The economic data released this week is consistent with a moderate economic expansion in Q4. Financial markets are reacting negatively to weaker-than-expected industrial production from China. Industrial production in China was up 5.4 percent in November from a year earlier.
Meanwhile, U.S. industrial production increased by 0.6 percent in November. The details are weaker than the headline. Manufacturing output was unchanged for the month after slipping by 0.1 percent in October. Mining output was up by 1.7 percent. Utility output was up by 3.3 percent in November, boosted by cold weather. Overall capacity utilization ticked up to 78.48 percent and looks like it is nearing the top of its cycle.
U.S. nominal retail sales for November increased by a modest 0.2 percent for the month despite very favorable conditions for consumers. The culprit was gasoline as the average monthly price for unleaded fell 6.5 percent in November to $2.70. December gasoline prices have declined even more, so gasoline looks like it will be a drag on nominal retail sales in December as well. Retail sales excluding gasoline increased by a respectable 0.5 percent in November. We expect holiday shopping metrics to be good this season.
Manufacturing and trade inventories were up by 0.6 percent nominally in October. After a strong inventory gain in Q3 we expect that inventories will be a moderate drag on GDP in Q4.
The Consumer Price Index for November was unchanged as lower energy prices counteracted moderate consumer price inflation elsewhere. Over the previous 12 months, headline CPI was up by 2.2 percent, well below the 2.9 percent year-over-year gain from mid-summer. Core CPI increased by 0.2 percent for the month, and was up by 2.2 percent over the previous 12 months.
The Producer Price Index for Final Demand increased by just 0.1 percent in November. Over the previous 12 months headline PPI was up by 2.5 percent, well below its 3.4 percent year-over-year gain from last July. The energy sub-index for the PPI fell by 5.0 percent for the month. Outside of energy, prices were mixed. The core PPI (final demand less food, energy and trade) was still up by 2.8 percent over the previous 12 months.
Total mortgage applications were up by 1.6 percent for the week ending December 7 as both purchase and refi apps increased. Purchase apps were up by 2.5 percent, their fourth consecutive weekly gain. Refi apps increased by 1.8 percent for the week, after increasing in the previous two weeks. On a four-week moving average basis, refi apps are down 36.2 percent from a year ago while purchase apps are down by just 0.2 percent. According to the Mortgage Bankers Association, the rate for a 30-year fixed rate mortgage fell for the third consecutive week, to 4.96 percent.
Initial claims for unemployment insurance decreased by a sizeable 27,000 for the week ending December 8, to hit 206,000. This erases the gains seen in the level of initial claims since early September. Continuing claims gained 25,000 for the week ending December 1, to hit 1,661,000.
The National Federation of Independent Business’s Small Business Optimism Index eased in November to 104.8, still high but also its lowest reading since last March.
For a PDF version of this report, click here: Comerica Economic Weekly, December 14, 2018
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