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On the radar: Look back at the February 11 week includes some delayed data reports

A look back at the February 11 week is through the murky lens of whether another partial shutdown of the federal government was going to occur or not. That uncertainty took some of the attention away from the data reports. Still, markets saw the welcome start of catching up on economic data releases delayed by the government shutdown. While some of the data was relatively old, it helped flesh out the picture for the fourth quarter 2018 and provided a better sense of the momentum going into 2019.

Unfortunately, some of that data was less than stellar. The December report on retail and food services for December was weaker than expected at down 1.2% and indicated that consumer spending was down at year-end. Some of it was due to the 5.1% plunge in gasoline prices that reduced the dollar value of sales, but even a solid month up 1.1% for motor vehicle sales couldn’t put an upside to the report. If there was a bright spot, it was that year-over-year sales were up 4.1%, although even that pointed to downward momentum from earlier in 2018.

Energy prices was the main factor behind tame January inflation readings from the Consumer Price Index (CPI), Final Demand Producer Price Index (PPI), and Import Price Index. The CPI was flat month-over-month and up 1.6% from a year ago; the core was up 0.2% and up 2.2%. The PPI dipped 0.1% compared to the prior month and was up 2.0% year-over-year; the core – excluding food, energy, and trade services – was up 0.2% and up 2.5%. The Import Price Index declined 0.5% in January from December and was down 0.7% excluding petroleum; the index was down 1.7% compared to a year ago and down 0.4% excluding petroleum. Overall inflation is low and dragged down by energy prices, while the year-over-year pace for the CPI and PPI is close enough to the Fed’s symmetric 2% objective that there will be no hurry to raise rates.

The Atlanta Fed’s Business Inflation Expectations measure for February notched down one-tenth to 1.9%, a second month in a row at which it was lower and the lowest since 1.8% in October 2017. Taken in context with the University of Michigan’s Survey of Consumers where inflation expectations for 1 year fell two-tenths 2.5% in early February and the 5-year expectations were down three-tenths to 2.3%, it would suggest that both businesses and consumers are not feeling more than mild inflationary pressures as present.

The University of Michigan Consumer Sentiment Index was up to 95.5 in the preliminary report from 91.2 in January. This pointed to a sense of relief after the federal government shutdown ended, but the rise did not fully retrace the decline from 98.3 in December. Consumers are still confident – particularly in regard to current conditions — but have fallen from the giddy heights of the past two years.

The NFIB Small Business Optimism Index for January continued its downward trend of the past few months, reaching 101.2 after 104.4 in December, and was the lowest since 98.4 in November 2016. Like consumers, small businesses are confident, just not at levels seen in 2017 and 2018. The outlook is for continued moderate expansion, but with more upside risks perceived.

The New York Fed’s Empire State Survey for February was consistent with ongoing modest expansion for the factory sector. Activity is generally slower than in the 2017-2018 period. However, it remains intact, if less vigorous. The January numbers on industrial production and capacity utilization were below expectation, although for the reasons expected. Manufacturing took a hit with fewer motor vehicles being produced, mining paused after two months of solid increases, and utilities bounced back with arrival of more seasonal weather from a mild December.

The data on Job Openings and Labor Turnover (JOLTS) in December registered a fresh record high of 7.335 million for job openings and a hectic pace of hiring at 5.907 million, while job separations remained on tract at 5.545 million. The level of voluntary job leavers – part of separations and a measure of the health of the labor market – were down slightly to 3.482 million, still within range of the record high of 3.648 million in August 2018. Importantly, these numbers did not include the Current Employment Survey revisions that are likely to significantly change this picture when the January data is reported on Friday, March 15 at 10:00.

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