U.S. economic data released in mid-November has been generally positive and consistent with growing expectations of a fed funds rate increase on December 14. In her prepared remarks for the congressional Joint Economic Committee, FOMC chair Janet Yellen said today that “…an increase [in the fed funds target range] could well become appropriate relatively soon.” Yellen is still hedging her bets, but that is about as strong an indication from her as we are likely to hear that we will see a December rate hike. Expectations for a December rate hike are very high. According to the fed funds futures market, the implied odds of a December rate hike are 91 percent.
Retail sales were solid in October, gaining 0.8 percent, after increasing by a strong 1.0 percent in September. Auto sales drove the numbers higher. Unit auto sales for the month reclaimed the 18.0 million unit mark. Other retail sales categories were generally positive.
One of the softer reports for the week was on U.S. industrial production for October, which was unchanged after dipping slightly through August and September. Manufacturing output increased by 0.2 percent for the month. Mining output gained 2.1 percent, consistent with moderate gains in the drilling rig count. Utility output fell by 2.6 percent.
Housing starts surged in October, gaining 25.5 percent, with strong single-family construction and a rebound in multifamily building activity. Permits gained slightly, up 0.3 percent for the month.
Business inventories increased in September by 0.1 percent. Better still, the inventory/sales ratio is trending down after climbing through 2015.
The Producer Price Index for final demand was unchanged in October. On the goods side, increases in energy prices were muted by declining food prices. On the services side, declines in trade and other service prices reduced the services sub-index for the month. Over the previous 12 months the PPI for final demand was up by 0.8 percent. Excluding food, energy and trade, it was up by 1.6 percent over the year.
The Consumer Price Index increased by 0.4 percent in October, driven by increases in energy, apparel and shelter prices. Headline CPI is trending up on a year-over-year basis, now up by 1.6 percent. Core CPI (less food and energy) was up 0.1 percent for the month, and by 2.1 percent over the previous 12 months.
Initial claims for unemployment insurance fell by 19,000 for the week ending November 12, to hit a very low 235,000. Continuing claims for the week ending November 5 dropped by 66,000, with the total falling below the benchmark two million level to an ultralow 1,977,000. The Empire State Manufacturing Survey for November was stronger than expected, showing a pick-up in manufacturing activity for the New York region over the month.
The Federal Reserve bank of Philadelphia’s manufacturing index eased in November to a still-positive 7.6.
According to the Federal Reserve Bank of Atlanta, their hourly wage tracker was up 3.9 percent in October over the previous 12 months.
We will not publish a Comerica Economic Weekly next week. Happy Thanksgiving!
For a PDF version of the Comerica Economic Weekly, including forecast tables and the variables calendar, click here: CMAEconWeekly 11-18-2016.