Retailers Had a Good Start to 2020: February 10 – 14

Consumers continued to spend in January while manufacturing remained soft. Here are the five things we learned from U.S. economic data released during the week ending February 14.

#1Retail sales picked up the pace in January. The Census Bureau estimates retail and food services sales grew 0.3 percent during the month to a seasonally adjusted $529.8 billion. Sales at auto dealers & parts store rose 0.2 percent but fell 0.5 percent at gas stations (as prices at the pump mellowed). Net of activity at auto dealers/parts stores and gas stations, core retail sales advanced 0.4 percent, just off December’s 0.5 percent bounce. Sales grew at retailers focused on building materials (+2.1 percent), furniture (+0.6 percent), groceries (+0.3 percent), and sporting goods/hobbies (+0.1 percent). Also, restaurants and bars reported a 1.2 percent sales jump. Losing momentum in January were clothing stores (-3.1 percent), electronics/appliance retailers (-0.5 percent), and health/personal care stores (-0.4 percent). Over the past year, retail sales have risen 4.4 percent, while the 12-month comparable for core retailers was +3.3 percent.

#2A slowdown in aircraft production slowed January manufacturing activity. The Federal Reserve reports that manufacturing production fell for the first time in three months with a seasonally adjusted 0.1 percent decline. Durable goods output sank 0.5 percent, hurt by a 7.4 percent drop in aerospace transportation equipment (think the shutdown of 737 MAX production). Nondurables output weakened 0.6 percent. Overall industrial production shed 0.3 percent, its fourth decline in five months. While mining output gained 1.2 percent, moderate winter weather slackened utilities’ output by 4.0 percent. Both manufacturing and overall industrial production were both 0.8 percent below their year-ago paces.

#3A drop in prices at the pump kept inflation at bay in January. The Bureau of Labor Statistics finds the Consumer Price Index (CPI) increased 0.1 percent on a seasonally adjusted basis, following three consecutive 0.2 percent monthly increases. Food prices grew 0.2 percent while energy CPI declined 0.7 percent (gasoline: -1.6 percent). Net of food and energy, core CPI rose 0.2 percent. Increasing were prices for apparel (+0.7 percent), shelter (+0.4 percent), transportation services (+0.3 percent), and medical services (+0.3 percent). Prices declined for used cars/trucks (-1.2 percent) and medical care commodities (-0.6 percent). Over the past year, CPI has risen 2.5 percent while core CPI has a 12-month comparable of +2.3 percent.

#4The count of job openings narrowed as 2019 ended. Nonfarm employers had a seasonally adjusted 6.423 million unfilled jobs on the final day of 2019, down 364,000 from November and 14.1 percent from a year earlier. The Bureau of Labor Statistics also tells us that were 5.739 million open private-sector jobs, down 16.3 percent from December 2018 levels. Substantial year-to-year percentage declines in job openings were widespread across the economy. This included drops in retail (-29.2 percent), financial activities (-20.3 percent), construction (-20.1 percent), and manufacturing (-17.2 percent). Edging up was the count of hired workers, including by 80,000 to 5.907 million (+3.0 percent versus December 2018), with private sector hiring growing 3.9 percent from a year earlier to 5.563 million. Separations inched up by 21,000 to 5.730 million (+4.8 percent versus December 2018), with 3.488 million people quitting their jobs (up 2.9 percent from a year earlier) and 1.895 million people laid off (up 8.2 percent from a year earlier).

#5Small business owner sentiment solidified in January. The Small Business Optimism Index from the National Federation of Independent Business added 1.6 points during the month to a seasonally adjusted reading of 104.3. The measure has been above a reading of 100 (benchmarked to 1986 sentiment) for 38 straight months. Making positive contributions were six of 10 index components, led by expected real sales, earnings trends, current job openings, and whether it is a good time to expand. The press release said that “2020 is off to an explosive start for the small business economy.” 

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 8, 2020, First-Time Claims, seasonally adjusted): 205,000 (+2,000 vs. previous week; -26,000 vs. the same week a year earlier). 4-week moving average: 212,000, -7,4% vs. the same week a year earlier).
University of Michigan Surveys of Consumers (February 2020-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 100.9 (January 2020: 99.8, February 2019: 93.8).
Import Prices (January 2020, All Imports): Unchanged vs. December 2019, +0.3% vs. January 2019. Nonfuel Imports: +0.2% vs. December 2019, -0.9% vs. January 2019.
Export Prices (January 2020, All Exports): +0.7% vs. December 2019, +0.5% vs. January 2019. Nonagricultural Exports: +0.7% vs. December 2019, +0.2% vs. January 2019.
Business Inventories (December 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.040 trillion (+0.1% vs. November 2019, +2.2% vs. December 2018.
Monthly Treasury Statement (January 2020 (First 4 Months of FY2020, Federal Budget Deficit): -$389.2 billion (vs. First 4 months of FY2019: -$310.3 billion).

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

Retail Sales Up, Industrial Production Down: January 13 – 17

Retail sales ended 2019 on a positive note while job openings fell sharply. Here are the five things we learned from U.S. economic data released during the week ending January 17.

#1Holiday retail sales were decent. The Census Bureau estimates retail and food services sales grew 0.3 percent in December to a seasonally adjusted $529.6 billion. Sales slowed 1.3 percent at auto dealers/parts stores but rose 2.8 percent at gas stations. Net of sales at auto dealers/parts stores and gas stations, core retail sales bloomed 0.5 percent in December and were 5.7 percent of the year-ago pace. A quick look at combined November-December sales—a proxy for the recent holiday season—finds core retail sales were a solid 4.2 percent ahead of that of the prior year. In December, sales rose at retailers focused on apparel (+1.6 percent), building materials (+1.4 percent), sporting goods/hobbies (+0.9 percent), groceries (+0.4 percent), and furniture (+0.1 percent). Restaurant sales eked out a 0.2 percent improvement. Sales fell 0.8 percent at department stores.

#2Industrial production slowed for the third time in four months in December. The Federal Reserve estimates industrial production dropped a seasonally adjusted 0.3 percent, following a 0.8 percent increase in November and two consecutive 0.5 percent decreases in September and October. The headline index drop occurred despite a 0.2 percent improvement in manufacturing output (following a 1.0 percent bounce in November). Durable goods production slowed 0.2 percent (including a 4.6 percent slump in motor vehicle/parts output). In contrast, the output of nondurables expanded by 0.6 percent. Mining output advanced for the first time since August with a 1.3 percent gain while utilities production fell 5.6 percent due to moderate winter weather. Industrial production was 1.0 percent below that of a year earlier while manufacturing output was 1.3 percent behind the year-ago pace. 

#3Job openings shrank in November. The Bureau of Labor Statistics states that there were a seasonally adjusted 6.800 million job openings at the end of the month, down 561,000 from October and 10.8 percent from the year earlier. Even with the decline, there were more job openings than the number of unemployed adults (5.753 million). Private-sector job openings were off 12.7 percent from the same month a year earlier, with sizable year-to-year percentage declines in retail (-32.5 percent), construction (-23.3 percent), manufacturing (-22.6 percent), financial activities (-11.7 percent), accommodations/food services (-9.5 percent), and professional/business services (-7.8 percent). The number of job hires grew by 39,000 in November to 5.821 million, which matched the November 2018 count. 5.648 million people left their jobs in November, down a mere 4,000 from October and up a modest 0.9 percent from a year earlier. 3.536 million people quit their jobs during the month (+39,000 vs. October 2019 and +4.6 percent vs. November 2018) while the number of people laid off declined 46,000 to 1.749 million (-7.4 percent vs. November 2018).

#4Inflation took a holiday in December. The Bureau of Labor Statistics indicates that the Consumer Price Index (CPI) increased 0.2 percent on a seasonally adjusted basis during the month, down from gains of 0.4 percent and 0.3 percent in October and November, respectively. Food CPI grew 0.2 percent while energy CPI jumped 1.4 percent, the latter growing due to gasoline prices jumping 2.8 percent. Net of food and energy, core CPI increased 0.1 percent, its smallest gain since September. Rising were prices for medical care commodities (+1.5 percent) and services (+0.4 percent), apparel (+0.4 percent), shelter (+0.2 percent), and new vehicles (+0.1 percent). Prices fell for used cars/trucks (-0.8 percent) and transportation services (-0.3 percent). Both headline and core CPI have risen 2.3 percent over the past year.

Final demand Producer Price Index (PPI) inched up a seasonally adjusted 0.1 percent in December after holding steady during the prior month. The core measure of wholesale prices, which nets out of food, energy, and trade services, had a matching 0.1 percent increase. PPI for goods grew 0.3 percent. Prices jumped 1.5 percent for wholesale energy (gasoline: +3.7 percent) but fell 0.3 percent for wholesale food. PPI for final demand services held steady in December even as trade services PPI (measuring retailer and wholesaler margins) decreased 0.3 percent. Over the past year, final demand PPI has risen a modest 1.3 percent. In contrast, the 12-month comparable for the core measure has gained 1.5 percent.

#5Housing starts rose to a 13-year high in December. The Census Bureau reports housing starts jumped 16.9 percent during the month to a seasonally adjusted annualized rate of 1.375 million units. This was 40.8 percent ahead of the year-ago starts rate and the measure’s highest mark since October 2006. Starts surged for both single-family (+11.2 percent vs. November 2019, +29.6 percent vs. December 2018) and multi-family units (+32.0 percent vs. November 2019, +74.6 percent vs. December 2018). Looking towards the future, the annualized count of issue housing permits declined 3.9 percent in December to 1.416 million (+5.8 percent vs. December 2018). The annualized count of housing completions grew 5.1 percent during the month to 1.277 million homes, up 19.6 percent from the same month a year earlier. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 11, 2020, First-Time Claims, seasonally adjusted): 204,000 (-10,000 vs. previous week; -13,000 vs. the same week a year earlier). 4-week moving average: 216,250 -3.0% vs. the same week a year earlier).
Import Prices (December 2019, All Imports, not seasonally adjusted): +0.3% vs. November 2019, +0.5% vs. December 2018. Nonfuel Imports: Unchanged vs. November 2019, -1.4% vs. December 2018.
Export Prices (December 2019, All Exports, not seasonally adjusted): -0.2% vs. November 2019, -0.7% vs. December 2018. Non-Agricultural Exports: -0.1% vs. November 2019, -0.6% vs. December 2018.
University of Michigan Surveys of Consumers (January 2020-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted):  99.1 (vs. December 2019: 99.3, January 2019: 91.2.
Housing Market Index (January 2020, Index (>50=More homebuilders view the housing market as “good” versus “poor,” seasonally adjusted): 75 (vs. December 2019: 76, January 2019: 58).
Small Business Optimism Index (December 2019, Index (1986=100), seasonally adjusted): 102.7 (vs. November 2019: 104.7, vs. December 2018: 104.4).
Business Inventories (November 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.037 trillion (-0.2% vs. October 2019, +2.8% vs. November 2018.
Treasury International Capital Flows (November 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$7.3 billion (vs. October 2019: +$4.3 billion, November 2018: -$3.0 billion.
Beige Book

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

A Robust Start to the Holiday Shopping Season: December 16 – 20

Consumer spending and sentiment were solid in November. Here are the five things we learned from U.S. economic data released during the week ending December 20.

#1Consumer spending signaled strength in November. The Bureau of Economic Analysis estimates real personal consumption expenditures (PCE) grew 0.3 percent on a seasonally adjusted basis during the month, its largest increase since July. Spending on goods increased 0.5, split between gains for durables and nondurables of +1.2 percent and 0.1 percent, respectively. (It is worth noting that just last week, Census Bureau data pointed to modest retail sales during the same month.) Expenditures on services crept up 0.2 percent. Nominal (not inflation-adjusted) PCE rose 0.4 percent in November, funded by 0.5 percent gains for both nominal personal income and nominal disposable income. Real disposable income expanded 0.4 percent. The savings rate edged up 1/10th of a point to 7.9 percent. Over the past year, real personal spending has risen 2.4 percent funded by a 3.1 percent jump in real disposable income.

#2Manufacturing output grew for the second time in five months in November. The Federal Reserve estimates manufacturing production jumped 1.1 percent during the month. Output of durable goods surged 2.2 percent, boosted by a post-GM strike rise in automobile manufacturing and sizable increases for both primary metals and computers/electronics. Nondurable goods output grew 0.1 percent. Overall industrial production gained 1.1 percent. Mining output slipped 0.2 percent as gas/oil drilling slowed. Cold weather in parts of the U.S. led to a 2.9 percent rise in utility output. Even with their November gains, both overall industrial production and manufacturing output have declined 0.8 percent over the past year.

#3The latest revision to Q3 GDP has the U.S. economy growing at a moderate rate. The third estimate of Q3 Gross Domestic Product keeps the seasonally adjusted annualized growth rate at a good but not great +2.1 percent. The Bureau of Economic Analysis’ revision reflects higher than previously believed levels of consumer spending and business investment, offset by lower levels of inventory accumulation. The only sectors of the economy making positive contributions to GDP growth were consumer spending, government spending, fixed residential investment, and exports. The same report finds corporate profits slipping 0.2 percent during the quarter. We will see our first snapshot of Q4 GDP on January 30.

#4Employers continued having difficulty finding people to fill open jobs. The Bureau of Labor Statistics reports that there were a seasonally adjusted 7.267 million open jobs at the end of October, up 235,000 for the month but off by 326,000 from a year earlier (but still near a record high for the data series). (By comparison, the BLS estimates that there were “only” 5.855 million unemployed adults during the same month.) Private-sector employers had 5.515 million open jobs, down 6.2 percent versus October 2018. Employers were unable to fill these jobs as hiring declined by 213,000 to 5.764 million (-1.9 percent versus October 2018). 5.636 million people departed their jobs, down 162,000 from September but essentially matching that of a year earlier. This included a small rise in workers voluntarily quitting their jobs (up 41,000 to 3.512 million, +1.2 percent versus October 2018). Meanwhile, the count of layoffs plummeted by 198,000 to 1.769 million (-4.6 percent versus October 2018).

#5Consumer confidence ends 2019 on a high note. The December Index of Consumer Sentiment reading of 99.3 (seasonally adjusted), essentially matched the preliminary mark reported a few weeks earlier and was up by 2.5 points from November and a full point over the previous year. The University of Michigan also notes that its current conditions index jumped 3.9 points to 115.5 (December 2018: 116.1) while the expectations index added 1.6 points to 88.9 (December 2018: 87.0). The press release stated that the impeachment hearings “had a barely noticeable impact on economic expectations,” with only two percent of survey respondents mentioning it.

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 14, 2019, First-Time Claims, seasonally adjusted): 234,000 (-18,000 vs. previous week; +14,000 vs. the same week a year earlier). 4-week moving average: 225,500 (+0.7% vs. the same week a year earlier).
Leading Indicators (November 2019, Index (2016=100)): 111.6 (Unchanged vs. October 2019, +0.1% vs. November 2018).
Existing Home Sales (November 2019, Sales, seasonally adjusted annualized rate): 5.35 million (-1.7% vs. October 2019, +2.7% vs. November 2018).
Housing Starts (November 2019, Housing Starts, seasonally adjusted annualized rate): 1.365 million units (+3.2% vs. October 2019, +13.6% vs. November 2018).
Housing Market Index (December 2019, Index (>50=Greater Percentage of Homebuilders View the Housing Market as Being “Good” versus Being “Poor,” seasonally adjusted): 76 (vs. November 2019: 71, vs. December 2018: 56).
State Employment (November 2019, Nonfarm Payrolls, seasonally adjusted): Vs. October 2019: Payrolls grew in 6 states, decreased in 1 state, and were essentially unchanged in 43 states and the District of Columbia. Vs. November 2018: Payrolls grew in 25 states and were essentially unchanged in 25 states and the District of Columbia.

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