Manufacturing Ends 2018 on a High Note: January 14 – 18

Factories were more active as 2018 wrapped up, but consumer sentiment softened in the early days of 2019. Here are the five things we learned from U.S. economic data released during the week ending January 18. 

Note that the partial shutdown of the federal government has and will delay the release of certain economic data reports.

#1Manufacturing output surged in December. The Federal Reserve reports that manufacturing production jumped a seasonally adjusted 1.1 percent during the month, its biggest gain since last February and leaving output up 3.2 percent over the past 12 months. Durable goods production blossomed by 1.3 percent, boosted by significant gains for motor vehicles, nonmetallic mineral products, wood products, aerospace, and computers/electronics. Production of nondurables increased 0.9 percent, pulled up by petroleum/coal products and food/beverage/tobacco goods. Manufacturing output has grown by 3.2 percent over the past year. Overall industrial production gained 0.3 percent during December and had expanded 4.0 percent since December 2017. Mining output jumped 1.5 percent for the month and had swelled 13.4 percent over the past year (boosted by oil and gas extraction). Relatively moderate weather in December led to a 6.3 percent drop in output at utilities (-4.3 percent versus December 2017).Manufacturing 2016-8 011819.png

#2Wholesale prices fell in December. The Producer Price Index (PPI) for final demand dropped by 0.2 percent on a seasonally adjusted basis during the month. This was the first decline in the Bureau of Labor Statistics’ wholesale price measure since February 2017. The core measure of wholesale prices, which removes the impact of energy, food and trade services, was unchanged in December. PPI for energy plummeted by 5.4 percent (slightly greater than November’s 5.0 percent drop) as gasoline prices fell 13.1 percent. PPI for final demand food swelled 2.4 percent, as prices for fresh fruit surged 48.9 percent. PPI for final demand services contracted by 0.1 percent, pulled down by lower prices for trade services (-0.3 percent) and transportation & warehousing (-0.2 percent). For all of 2018, final demand PPI has risen 2.5 percent while the core measure gained 2.8 percent.

#3Many issued weighed heavily on consumers during the opening days of the new year. The preliminary January reading of the University of Michigan’s Index of Consumer Sentiment came in at 90.7, 7.6 points below the final December reading, five full points below the January 2018 mark, and its lowest reading since 2016. The current conditions slumped by 6.1 points to 110.0 (January 2018: 110.5) while the expectations index plummeted by 8.7 points to 78.3 (January 2018: 86.3). The press release noted that survey respondent’s “year-ahead outlook for the national economy [was] judged the worst since mid 2014,” blaming the greater pessimism on the “partial government shutdown, the impact of tariffs, instabilities in financial markets, the global slowdown, and the lack of clarity about monetary policies.” Look for the release of final January sentiment figures on February 1.

#4Homebuilder confidence slightly rebounded in January. The Housing Market Index (HMI) added two points during the month to a seasonally adjusted reading of 58. Even with its first increase since October, the National Association of Home Builders’ measure is 14 points below its January 2018 mark. Nonetheless, this was the 55th consecutive month with an HMI above a reading of 50, indicative of a higher percentage of homebuilders saying the housing market was “good” as opposed as being “poor.” The HMI improved in two Census regions (Northeast, up 12 points to 48, and West, up five points to 70), was steady in the South (at 61), and shed three points in the Midwest (49). Improving from January were indices for current sales of single-family homes (up two points to 63), expected sales of new homes (up three points to 64), and traffic of prospective buyers (up a point to 44). The press release stated that “the gradual decline in mortgage rates in recent weeks helped to sustain builder sentiment.”

#5Much of December’s job growth was centered about eight states. The Bureau of Labor Statistics state-level employment report finds the following states had “statistically significant” increases in nonfarm payrolls during the month: Texas (+38,000), Florida (+22,800), Georgia (+16,700), Indiana (+13,200), Washington state (+11,400), South Carolina (+10,800), Colorado (+9,800), and Alabama (+8,100). Employment also had grown at other states, but not at “statistically significant” level. Relative to a year earlier, nonfarm payrolls increased in size in 40 states, with the largest year-to-year percentage gains in Nevada (+3.9 percent), Arizona (+3.4 percent), and Texas (+3.2 percent).

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 12, 2019, First-Time Claims, seasonally adjusted): 213,000 (-3,000 vs. previous week; -13,000 vs. the same week a year earlier). 4-week moving average: 220,750 (-8.3% vs. the same week a year earlier).
Import Prices (December 2018, All Imports, not seasonally adjusted): -1.0% vs. November 2018, -0.6% vs. December 2017. Nonfuel Imports: Unchanged vs. November 2018, +0.5% vs. December 2017.
Export Prices (December 2018, All Exports, not seasonally adjusted): -0.6% vs. November 2018, +1.1% vs. December 2017.
Beige Book

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.