Tag: consumer price index

Higher Gasoline Costs Push Consumer Prices Up 0.3 Percent in December

The Bureau of Labor Statistics reported that consumer prices rose 0.3 percent in December, its fastest pace since June. The consumer price index had declined 0.1 percent in October and was unchanged in November. On a year-over-year basis, we have seen a pickup in consumer price inflation over the past couple months, up from 0.9 percent in October to 1.2 percent in November to 1.5 percent in December. Core inflation, which excludes food and energy costs, was 1.7 percent in December for the fourth consecutive month.

In essence, price increases continue to be in the acceptable range, with the annual pace of inflation remaining below the Federal Reserve’s stated goal of 2 percent. Year-over-year consumer prices have remained below 2 percent each month since February 2013. A similar finding was noted in yesterday’s producer price index release.

Nonetheless, December’s data did reflect a modest increase, with a 3.1 percent increase in gasoline prices pushing the consumer price index higher. Indeed, the monthly average for West Texas intermediate crude jumped from $93.86 per barrel in November to $97.63 a barrel in December.

Food prices increased 0.1 percent for the third straight month. In December, this higher figure stemmed largely from a rise in restaurant prices. Prices for food purchased at home were unchanged. Increased prices for meats, fish, and eggs were offset by declining costs for cereals and bakery products.

Outside of food and energy, core inflation was also up 0.1 percent for the month. There were increases in the price of apparel, medical care services, and shelter in December. In contrast, the cost of medical care commodities, transportation services, and used cars are trucks were lower.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – November 25, 2013

Here is the summary of this week’s Monday Economic Report:

The latest forecast from the Organisation for Economic Co-operation and Development (OECD) calls for continuing improvements in markets around the world, with global GDP accelerating from 3.7 percent in 2013 to 5.5 percent in 2014. According to the OECD, the U.S. economy, which should grow by 2.1 percent this year, is predicted to strengthen to 3.2 percent next year. If true, it would be the first year since 2005 that annual output would expand by more than 3.0 percent. However, weaknesses persist in emerging markets, and continued political risks could dampen the prospects for better growth.

The latest data tend to reflect the recent pickup in the global economy. Manufacturers in China and Europe have seen improvements in sales, exports and production over the past few months as their respective economies have begun to stabilize. At the same time, manufacturing activity in the United States has accelerated in the past few months from midyear weaknesses. The Markit Flash U.S. Manufacturing Purchasing Managers’ Index (PMI) rose from 51.8 in October to 54.3 in November, with output at its fastest pace since February. Meanwhile, surveys from the Kansas City and Philadelphia Federal Reserve Banks have reported expanding activity levels since the summer, even as some weaknesses continue. Hiring growth remains quite soft, with new orders slowing in the Philadelphia region and exports falling for manufacturers in the Kansas City region. Nonetheless, respondents tend to be mostly upbeat about the sector over the next six months in most sentiment surveys, including these.

Consumer spending and the rebound in the housing sector have both been bright spots in the economy over the past few years, but in data released last week, the two were moving in opposite directions. Retail spending increased 0.4 percent in October, with year-over-year growth of 3.9 percent. While the annual pace of retail sales has decelerated since June, October’s modest gains were a sign that consumer purchases were beginning to strengthen, especially for automobiles.

In contrast, existing home sales have fallen for two consecutive months, down from an annualized 5.39 million units in July and August to 5.12 million units in October. Higher mortgage rates were to blame for the decrease, with many buyers rushing to close in-process deals during the summer when interest rates were soaring. This made the levels in those months an outlier. The good news is that existing home sales are still on an overall upward pace, and mortgage rates have declined from their early September highs. Of course, long-term interest rates are likely to move higher again in the coming months, which could once again dampen housing purchases. My guess, however, is that homebuyers will become accustomed to the new normal in mortgage rates, which, while higher than earlier in the year, are still at historic lows. This will allow housing to once again move in the right direction.

Monetary policy actions are behind the moves in interest rates. Fortunately, pricing pressures remain extremely modest. Consumer and producer prices were both lower in October, led by declining energy costs. With overall inflation mostly in check, at least for now, the Federal Reserve has been able to utilize highly accommodative measures to pursue its dual mandate of price stability and higher employment. The minutes of its October Federal Open Market Committee (FOMC) meeting and Federal Reserve Board Chairman Ben Bernanke’s remarks at the National Economists Club both suggested that the Federal Reserve does not plan to tighten its monetary policy anytime soon. While the FOMC will probably vote to taper (or reduce) its asset purchases in the coming months, it will keep short-term rates effectively at zero—at least until the unemployment rate hits 6.5 percent. Chairman Bernanke’s address made it clear that 6.5 percent was the threshold at which the Federal Reserve would begin to debate possible changes, and not a “trigger” that would automatically mean increased fund rates. That would suggest “easy money” policies for at least the next year and perhaps beyond.

This week will be a shorter one due to the Thanksgiving holiday, but there will be several important economic releases of note. First, we will finally get housing starts and permits data, which were delayed due to the government shutdown. As noted earlier, residential construction ebbed somewhat during the summer with higher mortgage rates, but the consensus estimate is for roughly 910,000 new starts at the annual rate in October, up from 891,000 in August. There will also be a number of key data points on manufacturing activity, including durable goods orders and regional reports from the Chicago, Dallas and Richmond Federal Reserve Banks. Other highlights include consumer confidence and leading indicators data.

Chad Moutray is the chief economist, National Association of Manufacturers.

retail sales - nov2013

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Lower Gasoline Costs Push Consumer Prices Down in October

The Bureau of Labor Statistics said that consumer prices declined 0.1 percent in October, the first decrease in six months. The decrease was almost entirely attributable to lower gasoline prices, which were off 2.9 percent for the month. Indeed, the price of West Texas intermediate crude fell from $102.36 per barrel on September 30 to $96.29 a barrel on October 31. (It has fallen further since then, closing at $93.34 per barrel yesterday.) Total energy costs were down 1.7 percent in October, with electricity prices up 0.1 percent and piped-in natural gas energy prices down 1.0 percent.

Food prices edged higher by 0.1 percent in October after being unchanged in September. Food costs have risen very modestly over the past 12 months, up just 1.3 percent year-over-year. In October, the increased cost for meats, poultry, fish and eggs (up 0.6 percent) was mostly offset by lower prices for cereals and baking products (down 0.4 percent) and dairy products (down 0.2 percent).

Outside of food and energy, components with the greatest year-over-year price increases have included alcoholic beverages, education and communication services, medical care services, recreation services, rent for one’s primary residence, tobacco and smoking products, and transportation services.

The bottom line, though, is that overall consumer prices have risen just 0.9 percent over the past 12 months, decelerating from 2.0 percent in July and 1.2 percent in September. Much of this easing has come from reduced energy costs, with the energy index down 1.1 percent from July to October. Excluding food and energy, core inflation is currently 1.7 percent, a pace that was unchanged from the month before.

This suggests that inflation remains quite modest, with core inflation below the Federal Reserve’s stated target of 2 percent. Indeed, core inflation has not exceeded 2 percent since July 2012. This should allow the Federal Reserve to continue to pursue “highly accommodative” policies, even as it seeks to “taper” (or slow) its asset purchases at future Federal Open Market Committee (FOMC) meetings. In his speech at last night’s National Economists Club, Fed Chairman Ben Bernanke reiterated the FOMC’s commitment to keeping short-term interest rates essentially zero for the foreseeable future, perhaps beyond when the unemployment rate hits 6.5 percent.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Core Consumer Inflation Remains Low

The Bureau of Labor Statistics said that consumer prices rose 0.2 percent in September, moving higher on increased energy costs. This figure suggests very modest growth in inflation overall, with food costs unchanged for the month. Yet, energy prices were up 0.8 percent in September, rebounding from the 0.3 percent decline in August. This was largely due a jump in gasoline costs. Indeed, the price of West Texas intermediate crude oil rose from an average of $95.77 per barrel in June to averages of $106.57 and $106.29, respectively, in August and September. As we ended October, crude oil costs had fallen more to levels closer to the June average.

Outside of food and energy, components with the greatest monthly price increases included shelter expenses for renters and owners, medical care services, transportation services, and tobacco. At the same time, declining prices were observed for apparel, alcoholic beverages, and recreational activities.

Overall, consumer prices have continued to decelerate on an annualized basis, down from 2.0 percent year-over-year in July to 1.5 percent in August to 1.2 percent in September. Excluding food and energy, core inflation is currently 1.7 percent, edging down from 1.8 percent the month before.

The significance of this figure is that core inflation remains below 2.0 percent – the target set by the Federal Reserve Board. Core consumer prices have not exceeded the 2.0 percent annualized rate since July 2012. This frees the Fed to pursue accommodative policies to stimulate growth.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Consumer Prices Edged Up Slightly in August

The Bureau of Labor Statistics said that consumer prices rose 0.1 percent in August, its slowest pace since May. After seeing gasoline prices go up earlier in the summer (up 6.3 percent and 1.0 percent in June and July, respectively), they stabilized in the month of August, down 0.1 percent. Overall energy costs for consumers declined 0.3 percent for the month, with lower electricity (down 0.7 percent) and piped-in natural gas (down 0.1 percent) costs helping to ease Americans’ home budgets.

The good news is that energy costs, in general, have risen very modestly, up just 0.2 percent year-to-date and actually down 0.1 percent year-over-year. This has helped to keep overall inflation mostly in-check. Food prices have also increased somewhat reasonably over the past 12 months, up 1.4 percent. In August, food costs were up 0.1 percent, with the largest gains seen for fruits, vegetables, meats, eggs, and dairy products.

Outside of food and energy, components with the greatest monthly price increases included alcoholic beverages, lodging away from home, medical care services, personal care, rent for one’s primary residence, and tobacco and smoking products.

Overall, consumer prices have risen 1.5 percent over the last 12 months, decelerating a bit from the 2.0 percent rate observed last month. Excluding food and energy, core inflation is currently 1.8 percent, edging up a tad from 1.7 percent the month before.

This suggests that inflation remains quite modest, with core inflation below the Federal Reserve’s stated target of 2 percent. Indeed, core inflation has not exceeded 2 percent since July 2012. A similar finding was noted in last week’s producer price index report. With the Federal Open Market Committee meeting starting today and a decision on monetary policy coming tomorrow, this news should allow the Federal Reserve to continue to pursue “highly accommodative” policies, even as it seeks to “taper” (or slow) its asset purchases.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Consumer Prices were Up 0.2 Percent in July, Moderating Slightly from June’s Rise

The Bureau of Labor Statistics said that consumer prices rose 0.2 percent in July, moderating slightly from June’s 0.5 percent rise. Both food and energy costs were higher, but the growth in energy prices slowed from the previous month. In June, the cost of energy products increased 3.4 percent, with gasoline alone up 6.3 percent. In July, those growth rates eased to 0.2 percent for energy goods and 1.0 percent for gasoline. This is consistent with the recent rise in West Texas intermediate crude oil costs, which have risen from an average of $93.80 a barrel in June to $104.61 in July.

Food prices rose 0.2 percent and 0.1 percent in June and July, respectively. The cost of fruits and vegetables were up sharply for the month, with pork prices also higher. These gains were counteracted by reductions in the price of cereal products, dairy products, and nonalcoholic beverages, among others. On a year-over-year basis, food prices have risen 1.4 percent, with the largest gains occurring in food consumption away from home (up 2.1 percent).

Outside of food and energy, the largest year-over-year increases in prices were for transportation services (up 3.0 percent), medical care services (up 2.6 percent), shelter (up 2.3 percent), tobacco and smoking products (up 1.7 percent), apparel (up 1.6 percent), and new motor vehicles (up 1.2 percent).

Overall, consumer prices have risen 2.0 percent over the course of the past 12 months. This suggests a pickup in inflationary pressures, with the annual pace up from 1.1 percent in April and 1.8 percent in June. Excluding food and energy, core inflation is currently 1.7 percent, edging slightly higher from the 1.6 percent rate observed in June.

These data suggest that inflation remains modest, with core inflation below the Federal Reserve’s stated target of 2 percent. The producer price index report released yesterday said mostly the same thing. This allows the Federal Reserve to pursue “highly accommodative” policies, even as it seeks to “taper” (or slow) its asset purchases later this year.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – July 22, 2013

Here is the summary for this week’s Monday Economic Report:

The manufacturing sector received a bit of good news last week with new data suggesting that the sector has improved in June and July from the weaknesses during the spring. Both the Empire State Manufacturing Survey from the New York Federal Reserve Bank and the Business Outlook Survey from the Philadelphia Federal Reserve Bank showed gains in their July reports, with mostly higher activity levels. Respondents were also cautiously optimistic about the second half of 2013, with nearly 60 percent of those taking the Philly Fed survey anticipating higher sales in the next six months. However, employment still lags behind. While the hiring measures in these surveys indicated positive growth, it was only up slightly, and in the Empire State study, the average workweek was down on net.

For its part, the Federal Reserve Board concurred with this assessment. The Beige Book reported that manufacturing activity was picking up in almost all of its districts. The one exception was the Kansas City Fed, where severe weather disruptions contributed to the decline in production in its June survey. At the same time, the Federal Reserve reported that industrial production grew 0.3 percent in June, an improvement from May’s flat reading and April’s decline of 0.3 percent. Manufacturing production has had small gains during the past two months. Manufacturing production is up just 0.4 percent during the first six months of 2013, or perhaps more positively, up 1.8 percent over the past 12 months. Still, soft demand has dampened sales and output. Ideally, we would like to see industrial production growth of 4 percent or greater.

In his semiannual congressional testimony, Federal Reserve Chairman Ben Bernanke said, “The economic recovery has continued at a moderate pace in recent quarters despite strong headwinds created by federal fiscal policy.” Moreover, he added, “The economy remains vulnerable to unanticipated shocks, including the possibility that global economic growth may be slower than currently anticipated.” With that in mind, he reiterated his view that the Federal Open Market Committee will maintain its “highly accommodative” policies for the foreseeable future—something that would not be altered by possibly scaling back its asset purchases later this year. For its part, the latest Consumer Price Index data—much like the producer price reports released the week before—show that core inflation is under control, with year-over-year rates below the Federal Reserve’s stated target of 2 percent. However, the significant increase in energy costs during the past few weeks have caused prices at both the consumer and producer level to accelerate, which the Federal Reserve will continue to monitor.

As noted in last week’s report, interest rates have also been on the rise. The average 30-year fixed-rate mortgage, according to Freddie Mac, was 4.37 percent last week, a full percentage point higher than the first week of May. We would expect that higher mortgage rates would dampen some of the enthusiasm for housing (even with rates that are still historically low). Indeed, new residential construction and permits in June declined sharply. Fortunately, much of the decrease was in the highly volatile multifamily unit segment, with single-family starts off less dramatically. Moreover, new housing permits for single-family units edged slightly higher, perhaps indicating that the housing recovery will continue its upward ascent, even with some downward pressure from higher rates. From the homebuilder perspective, the Housing Market Index (HMI) suggests that builders remain very confident, with the index up six points in July.

This week, we will see if the improvements in manufacturing activity were limited to just a few reports, or if it is more broad-based. New durable goods orders, with preliminary numbers out on Thursday, are expected to show modest gains in June. In addition, sentiment surveys from the Kansas City and Richmond Federal Reserve Banks will be out, with the former hopefully showing recoveries from weaker storm-related data in June. Internationally, we will also get Flash Purchasing Managers’ Index (PMI) data from Markit for both Europe and China, both of which contracted in their last reports. Look for continued slowness in China and for Europe’s recession to produce yet another negative PMI reading for July (which would be its 24th consecutive monthly sub-50 figure). Other data of note include Flash PMI data for the United States, the Chicago Fed’s National Activity Index and a final consumer sentiment statistic from the University of Michigan and Thomson Reuters.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Consumer Prices Jump Higher in June on Higher Energy Costs

Consumer prices increased 0.5 percent in June, its fastest pace since February. The February comparison is an appropriate one, as the primary driver of increased prices in that month was higher gasoline prices, much as it was in June. The price of gasoline rose 6.3 percent in June, spurred on by higher petroleum costs. The average cost of West Texas intermediate (WTI) crude ended May at $91.93 per barrel, but by the end of June, that average was $96.36 a barrel. Of particular note here is that this data pre-dates the recent rise, with WTI approaching $107 per barrel this morning, suggesting further consumer price pressures in July.

Food prices were up more modestly, up 0.2 percent in June, reversing the 0.1 percent decline in May. Through the first six months of 2013, there has been very little food cost inflation, up 0.5 percent over that time frame. June’s higher food prices were mainly for bakery products, meat, milk, and some fresh vegetables. The cost of food purchased away from home (e.g., restaurants and bars) rose 0.2 percent and has risen slightly faster over the past 12 months than food purchased for the home, up 2.2 percent versus 0.9 percent year-over-year.

Core inflation, which excludes food and energy costs, was up 0.2 percent for the month. Over the past year, the core inflation rate was 1.6 percent year-over-year, representing a deceleration from earlier in the year. The pace had been 2.0 percent as recently as February.

Overall, these numbers suggest that inflationary concerns, particularly at the core level, remain under control, at least for now. This allows the Federal Reserve to pursue “highly accommodative” policies, even as it seeks to “taper” (or slow) its asset purchases later this year. With core inflation below the Fed’s stated target of 2 percent, the Federal Open Market Committee is free to focus on stimulating the economy. Look for Fed Chairman Ben Bernanke to reiterate this during his semi-annual monetary policy testimony before Congress tomorrow and Thursday.

With that said, it will be interesting to see how higher petroleum costs impact these data moving forward. Manufacturers have been fortunate to have lessened pricing pressures over much of the past year, according to the latest producer price data, but increased energy costs could spur raw material prices higher, particularly if the current WTI prices are sustained.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Consumer Prices Edge Slightly Higher in May

Consumer prices rose 0.1 percent in May, reversing a two-month decline. In the first five months of 2013, prices have gone up a very marginal 0.3 percent. This suggests that inflationary pressures have been minimal, with falling energy prices over much of that time providing a buffer for other increases. In May, there was a modest rise of 0.4 percent in energy costs, but this follows declines of 2.6 percent and 4.3 percent in the prior two months, respectively. Since the end of 2012, energy prices have decreased 3.1 percent. Gasoline prices were flat in May, with fuel oil costs down 2.9 percent.

Meanwhile, food prices declined by 0.1 percent in May, a shift from the 0.2 percent increase in April. Similar to energy, food costs were up just 0.3 percent in the first five months of the year. This indicates a deceleration from the 1.5 percent and 0.7 percent paces observed in the same time period in 2011 and 2012, respectively. The largest declines in May were in dairy, cereal and baked products, meats, and nonalcoholic beverages. The cost of food purchased away from home rose 0.2 percent.

Core inflation, which excludes food and energy costs, remains in the acceptable range. The annual pace is currently 1.7 percent, the same rate as in April but lower than earlier in the year. Service sector price increases account for the bulk of this, with year-over-year growth of 2.3 percent. Goods prices have declined 0.2 percent, in contrast, over the past 12 months.

Last week’s producer price index data observed larger jumps in food and energy costs, but the core inflation rate was close to what we see in this report. With the Federal Open Market Committee announcing its plans tomorrow, this report helps keep inflationary concerns at bay, at least for now. While much of the conversation has centered on a possible “tapering” (or slowing) of the asset purchases made by the Fed over the course of the rest of this year, reduced pricing pressures have allowed the Fed to pursue accommodative policies in general.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Consumer Prices Unchanged in December

The consumer price index was unchanged in December, according to the Bureau of Labor Statistics. This was in-line with consensus estimates and an increase from November’s -0.3 percent decline. The primary drag on prices was lower energy costs. Gasoline prices were off 2.3 percent, building on the 7.4 percent decline the previous month.

Overall energy costs were down 1.2 percent for the month. Meanwhile, food prices have risen 0.2 percent for each of the past three months (October to December). In December, the largest increase for food items occurred among fruits and vegetables (up 0.6 percent).

Core inflation – which excludes food and energy costs – rose just 0.1 percent in December, the same as was observed in November. Inflation is running at the 1.9 percent rate on a year-over-year basis. As we saw yesterday with producer prices, the annual rate of inflation has eased throughout the year, largely on lower energy costs. Inflation was 2.3 percent in January 2012. For the most part, pricing pressures remain under control, at least for now, up modestly and within the range set by the Federal Reserve Board.

Chad Moutray is chief economist, National Association of Manufacturers.

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