Friday December 15 2017
US Industrial Production Rises Less than Expected
Federal Reserve | Joana Taborda |

US industrial output went up 0.2 percent month-over-month in November of 2017, following an upwardly revised 1.2 percent rise in October which was the highest since May of 2010. Figures came slightly below market expectations of a 0.3 percent gain. Manufacturing production recorded its third consecutive monthly gain and oil and gas extraction returned to normal levels after being held down in October by Hurricane Nate. Excluding the post-hurricane rebound in oil and gas extraction, total industrial production would have been unchanged in November.

In November, manufacturing output rose 0.2 percent and was 2.4 percent above its year-earlier level. The increase in November reflected a gain of 0.4 percent for durables. The index for nondurable manufacturing was unchanged, and the index for other manufacturing (publishing and logging) dropped 1.4 percent. Within durable manufacturing, gains were widespread, with the largest being the advance of 1.7 percent registered by primary metals. Among nondurable manufacturing industries, increases for plastics and rubber products and for printing and support were offset by declines for all of the other major industries.

A gain of 3.0 percent in oil and gas extraction was the primary contributor to a jump of 2.0 percent for mining production in November. The index for mining is up 9.4 percent from its year-earlier level, but it is 8.2 percent below its peak in December 2014.

The index for utilities dropped 1.9 percent, as a decrease for electric utilities outweighed an increase for natural gas utilities.

Capacity utilization for manufacturing edged up to 76.4 percent in November, its highest reading since May 2008. Utilization for durables increased 0.2 percentage point to 75.9 percent, and the operating rate for nondurables edged down 0.1 percentage point to 78.0 percent. The operating rate for mines increased 1.5 percentage points to 84.5 percent, and the rate for utilities decreased 1.4 percentage points to 75.7 percent.

Year-on-year, industrial production increased 3.40 percent, the biggest annual gain in three years. 

Thursday December 14 2017
US Factory Activity Growth at 11-Month High
Markit | Joana Taborda |

The IHS Manrkit US Manufacturing PMI increased to 55 in December of 2017 from 53.9 in November and beating market expectations. The reading pointed to the fastest expansion in manufacturing since January amid sharper increases in production, new orders and employment.

Anecdotal evidence suggested that greater domestic demand was a key driver of manufacturing growth at the end of the year. A number of firms also cited efforts to boost operating capacity at their plants, which led to the steepest rise in payroll numbers since September 2014.

Business optimism picked up for the third month running in December. The degree of positive sentiment was also the strongest since January 2016. Survey respondents widely commented on hopes of a sustained upturn in sales volumes over the year ahead, supported by new product launches and investment in additional plant capacity. 

Meanwhile, higher prices for raw materials resulted in the strongest rate of input cost inflation since December 2012. There were signs that manufacturers had absorbed part of the rise in average cost burdens, as highlighted by a slower increase in factory gate charges in December.

Thursday December 14 2017
US Retail Sales Rise More than Expected
Joana Taborda |

Retail sales in the United States increased 0.8 percent month-over-month in November of 2017, following an upwardly revised 0.5 percent rise in October and beating market expectations of 0.3 percent. November was the month of the holiday shopping season, with sales rising for most categories except autos and at general merchandise stores.

11 of 13 major retail categories showed month-over-month increases.

Rises were seen gasoline stations (2.8 percent compared to 0.3 percent in October); non-store retailers (2.5 percent compared to -0.4 percent); electronics/appliances (2.1 percent compared to 1.2 percent); furniture/home furniture (1.2 percent compared to 1.8 percent); building materials and garden equipment (1.2 percent compared to -0.1 percent); sporting goods/hobbies (0.9 percent compared to 1.7 percent); food and drink places (0.7 percent compared to 0.4 percent); clothing and accessories (0.7 percent, the same as in September); health/personal care (0.4 percent compared to 1.3 percent); food and beverages (0.2 percent compared to 0.5 percent) and miscellaneous stores (0.1 percent compared to -0.1 percent). 

On the other hand, sales at general merchandise stores were flat (compared to 0.1 percent) and those of autos declined 0.3 percent (compared to 1.5 percent). 

Year-on-year, retail sales increased 5.8 percent, following an upwardly revised 4.9 percent rise in October. 

Thursday December 14 2017
US Initial Claims Unexpectedly Drop for Fourth Week
DOL | Luisa Carvalho |

The number of Americans filing for unemployment benefits decreased by 11 thousand to 225 thousand in the week ended December 9th, from the previous week's unrevised level of 236 thousand and below market expectations of 239 thousand. It is the fourth straight week of declines in initial claims, bringing it to the lowest since the week ended October 14th. Claims taking procedures continue to be disrupted in the Virgin Islands and those in Puerto Rico still have not returned to normal.

Last week marked the 145th straight week that claims remained below the 300,000 threshold, which is associated with a strong labor market. That is the longest such stretch since 1970.

The 4-week moving average was 234,750, a decrease of 6,750 from the previous week's unrevised average of 241,500. 

The advance seasonally adjusted insured unemployment rate was 1.3 percent for the week ending December 2, 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 December 2 was 1,886,000, a decrease of 27,000 from the previous week's revised level. The previous week's level was revised up 5,000 from 1,908,000 to 1,913,000. The 4-week moving average was 1,918,500, an increase of 4,500 from the previous week's revised average. The previous week's average was revised up by 1,250 from 1,912,750 to 1,914,000. 

Wednesday December 13 2017
Fed Hikes Interest Rates as Expected
Federal Reserve | Joana Ferreira |

The Federal Reserve raised the target range for the federal funds rate by a quarter point to 1.25-1.5 percent during its December 2017 meeting, saying that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. The central bank has forecast three rate hikes in 2018.

GDP growth for 2017 is seen higher at 2.5 percent (compared to 2.4 percent in the September projection) and the 2018 forecast was also raised to 2.5 percent (compared to 2.1 percent). PCE inflation is expected at 1.7 percent in 2017 (compared to 1.6 percent) and at 1.9 percent next year (unchanged from September). Meanwhile, forecasts for the core PCE inflation were unchanged at 1.5 percent in 2017 and at 1.9 percent in 2018.

Excerpts from FOMC Statement:

Information received since the Federal Open Market Committee met in November indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Averaging through hurricane-related fluctuations, job gains have been solid, and the unemployment rate declined further. Household spending has been expanding at a moderate rate, and growth in business fixed investment has picked up in recent quarters. On a 12-month basis, both overall inflation and inflation for items other than food and energy have declined this year and are running below 2 percent. Market-based measures of inflation compensation remain low; survey-based measures of longer-term inflation expectations are little changed, on balance.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. Hurricane-related disruptions and rebuilding have affected economic activity, employment, and inflation in recent months but have not materially altered the outlook for the national economy. Consequently, the Committee continues to expect that, with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace and labor market conditions will remain strong. Inflation on a 12-month basis is expected to remain somewhat below 2 percent in the near term but to stabilize around the Committee's 2 percent objective over the medium term. Near-term risks to the economic outlook appear roughly balanced, but the Committee is monitoring inflation developments closely.

In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1-1/2 percent. The stance of monetary policy remains accommodative, thereby supporting strong labor market conditions and a sustained return to 2 percent inflation.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments. The Committee will carefully monitor actual and expected inflation developments relative to its symmetric inflation goal. The Committee expects that economic conditions will evolve in a manner that will warrant gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run. However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data.

Wednesday December 13 2017
US Inflation Rate Rises to 2.2% in November
BLS | Joana Ferreira |

US consumer price inflation increased to 2.2 percent year-on-year in November 2017 from 2 percent in the previous month, as widely expected. Energy prices rose at a faster pace while apparel and vehicle costs fell. The Fed is expected to raise interest rates later in the day despite a split among policymakers on the outlook for inflation.

Year-on-year, energy prices jumped 9.4 percent in November, following a 6.4 percent rise in October, as cost increased at a faster pace for gasoline (16.5 percent from 10.8 percent in October), fuel oil (18.6 percent from 11.7 percent), electricity (2.5 percent from 2 percent) and utility piped gas service (3.6 percent from 3.2 percent). Also, prices rose faster for food (1.4 percent from 1.3 percent in October) and medical care commodities (1.8 percent from 0.9 percent). Meanwhile, inflation slowed for transportation services (3.8 percent from 4.2 percent in October) and medical care services (1.6 percent from 1.9 percent), and was it steady at 3.2 percent for shelter. Cost declined for apparel (-1.6 percent from -0.6 percent in October), new vehicles (-1.1 percent from -1.4 percent) and used cars and trucks (-2.1 percent from -2.9 percent).

On a monthly basis, consumer prices rose 0.4 percent, faster than a 0.1 percent advance in October and in line with expectations. The energy index rose 3.9 percent and accounted for about three-fourths of the all items increase. The gasoline index increased 7.3 percent, and the other energy component indexes also rose. The food index was unchanged in November, with the index for food at home declining slightly.

Excluding food and energy, consumer prices edged up 0.1 percent on the month, following a 0.2 percent rise in October and missing consensus of 0.2 percent. Year-on-year, core consumer prices rose 1.7 percent, easing from a 1.8 percent gain in the previous month and missing expectations of 1.8 percent. 

Wednesday December 13 2017
US Government Budget Gap Widens Modestly
US Treasury | Joana Taborda |

The US budget deficit increased to USD 138.5 billion in November 2017 from USD 136.7 billion in the same month of the previous year, above market expectations of USD 134 billion. Both outlays and receipts were the highest on record for a November month.

In November, outlays climbed 3.1 percent year-on-year to USD 346.9 billion as other expenses accounted for USD 133 billion; social security for USD 79 billion; Medicare for USD 55 billion; defense for USD 47 billion and interest on debt for USD 32 billion.
Meanwhile, receipts increased 4.3 percent year-on-year to USD 208.4 billion as individual income taxes accounted for USD 99 billion; social security for USD 90 billion; other taxes and duties for USD 22 billion and corporate income taxes for USD -2 billion.
When accounting for calendar adjustments, the deficit was also USD 139 billion compared with a gap of USD 137 billion in November of 2016.
Considering the first two months of the current fiscal year, the deficit went up to USD 202 billion from USD 183 billion a year earlier.

Friday December 08 2017
US Consumer Sentiment at 3-Month Low
University of Michigan | Joana Taborda |

The University of Michigan's consumer sentiment for the United States fell to 96.8 in December of 2017 from 98.5 in November, well below market expectations of 99, preliminary estimates showed. It is the lowest reading in three months as consumer expectations fell and inflation expectations went up.

The gauge of consumer expectations fell to 84.6 from 88.9 in November. In contrast, the current conditions index went up to 115.9 from 113.5. 

Also, Americans expect the inflation rate to be 2.8 percent next year, higher than 2.5 percent in November. The 5-year expectation also increased to 2.5 percent from 2.4 percent. 

Consumer sentiment has remained quite favorable although it continued to slowly recede in early December from its October cyclical peak. Most of the recent decline was concentrated in the long-term prospects for the economy, while consumers thought current economic conditions have continued to improve. Importantly, the largest decline in long-term economic prospects was recorded among Democrats, which reflected their concerns about the impact of the proposed changes in taxes. Perhaps the most important changes in early December were higher income expectations as well as a higher expected inflation rate in 2018. Income gains have been slowly improving during the past year, and the data indicate that trend has continued. In contrast, the rise in inflation expectations in early December was a surprise, and confidence in this finding must await confirmation in the months ahead before any inferences are drawn. Buying plans for durables have improved in early December, largely due to attractive pricing, in contrast to the rise in the expected inflation rate. Overall, the data signal an expected gain of 2.7% in real consumption expenditures in 2018.

Friday December 08 2017
US Jobless Rate Steady at 4.1% in November
BLS | Luisa Carvalho |

The US unemployment rate held at 4.1 percent in November of 2017, the same as in October and in line with market expectations. It is the lowest jobless rate since February of 2001. The number of unemployed persons was essentially unchanged at 6.6 million. Over the year, the unemployment rate and the number of unemployed persons were down by 0.5 percentage point and 799,000, respectively.

Among the major worker groups, the unemployment rate for teenagers increased to 15.9 percent in November. The jobless rates for adult men (3.7 percent), adult women (3.7 percent), Whites (3.6 percent), Blacks (7.3 percent), Asians (3.0 percent), and Hispanics (4.7 percent) showed little change.

The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 1.6 million in November and accounted for 23.8 percent of the unemployed. Over the year, the number of long-term unemployed was down by 275,000.

The labor force participation rate remained at 62.7 percent in November and has shown no clear trend over the past 12 months. The employment-population ratio, at 60.1 percent, changed little in November and has shown little movement, on net, since early this year.

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers), at 4.8 million, was essentially unchanged in November but was down by 858,000 over the year. 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.

In November, 1.5 million persons were marginally attached to the labor force, down by 451,000 from a year earlier. (The 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 469,000 discouraged workers in November, down by 122,000 from a year earlier. (The 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 1.0 million persons marginally attached to the labor force in November had not searched for work for reasons such as school attendance or family responsibilities. 

Meanwhile, total nonfarm payroll employment increased by 228,000 in November. Employment continued to trend up in professional and business services, manufacturing, and health care.

Friday December 08 2017
US Economy Adds More Jobs than Expected
BLS | Joana Taborda |

Non farm payrolls in the United States increased by 228 thousand in November of 2017, following a downwardly revised 244 thousand in October and beating market expectations of 200 thousand. Employment continued to trend up in professional and business services, manufacturing, and health care. Employment growth has averaged 174,000 per month thus far this year, compared with an average monthly gain of 187,000 in 2016.

Employment in professional and business services continued on an upward trend in November (+46,000). Over the past 12 months, the industry has added 548,000 jobs. 

In November, manufacturing added 31,000 jobs. Within the industry, employment rose in machinery (+8,000), fabricated metal products (+7,000), computer and electronic products (+4,000), and plastics and rubber products (+4,000). Since a recent low in November 2016, manufacturing employment has increased by 189,000.

Health care added 30,000 jobs in November. Most of the gain occurred in ambulatory health care services (+25,000), which includes offices of physicians and outpatient care centers. Monthly employment growth in health care has averaged 24,000 thus far in 2017, compared with an average increase of 32,000 per month in 2016. 

Within construction, employment among specialty trade contractors increased by 23,000 in November and by 132,000 over the year.  

Employment in other major industries, including mining, wholesale trade, retail trade, transportation and warehousing, information, financial activities, leisure and hospitality, and government, changed little over the month. 

The average workweek for all employees on private nonfarm payrolls increased by 0.1 hour to 34.5 hours in November. In manufacturing, the workweek was unchanged at 40.9 hours, and overtime remained at 3.5 hours. The average workweek for production and nonsupervisory employees on private nonfarm payrolls was unchanged at 33.7 hours. 

In November, average hourly earnings for all employees on private nonfarm payrolls rose by 5 cents to $26.55. Over the year, average hourly earnings have risen by 64 cents, or 2.5 percent. Average hourly earnings of private-sector production and nonsupervisory employees rose by 5 cents to $22.24 in November. 

The change in total nonfarm payroll employment for September was revised up from +18,000 to +38,000, and the change for October was revised down from +261,000 to +244,000. With these revisions, employment gains in September and October combined were 3,000 more 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 over the last 3 months.