Friday October 13 2017
US Consumer Sentiment Jumps to Near 14-Year High
University of Michigan | Joana Ferreira |

The University of Michigan's consumer sentiment for the United States rose to 101.1 in October 2017 from 95.1 in September, way above market expectations of 95. It was the highest level since January 2004.

The current conditions index rose to 116.4 from 111.7 in September and the gauge of consumer expectations increased to 91.3 from 84.4.
Also, Americans expect the inflation rate to be 2.3 percent next year, lower than 2.7 percent in September's survey. The 5-year expectation also decreased to 2.4 percent from 2.5 percent in the previous month. 
"Consumer sentiment surged in early October, reaching its highest level since the start of 2004. The October gain was broadly shared, occurring among all age and income subgroups and across all partisan viewpoints. The data indicate a robust outlook for consumer spending that extends the current expansion to at least mid 2018, which would mark the 2nd longest expansion since the mid 1800's. While the early October surge indicates greater optimism about the future course of the economy, it also reflects an unmistakable sense among consumers that economic prospects are now about as good as could be expected. This "as good as it gets" outlook is supported by a moderation in the expected pace of growth in both personal finances and the overall economy, accompanied by a growing sense that, even with this moderation, it would still mean the continuation of good economic times. Although such an outlook is typically recorded in the late phase of an expansion, its occurrence is independent of the ultimate length of an expansion. Indeed, nothing in the latest survey indicates that consumers anticipate an economic downturn anytime soon - which contrarians may consider a clear warning sign of trouble ahead. Nonetheless, consumers anticipate low unemployment, low inflation, small increases in interest rates, and most importantly, modest income gains in the year ahead. It is this acceptance of lackluster growth rates in personal income and in the overall economy that signifies that consumers have accepted, however reluctantly, limits on the pace of improving prospects for living standards.", Surveys of Consumers chief economist Richard Curtin commented.

Friday October 13 2017
US Inflation Rate Rises to 5-Month High on Energy Prices
BLS | Joana Ferreira |

US consumer prices increased 2.2 percent year-on-year in September 2017, missing market expectations of 2.3 percent and following a 1.9 percent gain in the previous month. Still it was the highest inflation rate since April, as hurricane-related production disruptions at oil refineries in the Gulf Coast area boosted energy prices.

Year-on-year, energy prices jumped 10.1 percent, following a 6.4 percent rise in August, due to hurricane-related production disruptions at oil refineries in the Gulf Coast area. Main increases were reported for gasoline (19.3 percent from 10.4 percent in August) and fuel oil (15.6 percent from 9.4 percent) while prices rose less for electricity (1.7 percent from 2.3 percent) and utility piped gas service (3.8 percent from 5.4 percent). Additional upward pressure came from food (1.2 percent from 1.1 percent in August), transportation services (3.9 percent from 3.5 percent) and medical care services (1.7 percent from 1.6 percent). Meanwhile, inflation slowed for medical care commodities (1 percent from 2.4 percent in August) and shelter (3.2 percent from 3.3 percent).

In contrast, prices continued to fall for for new vehicles (-1 percent from -0.7 percent in August), used cars and trucks (-3.7 percent from -3.8 percent) and apparel (-0.2 percent from -0.6 percent).

Core inflation rate, which excludes prices of food and energy, stood at a two-year low of 1.7 percent for the fifth consecutive month, missing market expectations of 1.8 percent.

On a monthly basis, consumer prices went up 0.5 percent, the biggest gain since January, but below market expectations of 0.6 percent. The gasoline index increased 13.1 percent in September and accounted for about three-fourths of the increase. Other major energy component indexes were mixed, and the food index rose slightly (0.1 percent). Excluding food and energy, consumer prices rose 0.1 percent, also missing expectations of 0.2 percent.

Friday October 13 2017
US Retail Sales Rise the Most Since 2015
Anna |

Retail sales in the US rose 1.6 percent month-over-month in September of 2017, slightly below market expectations of a 1.7 percent but following a revised 0.1 percent fall in August. It is the biggest gain since March 2015 as motor vehicles sales recovered after hurricanes and higher prices boosted receipts at gasoline stations

Excluding motor vehicles and gasoline, sales increased 0.5 percent.

These so-called core retail sales, excluding automobiles, gasoline, building materials and foodservices,increased 0.4 percent last month after being unchanged in August.

8 of 13 major retail categories showed a gain.  Receipts at auto dealerships jumped 3.6 percent (1.5 percent in August) as residents replaced flood-damaged motor vehicles.  Sales at gasoline stations surged 5.8 percent after a 4.1 percent increase the prior month. Receipt at building materials merchants increased 2.1 percent (0.6 percent in August), the biggest advance since February. Sales at restaurants and bars rose 0.8 percent, the most since January. Purchases also were higher at general merchandise stores, Internet retailers and clothing outlets. In contrast, sales went down at furniture stores; electonics and appliances; health and personal care; sporting goods, hobby, book & music and miscellaneus.

On annual basis, retail sales rose 4.4 percent versus 3.2 repoerted in August.

Thursday October 12 2017
US Jobless Claims Lowest in 6 Weeks
Anna |

Initial Jobless Claims in the United States decreased by 15 thousand to 243 thousand in the week ending October 7th returning to levels seen before hurricanes Harvey and Irma affected Texas, Florida and Georgia. Economists had expected jobless claims to go down to 251 thousand and data for the prior week was revised to show 2 thousand fewer applications received than previously reported.

The advance seasonally adjusted insured unemployment rate was 1.3 percent for the week ending September 30, a decrease of 0.1 percentage point from the previous week's unrevised rate.

The advance number for seasonally adjusted insured unemployment (continuing jobless claims) during the week ending September 30 was 1,889,000, a decrease of 32,000 from the previous week's revised level. This is the lowest level for insured unemployment since December 29, 1973 when it was 1,805,000. The previous week's level was revised down by 17,000 from 1,938,000 to 1,921,000.

The 4-week moving average, a less-volatile measure than the weekly figure, was 1,925,000, a decrease of 11,500 from the previous week's revised average. The previous week's average was revised down by 10,500 from 1,947,000 to 1,936,500.

Wednesday October 11 2017
December Rate Rise on the Table Despite Weak Inflation
Federal Reserve | Joana Ferreira |

Several Fed policymakers thought that another increase in the target range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged, despite worries about the risk of stubbornly low inflation, minutes from last FOMC meeting showed.

Excerpts from the minutes of the FOMC's September 19-20 meeting:

Participants raised a number of important considerations about the implications of persistently low inflation for the path of the federal funds rate over the medium run. Several expressed concern that the persistence of low rates of inflation might imply that the underlying trend was running below 2 percent, risking a decline in inflation expectations. If so, the appropriate policy path should take into account the need to bolster inflation expectations in order to ensure that inflation returned to 2 percent and to prevent erosion in the credibility of the Committee's objective. It was also noted that the persistence of low inflation might result in the federal funds rate staying uncomfortably close to its effective lower bound. However, a few others pointed out the need to consider the lags in the response of inflation to tightening resource utilization and, thus, increasing upside risks to inflation as the labor market tightened further.

In their discussion of monetary policy, all participants agreed that the economy had evolved broadly as they had anticipated at the time of the June meeting and that the incoming data had not materially altered the medium-term economic outlook. Consistent with those assessments, participants saw it as appropriate, at this meeting, to announce implementation of the plan for reducing the Federal Reserve's securities holdings that the Committee released in June. Many underscored that the reduction in securities holdings would be gradual and that financial market participants appeared to have a clear understanding of the Committee's planned approach for a gradual normalization of the size of the Federal Reserve's balance sheet. Consequently, participants generally expected that any reaction in financial markets to the start of balance sheet normalization would likely be limited.

With the medium-term outlook little changed, inflation below 2 percent, and the neutral rate of interest estimated to be quite low, all participants thought it would be appropriate for the Committee to maintain the current target range for the federal funds rate at this meeting, and nearly all supported again indicating in the postmeeting statement that a gradual approach to increasing the federal funds rate will likely be warranted. Nevertheless, many participants expressed concern that the low inflation readings this year might reflect not only transitory factors, but also the influence of developments that could prove more persistent, and it was noted that some patience in removing policy accommodation while assessing trends in inflation was warranted. A few of these participants thought that no further increases in the federal funds rate were called for in the near term or that the upward trajectory of the federal funds rate might appropriately be quite shallow. Some other participants, however, were more worried about upside risks to inflation arising from a labor market that had already reached full employment and was projected to tighten further. 

Consistent with the expectation that a gradual rise in the federal funds rate would be appropriate, many participants thought that another increase in the target range later this year was likely to be warranted if the medium-term outlook remained broadly unchanged. Several others noted that, in light of the uncertainty around their outlook for inflation, their decision on whether to take such a policy action would depend importantly on whether the economic data in coming months increased their confidence that inflation was moving up toward the Committee's objective.

Friday October 06 2017
US Economy Sheds 33K Jobs, 1st Fall Since 2010
BLS | Joana Taborda |

Non farm payrolls in the United States fell by 33 thousand in September of 2017, following an upwardly revised 169 thousand rise in August and well below market expectations of a 90 thousand gain. It is the first drop in payrolls since September of 2010 as employment declined sharply in food services and drinking places and grew below-trend growth in some other industries likely reflecting the impact from Hurricanes Irma and Harvey.

Employment in food services and drinking places dropped sharply in September (-105,000), as many workers were off payrolls due to the recent hurricanes. Over the prior 12 months, food services and drinking places had added an average of 24,000 jobs per month. 

In September, health care added 23,000 jobs, in line with its average monthly gain over the prior 12 months (+27,000). The employment increase in ambulatory health care services (+25,000) was partially offset by a decline in nursing care facilities (-9,000). 

Employment in transportation and warehousing increased by 22,000 in September. Job gains occurred in warehousing and storage (+5,000), couriers and messengers (+4,000), and air transportation (+3,000). 

Employment in financial activities changed little in September (+10,000). A job gain in insurance carriers and related activities (+11,000) largely reflected hurricane-recovery efforts. The gain was partly offset by losses in activities related to credit intermediation (-4,000) and in commercial banking (-3,000). Over the year, financial activities has added 149,000 jobs.

In September, employment in professional and business services was little changed (+13,000). Over the prior 12 months, job growth in the industry had averaged 50,000 per month.

Manufacturing employment was essentially unchanged in September (-1,000). From a recent employment trough in November 2016 through August of this year, the industry had added an average of 14,000 jobs per month.

Employment in other major industries, including mining, construction, wholesale trade, retail trade, information, and government, showed little change over the month.

The average workweek for all employees on private nonfarm payrolls was unchanged at 34.4 hours in September. In manufacturing, the workweek also was unchanged at 40.7 hours, and overtime held steady at 3.3 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.6 hours. 

In September, average hourly earnings for all employees on private nonfarm payrolls rose by 12 cents to $26.55. Over the past 12 months, average hourly earnings have increased by 74 cents, or 2.9 percent. 

In September, average hourly earnings of private-sector production and nonsupervisory employees increased by 9 cents to $22.23. 

The change in total nonfarm payroll employment for July was revised down from +189,000 to +138,000, and the change for August was revised up from +156,000 to +169,000. With these revisions, employment gains in July and August combined were 38,000 less than previously reported. After revisions, job gains have averaged 91,000 over the past 3 months.

Friday October 06 2017
US Unemployment Rate Lowest in Over 16 Years
BLS | Joana Ferreira |

US unemployment rate unexpectedly fell to 4.2 percent in September 2017 from 4.4 percent in the previous month and below market consensus of 4.4 percent. It was the lowest jobless rate since February 2001, as the number of unemployed persons declined by 331 thousand to 6.8 million. Meanwhile, the labor force participation rate rose by 0.2 percentage points to 63.1 percent, its highest level since March 2014.

Among the major worker groups, the unemployment rates for adult men (3.9 percent) and Blacks (7.0 percent) declined in September. The jobless rates for adult women (3.9 percent), teenagers (12.9 percent), Whites (3.7 percent), Asians (3.7 percent), and Hispanics (5.1 percent) showed little change.

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged in September at 1.7 million and accounted for 25.5 percent of the unemployed.  

The employment-population ratio increased by 0.3 percentage point to 60.4 percent in September and has increased by 0.6 percentage point over the past 12 months. The labor force participation rate, at 63.1 percent, changed little over the month and has shown little movement over the year.  

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed at 5.1 million in September. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find full-time jobs.  

There were 1.6 million persons marginally attached to the labor force, down by 275,000 from a year earlier. (These 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 421,000 discouraged workers in September, down by 132,000 from a year earlier. Discouraged workers are persons not currently looking for work because they believe no jobs are available for them. The remaining 1.1 million persons marginally attached to the labor force in September had not searched for work for reasons such as school attendance or family responsibilities.  

Thursday October 05 2017
US August Trade Gap Lowest in 11 Months
BEA | Joana Ferreira |

The trade deficit in the United States narrowed to USD 42.4 billion in August 2017 from a revised USD 43.6 billion in July and below market expectations of a USD 42.7 billion gap. Exports grew 0.4 percent to the highest level in more than 2-1/2 years while imports fell 0.1 percent.

Exports rose USD 0.8 billion, or 0.4 percent, to USD 195.3 billion from USD 194.5 billion in the previous month. It was the highest level in exports since December 2014, as goods exports increased USD 0.6 billion to a near two-year high of USD 129.2 billion. Sales rose for consumer goods (up USD 1.0 billion), of which pharmaceutical preparations (up USD 0.6 billion); and capital goods (up USD 0.4 billion), of which telecommunications equipment (up USD 0.4 billion). By contrast, exports of industrial supplies and materials decreased USD 1.0 billion, mainly due to lower sales of fuel oil (down USD 0.7 billion); and those of foods, feeds, and beverages fell USD 0.4 billion.

Imports dropped USD 0.4 billion, or 0.1 percent, to USD 237.7 billion from USD 238.1 billion in July, due to lower purchases of industrial supplies and materials (down USD 0.5 billion), of which finished metal shapes (down USD 0.2 billion), and copper (down USD 0.2 billion); and capital goods (down USD 0.5 billion). Meanwhile, imports of motor vehicles rose USD 0.7 billion, as purchases of passenger cars grew USD 0.5 billion.

On a non-seasonally adjusted basis, exports of goods rose to China (8.7 percent), Mexico (5.7 percent), Canada (12.5 percent) and the EU (9.1 percent), while sales to Japan dropped 5.5 percent. Imports of goods increased from Canada (9.1 percent), Japan (4 percent), China (5.1 percent), Mexico (9.7 percent) and the EU (2.5 percent).

The US trade deficit narrowed with the EU (USD -12.4 billion from USD -13.5 billion in July) and Canada (USD -0.4 billion from USD -1.1 billion), but widened with China (USD -34.9 billion from USD -33.6 billion), Mexico (USD -6.2 billion from USD -4.9 billion) and Japan (USD -6.6 billion from USD -5.8 billion) 

Year-to-date, the goods and services deficit increased to USD 361.4 billion from USD 332.3 billion in the same period in 2016.

Thursday October 05 2017
US Jobless Claims Fall to 260K
Anna |

Initial Jobless Claims in the United States decreased by 12 thousand to 260 thousand in the week ending September 30th. Economists had expected jobless claims to go down to 265 thousand. Still, the claims remained above 260K for the fifth consecutive week as Hurricanes Irma, Harvey and Maria had disrupted the labor market in Florida, Georgia, Texas, Puerto Rico and Virgin islands.

Applications for unemployment insurance fell by a combined 9,000 in Florida, Georgia and Texas before seasonal adjustments, as those states recover from the hurricanes in late August and early September. Claims for Puerto Rico were estimated again and from the Virgin Islands surged to 1,039 from 68 as the islands cope with severe disruptions coused by Hurricane Maria.

The 4-week moving average was 268,250, a decrease of 9,500 from the previous week's unrevised average of 277,750. 

The advance seasonally adjusted insured unemployment rate was 1.4 percent for the week ending September 23, unchanged from the previous week's unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending September 23 was 1,938,000, an increase of 2,000 from the previous week's revised level. The previous week's level was revised up 2,000 from 1,934,000 to 1,936,000. The 4-week moving average was 1,947,000, a decrease of 3,250 from the previous week's revised average. The previous week's average was revised up by 500 from 1,949,750 to 1,950,250. 

The largest increases in initial claims for the week ending September 23 were in Florida (+8,425), Michigan (+3,635), Georgia (+3,370), Kansas (+2,505), and Missouri (+1,377), while the largest decreases were in Texas (-8,283), Ohio (- 3,765), New York (-2,536), Oregon (-686), and California (-528).

Wednesday October 04 2017
US Services Sector Grows The Most in 12 Years
ISM | Joana Taborda |

The ISM Non-Manufacturing PMI index for the United States jumped to 59.8 in September of 2017 from 55.3 in August, beating market expectations of 55.5. It is the highest reading since August of 2005, mainly boosted by a rise in production and new orders, despite the impact on the supply chain from the hurricanes.

Increases were seen in business activity (61.3 from 57.5); new orders (63 from 57.1); employment (56.8 from 56.2); backlogs of orders (56 from 53.25) and new export orders (56 from 55.) Supplier deliveries also went up (58 from 50.5) and price pressures were the highest since February of 2012 (66.3 from 57.9). In contrast, inventories declined (51.5 from 53.5).

The 15 non-manufacturing industries reporting growth in September — listed in order — are: Retail Trade; Other Services; Management of Companies & Support Services; Information; Utilities; Transportation & Warehousing; Real Estate, Rental & Leasing; Wholesale Trade; Construction; Professional, Scientific & Technical Services; Finance & Insurance; Health Care & Social Assistance; Public Administration; Educational Services; and Accommodation & Food Services. The two industries reporting contraction in September are: Arts, Entertainment & Recreation; and Mining.