U.S. data from the middle of January reminds us that there is still uncertainty associated with economic metrics, even within the context of a generally favorable U.S. outlook. The Swiss National Bank added to global uncertainty as they released their increasingly expensive peg to the euro. Swiss watch makers were alarmed.
Crude oil prices look like they have at least temporarily stabilized in mid-January, with WTI settling around $47-48 per barrel. The national average price for regular unleaded gasoline is down to $2.08 per gallon according to AAA.
The Producer Price Index for final demand fell by 0.3 percent in December due to the pull from energy prices. It is now up by 1.1 percent over the previous 12 months. Removing food and energy, the core PPI increased by 0.1 percent in December, so we are still seeing weak, but positive price gains in the broader economy. The Consumer Price Index tells a similar story. December CPI was down 0.4 percent, and core CPI was unchanged.
Labor data was inconclusive. The Jobs Openings and Labor Turnover Survey for November showed an increase in the rate of job openings. However, initial claims for unemployment insurance increased by 19,000 for the week ending January 10, to hit 316,000. Seasonal factors are difficult to account for this time of year, so there may be some noise in the data.
Consumer sentiment continues to improve. The University of Michigan Consumer Sentiment Index for January surged to 98.2, getting back to a more normal, pre-recession level. However, retail sales data from earlier this week disappointed. Retail sales for December fell by 0.9 percent. We knew gasoline sales would ease, reflecting lower prices. And we knew that unit auto sales for the month were down slightly. However, electronics and appliance store sales were also weak, as were sales at building materials stores, general merchandise stores and sporting good stores.
Industry indicators for the week were likewise mixed. The National Federation of Independent Business’s Small Business Optimism Index also regained pre-recession form, increasing to 100.4 in December. Meanwhile, industrial production eased by 0.1 percent in December, due to a reset in utility output after surging in November. Business inventories increased by a moderate 0.2 percent in November. We expect to see a little drag from inventories on 2014Q4 GDP when the first estimate is released at the end of this month.
The Federal Reserve’s Beige Book said that most regions in the U.S. showed modest-to-moderate growth in the second half of the fourth quarter. The Empire State Manufacturing Survey said that manufacturing conditions in New York and northern New Jersey improved in December. Just down interstate 95, the Philadelphia Fed survey eased to a still-positive reading in December.
U.S. economic data from year-end 2014 continues to impress, setting the stage for solid momentum in 2015.
For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly 01-16-15.