Retail Sales Ended 2017 on a Happy Note: January 9 – 13

The 2017 holiday season was merry for many members of the retail sector. Here are the five things we learned from U.S. economic data released during the week ending January 12.  

#1Retail sales ended 2017 on a high note. The Census Bureau estimates U.S. retail and food services sales grew 0.4 percent during the month to a seasonally adjusted $495.4 billion (+5.6 percent versus December 2016). This follows an upwardly revised 0.9 percent gain in November, signaling a healthy retail market during the just completed holiday season. Sales increased 1.2 percent at building material retailers, 0.7 percent at restaurant/bars, and 0.2 percent at auto dealers/parts stores while those at gas stations held firm during the month. Net of all four of those segments, core retail sales gained 0.3 percent during December following a 0.9 percent bump in November. Core retail sales have risen 5.6 percent over the past year. Sales gained in December at grocery stores (+0.7 percent), furniture retailers (+0.6 percent), health/personal care stores (+0.4 percent) but fell at sporting goods/hobby stores (-1.6 percent), department stores (-1.1 percent), apparel retailers (-0.3 percent), and electronics/appliance stores (-0.2 percent). Finally, sales at nonstore retailers (i.e., web retailers) jumped 1.2 percent during December and rose 12.7 percent over the past year. Nonstore retail sales have zoomed up 57.4 percent since December 2012, well above the five-year comparable for overall retail sales (+21.0 percent).December 2017 Retail Sales 011318

#2Core consumer prices grew at their fastest rate since last January. The Consumer Price Index (CPI) increased 0.1 percent on a seasonally adjusted basis during December, leaving the Bureau of Labor Statistics measure up 2.1 percent for all of 2017. Energy CPI declined 1.2 percent during the month, as gasoline prices fell 2.7 percent. Food CPI gained 0.2 percent, as prices for meats/poultry/fish/eggs jumped 0.9 percent. Net of energy and food, core CPI climbed 0.3 percent for the month and 1.8 percent over the past year. This was the largest single-month increase in core consumer prices in 11 months. Rising during the month were prices for used vehicles (+1.4 percent), medical commodities (+1.0 percent), new vehicles (+0.6 percent), shelter (+0.4 percent), transportation services (+0.3 percent), and medical services (+0.2 percent).

#3But wholesale prices chilled, thanks to decreases for food and trade services. Per the Bureau of Labor Statistics, the Producer Price Index (PPI) for final demand declined 0.1 percent on a seasonally adjusted basis during December, following 0.4 percent increases during each of the two previous months. The core measure—final demand PPI net of energy, food, and trade services—grew 0.1 percent during the months, its smallest monthly increase since last August. Final demand goods wholesale prices held steady during November, with prices for food falling 0.7 percent and that for energy goods holding unchanged. Net of energy and food, wholesale goods prices grew 0.2 percent. PPI for final demand services declined 0.2 percent, its first decline since last February. PPI for trade services—measuring retailer and wholesaler margins—dropped 0.6 percent. Over the past year, final demand PPI has grown 2.6 percent while that net of food, energy, and trade services has increased 2.3 percent.

#4Counts of both job openings and people hired slowed slightly during November. The Bureau of Labor Statistics reports that there were a seasonally adjusted 5.879 million job openings at the end of November, down 46,000 from October but still up 4.4 percent from the same month a year earlier. The private sector had 5.360 million job openings at the end of November, a 6.0 percent increase from a year ago. The industries with the largest year-to-year percentage gains in job openings were manufacturing (+18.5 percent), construction (+18.0 percent), financial activities (+17.3 percent), leisure/hospitality (+13.0 percent), and retail (+11.8 percent). Employers hired 5.488 million people during November, off 104,000 for the month but 4.3 percent ahead of the year-ago pace. Private sector hiring has grown 4.0 percent over the past year to 5.110 million workers. Industries with the largest year-to-year percentage increases in hiring were manufacturing (+25.0 percent), financial activities (9.7 percent), professional/business services (+5.8 percent), and health care/social assistance (+4.9 percent). 5.202 million people left their jobs during November, down 49,000 for the month but up 2.5 percent from a year earlier. Voluntary quits have risen 3.9 percent over the past year while layoffs have inched up by a slower 1.6 percent rate.

#5Small business owners’ confidence slipped in December. The National Federation of Independent Business’ Index of Small Business Optimism shed 2.6 points during the month to a seasonally adjusted 104.9 (1986=100). While this reading was off 9/10ths of a point from a year earlier, it was just above the index’s 2017 average of 104.8 (which itself was a record for the measure). Only two of the index’s ten components improved during the month: measures for both plans to make capital outlays and current job openings added a point during December. Falling were measures for expectations for the economy to improve (-11), plans to increase inventories (-8), expectations for real sales (-6), earnings trends (-5), and plans to increase employment (-4).

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 6, 2018, First-Time Claims, seasonally adjusted): 261,000 (+11,000 vs. previous week; +16,000 vs. the same week a year earlier). 4-week moving average: 250,750 (-0.6% vs. the same week a year earlier).
Business Inventories (November 2017, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.895 trillion (+0.4% vs. October 2017, +3.2% vs. November 2016).
Import Prices (December 2017, All Imports, not seasonally adjusted): +0.1% vs. November 2017, +3.0% vs. December 2016. Nonfuel Imports: -0.1% vs. November 2017, +1.4% vs. December 2016.
Export Prices (December 2017, All Exports, not seasonally adjusted): -0.1% vs. November 2017, +2.6% vs. December 2016. Nonagricultural Exports: Unchanged vs. November 2017, +2.7% vs. December 2016.
Consumer Credit (November 2017, Outstanding Consumer Credit Balances-net of real estate-backed loans, seasonally adjusted): $3.827 trillion (+$27.9 billion vs. October 2017, +5.3% vs. November 2016).

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

Another Fed Rate Bump to End 2017: December 11 – 15

Just in time for the holidays, the Federal Reserve bumps up its short-term interest rate target. Meanwhile, retailers start the holiday season with signs of strength. Here are the five things we learned from U.S. economic data released during the week ending December 15.

#1One last hike in the short-term interest rate target for2017. As widely anticipated, the Federal Open Market Committee (FOMC) raised its fed funds target rate by a quarter percentage point to a range between 1.25 and 1.50 percent. Even though this was the target rate’s highest point in nine years, the Fed sees current rates as being “accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.” The FOMC policy statement noted that the U.S. economy “has been rising at a solid rate” and that “labor market continued to strengthen.” Nevertheless, concerns remained about low inflation as it remained below the Fed’s two-percent target. Two FOMC members opposed the rate hike: Charles Evans and Neel Kashkari. Looking towards the future, FOMC members forecast three more quarter-point rate hikes next year and either two or three more in 2019.FOMC Fed funds target projections 121517

#2Manufacturing output edged up in November. The Federal Reserve reports that manufacturing production increased 0.2 percent on a seasonally adjusted basis during the month following an upwardly revised estimate of a 1.2 percent gain in October. Durable goods production expanded 0.4 percent, with gains across most product sectors (including a 1.7 percent bump for primary metals and 0.7 percent increases for both fabricated metals and machinery). Nondurables output held steady for the month, with a 1.7 percent increase in plastics/rubber products being the largest gainer and a 1.0 percent drop in apparel production the biggest decliner. Overall industrial production inched up 0.2 percent during November following a 0.2 percent gain in October. Mining output jumped 2.0 percent as oil and gas extraction rebounded following hurricane caused slowdowns during the prior month. Utility output fell 1.9 percent in October. Manufacturing output has risen 2.4 percent over the past year while the 12-month comparable for all industrial production was +3.4 percent.

#3Retailers enjoyed a good start to the holiday shopping season in November. The Census Bureau estimates retail and food services sales gained 0.8 percent during the month to a seasonally adjusted $492.7 billion. This was an improvement from the upwardly revised 0.5 percent sales gain during October and left sales 5.8 percent ahead of the year-ago sales pace. Sales at auto dealers/parts stores cooled 0.2 percent while those at gas stations rose 2.8 percent (as gasoline prices increased). Net of both auto dealers and gas stations, retail sales gained 0.8 percent during November following a 0.4 percent increase in October. Sales swelled 2.1 percent at electronics/appliance stores, 1.2 percent at both furniture stores and building material retailers, 0.9 percent at sporting goods/hobby retailers, and 0.7 percent at both apparel retailers and restaurants/bars. The ongoing shift away from brick and mortar retailers continued as nonstore retailers enjoyed a 2.5 percent month-to-month gain in sales, with activity up a sharp 10.4 percent from a year earlier.

#4Higher gasoline prices pulled up consumer prices during November. The Consumer Price Index (CPI) rose a seasonally adjusted 0.4 percent during the month following a much more modest 0.1 percent increase during October, per the Bureau of Labor Statistics. Energy CPI gained 3.9 percent, resulting from a 7.1 percent bump in gasoline prices. Food CPI held steady. Net of energy and food, core CPI increased 0.1 percent during November following a 0.1 percent gain in October. Rising during the month were prices for used cars/trucks (+1.0 percent), medical care commodities (+0.6 percent), new vehicles (+0.3 percent), shelter (+0.2 percent), and transportation services (+0.1 percent). Prices for apparel (-1.3 percent) and medical care services (-0.1 percent) dropped during the month. CPI has risen 2.2 percent over the past year while core CPI has a 12-month comparable of +1.7 percent.

Meanwhile, wholesale prices continued to firm during the same month. The Producer Price Index (PPI) for final demand increased 0.4 percent on a seasonally adjusted basis for the third consecutive month and has risen 3.1 percent over the past 12 months. The core final demand wholesale price measure, which nets out the impacts of food, energy and trade services, also gained 0.4 percent for the month and has a 12-month comparable of +2.4 percent. Prices for final demand goods jumped 1.0 percent, led by increases for wholesale energy and food of +4.6 percent and +0.3 percent, respectively. The former included the impact of the 15.8 percent surge in gasoline prices. Net of energy and food, PPI for final demand goods grew 0.3 percent. PPI for final demand services increased 0.2 percent despite a 0.3 percent drop in the measure for trade services prices (reflecting tighter margins for wholesalers and retailers).   

#5Employers expect to add more workers in early 2018. Twenty-one percent of the more than 11,500 employers responding to a survey by Manpower anticipate increasing staff levels during Q1 2018 while five percent expect to contract payrolls. The difference of +16 translates into a Net Employment Outlook of +19 after seasonal adjustments, which was its best reading in more than a decade. The Net Employment Outlook was positive all 13-tracked industries, led by led by leisure/hospitality (+28), transportation/utilities (+26), professional/business services +23), and wholesale/retail trade (+23). Net Employment Outlook readings improved in the Northeast (+17) and South (+18) but softened in the Midwest (+20) and West (+19). The press release noted seeing “a renaissance in industries like construction and manufacturing,” but also employers are “struggling” to find “people with the right skills” to fill open positions.

Other U.S. economic data released over the past week:

Jobless Claims (week ending December 9, 2017, First-Time Claims, seasonally adjusted): 225,000 (-11,000 vs. previous week; -26,000 vs. the same week a year earlier). 4-week moving average: 234,750 (-7.2% vs. the same week a year earlier).
Job Openings and Labor Turnover (October 2017, Number of Job Openings, seasonally adjusted): 5.996 million (-204,000 vs. September 2017, +7.3% vs. October 2016). Hiring: 5.552 million (+232,000 vs. September 2017, +6.8% vs. October 2016).
Import Prices (November 2017, All Imports, not seasonally adjusted): +0.7% vs. October 2017, +3.1% vs. November 2016. Nonfuel Imports: Unchanged vs. October 2017, +1.4% vs. November 2016.
Export Prices (November 2017, All Exports, not seasonally adjusted): +0.5% vs. October 2017, +3.1% vs. November 2016. Nonagricultural Exports: +0.6% vs. October 2017, +3.1% vs. November 2016).
Small Business Optimism (November 2017, Index (1986=100), seasonally adjusted): 107.5 (34-year high, vs. October 2017=103.8, November 2016: 98.4).
Monthly Treasury Statement (November 2017, Federal Government Surplus/Deficit): -$138.6 billion (vs. November 2016: -$136.7 billion). First 2 months of FY2018: -$201.8 billion (vs. first 2 months of FY2017: -$182.5 billion).
Business Inventories (October 2017, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.886 trillion (-0.1% vs. September 2017, +3.5% vs. October 2016).
Treasury International Flows (October 2017, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$7.5 billion (vs. September 2017: +$60.8 Billion, vs. October 2016: -$10.0 billion).

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

Inflation Solidifies and Manufacturing Rebounds: November 13 – 17

Inflation measures continued to converge towards the Fed’s target. Here are the five things we learned from U.S. economic data released during the week ending November 17.  

#1Topline consumer inflation was modest in October. The Consumer Price Index (CPI) inched up 0.1 percent during the month, per the Bureau of Labor Statistics. This followed gains of 0.4 percent and 0.5 percent during August and September, respectively. Holding down the headline index was the 1.0 percent drop in energy prices as gasoline prices declined 2.3 percent. Food CPI was unchanged for the month. Net of both energy and food, core CPI grew 0.2 percent during October and has risen 1.8 percent over the past 12 months. This was the largest 12-month comparable for core consumer prices since April as it gradually edges closer to the Federal Reserve’s two-percent target inflation rate. Used car/truck prices jumped 0.7 percent, with prices also rising for shelter (+0.3 percent), medical services (+0.3 percent), and transportation services (+0.2 percent). Falling during the month were prices for new vehicles (-0.2 percent) and apparel (-0.1 percent).CPI October 2017--111717

#2Meanwhile, wholesale prices repeated the prior month’s increase in October. The Producer Price Index (PPI) for final demand grew at a seasonally adjusted 0.4 percent rate during the month, matching September’s increase and doubling August’s rise. The Bureau of Labor Statistics’ core measure of wholesale prices (removing energy, food, and trade services) grew 0.2 percent for the third consecutive month. PPI for final demand energy was unchanged during the month (as wholesale gasoline prices fell 4.6 percent) while that for final demand food jumped 0.5 percent, its biggest single-month increase since June. PPI for core goods (net of energy and food) grew 0.3 percent, impacted by a 2.1 percent jump in the price for pharmaceutical preparations. PPI for final demand services jumped 0.5 percent, including a 1.1 percent rise in trade services PPI (largely retailer and wholesaler margins). Final demand PPI has risen 2.8 percent over the past year while the 12-month comparable for the core measure has gained 2.3 percent, the fifth time over the past seven months that it has been at or above two-percent.

#3Manufacturing output grew faster than it has in any month since April. The Federal Reserve reports manufacturing production jumped 1.3 percent on a seasonally adjusted basis during October, following a 0.4 percent gain in September. The Fed attributes much of the gain to activity returning to normal levels following disruptions caused by the hurricanes in August and September. Output of durables increased 0.4 percent (including a 1.0 percent rise in automobile production) while nondurables output surged 2.3 percent. Production grew by more than one percent for chemicals, petroleum/coal products, textiles, and apparel. Manufacturing output has gained 2.5 percent over the past year. Overall industrial production increased 0.9 percent (also its largest single-month gain since April), putting output 2.9 percent above its October 2016 mark. Output at utilities gained 2.0 percent while mining output fell 1.3 percent (later caused by temporary disruptions in oil drilling due to Hurricane Nate).

#4Retail sales expanded at a slower pace during October. Following a hurricane preparation and recovery fueled 1.9 percent surge during the previous month, retail and food services sales grew a far more modest 0.2 percent during October. The Census Bureau estimates sales were at a seasonally adjusted $486.6 billion, which was 4.6 percent ahead of its year-ago pace. Sales at auto dealers/parts stores jumped 0.7 percent while activity fell 1.2 percent at gas stations (primarily because of declining prices at the pump). Net of both, core retail sales increased 0.3 percent. Sales grew at 1.5 percent at sporting goods/hobby stores, 0.8 percent at both apparel stores and bars, 0.7 percent at both furniture and appliance/electronics retailers, and 0.6 percent at grocery stores. Sales fell 1.2 percent at building material stores and 0.3 percent at nonstore retailers.

#5Housing starts rose to their highest level in a year during October. The Census Bureau reports that housing starts grew 13.7 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.290 million units. This was the highest level of housing starts since October 2016, when starts were at an annualized rate of 1.328 million units. Starts of single-family units increased 5.3 percent during the month while multi-family units surged 37.4 percent in October. Starts grew in three of four regions with only the West experiencing a decline. Looking towards the future, the number of issued building permits rose 5.9 percent in October to a SAAR of 1.297 million permits, 0.9 percent above the year-ago rate. The annualized rate of home completions blossomed 12.6 percent during October to 1.232 million homes with a 12-month comparable of 15.5 percent.

Other U.S. economic data released over the past week:
Jobless Claims (week ending November 11, 2017, First-Time Claims, seasonally adjusted): 249,000 (+10,000 vs. previous week; +10,000 vs. the same week a year earlier). 4-week moving average: 237,750 (-5.4% vs. the same week a year earlier).
Import Prices (October 2017, All Imports, not seasonally adjusted): +0.2% vs. September 2017, +2.5% vs. October 2016. Nonfuel imports: +0.2% vs. September 2017, +1.4% vs. October 2016.
Export Prices (October 2017, All Exports, not seasonally adjusted): Unchanged vs. September 2017, +2.7% vs. October 2016. Nonagricultural Exports: -0.3% vs. September 2017, +2.5% vs. October 2016.
State Employment (October 2017, Nonfarm Payrolls, seasonally adjusted): 9 states with significant month-to-month increases in payrolls and 3 states had significant month-to-month employment decreases. 27 states had significant year-to-year increases in payrolls.
Small Business Optimism (October 2017, Index (1986=100), seasonally adjusted): 103.8 (vs. September 2017: 103.0; October 2016: 94.9).
Treasury International Capital Flows (September 2017, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$60.8 billion (vs. August 2017: +$40.4 billion, vs. September 2016: -$51.4 billion).
Monthly Treasury Statement (October 2017, Budget Surplus/Deficit): -$63.2 billion (vs. October 2016: -$45.8 billion).
Business Inventories (September 2017, Manufacturers’ and trade inventories, seasonally adjusted): $1.889 trillion (unchanged vs. August 2017, +3.5% vs. September 2016).

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