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.

Job Openings Outpaces Unemployment Again: July 9 – 13

Employers continue to struggle to fill their job openings. Here are the five things we learned from U.S. economic data released during the week ending July 13.

#1There remain more job openings than people unemployed. The Bureau of Labor Statistics estimates there were a seasonally adjusted 6.638 million job openings at the end of May. While down 202,000 from the prior month, the count of job openings was not only 16.7 percent larger than that of a year earlier but also higher than the 6.065 million people the BLS had reported being jobless in last week’s employment report. Private sector job openings have grown 16.6 percent over the past year, with some of largest year-to-year percentage gains seen for construction (+32.8 percent), transportation/warehousing (+28.9 percent), manufacturing (+24.6 percent), and professional/business services (+20.6 percent). During the same month, hiring grew by 268,000 to 5.754 million (+4.9 percent versus June 2017). Private sector hiring has risen 5.2 percent over the past year, with substantial year-to-year percentage gains seen in transportation/warehousing (+11.6 percent), health care/social assistance (+9.7 percent), accommodation/food services (+9.6 percent), professional/business services (+5.3 percent), and manufacturing (+4.2 percent). 5.468 million people left their jobs during June, an increase of 44,000 for the month and up 3.8 percent from a year earlier. This included a record 3.561 million people voluntarily quitting their jobs (increasing 212,000 for the month and 10.4 percent over the past year), reflecting the robust employment opportunities for workers.Job Openings Unemployment 071318.png

#2Consumer prices grew at a slower rate in June, thanks to lower electricity and natural gas prices. The Consumer Price Index (CPI) increased 0.1 percent on a seasonally adjusted basis, following two consecutive 0.2 percent monthly gains, as reported by the Bureau of Labor Statistics. Energy prices fell 0.3 percent (its first drop since March), thanks to lower electricity and natural gas prices. Meanwhile, gasoline prices grew 0.5 percent. Food CPI increased 0.2 percent. Net of energy and food, core CPI expanded 0.2 percent for the fourth time in five months. Growing during June were prices for used cars/trucks (+0.7 percent), medical care services (+0.5 percent), new vehicles (+0.4 percent), transportation services (+0.2 percent), and shelter (+0.1 percent). On the other end of the spectrum, apparel prices slumped 0.9 percent. CPI has risen 2.9 percent over the past year, while core CPI has a 12-month comparable of +2.3 percent.

#3Meanwhile, wholesale prices firmed further. The Producer Price Index (PPI) for final demand jumped 0.3 percent on a seasonally adjusted basis in June, down from May’s 0.5 percent bounce. The Bureau of Labor Statistics’ core measure for wholesale prices—final demand PPI net of energy, food and trade services—grew by a more modest 0.1 percent. Energy PPI blossomed 0.8 percent, with prices for fuels and lubricants surging 21.8 percent. Food PPI, however, fell 1.1 percent as vegetable prices plummeted 13.8 percent. Net of energy and food, core goods PPI increased 0.3 percent. PPI for final demand services grew 0.4 percent, its largest single-month rise since January. Trade services PPI (a measure of retailer and wholesaler margins) jumped 0.7 percent in June after rising 0.9 percent during May. Over the past year, PPI has increased 3.4 percent, with the core measure of wholesale prices growing 2.7 percent over the past 12 months.

#4Even with a slight pullback, small business owners remained confident in June. The Small Business Optimism Index from the National Federation of Independent Business lost 6/10ths of a point during the month to a seasonally adjusted 107.2 (1986=100). Even with the decline, the index has been above a reading of 100 for 19 consecutive months. Five of the index components improved during the month (including those for current inventories and current job openings) while the other five lost ground (including those for expected real sales and whether it is a good time to expand). The press release argued that the “first six months of the year have been very good to small business thanks to tax cuts, regulatory reform, and policies that help them grow.”

#5The U.S. budget deficit continued to pace ahead of that from last year. Per the Department of the Treasury, the federal government ran a budget deficit of -$74.9 billion. Receipts totaled $316.3 billion for the month (down 6.6 percent from the same month a year earlier) while expenditures were $391.1 billion (8.8 percent smaller than that of June 2017). Over the first nine months of FY2018, the U.S. government has run up a -$607.1 billion trade deficit, up 16.1 percent from the same nine months during the previous fiscal year. Receipt collected over these nine months—$2.540 trillion—was pacing 1.3 percent ahead of that from the same period in FY2018. Over this same time period, personal income tax collections were 8.9 percent larger than that of a year earlier while corporate taxes were down 27.6 percent. Expenditures totaled $3.148 trillion, up 3.8 percent from the nine-month total of a year earlier.

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 7, 2018, First-Time Claims, seasonally adjusted): 214,000 (-18,000 vs. previous week; -30,000 vs. the same week a year earlier). 4-week moving average: 223,000 (-9.2% vs. the same week a year earlier).
Import Prices (June 2018, All Imports, not seasonally adjusted): -0.4% vs. May 2018, +4.3% vs. June 2017. Nonfuel imports: -0.3% vs. May 2018, +1.5% vs. June 2017.
Export Prices (June 2018, All Exports, not seasonally adjusted): +0.3% vs. May 2018, +5.3% vs. June 2017. Nonagricultural exports: +0.4% vs. May 2018, +5.4% vs. June 2017.
University of Michigan Consumer Sentiment (July 2018-preliminary, Index of Consumer Sentiment, seasonally adjusted): 97.1 (vs. June 2018: 98.2, vs. July 2017: 93.4).
Consumer Credit (May 2018, Outstanding Consumer Credit-net of real estate-backed loans, seasonally adjusted): $3.898 trillion (+$24.5 billion vs. April 2018, +4.8% vs. May 2017). 

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