In spite of the fairly busy release schedule, a look back at the March 11 week indicates it was not a momentous one for economic data, especially in advance of the FOMC meeting on March 19-20. The Census Bureau continued to catch up on delayed data releases.
It was a relief to get the data on retail and food sales for January on Monday, but the numbers are still relatively old. Nonetheless, it suggested that the sluggish sales of late 2018 are giving way to a livelier environment at the start of the, at least excluding motor vehicles. The total was up 0.2% overall, but a much more solid 0.9% excluding motor vehicle sales.
The data on inflation and inflation expectations was tame and reflected higher energy costs that started in January and continued into February. Month-over-month increases were generally tame, but the underlying data year-over-year suggested that inflation is running around the Fed’s 2% objective, at least at the core. The CPI was up 1.6% compared to a year-ago in February, but excluding food and energy was up 2.2%. The Final Demand PPI was up 1.9% at the total and up 2.3% at the core – excluding food, energy, and trade services. The Import Price Index reached up 3.3% compared to last year but was up 2.0% excluding petroleum. Fed policymakers should not have to worry about a sustained impact from the drop in energy costs late in 2018, but neither will they have to be too wary of an inflation overshoot.
The Atlanta Fed’s Business Inflation Expectations Index held at 1.9% in March, just under the 2% objective. The University of Michigan inflation expectations measures also pointed to some moderation in the inflation outlook in the 1-year measure at 2.4% after 2.6% in February, while the 5-year measure notched up two-tenths to 2.5%.
Consumer confidence recovered further after the partial federal government shutdown in January. The University of Michigan Consumer Sentiment Index rose to 97.8 in the preliminary report, up from 93.8 in February and 91.2 in January, but not quite matching the 98.3 in December 2018. Confidence improved both for current conditions and the six month outlook. Business confidence was not much changed in February from January. The NFIB Small Business Optimism Index barely budged higher to 101.7 after 101.2 in the prior month. Some of this may be attributable to remaining uncertainties about conditions in the global economy and the state of trade and tariff policy while negotiations continue with China.
Data related to manufacturing was less than stellar, if still consistent with some areas of growth. New orders for durable goods was up 0.4% in January, although that was largely due to a 1.2% rise in transportation. Excluding transportation, orders edged down 0.1%. Industrial production was nearly flat in February. The narrow up 0.1% was due to a 3.7% jump in utilities output when winter weather hit hard and mining managed to rise 0.3% on some energy demand. However, manufacturing was off 0.4%, a second month in a row of mild declines. The earliest of the District Bank surveys of manufacturing is the New York Fed’s Empire State Manufacturing Survey. The March data pointed to general business conditions that showed mild expansion at 3.7 after 8.8 in February and 3.9 in January. The slowdown that occurred late last year is continuing.
Data on the labor market did not add anything fresh to the numbers in the February Employment Situation. Data on state employment and unemployment was for January, although it included annual revisions. The numbers on Job Openings and Labor Turnover (JOLTS) was also for January and incorporated revised number. Its best piece of news was that voluntary job quits are at an all time high, suggesting that workers are taking advantage of a tight labor market to seek out new opportunities and better pay.
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