Friday January 18 2019
US Consumer Sentiment Lowest since Trump was Elected
University of Michigan | Joana Taborda | joana.taborda@tradingeconomics.com

The University of Michigan's consumer sentiment for the US fell to 90.7 in January of 2019 from 98.3 in December, well below market expectations of 97. It is the lowest reading since October of 2016. The decline was primarily focused on prospects for the domestic economy, with the year-ahead outlook for the national economy judged the worst since mid 2014.

The current economic conditions subindex declined to 110 from 116.1 and the gauge for consumer expectations dropped to 78.3 from 87. Inflation expectations for the year ahead were flat at 2.7 percent and the 5-year outlook edged up to 2.6 percent from 2.5 percent. 

Consumer sentiment declined in early January to its lowest level since Trump was elected. The decline was primarily focused on prospects for the domestic economy, with the year-ahead outlook for the national economy judged the worst since mid 2014. The loss was due to a host of issues including the partial government shutdown, the impact of tariffs, instabilities in financial markets, the global slowdown, and the lack of clarity about monetary policies. Aside from the direct economic impact from these various issues on the economy, the indirect effect meant that half of all consumers believed that these events would have a negative impact on Trump's ability to focus on economic growth. While the January falloff in optimism is certainly consistent with a slowdown in the pace of growth, it does not yet indicate the start of a sustained downturn in economic activity. It is the strength in personal finances that will continue to support consumption expenditures at favorable levels in 2019. Nonetheless, consumers now sense a need to buttress their precautionary savings, which is typically done by reducing their discretionary spending. Evolving job and wage prospects, which were slightly weaker in early January, are critical to extending the current expansion.




Friday January 18 2019
US Industrial Production Rises More than Expected
Federal Reserve | Joana Ferreira | joana.ferreira@tradingeconomics.com

US industrial output rose 0.3 percent from a month earlier in December 2018, following a downwardly revised 0.4 percent growth in November and beating market expectations of a 0.2 percent gain. Manufacturing production increased by the most in 10 months and mining activity continued to rise while utilities output contracted sharply.

Manufacturing production advanced 1.1 percent in December, the biggest gain since February, following a meager 0.1 percent rise in November. Within durable manufacturing, motor vehicles and parts posted the largest gain (4.7 percent vs 0.2 percent in November), followed by nonmetallic mineral products (2.8 percent vs -0.9 percent), wood products (1.8 percent vs -0.3 percent), aerospace and miscellaneous transportation equipment (1.7 percent vs 1.2 percent) and computer and electronic products (1.3 percent vs 0.4 percent). Among nondurables, the index for petroleum and coal products jumped 3.5 percent, reversing a 2.4 percent decline in the previous month. The output of other manufacturing (publishing and logging) increased 0.2 percent.

Mining output rose 1.5 percent in December (vs 1.1 percent in November), with gains in oil and gas extraction, coal mining, and support activities for mining (mainly oil and gas well drilling).

By contrast, the output of utilities fell 6.3 percent in December (vs 1.3 percent in November), with both electric and gas utilities posting sharp declines, as warmer-than-usual temperatures lowered the demand for heating.

Capacity utilization for the industrial sector rose 0.1 percentage point in December to 78.7 percent, a rate that is 1.1 percentage points below its long-run (1972–2017) average. Capacity utilization for manufacturing jumped 0.7 percentage point in December to 76.5 percent, about 2 percentage points below its long-run average. The utilization rate for mining increased to 94.8 percent and remained well above its long-run average of 87.0 percent. The operating rate for utilities fell to 75.0 percent, a rate that is about 10 percentage points below its long-run average.




Thursday January 17 2019
US Jobless Claims Unexpectedly Fall 2nd Week
DOL | Agna Gabriel | agna.gabriel@tradingeconomics.com

The number of Americans filling for unemployment benefits decreased by 3 thousand to 213 thousand in the week ending January 12 from the previous week’s unrevised level of 216 thousand. It was the second straight week of declines, bringing initial claims to the lowest level since the week ending December 8. It compares with market expectations of 220 thousand.

The 4-week moving average was 220,750, a decrease of 1,000 from the previous week's unrevised average of 221,750.

According to unadjusted data, the largest declines were reported in New York (-23,318); Georgia (-5,010); Pennsylvania (-4,015) and Connecticut (-3,086) while the biggest increases were seen in California (+17,154); Texas (+6,726); Kentucky (+4,024) and Virginia (+2,469).

The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending January 5, unchanged from the previous week's unrevised rate.

The advance number for seasonally adjusted insured unemployment during the week ending January 5 was 1,737,000, an increase of 18,000 from the previous week's revised level. The previous week's level was revised down by 3,000 from 1,722,000 to 1,719,000. The 4-week moving average was 1,728,500, an increase of 8,000 from the previous week's revised average. The previous week's average was revised down by 750 from 1,721,250 to 1,720,500.

Initial claims for UI benefits filed by former Federal civilian employees rose by an unadjusted 5,694 to 10,454 in the week ended January 5, the second week of the shutdown, with Texas and California posting some of the largest increases.

There were 481 initial claims filed by newly discharged veterans, an increase of 154 from the preceding week. There were 13,498 former Federal civilian employees claiming UI benefits for the week ending December 29, an increase of 2,123 from the previous week. Newly discharged veterans claiming benefits totaled 6,593, an increase of 68 from the prior week.





Friday January 11 2019
US Inflation Rate Lowest in 16 Months
BLS | Joana Taborda | joana.taborda@tradingeconomics.com

Annual inflation rate in the United States fell to 1.9 percent in December of 2018 from 2.2 percent in November, matching market expectations. It is the lowest inflation rate since August of 2017, mainly due to a decline in gasoline cost. On a monthly basis, consumer prices edged down 0.1 percent after a flat reading in the previous month and also in line with forecasts. It is the first monthly decrease in consumer prices in nine months, due to a 7.5 percent slump in gasoline prices.

Year-on-year, prices fell for gasoline (-2.1 pecent compared to +5 percent in November); new vehicles (-0.3 percent compared to +0.3 percent); medical care commodities (-0.5 percent compared to +0.6 percent); and apparel (-0.1 percent compared to -0.4 percent). Also, cost slowed for fuel oil (1.9 percent compared to 16.1 percent in November); transportation services (2.8 percent compared to 3.3 percent); and used cars and trucks (1.4 percent compared to 2.3 percent). On the other hand, inflation went up for electricity (1.1 percent compared to 0.6 percent); food (1.6 percent compared to 1.4 percent); medical care services (2.6 percent compared to 2.4 percent); and used cars and trucks (1.4 percent compared to 0.4 percent) but was steady for shelter (3.2 percent). Also, cost rebounded for utility piped gas service (2.3 percent compared to -2.1 percent). 

Excluding food and energy, consumer prices increased 2.2 percent over a year earlier, the same as in November and matching forecasts.

On a monthly basis, the gasoline index fell 7.5 percent in December. This decline more than offset increases in several indexes including shelter, food, and other energy components. The energy index went down 3.5 percent, as the gasoline and fuel oil indexes decreased, but the indexes for natural gas and for electricity increased. The food index went up 0.4 percent in December.

The index for all items less food and energy increased 0.2 percent in December, the same increase as in October and November and in line with forecasts. Along with the index for shelter, the indexes for recreation, medical care, and household furnishings and operations all increased in December, while the indexes for airline fares, used cars and trucks, and motor vehicle insurance all declined. 




Thursday January 10 2019
US Jobless Claims Fall More than Expected
DOL | Agna Gabriel | agna.gabriel@tradingeconomics.com

The number of Americans filling for unemployment benefits decreased by 17 thousand to 216 thousand in the week ending January 5 from the previous week’s revised level of 233 thousand and below market expectations of 225 thousand.

The 4-week moving average was 221,750, an increase of 2,500 from the previous week's revised average. The previous week's average was revised up by 500 from 218,750 to 219,250. 

According to unadjusted data, the largest declines were reported in New Jersey (-8,132); Ohio (-5,639); Michigan (-5,058); Massachusetts (-3,592) and Iowa (-3,171) while the biggest increases were seen in New York (+26,446); Georgia (+10,420); Texas (+3,657) and South Carolina (+3,331).

The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending December 29, unchanged from the previous week's unrevised rate. 

The advance number for seasonally adjusted insured unemployment during the week ending December 29 was 1,722,000, a decrease of 28,000 from the previous week's revised level. The previous week's level was revised up 10,000 from 1,740,000 to 1,750,000. The 4-week moving average was 1,721,250, an increase of 15,250 from the previous week's revised average. The previous week's average was revised up by 2,500 from 1,703,500 to 1,706,000.


Wednesday January 09 2019
Fed Cautious on Future Rate Hikes
Federal Reserve | Joana Ferreira | joana.ferreira@tradingeconomics.com

Federal Reserve officials revised down their assessments of the appropriate path for monetary policy amid growing concerns about volatility in financial markets, trade tensions and uncertain global growth, minutes from the last FOMC meeting showed. Policymakers also noted that the central bank could afford to be patient about further policy firming as inflation remains muted.

Excerpts from the minutes of the Federal Open Market Committee, December 18-19, 2018:

In their consideration of monetary policy at this meeting, participants generally judged that the economy was evolving about as anticipated, with real economic activity rising at a strong rate, labor market conditions continuing to strengthen, and inflation near the Committee's objective. Based on their current assessments, most participants expressed the view that it would be appropriate for the Committee to raise the target range for the federal funds rate 25 basis points at this meeting. A few participants, however, favored no change in the target range at this meeting, judging that the absence of signs of upward inflation pressure afforded the Committee some latitude to wait and see how the data would develop amid the recent rise in financial market volatility and increased uncertainty about the global economic growth outlook.

With regard to the outlook for monetary policy beyond this meeting, participants generally judged that some further gradual increases in the target range for the federal funds rate would most likely be consistent with a sustained economic expansion, strong labor market conditions, and inflation near 2 percent over the medium term. With an increase in the target range at this meeting, the federal funds rate would be at or close to the lower end of the range of estimates of the longer-run neutral interest rate, and participants expressed that recent developments, including the volatility in financial markets and the increased concerns about global growth, made the appropriate extent and timing of future policy firming less clear than earlier. Against this backdrop, many participants expressed the view that, especially in an environment of muted inflation pressures, the Committee could afford to be patient about further policy firming. A number of participants noted that, before making further changes to the stance of policy, it was important for the Committee to assess factors such as how the risks that had become more pronounced in recent months might unfold and to what extent they would affect economic activity, and the effects of past actions to remove policy accommodation, which were likely still working their way through the economy.

Participants emphasized that the Committee's approach to setting the stance of policy should be importantly guided by the implications of incoming data 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; neither the pace nor the ultimate endpoint of future rate increases was known. 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 and risks to the global outlook, on the one hand, and further indicators of tightness in labor markets and possible risks to financial stability from a prolonged period of tight resource utilization, on the other hand, were noted in this context.

Participants discussed ideas for effectively communicating to the public the Committee's data-dependent approach, including options for transitioning away from forward guidance language in future postmeeting statements. Several participants expressed the view that it might be appropriate over upcoming meetings to remove forward guidance entirely and replace it with language emphasizing the data-dependent nature of policy decisions.




Monday January 07 2019
US Services Growth Below Forecasts: ISM
ISM | Joana Taborda | joana.taborda@tradingeconomics.com

The ISM Non-Manufacturing PMI index for the United States fell to 57.6 in December of 2018 from 60.7 in November and below market expectations of 59. The reading pointed to the weakest expansion in the services sector in five months, amid a slowdown in business activity, employment, inventories and supplier deliveries.

A slowdown was seen in business activity (59.9 from 65.2), employment (56.3 from 58.4), inventories (51.5 from 57.5) and supplier deliveries (51.5 from 56.5). On the other hand, faster increases were recorded for new orders (62.7 from 62.5) and new export orders (59.5 from 57.5). The price pressue eased (57.6 percent from 64.3 percent) but still signalled 34th consecutive month of growth. 

The 16 non-manufacturing industries reporting growth in December listed in order are: Arts, Entertainment & Recreation; Transportation & Warehousing; Health Care & Social Assistance; Retail Trade; Information; Utilities; Accommodation & Food Services; Professional, Scientific & Technical Services; Public Administration; Other Services; Finance & Insurance; Wholesale Trade; Agriculture, Forestry, Fishing & Hunting; Educational Services; Construction; and Management of Companies & Support Services. The only industry reporting a decrease in December is Mining.

Respondents also indicated that there is still concern about tariffs despite the hold on increases by the US and China and that capacity constraints have lessened while employment-resource challenges remain. Respondents are mostly optimistic about overall business conditions.




Friday January 04 2019
US Nonfarm Payrolls Rise the Most in 10 Months
BLS | Joana Ferreira | joana.ferreira@tradingeconomics.com

Nonfarm payrolls in the US increased by 312 thousand in December 2018, following an upwardly revised 176 thousand rise in November and easily beating below market expectations of 177 thousand. Job gains occurred in health care, food services and drinking places, construction, manufacturing, and retail trade. The December jobs gain pushed total US employment above 150 million jobs for the first time.

Employment in health care rose by 50,000 in December. Within the industry, job gains occurred in ambulatory health care services (+38,000) and hospitals (+7,000). Health care added 346,000 jobs in 2018, more than the gain of 284,000 jobs in 2017.

In December, employment in food services and drinking places increased by 41,000. Over the year, the industry added 235,000 jobs, similar to the increase in 2017 (+261,000).

Construction employment rose by 38,000 in December, with job gains in heavy and civil engineering construction (+16,000) and nonresidential specialty trade construction (+16,000). The construction industry added 280,000 jobs in 2018, compared with an increase of 250,000 in 2017.

Manufacturing added 32,000 jobs in December. Most of the gain occurred in the durable goods component (+19,000), with job growth in fabricated metal products (+7,000) and in computer and electronic products (+4,000). Employment in the nondurable goods component also increased over the month (+13,000). Manufacturing employment increased by 284,000 over the year, with about three-fourths of the gain in durable goods  industries. Manufacturing had added 207,000 jobs in 2017.

In December, employment in retail trade rose by 24,000. Job growth occurred in general merchandise stores (+15,000) and automobile dealers (+6,000). These gains were partially offset by a job loss in sporting goods, hobby, book, and music stores (-9,000). Retail trade employment increased by 92,000 in 2018, after little net change in 2017 (-29,000).

Over the month, employment in professional and business services continued to trend up (+43,000). The industry added 583,000 jobs in 2018, outpacing the 458,000 jobs added in 2017.

Employment in other major industries, including mining, wholesale trade, transportation and warehousing, information, financial activities, and government, showed little change over the month.

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in December. In manufacturing, both the workweek and overtime increased by 0.1 hour to 40.9 hours and 3.6 hours, respectively. The average workweek for production and nonsupervisory employees on private nonfarm payrolls held at 33.7 hours.

In December, average hourly earnings for all employees on private nonfarm payrolls rose 11 cents to $27.48. Over the year, average hourly earnings have increased by 84 cents, or 3.2 percent. Average hourly earnings of private-sector production and nonsupervisory employees increased by 9 cents to $23.05 in December.




Friday January 04 2019
US Jobless Rate Rises to 3.9% in December
BLS | Stefanie Moya | stefanie.moya@tradingeconomics.com

The US unemployment rate rose to 3.9 percent in December 2018 from a 49-year low of 3.7 percent in the previous month, and above market expectations of 3.7 percent. It was the highest jobless rate since July, as the number of unemployed persons increased by 276 thousand to 6.3 million and employment advanced by 142 thousand to 156.9 million.

Among the major worker groups, the unemployment rates for adult men (3.6 percent) and Blacks (6.6 percent) increased in December. The jobless rates for adult women (3.5 percent), teenagers (12.5 percent), Whites (3.4 percent), Asians (3.3 percent), and Hispanics (4.4 percent) recorded little or no change over the month.

Among the unemployed, the number of job leavers went up by 142,000 in December to 839,000. Job leavers are unemployed persons who quit or otherwise voluntarily left their previous job and immediately began looking for new employment.

In December, the number of long-term unemployed (those jobless for 27 weeks or more) was little changed at 1.3 million and accounted for 20.5 percent of the unemployed. Over the year, the number of long-term unemployed was down by 205,000.

The labor force participation rate, at 63.1 percent, changed little in December, and the employment-population ratio was 60.6 percent for the third consecutive month. Both measures were up by 0.4 percentage point over the year.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.7 million, changed little in December but was down by 329,000 over the year. 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 December, 1.6 million persons were marginally attached to the labor force, little changed 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.




Thursday January 03 2019
US Factory Activity Growth Slows to 2-Year Low: ISM
Institute for Supply Management | Joana Ferreira | joana.ferreira@tradingeconomics.com

The ISM Manufacturing PMI in the US fell to 54.1 in December, the weakest since November 2016, from 59.3 in November and missing market expectations of 57.9. It was the largest monthly drop since October 2008 as growth in new orders, production and employment slowed sharply.

The New Orders Index posted the biggest monthly decline since January 2014, dropping to its lowest level since August 2016 (51.1 vs 62.1 in November). In addition, a slowdown was recorded in output growth (54.3 vs 60.6) and the pace of job creation (56.2 vs 58.4). Other indexes also fell: supplier deliveries (57.5 vs 62.5); inventories (51.2 vs 52.9); and prices (54.9 vs 60.7).

“Comments from the panel reflect continued expanding business strength, but at much lower levels. Demand softened, with the New Orders Index retreating to recent low levels, the Customers’ Inventories Index remaining too low — a positive heading into the first quarter of 2019 — and the Backlog of Orders declining to a zero-expansion level. Consumption continued to strengthen, with production and employment still expanding, but at much lower levels compared to prior periods. Inputs — expressed as supplier deliveries, inventories and imports — softened as well, with suppliers improving delivery performance, and inventories and imports declining.

Exports continue to expand, but at low levels consistent with November. Price increases relaxed to levels not seen since June 2017, when the index registered 53 percent. The manufacturing community continues to expand, but at much lower levels and at a sharp decline from November,” says Fiore.

Of the 18 manufacturing industries, 11 reported growth in December, in the following order: Textile Mills; Apparel, Leather & Allied Products; Machinery; Transportation Equipment; Computer & Electronic Products; Wood Products; Chemical Products; Food, Beverage & Tobacco Products; Miscellaneous Manufacturing; Electrical Equipment, Appliances & Components; and Primary Metals. The six industries reporting contraction in December — in the following order — are: Printing & Related Support Activities; Fabricated Metal Products; Nonmetallic Mineral Products; Petroleum & Coal Products; Paper Products; and Plastics & Rubber Products.