Bracing for a Halt: March 16 – 20

This past week’s jobless claims data is only a taste of what is about to come. Here are the five things we learned from U.S. economic data released during the week ending March 20.

#1Jobless surged in mid-March, and that was only the tip of the iceberg. The Department of Labor reported that there were a seasonally adjusted 281,000 first-time claims made for unemployment insurance benefits during the week ending March 14. The surge of 70,000 applications from the prior week was the fourth largest jump in the 53-year history of the data series. The four-week moving average of first-time claims jumped by 16,500 to 232,250. Next week’s claims data will be historic as the full force of COVID-19 business shutdowns shows up, with some forecasters anticipating next week’s estimate showing two or three million claims. The DOL press release noted that many states reported pandemic-related layoffs with the impact centered on “service related industries broadly and in the accommodation and food services industries specifically, as well as in the transportation and warehousing industry.”

#2The Fed cut its short-term interest target to near zero percent and took other actions to support the credit markets. The Federal Open Market Committee (FOMC) canceled its two-day meeting scheduled for last week but voted to cut its fed funds target rate by a full percentage point to a range between 0.00 and 0.25 percent. This followed a half-percentage point cut earlier in the month. The statement noted that “the coronavirus outbreak has harmed communities and disrupted economic activity.” The FOMC expects to maintain this target rate until “it is confident that the economy has weathered recent events and is on track to achieve its maximum employment and price stability goals.” Other steps taken by the Fed include an asset purchasing program for Treasury and mortgage-backed securities, the creation of a facility to inject liquidity into the money market fund market (including those linked to short-term state and municipal securities), and an expansion of its overnight and term repurchase agreement operations.

#3Leading indicators edged up in February for a final hurrah. The Conference Board’s Leading Economic Indicators added 1/10th of a point during the month to a reading of 112.1 (2016=100), following an 8/10ths of a point advance in January. Only four of the LEI’s ten components made positive contributions. The coincident index advanced by 3/10ths of a point to 107.6 while the lagging index rose by 4/10ths of a point to 109.1. The subhead of the press release said it all: “Improvement in [the] Index Will Not Continue into March.” Noting the sharp declines in the stock prices, consumer sentiment, and hours worked, the press release concluded that “the economy may already be entering into a period of contraction.” 

#4Retail sales fell in February. The Census Bureau indicates that U.S. retail and food services sales dropped 0.5 percent during the month to a seasonally adjusted $528.1 billion. Some of the softness came from weakness at auto dealers/parts stores (-0.9 percent) and gas stations (with lower prices pulling down sales 2.8 percent). But even core retail sales were off 0.2 percent from January. There was weakness across most retail sectors; including, electronics/appliance stores (-1.4 percent), building materials retailers (-1.3 percent), apparel stores (-1.2 percent), restaurants/bars (-0.5 percent), furniture retailers (-0.4 percent), and department stores (-0.2 percent). Retail sales were up 4.3 percent from a year earlier, with core sales having a 12-month comparable of +4.4 percent.

#5Manufacturing output continued struggling in February. Even though the Federal Reserve finds manufacturing production grew a seasonally adjusted 0.1 percent during the month, with output 0.4 percent below that of a year earlier. Durable goods production gained 0.3 percent, boosted by motor vehicle production, while nondurables output declined 0.1 percent, pulled down by textiles, petroleum/coal products, and chemicals. Overall industrial production rose 0.6 percent in February, matching its year-ago level. Mining output slumped 1.5 percent while utility output surged 7.1 percent (with both electric and gas utilities reporting large increases).

Other U.S. economic data released over the past week:
Existing Home Sales (February 2020, Sales of Previously Owned Homes, seasonally adjusted annualized rate): 5.77 million units (+6.5% vs. January 2020, +7.2% vs. February 2019).
Job Openings and Labor Turnover (January 2020, Nonfarm Job Openings, seasonally adjusted): 6.963 million (+411,000 vs. December 2019, -557,000 vs. January 2019).
Business Inventories (January 2020, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.035 trillion (-0.1% vs. December 2019, +1.1% vs. January 2019).
Housing Market Index (March 2020, Index (>50=More Homebuilders Viewing Housing Market as “Good” vs. Being “Poor,” seasonally adjusted): 72 (vs. February 2020: 74, vs. March 2019: 62).
Treasury International Capital Flows (January 2020, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$28.0 billion (vs. December 2019: +$65.7 billion, vs. January 2019: -$24.8 billion).

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

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.