Comerica Economic Weekly, January 18, 2019

Robert A. Dye, Ph.D.


Daniel Sanabria

A oil manufacturing plant at dusk

U.S. economic data released this week was mostly positive, but our line of sight into the U.S. economy is increasingly obscured...

U.S. economic data released this week was mostly positive, but our line of sight into the U.S. economy is increasingly obscured due to the now longest federal government shutdown in U.S. history.

Data produced by the U.S. Census Bureau and the Bureau of Economic Analysis are not being released due to the government shutdown. That means that the key retail sales and new housing construction data for December that was originally supposed to be release this week will be delayed. The Federal Reserve, the Bureau of Labor Statistics, academic institutions and private sources are all unaffected by the government shutdown.

The Philadelphia Fed reported continued positive manufacturing conditions in January. The Empire State Manufacturing Survey produced by the New York Fed saw only a slight improvement in activity in January.

The National Association of Home Builders Housing Market Index ticked up slightly in January. Builder optimism still remains well below 2018 levels. Lower mortgage rates are helping to support demand.

The Mortgage Bankers Association composite mortgage applications index was up for the second consecutive week. The purchase index was up 9.1 percent and the refi index was up 18.7 percent for the week of January 11.

Labor data was still good through early January, but the government shutdown will likely be more visible in the next round of data. Initial claims for unemployment insurance declined by 3,000 to hit 213,000 for the week ending January 12. Continuing claims climbed by 18,000 to hit 1,737,000 for the week ending January 5.

The Producer Price Index for December fell by 0.2 percent, as crude oil prices dipped to 2018 lows. The energy sub-index was down 5.4 percent for the month. Core PPI (less food, energy and trade) was unchanged in December. The headline PPI was up 2.5 percent and core PPI was up 2.8 percent for the year ending in December.

The December industrial production data from the Federal Reserve marks the 100th anniversary of that data series. Total industrial production increased by a moderate 0.3 percent in December after gaining 0.4 percent in November. Manufacturing output was strong in December, up 1.1 percent. Mining output increased by 1.5 percent. The utility sector was a drag with output declining by 6.3 percent due to mild weather.

On Tuesday, the lower house of the U.K. Parliament voted down the deal that Prime Minister Teresa May negotiated for the U.K. to leave the E.U.  May’s government survived a no confidence vote on Wednesday by a slim 19 vote margin. According to Article 50 of the EU treaty, March 29 is the date for Brexit, with or without a negotiated divorce. However, a recent ruling by the European Court of Justice allows the U.K. to unilaterally revoke the Article 50 exit clause. More intrigue to come.

Comments today from New York Federal Reserve Bank President John Williams reinforce the Fed’s new “patient” language. Williams acknowledged that the Fed is seeing emerging headwinds from the partial government shutdown in the U.S. and from elevated geopolitical uncertainties abroad. Williams told the New Jersey Bankers Association that the Fed will be patient and prudent in its approach to monetary policy.

We expect the Fed to leave interest rates unchanged at the next two FOMC meetings, maybe longer.

For a PDF version of this report, click here: Comerica Economic Weekly, January 18, 2019.

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January 18, 2019
Robert A. Dye, Ph.D., Senior Vice President and Chief Economist at Comerica Bank

Robert A. Dye, Ph.D.

Senior Vice President and Chief Economist
Daniel Sanabria, Senior Economist at Comerica Bank

Daniel Sanabria

Senior Economist

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