Thursday February 16 2017
US Housing Starts Decline 2.6% In January
U.S. Census Bureau | Joana Taborda |

Housing starts in the United States went down 2.6 percent from the previous month to a seasonally adjusted annualized rate of 1246 thousand in January of 2017, following an upwardly revised 1279 thousand in the previous month and due to a fall in the multi-family segment. Figures beat market expectations of 1222 thousand. Building permits rose 4.6 percent to a one-year high of 1285 thousand, also better than forecasts of 1230 thousand.

The volatile multi-family segment declined 7.9 percent to 421 thousand while single-family housing starts, the largest segment of the market, rose 1.9 percent to 823 thousand. Starts declined in the Midwest (-17.9 percent to 188 thousamd) and the West (-41.3 percent to 225 thousand) but went up in the Northeast (55.4 percent to 143 tousand) and the South (20 percent to 690 thousand).

Building permits reached the highest since November of 2015. Figures for the previous month were revised up to 1228 thousand. Permits for the multi-family segment jumped 23.5 percent to 446 thousand, offsetting a 2.7 percent fall in the single-family segment (to 808 thousand) and a 16.2 percent drop in structures with 2 to 4 units (to 31 thousand). Permits rose in the Northeast (29.6 percent to 149 thousand), the South (9.9 percent to 642 thousand) and the Midwest (5.3 percent to 198 thousand) but fell 13.2 percent in the West (to 296 thousand). 

Year-on-year, housing starts rose 10.5 percent and building permits went up 8.2 percent. 

Thursday February 16 2017
US Jobless Claims Rise Less Than Expected
DOL | Joana Ferreira |

The number of Americans filing for unemployment benefits increased by 5 thousand to 239 thousand in the week ended February 11th 2017, from the previous week's unrevised level of 234 thousand and below market expectations of 245 thousand.

Claims have now been below 300,000, the level associated with a healthy labor market, for 102 consecutive weeks. It was the longest stretch since 1970.

The 4-week moving average was 245,250, an increase of 500 from the previous week's revised average. The previous week's average was revised up by 500 from 244,250 to 244,750. 

The advance seasonally adjusted insured unemployment rate was 1.5 percent for the week ending February 4, unchanged from the previous week's unrevised rate. 

The continuing claims drawn by workers for more than a week (the advance number for seasonally adjusted insured unemployment) during the week ending February 4 was 2,076,000, a decrease of 3,000 from the previous week's revised level. The previous week's level was revised up 1,000 from 2,078,000 to 2,079,000. The 4-week moving average was 2,080,250, an increase of 4,250 from the previous week's revised average. The previous week's average was revised up by 250 from 2,075,750 to 2,076,000.

Wednesday February 15 2017
US Industrial Output Falls Unexpectedly In January
Federal Reserve | Joana Ferreira |

US industrial production fell by 0.3 percent month-over-month in January 2017, following a downwardly revised 0.6 percent rise in the previous month and worse than market expectations of a 0.1 percent gain. Utilities output dropped sharply by 5.7 percent due to unseasonably warm weather while manufacturing production grew 0.2 percent, matching analysts' forecasts, and mining output rose 2.8 percent.

Utilities output contracted by 5.7 percent, following an upwardly revised 5.1 percent growth in the previous month, largely because unseasonably warm weather reduced the demand for heating. 

By contrast, manufacturing production moved up 0.2 percent, the same as in December and in line with expectations; and mining output jumped 2.8 percent after falling by 1.4 percent in the previous month.

Compared to the same month of 2016, industrial output showed no growth, as a sharp drop in utilities output (-2.6 percent) offset an increase in both manufacturing (0.3 percent) and mining (0.4 percent).

Capacity utilization for the industrial sector fell 0.3 percentage point in January to 75.3 percent, a rate that is 4.6 percentage points below its long-run (1972-2016) average.

Wednesday February 15 2017
US Retail Sales Rise More Than Expected In January
US Census Bureau | Joana Ferreira |

Retail sales in the United States increased by 0.4 percent month-over-month in January 2017, following an upwardly revised 1 percent rise in December and above market expectations of a 0.1 percent gain. Higher sales at gasoline stations, restaurants and electronics and appliances stores offset a sharp drop in motor vehicle purchases.

11 out of 13 major retail categories showed gains in January while 2 declined.

The biggest increases were recorded at: Gasoline stations (2.3 percent from 3.2 percent in December); sporting goods, hobby, book and music stores (1.8 percent from -0.2 percent); food services and drinking places (1.4 percent from -1.1 percent); electronics and appliance stores (1.6 percent from -1.1 percent).

By contrast, sales of motor vehicles dropped 1.4 percent, the biggest decline in 10 months, after rising by 3.2 percent in December.

The so-called core retail sales that exclude automobiles, gasoline, building materials and food services and correspond most closely with the consumer spending component of gross domestic product, rose 0.4 percent after an upwardly revised 0.4 percent gain in December.

Compared to January last year retail sales were up 5.6 percent. 

Wednesday February 15 2017
US Inflation Rate At Near 5-Year High Of 2.5%
BLS | Joana Taborda |

Consumer prices in the United States increased 2.5 percent year-on-year in January of 2017, following a 2.1 percent rise in December and above market expectations of 2.4 percent. The inflation rate accelerated for the sixth consecutive month to the highest since March of 2012, mainly boosted by gasoline prices.

Year-on-year, energy prices jumped 10.8 percent, following a 5.4 percent rise in December. In addition, inflation accelerated for transportation services (3.2 percent from 2.8 percent in December) but eased for shelter (3.5 percent from 3.6 percent) and medical care (3.6 percent from 3.9 percent). Meanwhile, food prices declined 0.2 percent, the same as in December. 

Annual core inflation, which excludes food and energy, rose to 2.3 percent from 2.2 percent in the previous month and beating expectations of 2.1 percent.

On a monthly basis, consumer prices increased 0.6 percent, higher than 0.3 percent in December and also above forecasts of 0.3 percent. It is the highest monthly rate since February of 2013. Energy prices increased 4 percent as gasoline jumped 7.8 percent, accounting for nearly half the increase in CPI. Food cost, which had been unchanged for 6 consecutive months, increased 0.1 percent. The food at home index was unchanged, while the index for food away from home rose 0.4 percent. Additional upward pressure came from prices of apparel, new vehicles, motor vehicle insurance, and airline fares all rising 0.8 percent or more. The shelter index went up 0.2 percent, a smaller increase than in recent months.

Excluding food and energy, prices rose 0.3 percent, above 0.2 percent in the previous two months and beating expectations of 0.2 percent. 

Tuesday February 14 2017
Fed Might Raise Rates Relatively Soon
Federal Reserve | Joana Taborda |

The US economy is expected to continue to expand at a moderate pace and wait too long to raise rates would be unwise, Fed Chair Yellen said in prepared remarks to the Congress. However, the economic outlook and fiscal policy face uncertainty and monetary policy is not on a preset course thus any changes will depend on incoming data, Fed Chair added.

Excerpts from Fed Chair Yellen Testimony Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C. February 14, 2017:

My colleagues on the FOMC and I expect the economy to continue to expand at a moderate pace, with the job market strengthening somewhat further and inflation gradually rising to 2 percent. This judgment reflects our view that U.S. monetary policy remains accommodative, and that the pace of global economic activity should pick up over time, supported by accommodative monetary policies abroad. 

As always, considerable uncertainty attends the economic outlook. Among the sources of uncertainty are possible changes in U.S. fiscal and other policies, the future path of productivity growth, and developments abroad.

At its December meeting, the Committee raised the target range for the federal funds rate by 1/4 percentage point, to 1/2 to 3/4 percent. In doing so, the Committee recognized the considerable progress the economy had made toward the FOMC's dual objectives. The Committee judged that even after this increase in the federal funds rate target, monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a return to 2 percent inflation.

At its meeting that concluded early this month, the Committee left the target range for the federal funds rate unchanged but reiterated that it expects the evolution of the economy to warrant further gradual increases in the federal funds rate to achieve and maintain its employment and inflation objectives. As I noted on previous occasions, waiting too long to remove accommodation would be unwise, potentially requiring the FOMC to eventually raise rates rapidly, which could risk disrupting financial markets and pushing the economy into recession. Incoming data suggest that labor market conditions continue to strengthen and inflation is moving up to 2 percent, consistent with the Committee's expectations. At our upcoming meetings, the Committee will evaluate whether employment and inflation are continuing to evolve in line with these expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.

That said, the economic outlook is uncertain, and monetary policy is not on a preset course. FOMC participants will adjust their assessments of the appropriate path for the federal funds rate in response to changes to the economic outlook and associated risks as informed by incoming data. Also, changes in fiscal policy or other economic policies could potentially affect the economic outlook. Of course, it is too early to know what policy changes will be put in place or how their economic effects will unfold. While it is not my intention to opine on specific tax or spending proposals, I would point to the importance of improving the pace of longer-run economic growth and raising American living standards with policies aimed at improving productivity. I would also hope that fiscal policy changes will be consistent with putting U.S. fiscal accounts on a sustainable trajectory. In any event, it is important to remember that fiscal policy is only one of the many factors that can influence the economic outlook and the appropriate course of monetary policy. Overall, the FOMC's monetary policy decisions will be directed to the attainment of its congressionally mandated objectives of maximum employment and price stability.

Friday February 10 2017
US Budget Surplus Beats Estimates In January
US Treasury | Joana Taborda |

The US government posted a $51 billion budget surplus in January of 2017, 7.1 percent lower than a $55 billion surplus a year earlier but above market expectations of $40 billion. Receipts rose 10 percent to $344 billion and outlays increased 13 percent to $293 billion.

In January, individual income taxes accounted for $197 billion of total recipts, social security and other payroll taxes for $110 billion, corporate income taxes for $9 billion and other taxes and duties for the remaining $28 billion. Regarding outlays, social security accounted for $78 billion, Medicare for $46 billion, defense for $40 billion, interest on debt for $22 billion and other expenses for the remaining $107 billion. 

When adjusting for calendar effects, the January 2017 surplus was $23 billion compared with a $13 billion surplus in the same month of 2016.

The fiscal 2017 year-to-date deficit was $157 billion compared with $160 billion in the same period of fiscal 2016.

Friday February 10 2017
US Consumer Sentiment At 3-Month Low
University of Michigan | Joana Taborda |

The preliminary reading of the University of Michigan's consumer sentiment for the United States fell to 95.7 in February of 2017 from a 13-year high of 98.5 in the previous month and lower than market forecasts of 97.9. Future expectations declined and current conditions edged down.

The gauge of future expectations fell to 85.7 from 90.3 in January and the barometer for current economic conditions edged down to 111.2 from 111.3.

Americans expect the inflation rate to be 2.8 percent next year, compared with 2.6 percent in January and 2.5 percent over the next 5 years, lower than 2.6 percent the previous month.

Thursday February 09 2017
US Jobless Claims Down To Near 43-Year Low
DOL | Joana Taborda |

The number of Americans filing for unemployment benefits decreased by 12 thousand to 234 thousand in the week ended February 4th 2017, below market expectations of 250 thousand. It is the smallest figure since the week ended November 12th 2016 when claims came in at 233,000, the lowest in 43 years. Claims have been below 300 thousand, the level associated with a healthy labor market for 101 straight weeks. That’s the longest streak since 1970. Yet, the 4-week moving average considered a better measure as removes week-to-week volatility reached the lowest since 1973.

The 4-week moving average that removes week-to-week volatility decreased by 3,750 to 244,250. This is the lowest level for this average since November 3, 1973 when it was 244,000.

The advance seasonally adjusted insured unemployment rate was 1.5 percent for the week ending January 28, unchanged from the previous week's unrevised rate.

Continuing claims  rose by 15,000 to 2,078,000 during the week ending January 28. The previous week's level was revised down by 1,000 to 2,063,000.

The 4-week moving average was 2,075,750, a decrease of 3,750 from the previous week's revised average. The previous week's average was revised down by 250 to 2,079,500. 

Tuesday February 07 2017
US Trade Deficit Narrows in December
BEA | Joana Taborda |

The goods and services deficit in the United States narrowed to USD 44.3 billion in December of 2016 from an upwardly revised USD 45.7 billion gap a month earlier and lower than market expectations of a USD 45 billion shortfall. Exports reached the highest in 1-1/2-years with shipments of advanced technology goods hitting a record high. Considering full 2016, the trade deficit widened 0.4 percent to a four-year high of USD 502.3 billion.

The smaller gap in December reflected a decrease in the goods deficit of USD 1.2 billion to USD 65.7 billion and an increase in the services surplus of USD 0.3 billion to USD21.4 billion.

Total exports jumped 2.7 percent to USD 190.7 billion, the highest value since April of 2015.  It follows a 0.2 percent fall in November and a 1.8 percent drop in October and is the biggest gain since September of 2012 when sales went up 2.9 percent. Exports of goods increased 3.9 percent to USD 126.9 billion, mainly boosted by capital goods (USD 3.3 billion); civilian aircraft (USD 1.0 billion); engines for civilian aircraft (USD 1.0 billion); industrial supplies and materials (USD 0.7 billion); natural gas (USD 0.2 billion) and fuel oil (USD 0.2 billion). Exports of services increased 0.4 percent to USD 63.8 billion: transport, which includes freight and port services and passenger fares, rose by USD 0.1 billion and travel (for all purposes including education) increased USD 0.1 billion.

Among main trade partners, exports surged to the European Union (10.1 percent), Japan (4.2 percent) and to OPEC (26.5 percent). In contrast, shipments fell to China (-4.1 percent), Canada (-2.8 percent), Mexico (-2.5 percent) and Brazil (-14 percent). 

Total imports went up 1.5 percent to USD 235 billion, the highest since March of 2015. It follows a 1.2 percent rise in both November and October. Imports of goods increased 1.9 percent to USD 192.6 billion including automotive vehicles, parts, and engines (USD 1.6 billion); passenger cars (USD 1.4 billion); industrial supplies and materials (USD 1.1 billion); natural gas (USD 0.4 billion); fertilizers, pesticides, and insecticides( USD 0.4 billion) and capital goods (USD 1.0 billion). Imports of services were nearly unchanged at USD 42.3 billion. 

Imports from Brazil jumped 12 percent and from Japan increased 7.6 percent. In contrast, purchases fell from China (-7.6 percent), Canada (-4.4 percent), Mexico (-7.4 percent), the EU (-1.2 percent) and OPEC (-4.3 percent). 

The country recorded trade deficits with all main trade partners in December: China (USD -27.8 billion); European Union (USD -12.3 billion); Japan (USD -6.5 billion); Mexico (USD -4.4 billion) and Canada (USD -2.2 billion).

Considering full 2016, the goods and services deficit increased USD 1.9 billion or 0.4 percent from 2015 to USD 502.25 billion . Exports decreased USD 51.7 billion or 2.3 percent to USD 2209.42 billion. Imports fell USD 49.9 billion or 1.8 percent to USD 2711.67 billion. Among main trading partners, the deficit rose with: Mexico (4.2% to USD 63.2 billion, five-year high) and Japan (USD 68.94 billion from USD 68.92 billion). In contrast, it narrowed with Canada (USD 11.24 billion from USD 15.55 billion), the European Union (USD 146.34 billion from USD 155.57 billion) and China (5.5% to USD 347 billion). Still, the gap with China accounts for  more than three-fifths of the overall U.S. trade deficit. and is by far the largest among the major US trading partners.