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Look Back: Week of January 7, 2019

The partial federal government shutdown that went into effect December 22 is ongoing. At present economic data out of the Bureau of Labor Statistics and Federal Reserve are unaffected, but numbers from the Census Bureau are on hiatus. The week’s delayed reports were:

  • Factory orders for November at 10:00 ET on Monday, January 7.
  • International trade in goods and services for November at 8:30 ET on Tuesday, January 8.
  • Wholesale trade for November at 10:00 ET on Thursday, January 10.

It was a slender schedule of data reports before this. Markets were left to mull over a relatively unexciting series of economic data.

The ISM Non-Manufacturing Index for December declined to 57.6 from 60.7 in November. It was the lowest reading since 55.7 in July and reflected slower activity across three of its four components. However, new orders remained quite strong and suggests that business activity will pick up again soon. Employment was still solid if at a more moderate pace and the decline in supplier deliveries was nearer neutral, suggesting supply chain conditions are nearer normal after a hectic period.

The NFIB Small Business Optimism Index barely budged in December. It was little changed at 104.4 from 104.8 in November. The composition of the index components pointed to a somewhat less optimistic outlook, but that present conditions remained on about on trend. Certainly, the current job openings and plans to increase employment were consistent with continued tight labor market conditions.

The data on Job Openings and Labor Turnover for November were a bit softer than in recent months, but far from showing any substantive easing in conditions.  Levels remain elevated for job openings and hires, and low for separations outside of voluntary job leavers.

The numbers on initial jobless claims also pointed to a labor market with little slack with a decline of 17,000 to 216,000, the lowest level since early December.

The December Consumer Price Index for December came in on expectations and offered no real surprises. As anticipated, it was a downturn in energy costs (-3.5%) that brought the overall index down 0.1% month-over-month. The core CPI was up 0.2% for December. Year-over-year, the CPI was up 1.9% and the core up 2.2%. These remain in line with the Fed’s symmetric 2% objective and is probably the last inflation data that could influence the FOMC deliberations when they next meet on January 29-30.

The minutes of the December 18-19 FOMC meeting reflected increased concerns about the economic outlook against the uncertainties of slower global growth, unsettled domestic trade and tariffs policies, and signs of volatility in equity markets. The discussions took place before the market disruptions related to rumors that President Trump was considering removing Fed Chair Powell and the start of the partial federal government shutdown went into effect on December 22. The intensification of risks to the economy have helped downgrade expectations for future rate hikes.

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