Comerica Economic Weekly

Economic data for the end of 2013 are generally consistent with the view that the economy will gradually pick up momentum in 2014. A key outlier in the data stream was the December jobs report, which showed a meager gain of just 74,000 jobs for the month. We interpret the jobs report as an aberration and out of sync with other labor-related metrics. However, that aberration will need to correct in January or February for us to fully buy into the improving outlook for 2014. Moreover, very cold weather in early January may have an adverse impact on payroll employment in January, further muddying the interpretation of labor-related metrics.

We had an acceleration of residential construction activity late in 2013. Housing starts jumped in November to a 1,107,000 unit annual rate. December moderated to a still-strong 999,000 unit rate. Fourth quarter starts averaged a 1,002,000 unit rate, well above the third quarter average of 882,000. Permits data also moderated from strong October and November numbers. Likewise, residential permits for the fourth quarter were above the third quarter average.

Industrial production for December increased by 0.3 percent. Manufacturing was solid at a 0.4 percent gain, while utility output declined by 1.4 percent following a surge in November. Auto and light truck assemblies increased to an 11.5 million unit rate in December.

Retail sales for December increased by a modest 0.2 percent, held down by weaker-than-expected auto sales. Retail sales of autos and parts declined by 1.8 percent for the month. The unit sales numbers declined from a robust 16.4 million unit rate in November to 15.4 million in December. Non-auto retail sales for December were good, increasing by 0.7 percent, led by gains in nondurables such as food, gasoline and clothing.

Initial claims for unemployment insurance for the week ending January 11 dipped by 2,000 to hit 326,000. Initial claims have been volatile as of late, and trending up slightly, but remain consistent with an improving labor market. Job openings and labor turnover data from November are also consistent with moderately improving labor market conditions.

Price data in December shows that inflation remains contained. The producer price index for finished goods increased by 0.4 percent for the month as energy prices ticked up. Wholesale energy prices increased by 1.6 percent in December as gasoline, diesel fuel and home heating oil prices reversed recent declines. The core PPI (less food and energy) gained 0.3 percent in December. Over the previous 12 months the headline PPI was up 1.2 percent. The consumer price index for December increased by 0.3 percent, also pushed by energy prices. Consumer gasoline prices were up 3.1 percent for the month. Exclusive of food and energy, the core CPI was up a sedate 0.1 percent in December. Over the previous 12 months headline CPI is up 1.5 percent.

The Federal Reserve’s Beige Book for January highlights generally improving economic conditions across most regions and most sectors at the end of 2013. Eleven of the twelve Federal Reserve Districts cited modest-to-moderate improvement at the end of the year. Only the Kansas City District reported steady conditions. Real estate markets generally improved, although activity  slowed in some areas late in the year. Commercial real estate conditions were generally improving.

For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly011714.

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