Wednesday December 12 2018
US Inflation Rate Lowest in 9 Months
BLS | Joana Taborda |

Annual inflation rate in the US fell to 2.2 percent in November of 2018 from 2.5 percent in October, matching market expectations. It is the lowest reading since February. On a monthly basis, consumer prices were unchanged after rising 0.3 percent in October and also in line with forecasts. The gasoline index declined 4.2 percent, offsetting increases in an array of indexes including shelter and used cars and trucks.

Year-on-year, prices slowed for fuel oil (16.1 percent compared to 26.2 percent in October); gasoline (5 percent compared to 16.1 percent); electricity (0.6 percent compared to 0.7 percent); transportation services (3.3 percent compared to 3.8 percent); new vehicles (0.3 percent compared to 0.5 percent); medical care commodities (0.6 percent compared to 0.7 percent). Also, cost fell for apparel (-0.4 percent, the same as in October); and utility piped gas service (-2.1 percent, the same as in October). On the other hand, inflation was steady for shelter (3.2 percent) and went up food (1.4 percent compared to 1.2 percent); medical care services (2.4 percent compared to 1.9 percent); and used cars and trucks (2.3 percent compared to 0.4 percent). 

Excluding food and energy, consumer prices increased 2.2 percent over a year earlier, higher than 2.1 percent in October and in line with forecasts.

On a monthly basis, the gasoline index declined 4.2 percent in November, offsetting increases in an array of indexes including shelter and used cars and trucks. Other major energy component indexes were mixed, with the index for fuel oil falling but the indexes for electricity and natural gas rising. The food index rose in November, with the indexes for food at home and food away from home both increasing.  

The all items less food and energy index increased 0.2 percent in November, the same as in October and also in line with forecasts. Along with the indexes for shelter and used cars and trucks, the indexes for medical care, recreation, and water and sewer and trash collection also increased. The indexes for wireless telephone services, airline fares, and motor vehicle insurance declined in November. 

Friday December 07 2018
US Consumer Sentiment Above Forecasts
University of Michigan | Joana Taborda |

The University of Michigan's consumer sentiment for the US was steady at 97.5 in December of 2018, the same as in the previous month and above market expectations of 97, preliminary estimates showed. In the last 2 years, consumer sentiment has been above 90, a pattern not seen since 1997 to 2000.

The gauge for consumer expectations declined to 86.1 from 88.1 in November while the current economic conditions subindex increased to 115.2 from 112.3 in November. Inflation expectations for the year ahead eased to 2.7 percent from 2.8 percent and the 5-year outlook fell to 2.4 percent from 2.6 percent. 

Consumer sentiment was unchanged from last month's reading and has remained at very favorable levels since the start of 2017. In the two years from January 2017 to December 2018, the Sentiment Index was consistently above 90.0, averaging 97.5, identical to the early December reading. The last time the Sentiment Index was consistently above 90.0 for at least as long was from 1997 to 2000, recording a four-year average of 105.3. There are a number of plausible causes for the difference in consumer optimism from the late 1990's to today, most of which revolve around job and wage prospects. As noted in last month's report, as long as job and income growth remain strong, rising prices and interest rates will not cause substantial cutbacks in spending. In the early December survey, however, consumers did mention hearing much more negative news about future job prospects. Moreover, most consumers understand that the goal of increasing interest rates is to slow the pace of economic growth. In past expansions, there was plenty of room between low and high interest rates to nudge up rates without damaging consumer spending. The gap has been squeezed to just a few percentage points and more caution is now warranted.

Friday December 07 2018
US Jobless Rate Unchanged at 49-Year Low
BLS | Joana Ferreira |

The US unemployment rate was unchanged at a 49-year low of 3.7 percent in November 2018, in line with market expectations. The number of unemployed decreased by 100 thousand to 5.98 million and employment rose by 233 thousand to 156.80 million.

Among the major worker groups, the unemployment rates for adult men (3.3 percent), adult women (3.4 percent), teenagers (12.0 percent), Whites (3.4 percent), Blacks (5.9 percent), Asians (2.7 percent), and Hispanics (4.5 percent) showed little or no change in November.

The number of long-term unemployed (those jobless for 27 weeks or more) declined by 120,000 to 1.3 million in November. These individuals accounted for 20.8 percent of the unemployed.

Both the labor force participation rate, at 62.9 percent, and the employment-population ratio, at 60.6 percent, were unchanged in November.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.8 million, changed little in November. These individuals, who would have preferred full-time employment, were working part time because their hours had been reduced or they were unable to find full-time jobs.

In November, 1.7 million persons were marginally attached to the labor force, an increase of 197,000 from a year earlier. (Data are not seasonally adjusted.) These individuals were not in the labor force, wanted and were available for work, and had looked for a job sometime in the prior 12 months. They were not counted as unemployed because they had not searched for work in the 4 weeks preceding the survey. Among the marginally attached, there were 453,000 discouraged workers in November, essentially unchanged from a year earlier. (Data are not seasonally adjusted.) Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.2 million persons marginally attached to the labor force in November had not searched for work for reasons such as school attendance or family responsibilities.

Friday December 07 2018
US Economy Adds Less Jobs than Expected
BLS | Joana Taborda |

Non farm payrolls in the United States increased by 155 thousand in November of 2018, following a downwardly revised 237 thousand in October and well below market expectations of 200 thousand. Job gains occurred in health care, in manufacturing, and in transportation and warehousing.

Health care employment rose by 32,000 in November. Within the industry, job gains occurred in ambulatory health care services (+19,000) and hospitals (+13,000). Over the year, health care has added 328,000 jobs.

In November, manufacturing added 27,000 jobs, with increases in chemicals (+6,000) and primary metals (+3,000). Manufacturing employment has increased by 288,000 over the year, largely in durable goods industries.

Employment in transportation and warehousing rose by 25,000 in November. Job gains occurred in couriers and messengers (+10,000) and in warehousing and storage (+6,000). Over the year, transportation and warehousing has added 192,000 jobs.

In November, employment in professional and business services continued on an upward trend (+32,000). The industry has added 561,000 jobs over the year.

Retail trade employment changed little in November (+18,000). Job growth occurred in general merchandise stores (+39,000) and miscellaneous store retailers (+10,000). These gains were offset, in part, by declines in clothing and clothing accessories stores (-14,000); electronics and appliance stores(-11,000); and sporting goods, hobby, and book stores (-11,000).

Employment in other major industries--including mining, construction, wholesale trade, information, financial activities, leisure and hospitality, and government--showed little change over the month.  

The average workweek for all employees on private nonfarm payrolls decreased by 0.1 hour to 34.4 hours in November. In manufacturing, both the workweek and overtime were unchanged (40.8 hours and 3.5 hours, respectively). The average workweek for production and nonsupervisory employees on private nonfarm payrolls held at 33.7 hours. 

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $27.35. Over the year, average hourly earnings have increased by 81 cents, or 3.1 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 7 cents to $22.95 in November. 

The change in total nonfarm payroll employment for October was revised down from +250,000 to +237,000, and the change for September was revised up from +118,000 to +119,000. With these revisions, employment gains in September and October combined were 12,000 less than previously reported. (Monthly revisions result from additional reports received from businesses and government agencies since the last published estimates and from the recalculation of seasonal factors.) After revisions, job gains have averaged 170,000 per month over the last 3 months.

Thursday December 06 2018
US Services Growth Beats Forecasts: ISM
ISM | Joana Taborda |

The ISM Non-Manufacturing PMI index for the United States edged up to 60.7 in November of 2018 from 60.3 in October, beating market expectations of 59.2. The non-manufacturing sector continued to reflect strong growth in November although concerns persist about employment resources and the impact of tariffs. Yet, respondents remain positive about current business conditions and the direction of the economy.

Faster increases were seen in business activity/production (65.2 from 62.5), new orders (62.5 from 61.5), invesntories (57.5 from 56) and backlogs of orders (55.5 from 53.5). On the other hand, employment (58.4 from 59.7), supplier deliveries (56.5 from 57.5) and new export orders (57.5 from 61) slowed and price pressures intensified (64.3 from 61.7). 

The 17 non-manufacturing industries reporting growth in November — listed in order — are: Educational Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Transportation & Warehousing; Construction; Wholesale Trade; Real Estate, Rental & Leasing; Management of Companies & Support Services; Information; Finance & Insurance; Retail Trade; Other Services; Mining; Accommodation & Food Services; Public Administration; Arts, Entertainment & Recreation; and Utilities. The only industry reporting a decrease in November is Agriculture, Forestry, Fishing & Hunting.

Thursday December 06 2018
US Trade Deficit Reaches 10-Year High
BEA | Joana Taborda |

The U.S. trade deficit widened to USD 55.5 billion in October of 2018 from an upwardly revised USD 54.6 billion in the previous month and compared with market expectations of a USD 54.9 billion gap. It is the highest deficit since October of 2008 as lower soybean sales weighed down on exports and imports reached a new record high.

Total exports edged down 0.1 percent month-over-month to USD 211.05 billion. Exports of goods decreased USD 0.4 billion to USD 141.5 billion, led by foods, feeds, and beverages (USD -0.7 billion), namely soybeans (USD -0.8 billion); capital goods (USD -0.5 billion), namely civilian aircraft engines (USD -0.3 billion) and civilian aircraft (USD -0.3 billion). On the other hand, other goods increased USD 0.5 billion and industrial supplies and materials rose USD 0.3 billion. Exports of services went up USD 0.1 billion to USD 69.6 billion in October: financial services increased USD 0.1 billion; other business services, which includes research and development services; professional and management services; and technical, trade-related, and other services, rose USD 0.1 billion. Transport decreased USD 0.1 billion. 

According to unadjusted data, exports fell to China (-6.7 percent), but rose to Canada (6.3 percent), Mexico (15.1 percent), the EU (2.6 percent), Japan (2.3 percent), Brazil (19.2 percent) and OPEC (2.6 percent).

Total imports advanced 0.2 percent to USD 266.5 billion, hitting a new record high. Imports of goods increased USD 0.5 billion to USD 219.6 billion, mainly due to consumer goods (USD 2 billion), namely pharmaceutical preparations (USD 1.5 billion); other goods (USD 0.8 billion); and automotive vehicles, parts, and engines (USD 0.7 billion. On the other hand, purchases fel for capital goods (USD -3.2 billion), namely telecommunications equipment (USD -1.0 billion), computer accessories USD -0.8 billion) and computers (USD -0.7 billion). Imports of services increased USD 0.2 billion to USD 46.9 billion in October. Travel (for all purposes including education) rose USD 0.2 billion.

According to unadjusted data, imports increased from all main partners: China (4.4 percent), Canada (6.4 percent), Mexico (9.3 percent), the EU (20.3 percent), Japan 823 percent), Brazil (19 percent) and OPEC (8.7 percent). 

The goods deficit with China jumped to a record high of USD 43.1 billion from USD 40.2 billion. The trade gap also widened with the EU (USD 17.6 billion from USD 10.6 billion), Japan (USD 6.2 billion from USD 3.9 billion), OPEC (USD 6.5 billion from USD 1.9 billion) and Canada (USD 1.9 billion from USD 1.8 billion) but narrowed with Mexico (USD 7.2 billion from USD 7.7 billion).

Considering the first ten months of the year, the goods and services deficit increased USD 51.3 billion, or 11.4 percent, from the same period in 2017. Exports went up USD 149.3 billion or 7.7 percent. Imports rose USD 200.6 billion or 8.4 percent.

Thursday December 06 2018
US Jobless Claims Drop Less than Expected
DOL | Luisa Carvalho |

The number of Americans filling for unemployment benefits decreased by 4 thousand to 231 thousand in the week ending December 1 from the previous week's revised level of 235 thousand. It compares with market expectations of a decline to 225 thousand.

The 4-week moving average was 228,000, an increase of 4,250 from the previous week's revised average. The previous week's average was revised up by 500 from 223,250 to 223,750.

According to unadjusted data, the largest declines were seen in Oklahoma (-1,022), Kentucky (-753), Vermont (-309) and Massachusetts (-189) while the biggest increases were reported in California (+21,803), Pennsylvania (+9,954), New York (+8,965) and Illinois (+8,022).

The advance seasonally adjusted insured unemployment rate was 1.1 percent for the week ending November 24, a decrease of 0.1 percentage point from the previous week's unrevised rate. 

The advance number for seasonally adjusted insured unemployment during the week ending November 24 was 1,631,000, a decrease of 74,000 from the previous week's revised level. Figures came below market expectations of 1,700,000. The previous week's level was revised down by 5,000 from 1,710,000 to 1,705,000. The 4-week moving average was 1,667,000, an increase of 250 from the previous week's revised average. The previous week's average was revised down by 1,000 from 1,667,750 to 1,666,750. 

Monday December 03 2018
US Factory Growth Beats Forecasts: ISM
ISM | Joana Taborda |

The Institute for Supply Management’s Manufacturing PMI in the US jumped to 59.3 in November of 2018 from 57.7 in October, beating market expectations of 57.6. New orders, production and employment rose faster and comments from the panel reflect continued expanding business strength.

Faster increases were seen for new orders (62.1 from 57.4), production (60.6 from 59.9); employment (58.4 from 56.8), inventories (52.9 from 50.7) and backlogs of orders (56.4 from 55.8). Also, price pressures eased (60.7 from 71.6) while supplier deliveries slowed (62.5 from 63.8).

Of the 18 manufacturing industries, 13 reported growth in November, in the following order: Computer & Electronic Products; Plastics & Rubber Products; Paper Products; Textile Mills; Electrical Equipment, Appliances & Components; Miscellaneous Manufacturing; Machinery; Transportation Equipment; Chemical Products; Food, Beverage & Tobacco Products; Apparel, Leather & Allied Products; Furniture & Related Products; and Petroleum & Coal Products. The three industries reporting contraction in November are: Printing & Related Support Activities; Nonmetallic Mineral Products; and Primary Metals.

Monday December 03 2018
US Manufacturing PMI Revised Lower: Markit
Markit | Joana Taborda |

The IHS Markit US Manufacturing PMI was revised slightly down to 55.3 from a preliminary of 55.4 in November of 2018 and 55.7 in October. However, the reading indicated a solid improvement in the health of the sector that was above the series trend as new orders rose the most since May and job creation was also stronger. On the other hand, business confidence was the lowest since September of 2017 amid concerns over the sustainability of the current sequence of new order growth.

Production continued to increase in November. The rise in output was solid overall, albeit the joint-slowest in over a year. Nonetheless, panellists commonly reported on more favourable demand conditions.

Conversely, new orders increased at a sharp and accelerated pace in November. The rise in new business was the quickest since May and was often linked to increased client demand and new product launches. Foreign demand also picked up, with new export orders expanding at the fastest pace for nine months. 

Firms registered a further rise in employment in November, with many noting that greater production requirements had prompted them to hire additional workers. The rate of job creation was sharp and the second-fastest in the year-to-date. Nonetheless, panellists reportedly struggled to cope with the steep increase in new orders, despite higher staffing levels, as backlogs of work continued to increase. The level of work-in-hand grew at one of the fastest rates in over three years.

In response to higher amounts of new and unfinished work, manufacturing firms registered a strong expansion in buying activity. Input purchases also rose due to concerns of further tariffs and resulting increases in raw material costs. Stockpiling activity was linked to a sharp deterioration in vendor performance, as demand for inputs continued to outstrip supply.

Subsequently, cost burdens faced by goods producers rose further. Although the rate of inflation was slower than those seen earlier in the year, it remained marked. A combination of tariffs and supplier shortages were linked to higher raw material prices. Firms were reportedly able to partly pass greater cost burdens on to clients through higher output charges.

Business confidence dipped to the weakest since September 2017. Although optimism stemmed from stronger demand, some raised concerns surrounding the sustainability of the current sequence of new order growth.

Thursday November 29 2018
Fed Likely to Raise Rates in December
Federal Reserve | Joana Taborda |

The Fed considered that another increase in the federal funds rate is likely to be warranted fairly soon, suggesting a rate hike at the upcoming meeting in December, FOMC minutes showed. Policymakers also said that monetary policy is not on a preset course and can be adjusted according to incoming economic data.

Excerpts from the minutes of the Federal Open Market Committee November 7-8, 2018:

Participants commented on a number of risks and uncertainties associated with their outlook for economic activity, the labor market, and inflation over the medium term. A few participants indicated that uncertainty had increased recently, pointing to the high levels of uncertainty regarding the effects of fiscal and trade policies on economic activity and inflation. Some participants viewed economic and financial developments abroad, including the possibility of further appreciation of the U.S. dollar, as posing downside risks for domestic economic growth and inflation. A couple of participants expressed the concern that measures of inflation expectations would remain low, particularly if economic growth slowed more than expected. Several participants were concerned that the high level of debt in the nonfinancial business sector, and especially the high level of leveraged loans, made the economy more vulnerable to a sharp pullback in credit availability, which could exacerbate the effects of a negative shock on economic activity. The potential for an escalation in tariffs or trade tensions was also cited as a factor that could slow economic growth more than expected. With regard to upside risks, participants noted that greater-than-expected effects of fiscal stimulus and high consumer confidence could lead to stronger-than-expected economic outcomes.

Consistent with their judgment that a gradual approach to policy normalization remained appropriate, almost all participants expressed the view that another increase in the target range for the federal funds rate was likely to be warranted fairly soon if incoming information on the labor market and inflation was in line with or stronger than their current expectations. However, a few participants, while viewing further gradual increases in the target range of the federal funds rate as likely to be appropriate, expressed uncertainty about the timing of such increases. A couple of participants noted that the federal funds rate might currently be near its neutral level and that further increases in the federal funds rate could unduly slow the expansion of economic activity and put downward pressure on inflation and inflation expectations.

Participants emphasized that the Committee's approach to setting the stance of policy should be importantly guided by incoming data and their implications for the economic outlook. They noted that their expectations for the path of the federal funds rate were based on their current assessment of the economic outlook. Monetary policy was not on a preset course; if incoming information prompted meaningful reassessments of the economic outlook and attendant risks, either to the upside or the downside, their policy outlook would change. Various factors such as the recent tightening in financial conditions, risks in the global outlook, and some signs of slowing in interest-sensitive sectors of the economy on the one hand, and further indicators of tightness in labor markets and possible inflationary pressures, on the other hand, were noted in this context. Participants also commented on how the Committee's communications in its postmeeting statement might need to be revised at coming meetings, particularly the language referring to the Committee's expectations for "further gradual increases" in the target range for the federal funds rate.