Core Prices Chill, Job Openings Grow: May 6 – 10

Core inflation was on spring break in April, except at the gas pump.  Here are the five things we learned from U.S. economic data released during the week ending May 10.

#1Core consumer inflation was restrained (again) in April. The Bureau of Labor Statistics tells us that the Consumer Price Index (CPI) grew 0.3 percent on a seasonally adjusted basis during the month, following a 0.4 percent bounce in March. Energy prices jumped 2.9 percent, led by a 5.7 percent surge in gasoline prices. Food CPI, however, slipped 0.1 percent (including a 0.5 percent drop in the prices for food consumed at home). Core CPI, which nets out energy and food, edged up 0.1 percent for the third consecutive month. Rising were prices for medical care commodities (+0.9 percent), shelter (+0.4 percent), medical care services (+0.2 percent), transportation services (+0.1 percent), and new vehicles (-0.1 percent). Prices slumped for used cars/trucks (-1.3 percent) and apparel (-0.8 percent). CPI has risen 2.0 percent over the past year while the core price measure has a 12-month comparable of +2.1 percent.

#2Wholesale prices also moderated. Final demand Producer Price Index (PPI) grew at a seasonally adjusted 0.2 percent during April, down from the 0.6 percent burst a month earlier. The Bureau of Labor Statistics’ core wholesale price measure, which removes the impact of energy, food and trade services, jumped 0.4 percent. Both the headline and core PPI measures have risen 2.2 percent over the past year. During April, wholesale energy prices rose 1.8 percent (PPI for gasoline surged 5.9 percent) while food PPI slipped 0.2 percent. Net of energy and food, PPI for core goods was unchanged for the month (the first time it failed to increase since last December).

#3 Job openings rebounded in March. The Bureau of Labor Statistics reports that there were 7.488 million job openings on the final day of March (on a seasonally adjusted basis), up 346,000 from February, reversing January’s 483,000 contraction, up 8.6 percent from a year earlier, and well ahead of the 6.211 unemployed people during the month. Industries with large percentage year-to-year increases in job openings included construction (+53.8 percent), wholesale trade (+20.9 percent), professional/business services (+18.3 percent), and manufacturing (+11.7 percent). Hiring continued to lag, however, slipping by 35,000 jobs during the month to 5.660 million (up a measly 0.6 percent from a year earlier). Job separations fell by 142,000 to 5.434 million (essentially matching the March 2018 count). Voluntarily quits were 3.3 percent ahead of their year-ago pace (to 3.409 million) while layoffs slowed 4.0 percent over the same period to 1.700 million workers.

#4The trade deficit widened slightly in March. The Census Bureau and the Bureau of Economic Analysis indicates the U.S. trade deficit expanded by $0.7 billion to a seasonally adjusted -$50.0 billion as exports grew by $2.1 billion and imports expanded by $2.8 billion. Over the past year, exports have increased by 1.3 percent while imports have risen 2.1 percent. The goods deficit grew by $0.5 billion to -$72.4 billion while the services surplus narrowed by $0.2 billion to +$22.4 billion. The U.S. had its largest goods deficits with China, the European Union, and Mexico.

#5Consumer put away their credit cards in March. The Federal Reserve estimates consumer revolving credit balances shrank by $2.2 billion during the month to a seasonally adjusted $1.057 trillion. Over the past year, revolving credit balances have grown 3.2 percent. Non-revolving credit balances, which includes college and auto loans, increased by $12.4 billion during March (and 5.6 percent over the past year) to $2.995 trillion. In total, outstanding consumer credit balances (not including mortgages and other real estate backed loans) expanded by $10.3 billion during the month to $4.052 trillion, representing a 4.9 percent since March 2018.

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 4, 2019, First-Time Claims, seasonally adjusted): 228,000 -2,000 vs. previous week; +17,000 vs. the same week a year earlier). 4-week moving average: 220,250 (+2.3% vs. the same week a year earlier).
Wholesale Trade (March 2019, Inventories of Merchant Wholesalers, seasonally adjusted): $669.8 billion (-0.1% vs. February 2019, +6.7% vs. March 2018).
Monthly Treasury Statement (First 7 Months of FY2019, Federal Government Budget Deficit): -$530.9 billion (+37.8% vs. First 7 Months of FY2018).
Senior Loan Officers Opinion Survey

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Spring Had Sprung for Retailers in March: April 15 – 19

Retail sales rebounded while manufacturing sputtered in March. Here are the five things we learned from U.S. economic data released during the week ending April 19.  

#1Retail sales surged in March. The Census Bureau places total U.S. retail and food services sales at a seasonally adjusted $514.1 billion. The 1.6 percent increase from February was the largest single-month percentage gain in retail sales since the fall of 2017 and left sales up 3.6 percent from a year earlier. A part of the increase was thanks to improved sales at both auto dealers/parts stores (+3.1 percent) and gas stations (+3.5 percent), the latter the product of higher gasoline prices. Core retail sales rose a still robust 0.9 percent for the month, reversing February’s 0.7 percent sales decline and placing the measure 3.6 percent ahead of that from a year earlier. Sales activity rose at retailers focused on apparel (+2.0 percent), furniture (+1.7 percent), groceries (+1.2 percent), electronics/appliances (+0.5 percent), building materials (+0.3 percent), and health/personal care (+0.2 percent), along with a 0.8 percent bounce at restaurants and bars. The only major retailer category to suffer a sales decline during the month was sporting goods/hobby stores with a 0.3 percent drop while department store sales were flat.

#2Manufacturing output was flat in March. The Federal Reserve estimates manufacturing production was unchanged during the month after having increased 0.3 percent in February, leaving output up a soft 1.0 percent over the past year. Durable goods output slipped 0.1 percent, with output falling sharply for wood products and automobiles but growing for primary metals and electronics/computers. Nondurable goods production eked out a 0.1 percent increase, boosted by gains for textiles, petroleum/coal products, and chemicals. Overall, industrial production declined 0.1 percent in March, reversing February’s 0.1 percent gain. Mining output dropped 0.8 percent while that at utilities inched up 0.2 percent. The former has risen 10.5 percent over the past year while the latter’s 12-month comparable was +3.8 percent.

#3The trade deficit narrowed in February. The Census Bureau and the Bureau of Economic Analysis report that exports grew by $2.3 billion to $209.7 billion (+2.3 percent versus February 2018) while imports inched up by $0.6 billion to $259.7 billion (-0.5 percent versus February 2018). As a result, the trade deficit contracted by $1.8 billion to -$49.4 billion, its smallest reading since last June. The goods deficit shrank by $1.2 billion to -$72.0 billion while the services surplus grew by $0.5 billion to +$22.6 billion. The former was the result of higher exports of civilian aircraft and automobiles/parts and a decline in imports of industrial supplies/materials. The U.S. had its biggest goods trade deficits with China, the European Union, and Mexico.

#4Forward-looking economic indicators improved in March. The Conference Board’s Leading Economic Indicators (LEI) added 4/10ths of a point in March to a reading of 111.9 (+3.1 percent versus March 2018). Eight of ten LEI components made positive contributions, led by first-time unemployment insurance claims and consumers’ expectations for the economy. The coincident index grew by 1/10th of a point to 105.8 (+2.1 percent versus March 2018), with three of four components making positive contributions (industrial production was the exception). The lagging index also added 1/10th of a point as it grew to 107.0 (+2.9 percent versus March 2018), with four of seven components improving from their February readings. The press release notes that even with March’s gain, the LEI “continues to moderate, suggesting that growth in the US economy is likely to decelerate toward its long-term potential of about 2 percent by year end.”

#5Housing starts and building permits declined in March. The Census Bureau estimates housing starts slipped 0.3 percent during the month to a seasonally adjusted annualized rate of 1.139 million units. This was 14.2 percent below the March 2018 rate and the measure’s lowest mark since May 2017. Starts of single-family homes slowed 0.4 percent to an annualized 785,000 while multi-family unit starts slumped 3.4 percent. Looking towards the future, the number of issued building permits declined 1.3 percent to an annualized 1.269 million permits (-7.8 percent versus March 2018), with declines for single-family and multi-family homes of 1.1 percent and 2.7 percent, respectively. The annualized count of completed homes also fell, with a 1.9 percent drop to 1.338 million homes, which was nevertheless up 6.8 percent from a year ago.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 13, 2019, First-Time Claims, seasonally adjusted): 192,000 (-5,000 vs. previous week; -35,000 vs. the same week a year earlier; fewest since September 6, 1969). 4-week moving average: 201,250 (-10.8% vs. the same week a year earlier).
Housing Market Index (April 2019, Index (>50=greater percentage of homebuilders viewing housing market as “good” versus being “poor,” seasonally adjusted): 63 (vs. March 2019: 62, April 2018: 68).
State Employment (March 2019, Nonfarm Payrolls, seasonally adjusted) Vs. February 2019: Grew in 1 state, essentially unchanged in 49 states and the District of Columbia. Vs. March 2018: Grew in 22 states, essentially unchanged in 28 states and the District of Columbia.
Business Inventories (February 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.017 trillion (+0.3 percent versus January 2019, +4.9% vs. February 2018).
Treasury International Capital Flows (February 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$42.4 billion (vs. January 2019: -$19.6 billion, vs. February 2018: +$57.6 billion.
Beige Book

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A Slowdown in Growth: March 25 – 29

Economic activity was lukewarm in Q4 and early 2019. Here are the five things we learned from U.S. economic data released during the week ending March 29.

#1Q4 economic growth was less robust than previously believed. The Bureau of Economic Analysis’ third release of fourth quarter 2018 gross domestic product (GDP) finds the U.S. economy grew 2.2 percent on a seasonally adjusted annualized basis. This was a downward revision from the Q4 GDP report published a month ago that had indicated a 2.6 percent increase, and it was below Q3’s 3.4 percent annualized gain. Even with the downward revision, GDP grew 2.9 percent for all of 2018, ahead of increases of 2.2 percent and 1.6 percent for 2017 and 2016, respectively. The downward revision was the result of lower than previously believed levels of personal consumption expenditures, government spending, and business spending. The same report indicates that business profits slipped 0.4 percent from Q3 to an annualized $2.311 trillion. Corporate earnings for all of 2018 were $2.263 trillion, up 7.8 percent from 2017. The first view of Q1 2019 GDP comes out in late April, with early indications suggesting a weaker report (see next).GDP 2007-2018 032919

#2Meanwhile, economic activity appears to have been tepid in February. The Chicago Fed National Activity Index lost four basis points during the month to a reading of -0.29. This was the third consecutive month in which the CFNAI was negative, indicative of below-average economic growth. Of the 85 data points included in the CFNAI, only 38 made positive contributions, and just 37 indicators showed improvement from their January readings. Among the four major categories of indicators, two improved from the previous month: production (up 13-basis points to a contribution of -0.16) and sales/orders/inventories (up two-basis points to +0.02). Slipping in February were measures related to employment (down 17-basis points to a -0.10 contribution) and personal consumption/housing (down three-basis points to -0.03). The CFNAI’s three-month moving average fell to its lowest reading since October 2016, shedding 18-basis points to a reading of -0.18 (again, indicative of below-average economic growth). 

#3Real personal spending slightly grew in January. Real personal consumption expenditures (PCE) increased 0.1 percent on a seasonally adjusted basis during the month following December’s 0.6 percent decline, per the Bureau of Economic Analysis. Spending grew for both nondurable goods (+0.5 percent) and services (+0.2 percent) but plummeted 1.6 percent for durable goods. Nominal (not inflation adjusted) spending also grew 0.1 percent. The modest gain in spending occurred despite a 0.1 percent drop in nominal personal income and with disposable income (both nominal and real) falling 0.2 percent. Over the past year, real disposable income has grown 3.0 percent while real PCE increased 2.3 percent. January’s saving rate of 7.5 percent was off 2/10ths of a percentage point from December.

#4The trade deficit narrowed (but remained rather wide) in January. The Census Bureau and the Bureau of Economic Analysis reports that exports grew by $1.9 billion to $207.3 billion (+3.0 percent versus January 2018) during January while imports shrank by $6.8 billion to $258.5 billion (+1.6 percent versus January 2018). The resulting trade deficit of -$51.1 billion was down $8.8 billion from the previous month and 3.7 percent smaller than that of January 2018. The goods deficit plummeted by $8.2 billion to -$73.3 billion (down 2.8 percent from a year earlier) while the services surplus grew by $0.5 billion to +$22.1 billion (off 0.7 percent over the previous year). The former was the result in a $1.8 billion gain in exported goods (due to increased food and automotive exports) and a $6.5 billion decline in imported goods (due to a decrease in imports of capital goods and crude oil). The U.S. had its biggest goods deficits with China (-$33.2 billion), the European Union (-$13.1 billion), and Mexico (-$7.2 billion).

#5Differing stories from two measures of consumer sentiment. The Conference Board’s Consumer Confidence Index shed 7.3 points during March to a seasonally adjusted reading of 124.1 (1985=100). Also falling were indices for present conditions (slumping 12.2 points to 160.6) and expected conditions (off 4.0 points to 99.8). Dropping hard was the percentage of survey respondents who viewed current business conditions as “good,” declining from 40.6 percent to 33.4 percent. However, only 13.6 percent of consumers viewed current conditions as “poor.” The press release characterized sentiment as “volatile,” as consumers “have had to weather volatility in the financial markets, a partial government shutdown and a very weak February jobs report.”

Presenting a different story was the University of Michigan’s Index of Consumer Sentiment, which added 4.6 points during March to a seasonally adjusted reading of 98.4 (1966Q1=100). The present conditions grew by 4.8 points to 113.3 (March 2018: 121.2) while the expectations index rose by 4.4 points to 88.8 (which matched its reading from a year earlier). The press release noted that the improvement in the headline measure “was entirely due to households with incomes in the bottom two-thirds of the income distribution.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 23, 2019, First-Time Claims, seasonally adjusted): 211,000 (-5,000 vs. previous week; -6,000 vs. the same week a year earlier). 4-week moving average: 217,250 (-1.6% vs. the same week a year earlier).
New Home Sales (February 2019, New Houses Sold, seasonally adjusted annualized rate): 667,000 (+4.9% vs. January 2019, +0.6% vs. February 2018).
Housing Starts (February 2019, Housing Starts, seasonally adjusted annualized rate): 1.162 million (-8.7% vs. January 2019, -9.9% vs. February 2018).
Pending Home Sales (February 2019, Index (2001=100), seasonally adjusted): 101.9 (-1.0% vs. January 2019, -4.9% vs. February 2018).
Case-Shiller Home Price Index (January 2019, 20-City Index, seasonally adjusted): +0.1% vs. December 2018, +3.6% vs. January 2018).
FHFA Housing Price Index (January 2019, Purchase-Only Index, seasonally adjusted): +0.6% vs. December 2018, +5.6% vs. January 2018. 

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