Gas Prices Dropped as 2018 Ended: January 7 – 11

Core consumer prices grew at a steady, moderate pace in December. Here are the five things we learned from U.S. economic data released during the week ending January 11.  

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

#1Consumer prices fell in December, but core prices inched up. The Consumer Price Index (CPI) declined 0.1 percent on a seasonally adjusted basis during the month, per the Bureau of Labor Statistics. This was the first drop in consumer prices since last March, with gasoline prices being the main culprit. Energy CPI slumped by 3.5 percent (its third decline in four months) with gasoline prices plummeting 7.5 percent. Prices for both electricity (+1.8 percent) and utility delivered natural gas (+0.7 percent) both rose. Also rising were food prices (+0.4 percent—its biggest single-month gain since May 2014), pulled up by increased costs for fruit and vegetables. Net of energy and food, core CPI gained 0.2 percent. Rising were prices for medical care services (+0.4 percent) and shelter (+0.3 percent) while prices fell 0.2 percent for transportation services, used cars/trucks, and medical care commodities. Over the past year, CPI has increased by 1.9 percent while core consumer prices have risen 2.2 percent.CPI December 2018 111119.png

#2Even with a decline in November, there were more job openings than the number of unemployed people. The Bureau of Labor Statistics reports that there were 6.888 million open jobs on the final day of November, down 243,000 from October but 16.1 percent ahead of the November 2017 count. This was greater than the BLS’s estimate of 6.018 million unemployed people during the month. Private sector employers had 6.266 million open jobs in November, up 15.5 percent from a year earlier. Most industries reported double-digit percentage increases in job openings, with notable exceptions being retail (-6.2 percent), wholesale trade (+5.4 percent), and financial activities (+8.9 percent). Also dropping during the month was the number of people hired, declining by 218,000 to 5.710 million people (+3.7 percent versus November 2017). Industries reporting particularly large year-to-year percentage increases in hiring included wholesale trade (+31.7 percent), transportation/warehousing (+16.1 percent) health care/social assistance (+14.0 percent), financial activities (+10.9 percent), and manufacturing (+9.9 percent). 

#3Service sector activity chilled a bit as 2018 wrapped up. The NMI, the headline index from the Institute for Supply Management’s Nonmanufacturing Report on Business, shed 3.1 points to a reading of 57.5. This was the measure’s lowest reading since July but also represented the 107th consecutive month in which it was higher than 50.0 (indicative of an expanding service sector). Three of the NMI’s four components lost ground relative to November: business activity/production (down 5.3 points), supplier deliveries (down 5.0 points), and employment (off 2.1 points). Eking a small gain was the component tied to new orders, which added 2/10ths of a point. Sixteen of 18 tracked nonmanufacturing industries reported growth during December, led by arts/entertainment/recreation, transportation/warehousing, and health care/social assistance. Whereas the comments from survey respondents were “mostly optimistic about overall business conditions,” highlighted comments noted potential adverse effects resulting from the tariffs.

#4Small business owner optimism slipped again in December but remained near post-recession highs. The Small Business Optimism Index shed 4/10ths of a point during the month to a seasonally adjusted 104.4 (1986=100). Even though this was the fourth straight monthly decline, the National Federation of Independent Business’s measure has been above a reading of 100.0 for 25 consecutive months. Four of the index’s ten components improved from their November readings: plans to increase inventories (up six points), current job openings (up five points), current inventories (up four points), and plans to increase employment (up a point). Of the six declining components, the largest decreases were for expected economic conditions (off six points), whether it is a good time to expand (off five points), and plans to make capital outlays (down four points). The press release emphasized that small businesses “need workers to generate more sales, provide services, and complete projects.”

#5Consumer borrowing rose in November. The Federal Reserve estimates consumers held a seasonally adjusted $3.979 trillion in outstanding non-real estate related debt (e.g., mortgages) at the end of November. This represented an increase of $22.2 billion from October and a 4.3 percent gain over the past year. Revolving credit (e.g., credit card) expanded by $4.8 billion to $1.042 trillion (+2.2 percent versus November 2017). Nonrevolving credit balances rose by $17.3 billion in November to $2.937 trillion. Nonrevolving consumer credit balances, which includes both college and auto loans, have increased by 5.1 percent over the past 12 months.

Other U.S. economic data released over the past week:
Jobless Claims (week ending January 5, 2019, First-Time Claims, seasonally adjusted): 216,000 (-17,000 vs. previous week; +31,000 vs. the same week a year earlier). 4-week moving average: 221,750 (-9.4% vs. the same week a year earlier).
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The opinions expressed here are not necessarily those of Kevin’s current employer. No endorsements are implied.

The U.S. Trade Deficit Hits a 9-Year High: February 5 – 9

Imports grew faster than had exports during the final days of 2017. Here are the five things we learned from U.S. economic data released during the week ending February 9.

#1The trade deficit widened again in December. The Census Bureau and Bureau of Economic Analysis report that exports grew by $3.5 billion during the month to $203.4 billion (+7.3 percent versus December 2016) while imports blossomed by $6.2 billion to $256.5 billion (+9.5 percent versus December 2016). This left the U.S. trade deficit at a seasonally adjusted -$53.1 billion, $2.7 billion larger than that of November, up 19.1 percent over the past year, and the biggest single-month trade deficit since October 2008. The goods deficit widened by $2.6 billion during December to -$73.3 billion while the services surplus narrowed by $0.1 billion to +20.2 billion. The former reflected a $6.0 billion increase in imported goods (led by pharmaceutical preparations, cell phones, automobiles, and capital goods) and a $3.4 billion gain in exported goods (led by industrial suppliers/materials and capital goods). The United States had its largest goods deficits with China (-$34.0 billion), the European Union (-$17.2 billion), and Mexico (-$6.1 billion). The trade deficit was -$566.0 billion for all of 2017, 2.9 percent of the Gross Domestic Product (GDP). This was up from -$504.8 billion (or 2.7 percent of GDP) in 2016 and represented the largest annual trade deficit since 2008.Trade Deficit 2007-2017 020918

#2Hiring held firm as 2017 ended, while the count of job openings slipped. The Bureau of Labor Statistics estimates that there were a seasonally adjusted 5.811 million job openings at the end of December. This was 167,000 under the count from a month earlier but 4.9 percent above that from December 2016. The private sector had 5.290 million open jobs at the end of December, a 4.4 percent increase from a year earlier. Industries seeing the biggest year-to-year percentage gains in job openings were leisure/hospitality (+21.9 percent), state/local government (+20.1 percent), construction (+12.9 percent), retail (+8.2 percent), and manufacturing (+6.4 percent). Employers hired a seasonally adjusted 5.488 million people during December, down by only 5,000 from November but 3.5 percent ahead of the count of hires in December 2016. Private sector employers added 5.129 million workers (+2.9 percent versus December 2016). Industries with the largest percentage hiring gains included manufacturing (+20.1 percent), state/local government (+18.9 percent), wholesale trade (+10.8 percent), and professional/business services (+4.5 percent). 5.238 million people left their jobs during December, up 26,000 for the month and 3.0 percent from a year earlier). Voluntary quits jumped by 98,000 during the month to 3.259 million people (+5.6 percent versus December 2016) while layoffs decelerated by 80,000 to 1.645 million (+1.3 percent versus December 2016).

#3The service sector strengthened in January. The “NMI” from the Institute for Supply Management added 2.9 points during the month to a seasonally adjusted reading of 59.9. This was the 96th consecutive month in which the NMI was above a reading of 50.0, indicative of an expanding nonmanufacturing side of the economy. Three of the four components to the index gained during January: new orders (up 8.2 points to 62.7), employment (up 5.3 points to 61.6), and business activity/production (up 2.0 points to 59.8). The measure for supplier deliveries was unchanged at 55.5. Fifteen of 18 tracked service sector industries expanded during the month, led by company management/support services, arts/entertainment/recreation, and mining. The press release noted that survey respondents shared positive feedback on the business conditions and that “recent tax changes have had a positive impact on their respective businesses.”

#4Consumers slightly slowed their pace of taking on debt in December. Consumers held a seasonally adjusted $3.841 trillion in outstanding non-real estate backed debt at the end of the month, an increase of $18.4 billion from November and 5.4 percent from a year earlier. The Federal Reserve indicates revolving credit balances (e.g., credit cards) grew by $5.1 billion to $1.028 trillion. This represented a 6.0 percent increase since December 2016. Nonrevolving credit balances, which include student and automobile loans, grew by $13.3 billion to $2.813 trillion. Outstanding nonrevolving credit balances have risen 5.1 percent over the past year. 

#5Banks loosened credit standards for their commercial clients, but demand for C&I loans was mostly unchanged. Sixteen percent of the banks responding to the Federal Reserve’s January 2018 Senior Loan Officer Opinion Survey on Bank Lending Practices reported loosening lending standards to their large and middle-market commercial and industrial (C&I) customers while six percent indicated having tightened said standards. The loosening took the form of increasing the maximum size of credit lines, shrinking the spread of loan interest rates over the bank’s cost of funds, lowering the cost of credit lines, loosening loan covenants, and decreasing the premiums charged on riskier loans. Even as the terms and cost of business credit eased, the demand for such loans did not budge significantly on a net basis. Nineteen percent of responding banks reported that demand for commercial & industrial loans from large and middle-market firms was “moderately stronger” while 15.7 percent said that it was “moderately weaker.” 

Other U.S. economic data released over the past week:
Jobless Claims (week ending February 3, 2018, First-Time Claims, seasonally adjusted): 221,000 (-9,000 vs. previous week; -16,000 vs. the same week a year earlier). 4-week moving average: 224,500 (-8.4% vs. the same week a year earlier).

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

Payrolls Expand for the 86th Straight Month: December 4 – 8

Employers continued to expand their payrolls this fall. Here are the five things we learned from U.S. economic data released during the week ending December 8.

#1Hiring remained solid in November. The Bureau of Labor Statistics estimates nonfarm payrolls grew by a seasonally adjusted 228,000 during the month, following a gain of 244,000 during October. In all, payrolls have expanded by 2.071 million over the past year and have increased in each of the past 86 months. The goods-producing side of the economy added 62,000 jobs during November, led by manufacturing (+31,000) and construction (+24,000). The private service sector added 159,000 workers, with large increases seen in professional/business services (+46,000), health care/social assistance (+40,500), retail (+18,700), and leisure/hospitality (+14,000). The average workweek length increased by 1/10th of an hour to 34.5 hours (November 2016: 34.3 hours) while average weekly earnings grew by $4.38 to $915.98 (+3.1 percent versus November 2016).Payroll Gains 2011-2017 120817

Meanwhile, a separate household survey finds the unemployment rate held steady at its 17-year low of 4.1 percent (seasonally adjusted) The civilian labor force grew by 148,000, but the labor force participation rate remained at 62.7 percent. The labor force participation rate for adults aged 25 to 54 increased by 2/10ths of a percentage point to 81.8 percent (matching September as its highest point in nearly seven years). The median length of unemployment fell by 3/10ths of a week to 9.6 weeks (November 2016: 10.2 weeks) while the count of part-time workers seeking a full-time job grew slightly by 48,000 to 4.801 million (November 2016; 5.659 million). Finally, the broadest measure of labor underutilization (the U-6 series) inched up by 1/10th of a percentage point to 8.0 percent, just above its post-recession low.

#2Rising imports in October led to the largest trade deficit since January. Exports essentially held steady during the month at $195.9 billion (+5.6 percent versus October 2016) while imports jumped by $3.8 billion to $244.6 billion (+7.0 percent versus October 2016). As a result, the trade deficit expanded by $3.8 billion to -$48.7 billion according to the Census Bureau and Bureau of Economic Analysis. The goods deficit also grew by $3.8 billion to -$69.1 billion (+9.0 percent versus October 2016) while the services surplus held firm at +$20.3 billion (also virtually unchanged from a year earlier). In the case of the former, imports grew for crude oil (+$1.5 billion) and consumer goods (+$0.8 billion). Meanwhile, a $2.6 billion rise in industrial supplies/materials exports was counterbalanced by declining exports of soybeans (-$1.4 billion) and civilian aircraft (-$1.1 billion). The U.S. has its largest goods deficits with China (-$31.9 billion), the European Union (-$12.0 billion), Mexico (-$6.0 billion), and Japan (-$5.3 billion).

#3The service industry grew at a slower pace during November. The headline index from the Institute for Supply Management’s Non-Manufacturing Report on Business slumped 2.7 points during the month to a reading of 57.4. Despite the decline, this was the 95th straight month in which the NMI was above a reading of 50.0 (indicative of a growing service sector). All four components of the measure fell during the month: new orders (-4.1 points), supplier deliveries (-4.0 points), employment (-2.2 points), and business activity/production (8/10ths of a point). Sixteen of 18 tracked service sector industries expanded during November, led by retail, wholesale trade, and utilities. The press release noted that survey respondents’ comments “indicate that the economy and sector will continue to grow for the remainder of the year.”

#4Factory orders sputtered in October. The Census Bureau reports that new orders for manufactured goods slipped 0.1 percent during the month to a seasonally adjusted $479.6 billion. Even with the decline, this represented a 3.7 percent increase from the same month a year earlier. Transportation orders fell 4.2 percent as orders for civilian and defense aircraft slumped 18.5 percent and 7.6 percent, respectively. Net of transportation goods, orders jumped 0.8 percent for the month and was 6.8 percent ahead of year-ago levels. Growing for the month were new orders for machinery (+1.9 percent), electrical equipment/appliances (+0.8 percent), computers/electronics (+0.7 percent), and nondurable goods (+0.7 percent). New orders for nondefense capital goods net of aircraft (a proxy for business investment) gained 0.3 percent during October and has risen 9.6 percent over the past year. Shipments grew for the tenth time in 11 months with a 0.6 percent increase to $484.2 billion. Unfilled orders were essentially unchanged for the month at $1.135 trillion while inventories grew for the 11th time in 12 months with a 0.2 percent increase at $661.6 billion.

#5Q3 productivity growth remained solid after a revision The Bureau of Labor Statistics indicates nonfarm business sector productivity grew 3.0 percent during the quarter, matching the previous estimate of Q3 productivity reported a month earlier and the most significant gain in productivity since Q3 2014. This was the result of a 4.1 percent rise in output generated by a 1.1 percent gain in the number of hours worked during the quarter. Even with the bounce during the quarter, productivity has grown by a mere 1.5 percent over the past year. Manufacturing sector production fell 4.4 percent during the quarter, split by falls of -4.7 percent and -4.4 percent for durable and nondurable manufacturing, respectively. 

Other U.S. economic data released over the past week:
Jobless Claims (week ending December 2, 2017, First-Time Claims, seasonally adjusted): 236,000 (-2,000 vs. previous week; -15,000 vs. the same week a year earlier). 4-week moving average: 241,500 (-3.4% vs. the same week a year earlier).
Consumer Credit (October 2017, Outstanding Consumer Credit Balances (net of mortgages and other real estate-backed loans), seasonally adjusted): $3.802 trillion (+$20.5 billion vs. September 2017 +5.4% vs. October 2016).
University of Michigan Consumer Sentiment (December 2017-preliminary, Index (1966Q1=100), seasonally adjusted): 96.8 (vs. November 2017: 98.5; vs. December 2016: 98.2).
Wholesale Inventories (October 2017, Inventories of Merchant Wholesalers, seasonally adjusted): $605.3 billion (-0.5% vs. September 2017, +3.9% vs. October 2016).

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