Producer prices jumped 0.6 percent in January, its fastest monthly pace of growth since September 2012. For manufacturers, producer prices for final demand goods accelerated in the latest report, up 1.0 percent and increasing for the fifth straight month. This largely reflected a significant rise in energy costs, up 4.7 percent. In particular, gasoline prices were up 14.5 percent for producers in January, which was also coincidently the year-over-year growth rate. At the same time, food prices were unchanged in January. Higher costs for dairy products, eggs, grains, pork and shortening and cooking oils were offset by lower prices for beef and veal, chickens, confectionary end products, fish and pasta products, among others. Despite the flat month, food prices have dropped 2.2 percent since January 2016. Read More
The Bureau of Labor Statistics said that consumer prices rose 0.3 percent in December, rising for the fifth straight month. The increase in the latest release stemmed largely from higher energy costs, up 1.5 percent, with gasoline prices up 3.0 percent. Indeed, the average price of regular conventional gasoline was $2.25 per gallon on December 26, up from $2.08 on November 28, according to the Energy Information Administration. Over the past 12 months, energy prices have risen 5.4 percent. At the same time, food prices were unchanged for the sixth consecutive month, with a decline of 0.2 percent since December 2015. Overall, the consumer price index increased 2.1 percent year-over-year in October, up from 0.9 percent in July and the highest level since May 2014.
Core consumer prices were up 0.2 percent in December, mirroring the pace seen in November. There were higher prices for medical care, new and used vehicles, transportation services and shelter, but lower costs for apparel and household furnishings. Excluding food and energy costs, consumer prices have increased 2.2 percent over the past 12 months, which was the average for 2016. Even though core consumer price inflation has exceeded the Federal Reserve’s stated goal of 2 percent for 14 consecutive months, overall prices pressures remain modest and under control for now.
Producer prices increased 0.3 percent in December, extending the 0.4 percent gain seen in November. More importantly for manufacturers, producer prices for final demand goods accelerated in the latest report, up 0.7 percent in December. This reflected large monthly jumps in both energy and foods costs, up 2.6 percent and 0.7 percent, respectively. There were higher prices for beef, chicken, dairy products, eggs, fish and shellfish, pork and vegetables for the month. Still, food costs have been on a downward trend over the past two years, down 6.1 percent over the past 24 months. On the other hand, rising natural gas and gasoline prices helped push energy costs higher in December. Since December 2015, final demand energy prices have risen 6.1 percent, but to be fair, they have fallen 23.3 percent from levels seen three years ago. Excluding food and energy, final demand goods prices for producers increased by 0.3 percent in December. Read More
The Dallas Federal Reserve Bank said that manufacturing activity in its Texas district has now contracted for 18 straight months. The composite index of general business conditions edged somewhat higher, up from -20.8 in May to -18.3 in June, but with sentiment remaining sufficiently negative for the month. Still-low crude oil prices and a strong U.S. dollar continue to hamper economic growth in the region, as noted in the sample comments. Indeed, in a special question, 46.2 percent of respondents said that lower energy prices have had a negative impact on their business, with one-third noting a positive impact and 20.8 percent suggesting no impact.
Looking more specifically at the June data, key indicators were negative across-the-board, even with some of them easing a bit in this report. That included new orders (up from -14.9 to -14.2), production (up from -13.1 to -7.0), shipments (up from -11.5 to -8.6), capacity utilization (up from -11.0 to -9.3), employment (down from -6.7 to -11.5) and capital expenditures (up from -6.6 to -2.1). Just over 34 percent of those completing the survey said that new orders had declined in June, with 19.9 percent stating increased sales and 45.9 percent noting no change. Read More
The Bureau of Labor Statistics said that consumer prices were unchanged in January. Energy prices fell 2.8 percent for the month, but core inflation – which exclude food and energy prices – picked up, rising 0.3 percent. Food prices were flat. On the energy front, gasoline prices were off 4.8 percent, declining sharply for the second straight month. Along those lines, the average price of regular conventional gasoline decreased from decreased from $1.933 at the end of December to $1.752 a gallon at the end of January, according to the Energy Information Administration (EIA). Gasoline prices have continued to fall since then, averaging $1.638 per gallon on February 15, its lowest level since December 29, 2008. Meanwhile, higher prices for fruits and vegetables were offset by reduced costs in other categories.
Core consumer prices accelerated to their fastest monthly pace since August 2011, boosted by strong gains for apparel, medical care, new vehicles, shelter expenses and transportation services. On a year-over-year basis, core inflation was 2.2 percent, up from 1.8 percent six months ago. This was the highest year-over-year level for core inflation since June 2012. Yet, overall pricing pressures continue to remain in control for now, providing the Federal Reserve some flexibility even as it decides when to raise short-term interest rates once more.
The Federal Reserve Bank of Philadelphia said that manufacturing activity contracted for the fifth straight month in January. The composite index of general business activity rose from -10.2 in December to -3.5 in January, and yet, the headline figure has now been in negative territory since September. (Note that prior data reflect an annual revision for seasonal adjustments.) The underlying data were mixed. The pace of decline for new orders (up from -11.1 to -1.4) slowed in this latest report. In contrast, labor market data worsened for the month, including hiring (down from 2.2 to -1.9) and the average workweek (down from 0.6 to -2.2). On the positive side, shipments (up from -2.1 to 9.6) picked up at a decent rate, expanding after three consecutive months of declines. Read More
The Bureau of Economic Analysis said that personal spending increased by 0.4 percent in August, mirroring the gain seen in July. It has not been positive for six consecutive months, after essentially stagnating in February. Durable and nondurable goods spending were both higher for the month, up 1.2 percent and 0.6 percent, respectively. Motor vehicles and parts helped to buoy the durable goods purchasing numbers in each of the past two months, up 1.6 percent and 2.1 percent in July and August, respectively, and rebounding from the 3.4 percent decline in June. On a year-over-year basis, personal spending has increased by 3.5 percent, down from 3.7 percent in the prior report. In general, this suggests that Americans are increasing their spending modestly, but it also indicates a slower rate of purchasing than the more-robust pace seen in late 2014. For instance, the year-over-year rate peaked at 5.0 percent in 2014 in August. Read More
The Bureau of Labor Statistics said that producer prices for final demand goods and services rose 0.4 percent in June, extending the 0.5 percent increase seen in May. The gains for the goods sector were even stronger. Indeed, producer prices for final demand goods jumped 1.3 percent and 0.7 percent, respectively, in May and June, with each month spurred higher by rising energy and food costs. On the energy front, energy goods were 5.9 percent and 2.4 percent more expensive in those two months, respectively. This was consistent with the rise in West Texas intermediate crude oil prices, up from an average of $54.45 per barrel in April to $59.82 a barrel in June. At the same time, final demand energy goods costs remain 17.9 percent lower today than 12 months ago. Read More
The Bureau of Labor Statistics said that consumer prices rose 0.1 percent in April, slightly lower than the 0.2 percent gains observed in both February and March. Lower energy prices helped to reduce the pace of the headline number, with energy costs down 1.3 percent for the month. Gasoline prices declined 1.9 percent in April, easing a bit after 2.4 percent and 3.9 percent increases observed in February and March, respectively. On a year-over-year basis, gasoline sells for 31.7 percent less today than in April 2014. Note that the average price of gasoline has risen a little since then, with the Energy Information Administration reporting that the average price of regular gasoline was $2.604 per gallon on May 18, up from $2.315 on April 6. This is still more than one dollar lower than seen 12 months ago. Read More
Here is the summary for this week’s Monday Economic Report:
The U.S. economy grew 2.4 percent in 2014, just barely edging out the 2.2 percent gain in 2013. Yet, that somewhat understates the strength of the economy since the winter-related weaknesses seen at this point last year. Indeed, real GDP increased by an annualized 4.1 percent during the last three quarters of 2014, and in the fourth quarter, Americans spent at a healthy 4.3 percent annual pace, the fastest rate since the first quarter of 2006. Still, the 2.6 percent growth rate in real GDP in the fourth quarter also had some red flags. Weaker growth abroad, a strengthening U.S. dollar and worries about dramatically lower energy prices have impacted capital spending and international demand negatively. Therefore, while manufacturers remain mostly upbeat about orders and production in 2015, these developments serve as a reminder of the challenges in the global marketplace right now. Read More