile production. Here are the 5 things we learned from U.S. economic data released during the week ending February 17.

#1Both consumer and wholesale prices jumped during January. Per the Bureau of Labor Statistics, the Consumer Price Index (CPI) surged 0.6% on a seasonally adjusted basis during the month, its biggest 1-month gain since February 2013. Energy prices grew for a 5th straight month with a 4.0% increase as gasoline prices swelled 7.8% on a seasonally adjusted basis (without adjustments for seasonal variation, gas prices grew 5.3%). Other energy goods experiencing price increases during January included utility delivered natural gas (+1.5%) and fuel oil (+3.5%). Food prices grew for the 1st time since last April albeit with a tepid 0.1% gain. Net of energy and food, core CPI grew 0.3% during the month and had a 12-month comparable of +2.3%, which was above the Federal Reserve’s 2% inflation target rate. Rising during the month were prices for apparel (+1.4%), new vehicles (+0.9%), transportation services (+0.6%), and medical commodities (+0.3%).

Meanwhile, the Producer Price Index (PPI) for final demand goods and services jumped 0.6% on a seasonally adjusted basis during January. This was the wholesale price measure’s largest single-month increase since March 2011, leaving PPI 1.6% above its January 2016 reading. Net of the typically volatile prices for energy, food, and trade services, core PPI grew 0.2% during the month with a 12-month comparable of +1.6%. Wholesale prices for final demand goods rose 1.0% (its biggest single-month gain since last June), with 3/4ths of the gain attributed to a 4.7% surge in energy goods PPI (gasoline: +12.9%). Food prices were flat for the month. Net of energy and food, the core PPI measure for final demand gained 0.4% during January, led by price increases for pharmaceutical preparations and iron & steel scrap. Prices for final demand services jumped 0.3% as trade prices (i.e., retailer and wholesaler margins) increased 0.9%.consumer-producer-prices-021717

#2Manufacturing output grew modestly in January. The Federal Reserve reports that manufacturing production increased 0.2% during the month and was 0.3% above its January 2016 pace. The increase in manufacturing output was held down by a 2.9% slowdown in automobile production—net of autos, manufacturing output rose 0.5% during the month. Outside of motor vehicles, most other categories of durable goods production increased during January with machinery manufacturing growing the most. Production of nondurables rose 0.6%, with gains exceeding 1.0% for textiles, petroleum/coal products, and chemicals. Overall industrial production slowed 0.3% during January as warm winter weather pulled down output at utilities by 5.7%. Mining output grew 2.8%. Factory utilization in manufacturing edged up 1/10th of a percentage point to 75.1%. Overall industrial capacity utilization, however, slipped 3/10ths of a percentage point to 75.3%.

#3Retail sales started the new year on a strong note. The Census Bureau estimates retail and food services sales were at a seasonally adjusted $472.1 billion in January, up 0.4% from the prior month and 5.6% from a year earlier. (Note that the year-to-year comparable were helped a bit by a relatively weak sales report back in January 2016). Sales at auto dealers & parts stores fell 1.4% while those at gas stations surged 2.3% due to higher prices at the pump. Net of those two retailer classes, core retail sales grew 0.7% during January. Sales grew by at least 1% at sporting goods/hobby retailers (+1.8%), electronics/appliance stores (+1.6%), restaurants/bars (+1.4%), department stores (+1.2%), and apparel retailers (+1.0%). While sales at nonstore retailers (e.g., internet retailers) were unchanged for the month, they were a robust 12.0% above the January 2016 sales pace.

#4Housing starts slowed during January. The Census Bureau estimates housing starts were at a seasonally adjusted annualized rate of 1.246 million units, down 2.6% from the December pace. Starts activity slowed sharply in both the West (-41.3%) and Midwest (-17.9%) but grew healthily in both the Northeast (+55.4%) and South (+20.0%). Even with January’s decline, housing starts were 10.5% ahead of their January 2016 pace, indicative of a still solid construction market. Starts of single-family units were at a SAAR of 823,000 units, up 1.9% for the month and 6.2% from a year earlier. Looking towards the future, there were 1.285 million issued residential construction permits (SAAR), +4.6% vs. December 2016 and +8.2% vs. January 2016. Housing completions slowed 5.6% during the month to 1.047 million units. This was off 0.9% from the January 2016 completions pace.

#5Leading indicators signal economic expansion for the coming months. The Leading Economic Index from the Conference Board added 8/10ths of a point during January to a reading of 125.5 (2010 = 100). This was up 2.5% from a year earlier. 8 of the measure’s 10 components made positive contributions, led by the interest rate spread, building permits, and jobless claims. The coincident index edged up 1/10th of a point to 114.4 (+1.6 vs. January 2016). 3 of 4 coincident index components made positive contributions, including nonfarm payrolls and personal income net of transfer payments. The lagging index added 4/10ths of a point to 123.7 (+3.3% vs. January 2016), with 4 of 7 index components making a positive contribution. The press release noted should the indices’ trends continue, “the U.S. economy may accelerate in the near term.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 11, 2017, First-Time Claims, seasonally adjusted): 239,000 (+5,000 vs. previous week; -21,000 vs. the same week a year earlier). 4-week moving average: 244,250 (-9.2% vs. the same week a year earlier).
Housing Market Index (February 2017, Index (Greater than 50 = “Good” Housing Market, seasonally adjusted): 65 (vs. January 2017: 67, vs. February 2016: 58).
Small Business Optimism Index (January 2017, Index (1986 = 100), seasonally adjusted): 105.9 (vs. December 2016: 105.8, vs. January 2016: 93.9).
Business Inventories (December 2016, Manufacturing & Trade Inventories, seasonally adjusted): $ 1.836 trillion (+0.4% vs. November 2016, +2.0% vs. December 2015).
Treasury International Capital Data (December 2015, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$13.9 billion (vs. November 2016: +$15.9 billion, vs. December 2015: -$43.4 billion).

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

Energy and Shelter Prices Firmed as 2016 Wrapped Up: What We Learned During the Week of January 16 – 20

During the final days of 2016, consumer prices continued to firm while factory output increased. Here are the 5 things we learned from U.S. economic data released during the week ending January 20.

#1Gasoline and shelter pulled up consumer prices during December. The Consumer Price Index (CPI) jumped 0.3% on a seasonally adjusted during the month and was 2.1% above year ago levels, per the Bureau of Labor Statistics. Energy prices increased for the 4th consecutive month with a 1.5% gain as gasoline prices surged 3.0%. Holding steady for a 6th straight month were food prices. Net of energy and food, core CPI grew 0.2% during the month with a year-to-year comparable just above the Federal Reserve’s target with a 2.2% gain. Increasing during the month were prices for transportation services (+0.6%), used cars/trucks (+0.5%), medical care services (+0.4%), shelter (+0.3%), new vehicles (+0.1%), and medical care services (+0.1%). Apparel prices, on the other hand, fell for the 3rd time in 4 months with a 0.7% decline.consumer-prices-012017

#2Manufacturing activity edged up during December. The Federal Reserve estimates manufacturing sector output grew 0.2% during the month, leaving it 0.2% above its year ago level. The output of durable goods increased 0.5%, with “sizable” gains in the production of automobiles (+1.8%) and primary metals (+1.4). Nondurable goods production fell 0.3%, pulled down by substantial output declines for textiles (-3.0%) and chemicals (-1.0%). Overall industrial production grew 0.8% during the month and was 0.5% above its December 2015 level. Mining output was unchanged during the month while utility production jumped 6.6% as winter weather increased heating demand. Factory usage also grew during December with capacity utilization increasing by 6/10ths of a percentage point to 75.5% while factory utilization in the manufacturing sector edged up 1/10th of a percentage point to 74.8%.

#3Thanks to a boost in the multi-family sector, housing starts rebounded in December. The Census Bureau reports that housing starts jumped 11.3% during the month to a seasonally adjusted rate of 1.226 million units (+5.7% vs. December 2015). Starts grew in the Midwest, West, and Northeast, but declined in the South. Starts of single-family homes declined for a 2nd straight month: -4.0% to 795,000 units (SAAR, +3.9% vs. December 2015). On the flip side, starts of multi-family units (5+ units) surged 53.9% during the month to 417,000 units (SAAR, +10.3% vs. December 2015). Looking towards future activity, the count of issued building permits slipped 0.2% during December to a SAAR of 1.210 million permits (+0.7% vs. December 2015). Finally, the SAAR of completed homes dropped 7.9% during the month to 1.123 million units. This was 8.7% above the pace of completions in December 2015.

#4Homebuilders’ confidence slipped slightly in January but nevertheless stayed strong. The Housing Market Index (HMI), from the National Association of Home Builders, shed 2 points during the month to a seasonally adjusted reading of 67. This was the 31st straight month in which the index was above a reading of 50, indicative of a greater percentage of homebuilders describing the housing market as “good” versus seeing it as being “poor.” The HMI contracted in 3 of 4 Census regions: West (down 9 points to 75), Northeast (down 5 points to 52), and South (down 3 points to 67). The HMI held steady at 66 in the Midwest. Also falling were indices for current sales of single-family homes (down 3 points to 72), expected sales (down 2 points to 76), and traffic of prospective buyers (off a point to 51). Per the press release, the trade group expects construction of new single-family homes to increase 10% during 2017.

#5Industries that made the largest contributions to Q3 2016 GDP growth were finance/real estate, wholesale trade, and professional/business services. As reported previously, Gross Domestic Product (GDP) grew 3.5% on a seasonally adjusted annualized basis during the quarter. The Bureau of Economic Analysis released a report that provides detail the contributions to economic by industry groups. The industry sectors making the largest contributions GDP growth were finance/insurance (64-basis point contribution), wholesale trade (48-bassi point contribution), professional/business services (47-basis point contribution), durable goods manufacturing (32-basis points), and the government (25-basis points). Overall, the private service sector added 286-basis points to Q3 GDP growth while the private goods-producing side of the economy was responsible for 41-basis points of GDP growth.

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 14, 2017, First-Time Claims, seasonally adjusted): 234,000 (-15,000 vs. previous week; -57,000 vs. the same week a year earlier). 4-week moving average: 246,750 (-12.9% vs. the same week a year earlier).
Treasury International Capital Flows (November 2016, Domestic Securities Purchased by Foreign Investors, not-seasonally adjusted): +$13.3 billion (vs. -$6.0 billion in October 2016, vs. +$44.3 billion in November 2015).
Beige Book

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