the key reports released this past week were the January Consumer Price Index and the January Producer Price Index, both from the Bureau of Labor Statistics, the report on Industrial Production and Capacity Utilization for January from the Fed, and the December report on New Residential Construction from the Census Bureau...in addition, this week also saw the release of the first two regional Fed manufacturing indexes for February: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -19.4 to -16,6, which was still the seventh negative monthly index reading in a row, indicating an ongoing recession in First District manufacturing, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose from -3.5 in January to -2.8 in February, still its sixth consecutive negative reading, also implying an ongoing contraction in that region's manufacturing...
CPI Unchanged in January: Implies Real Retail Sales Up 0.3% from 4th Quarter
the consumer price index was unchanged in January, as lower prices for energy offset higher prices for core goods and services....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices were unchanged in January after revised prices fell 0.1% in December, rose 0.1% in November, rose 0.2% in October and fell 0.1% in September...with this release, the BLS has revised the seasonal adjustment factors used over the past year, resulting in minor changes to many monthly metrics that had been reported previously, which nonetheless still nets out to the same price changes year over year....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 236.916 in January from 236.525 in December, which left it statistically 1.4% higher than the 233.707 index reading of last January....regionally, prices for urban consumers have risen 2.6% in the West, 1.2% in the South, 0.8% in the Midwest, and 0.7% in the Northeast over the past year, with greater price increases within regions in cities of more than 1,500,000 people...with lower energy prices alone responsible for the unchanged CPI, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 243.779 to 244.528, which is now 2.21% ahead of its year ago reading of 239.248...
the seasonally adjusted energy price index fell by 2.8% in January after falling by a revised 2.8% in December and rising by a revised 0.3% in November, as the energy index is now just 6.5% lower than it was in January a year ago, when the energy price index had dropped 9.7% in one month.....prices for energy commodities were 4.8% lower in January while the index for energy services saw an 0.7% drop, after decreasing by 0.7% in December....the decrease in the energy commodity index included a 4.8% drop in the price of gasoline, the largest component, while fuel oil prices fell 6.5% and prices for other fuels, including propane, kerosene and firewood, averaged a 0.9% decrease…within energy services, the index for utility gas service fell by 0.6%, leaving utility gas priced 12.7% lower than a year ago, while the electricity price index fell by 0.7%, after it fell by 0.4% in December...energy commodities are now only priced 8.5% below their year ago levels, with gasoline just 7.3% lower priced than it was a year ago, as it was last January that the gasoline index fell 18.7% in one month, and hence the year over year comparisons going forward will be from that lower price level...meanwhile, the energy services price index is 4.7% lower than last January, as even electricity prices have fallen 2.4% over that period..
the seasonally adjusted food index was unchanged in January, after by falling by 0.2% in December and 0.1% in November, as prices for food purchased for use at home fell 0.2% while prices for food away from home rose 0.3%, as average prices at fast food outlets rose 0.5% and school lunches rose 0.7%, while prices at full service restaurants rose 0.2% ...meanwhile, prices for all categorizes of food at home except for fruits and vegetables fell in January, with the fruits and vegetables index rising 1.3% above December, as fresh vegetables rose 2.2% on a 15.3% jump in tomato prices, which more than offset 5.1% lower priced lettuce, while fresh fruits and canned fruits and vegetables both rose 1.1%...at the same time, however, the price index for the meats, poultry, fish, and eggs group fell 1.3% after falling 1.1% in December on an 8.4% drop in egg prices, coupled with 0.8% decreases in the indexes for both beef and poultry and a 0.7% decrease in the price index for pork...meanwhile, the index for cereals and bakery products fell 0.2% as breakfast cereal prices fell 2.2% and cracker group prices fell 0.7%, which together more than offset a 1.1% increase in prices for rice, pasta and cornmeal and a 0.9% increase in cookie prices...the index for dairy products also fell 0.2% as prices for milk other than whole milk fell 1.5% while cheese prices rose 0.4%...likewise, the index for beverages and beverage materials was also 0.2% lower as instant and freeze dried coffee was price 0.9% lower and carbonated drinks prices fell 0.4%... lastly, prices in the other foods at home category also averaged 0.2% lower as frozen and freeze dried preparations were marked down 1.4% and packaged salads fell 1.5%, more than offsetting a 1.6% increase in prices for salt and other seasonings and spices....only two food line items have seen price changes greater than 10% over the past year; ham prices, which were up 0.1% in January, remain 10.1% lower than they were in January a year ago, while the "other pork" category shows a 10.4% decrease over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...
among the seasonally adjusted core components of the CPI, which rose by 0.3% in January, the composite of all commodities less food and energy commodities rose by 0.2%, while the composite for all services less energy services rose by 0.3%....among the commodity components, which will be used by the Bureau of Economic Analysis to adjust January retail sales for inflation in national accounts data, the index for household furnishings and supplies fell 0.1% on a 0.5% decrease in prices for outdoor equipment and supplies and a 0.2% decrease in prices for housekeeping supplies, both of which were weighted heavily enough to offset a 2.9% increase in prices for window coverings and a 1.4% increase in prices for living room, kitchen, and dining room furniture....apparel prices were up 0.6% on a 7.2% increase in prices for women's outerwear, a 4.1% increase in prices for jewelry and a 3.7% increase in prices for girl's apparel, which were partially offset by 3.3% lower prices for men's furnishings and a 2.9% decrease in prices for men's shirts and sweaters...at the same time, prices for transportation commodities less fuel were up 0.4% as prices for new cars and trucks were up 0.3% and prices for tires were up 0.5%, and prices for medical care commodities were also up 0.4% on 0.7% higher drug prices...meanwhile, the recreational commodities index was unchanged as 2.2% lower prices for TVs were offset by 1.2% higher prices for audio discs, tapes and other media and 0.5% higher prices for pets and pet supplies...on the other hand, the education and communication commodities index fell 1.3% on a 2.2% decrease in prices for personal computers, an 0.8% decrease in prices for telephone hardware, and a 0.4% decrease in prices for educational books and supplies, while the separate index for alcoholic beverages rose 0.5%, and the index for other goods rose 0.2%...
within services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.2% increase in owner's equivalent rent and a 2.0% increase in costs for lodging away from home, while costs for household services like water, sewer and trash collection rose 0.2%....medical care services rose 0.5% on a 1.1% increase in health insurance and a 0.6% increase in inpatient hospital services, and transportation services rose 0.4% on a 4.0% increase in car and truck rentals, a 1.2% increase in airline fares, and a 1.0% increase in parking fees and tolls...in addition, the recreation services index rose 0.3% as a 5.4% increase in admissions to sporting events more than offset a 1.8% decrease in video discs and other media rentals, and education and communication services were 0.2% higher on a 0.8% increase in prices of internet services and electronic information providers and 0.5% higher technical and business school tuition and fees...lastly, other personal services were also up 0.2% on a 0.9% increase in tax return preparation and other personal accounting fees....among core prices, a 10.6% increase in moving and storage expenses was the only line item with a year over year increase greater than 10%, while only telephones, which were priced 15.9% lower, and televisions, which are 14.3% cheaper, saw their prices drop by more than 10% over the past year...
with this release, we should be able to estimate the economic impact of last week's January retail sales report...for the most accurate estimate, and the way the BEA will be figuring 1st quarter GDP at the end of April, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, January's clothing store sales, which rose by 0.2% in dollars, should be adjusted with the price index for apparel, which was up by 0.6%, to show us that real retail sales of clothing were actually down 0.4% in January...then, to get a GDP relevant quarterly change, we'd have to compare those January real clothing sales with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually...the short cut we usually use for a ballpark estimate is to apply the composite price index of all commodities less food and energy commodities, which was up 0.2%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales....those sales were up almost 0.4% in January, and since their price index was up 0.2%, real retail sales excluding food and energy sales were up approximately 0.2%...then, for the rest of the total, we find sales at grocery stores were up 0.8%, while prices for food at home were down 0.2%, suggesting a real increase of 1.0% in the volume of food purchased in January....next, sales at bars and restaurants were down 0.5% in dollars, and in addition those dollars bought 0.3% less, so real sales of food away from home were actually down about 0.8%...and while gas station sales were down 3.3%, gasoline prices were down 4.8%, suggesting a solid real increase in gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have the details on that...weighing the food and energy components at one third of total retail sales suggests that net real retail sales were up on the order of 0.2% in January, following a real decrease of 0.3% in December, an increase of 1.0% in November, and a decrease of 0.1% in October (data which we get from Table 7 of the income and outlays report (pdf))...that means we can estimate that January's real consumption of goods was 0.2% higher than that of December, 0.1% lower than that of November, and 0.9% higher than that of October, suggesting a real increase of more than 0.3% in January from the average monthly real sales of the 4th quarter...
Wholesale Prices Fell 0.7% in January While Margins of Service Providers Increased 0.5%
the seasonally adjusted Producer Price Index (PPI) for final demand increased by 0.1% in January as prices for finished wholesale goods fell by 0.7%, while margins of final services providers were 0.5% higher...this followed a December report that showed the overall PPI down 0.2%, with prices for finished goods also down 0.7% while final demand for services was up 0.1%....producer prices are now just 0.2% lower than they were a year ago, and 0.2% lower than two years ago, as the producer price index was unchanged over the span from January 2014 to January 2015...like the CPI, the PPI also underwent an annual revision of its seasonal adjustments with this release, resulting in minor revisions to previous reports...
as noted, the index for final demand for goods, aka 'finished goods', fell by 0.7% in January after falling 0.7% in December, and increasing 0.1% in November, as the index for wholesale energy prices fell 5.0% on a 41.0% drop in wholesale prices for home heating oil and a 8.3% drop in the price of wholesale gasoline...that was partially offset by a 1.0% increase in the index for wholesale food prices as a 17.3% increase in the index for fresh and dry vegetables, a 7.0% increase in the index for fresh and dry fruit, and a 7.4% increase in the index for beef and veal more than offset generally lower wholesale prices for other foods....excluding food and energy, the index for final demand for wholesale core goods was unchanged in January, as a 1.6% increase in wholesale prices for pharmaceutical preparations and a 1.3% increase in wholesale prices for tires offset a 3.4% decrease in wholesale prices for industrial chemicals...
meanwhile, the index for final demand for services rose by 0.5% in January after rising 0.1% in December, 0.5% in November, while falling by 0.3% in October and 0.4% in September, as the index for final demand for trade services rose 0.9%, the index for final demand for transportation and warehousing services rose 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was also 0.4% higher....noteworthy among trade services, seasonally adjusted margins for fuels and lubricants retailers were 8.2% higher and margins for machinery and equipment wholesaling rose 4.0%, while margins for TV, video, and photographic equipment and supplies retailers were 10.1% lower after falling 27.4% in December...among transportation and warehousing services, passenger airlines saw their margins increase 2.6% and freight airline margins rose 2.4%, while in the core final demand services index, margins for securities brokerage, dealing, investment advice, and related services rose 11.8% after rising 9.2% in December...
this report also showed the price index for processed goods for intermediate demand fell by 1.2% after a 1.0% decrease in December, as intermediate processed goods prices have now been down 16 out of the last 18 months and are 5.4% lower than in January a year ago....all intermediate goods indices were down for the 6th consecutive month, with prices for intermediate energy goods 4.6% lower, the index for processed foods and feeds 0.4% lower, while the price index for processed goods for intermediate demand less food and energy was down 0.5%...meanwhile, the price index for intermediate unprocessed goods was down 0.7% after falling 3.4% in December and 4.9% in November, with the index for crude energy goods down 10.0%, the index for unprocessed foodstuffs and feedstuffs down up 5.5%, and producer prices for raw materials other than food and energy materials unchanged... this raw materials index remains 17.9% lower than it was a year ago, as most commodity prices are still near multi year lows...
lastly, the price index for services for intermediate demand was up 1.1% in January after it rose 0.1% in both December and November, as a 0.7% decrease in the index for transportation and warehousing services for intermediate demand and a 0.1% increase in the index for trade services for intermediate demand were offset by a record 1.8% increase in the the core price index for services less trade, transportation, and warehousing for intermediate demand...over 70 percent of the rise in that core index can be traced to a 31.1 % increase in margins for securities brokerage, dealing, investment advice, and related services, while indexes for business loans, metals, minerals, and ores wholesaling, food wholesaling, management consulting services, and airline passenger services also contributed...over the 12 months ended in January, the year over year price index for services for intermediate demand, which has never turned negative, is now 1.5% higher than it was a year ago...
January Industrial Production Up 0.9%, Boosted by Normal Weather
after December industrial production was revised lower, January's jump in industrial production was the largest increase since November 2014, but more than half of it was due to a return to seasonal utility usage...the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.9% in January after falling by a revised 0.7% in December and a revised 0.8% November, which still left the index 1.7% below its year ago level...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 106.8% in January from 105.9 in December, which was originally reported at 106.0...at the same time, the November reading for the index was revised up from 106.4 to 106.6, the October index was unchanged from the last report at 107.4, and both the August and September index readings were revised down from 107.6 to 107.5...to the extent that this report plays into GDP, the changes to November and December industrial production might boost the 4th quarter's growth rate incrementally, while the January index is still less than 0.2% above the average of the prior three months...
the manufacturing index increased by 0.5 to 106.2 in January, after the index for December was revised down from 106.0 to 105.7, the manufacturing index for November was revised down from 106.1 to 105.9, the indices for September and October were left unchanged at 105.8 and 106.2 respectively, while the manufacturing index for August was revised from 106.0 to 105.9...as a result of these changes, combined with a weak reading last January, the year over year increase in the manufacturing index has now increased to 1.2% from last month's 0.8%... meanwhile, the mining index, which includes oil and gas well drilling, was unchanged at 110.1 in January, after falling from 113.9 in October and 112.3 in November, and still remains 9.8% lower than a year earlier....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 5.4%, from a depressed level of 95.5 in December to 101.7 in January...however, while cold, January's weather was still warmer than normal, so utility usage was still below par, and hence the index remains 2.8% below its level of January 2015...
this report also gives us capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which saw total capacity utilization rise from a revised 76.4% in December to 77.1% in January...seasonally adjusted capacity utilization for all manufacturing industries was up 0.3% to 76.1% in January as manufacturing capacity utilization for December was revised down 0.2% to 75.8%...after a downward revision of 0.4% to December's figure, utilization of NAICS durable goods production facilities rose 0.3% to 75.7% in January, while capacity utilization for non-durables rose from an unrevised 77.6% in December to 77.9% in January....capacity utilization for mining rose from 78.4% in December to 78.8% in January, probably as some capacity was scrapped, while utilities were operating at 77.5% of capacity during January, up from the revised 73.6% of capacity in December...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....
Housing Starts and New Permits Little Changed in January
the January report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing unit starts was at a seasonally adjusted annual rate of 1,099,000 in January , which was 3.8 percent (±12.0%)* below the revised December estimated seasonally adjusted annual rate of 1,143,000 housing units started, but was 1.8 percent (±13.5%)* above last January's rate of 1,080,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, January housing starts could have been up 8.2% or down as much as 15.8% from those of December, with even larger revisions subsequently possible...in this report, the annual rate for December housing starts was revised from the 1,149,000 reported last month to 1,143,000, while November starts, which were first reported at a 1,073,000 annual rate, were revised from last month's initial revised figure of 1,179,000 annually down to 1,079,000 annually with this report....
those annual rates of starts indicated by the annualized headline change were extrapolated from a survey of a small percentage of permit offices visited by Census field agents, which estimated that 73,600 housing units were started in January, down from 77,500 units started in December...of those housing units started in January, an estimated 47,900 were single family homes and 24,700 were units in structures with more than 5 units, down from 50,500 single family starts and 25,900 units started in structures with more than 5 units in December....the unadjusted estimates also show that total housing starts were down in every region of the country, with only the South seeing an increase in single family starts from 28,900 homes in December to 29,900 homes in January, which was still unchanged on a seasonally adjusted basis, with a ±19.2% margin of error on that metric...
the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised starts data...in January, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,202,000 housing units, which was 0.2 percent (±0.5%)* below the revised December rate of 1,204,000 permits annually but 13.5 percent (±1.5%) above the rate of permit issuance in January a year earlier...the annual rate for housing permits issued in December was revised from 1,232,000 to 1,204,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates, which showed permits for 74,700 housing units were issued in January, down from the estimated 96,800 new permits issued in December, with permits in the Northeast down from 16,700 to 5,100, as seasonably cold weather returned to the region....the January permits included 45,200 permits for single family homes, down from 50,600 single family permits in December, and 27,100 permits for housing units in apartment buildings with 5 or more units, down from 43,600 such multifamily permits a month earlier...for charts and additional analysis on this report, without our disparaging caveats, see Bill McBride's coverage in two posts: Housing Starts declined to 1.099 Million Annual Rate in January and Comments on January Housing Starts....