Archive for October, 2018

Employment Costs
Employment Cost Index 
Released On 10/31/2018 8:30:00 AM For Q3:18
Prior Consensus Consensus Range Actual
ECI – Q/Q change 0.6 % 0.7 % 0.5 % to 0.8 % 0.8 %
ECI – Y/Y change 2.8 % 2.8 %
Highlights
The employment cost index continues to signal elevated price pressures for labor, up 0.8 percent in the third-quarter for a year-on-year rate of 2.8 percent. The quarterly rate is the highest of the expansion, matched twice before in the first quarter this year and the first quarter last year, while the yearly rate is also an expansion high, matched once in the second-quarter of this year.

Among components, the cost of wages & salaries rose a quarterly 0.9 percent which is also an expansion high and the second such reading in three quarters. This yearly rate is up 1 tenth at 2.9 percent in what is a new expansion high. In contrast, however, benefit costs moderated and sharply, up only 0.4 percent in the quarter vs 0.9 percent in the second quarter and down 3 tenths on the year to 2.6 percent.

The slowing in benefit costs is a plus in today’s report and that helps offset the acceleration in wages. This report probably won’t turn up the heat for accelerated rate hikes from the Federal Reserve which watches this report with special focus.

Consensus Outlook
Increasing pressure is expected for the employment cost index with Econoday’s consensus at a 0.7 percent rise in the third quarter compared to 0.6 percent in the second quarter. The year-on-year rate in the second quarter, at 2.8 percent, was the highest in 10 years in what was a strong signal of wage pressures in the labor market.

https://us.econoday.com/byshoweventfull.asp?fid=485769&cust=us&year=2018&lid=0&prev=/byweek.asp#top

 

GDP
GDP 

Released On 10/26/2018 8:30:00 AM For Q3(a):2018
Prior Consensus Consensus Range Actual
Real GDP – Q/Q change – SAAR 4.2 % 3.3 % 2.6 % to 3.8 % 3.5 %
GDP price index – Q/Q change – SAAR 3.0 % 2.0 % 1.4 % to 3.2 % 1.7 %
Real Consumer Spending – Q/Q change – SAAR 3.8 % 3.3 % 3.1 % to 3.5 % 4.0 %

Highlights
Consumer spending is the driver that it should be, leading a solid third-quarter GDP report that, however, does raise some fundamental questions about the outlook for the economy. GDP came in at a 3.5 percent annualized rate in the quarter which is 2 tenths above Econoday’s consensus. Consumer spending, with strength centered in the key durable-goods subcomponent, easily beat high expectations, at a 4.0 percent rate that outdoes the second quarter’s very strong 3.8 percent showing.

Business investment wasn’t the major star as it has been in prior quarters but still was in the plus column at 0.8 percent growth. Yet the slowing, following growth rates of 8.7 and 11.5 percent in the second and first quarters, may hint at a quick fade for the stimulative effects of this year’s corporate tax cut. Residential investment extended its dismal run, falling at a 4.0 percent rate for the fifth contraction of the last six quarters which underscores housing as a problem sector.

Another problem that may be unfolding for the economy is trade. The deficit in net exports widened by a very steep $99.0 billion in the quarter and, by itself, pulled the quarter’s GDP down by 1.8 percentage points. Whatever tariff effects there are in the quarter, whether on metals or agriculture, they didn’t hold down imports which surged at a 9.1 percent growth rate. Also negative for GDP is exports which posted their first contraction in 2-1/2 years at minus 3.5 percent.

Coming to the rescue and outmatching the trade effect, however, is a constructive $76.3 billion build in inventories which, when measured against the prior quarter, contributed 2.1 percentage points to GDP. Inventories were a major negative in the second quarter, having been drawn down sharply and positioning the third-quarter for what proved to be a major build.

Government purchases round out the components, rising at a 3.3 percent clip and adding 0.6 percentage points to the quarter for one of the strongest showings of the expansion. But stimulus from government purchases is no surprise given the government’s massive $4.1 trillion in annual outlays.

Another impact the government has on the economy is monetary policy where interest rates, given the perceived need at the Federal Reserve to cool demand, are going up to fight the risk of inflation. Yet inflation didn’t show much life at all in the third-quarter as the GDP price index came in at only 1.7 percent. This misses the consensus by 3 tenths and is the most subdued result since the second-quarter last year.

But the real surprise in the report is the strength of consumer spending where the outlook, given the enormous level of demand for labor, looks very positive. Not positive, however, is the weakness in housing and also trade where the unfolding effects of tariffs and counter-tariffs are a major risk to future quarters. Uncertain in the outlook are inventories which may, however, continue to build given the underlying strength of consumer demand. But inventories, whose effects are abstract, added disproportionately to the quarter’s results, without which GDP would have come in no better than 1.4 percent.

Consensus Outlook
The first estimate for third-quarter GDP is expected to come in at a 3.3 percent annualized rate vs 4.2 percent in the second quarter. Consumer spending is expected to also come in at a 3.3 percent rate vs the prior quarter’s very strong 3.8 percent. Inventories also look to be a central positive in the quarter along with business investment. Residential investment, however, looks weak. The GDP price index is seen at 2.0 percent vs 3.0 percent.https://us.econoday.com/byshoweventfull.asp?fid=485684&cust=us&year=2018&lid=0&prev=/byweek.asp#top

 

Retail Sales
Retail Sales 

Released On 10/15/2018 8:30:00 AM For Sep, 2018
Prior Prior Revised Consensus Consensus Range Actual
Retail Sales – M/M change 0.1 % 0.6 % 0.3 % to 0.8 % 0.1 %
Retail Sales less autos – M/M change 0.3 % 0.2 % 0.4 % 0.1 % to 0.7 % -0.1 %
Less Autos & Gas – M/M Change 0.2 % 0.1 % 0.4 % 0.1 % to 0.5 % 0.0 %
Control Group – M/M change 0.1 % 0.0 % 0.3 % 0.2 % to 0.5 % 0.5 %

Highlights
Retail sales at the headline level flopped badly in September in what for third-quarter GDP, however, may be a head fake as control group sales, which are inputs into personal consumption expenditures, rose solidly.

Total retail sales inched only 0.1 percent higher which is below Econoday’s low estimate. Auto sales, perhaps boosted by replacement demand following Hurricane Florence’s strike on the Carolinas, jumped 0.8 percent following a long run of poor results. Contracting sharply, however, were sales at gasoline stations, down 0.8 percent following a strong gain in August, and also restaurants which had been very strong in prior months but plunged 1.8 percent in what may be another hurricane effect.

When excluding restaurants and gasoline stations and also autos and building materials, control group sales actually rose 0.5 percent which is at the high end of expectations. Some of this strength is offset by a 1 tenth downward revision to August to no change but, with July holding at a very strong 0.8 percent gain, still keeps consumer spending alive for the third quarter.

Building materials were neutral in the report with only a 0.1 percent rise. Losers in the month were health & personal care stores, down 0.3 percent, and department stores at minus 0.8 percent. Gainers included nonstore retailers, up 1.1 percent and again reflecting strength for e-commerce, and also furniture stores which also rose 1.1 percent.

This is a mixed report but is probably best assessed by the year-on-year rate for control sales, which is unchanged at a strong 4.9 percent. Special factors and unusual swings aside, the consumer continues to contribute solidly to economic growth.

Consensus Outlook
A bounce-back 0.6 percent increase is the forecast for September retail sales which in August proved unexpectedly soft at only a 0.1 percent gain. Driven by possible replacement demand from Hurricane Florence, unit vehicle sales were very strong in September. Ex-autos may be the reading that best tracks underlying demand and a more moderate gain of 0.4 percent is the call vs August’s 0.3 percent rise . Ex-autos ex-gas is at a consensus 0.4 percent gain in September with the consensus for control group sales at 0.3 percent.

 

https://us.econoday.com/byshoweventfull.asp?fid=485756&cust=us&year=2018&lid=0&prev=/byweek.asp#top

 

CPI
CPI 

Released On 10/11/2018 8:30:00 AM For Sep, 2018
Prior Consensus Consensus Range Actual
CPI – M/M change 0.2 % 0.2 % 0.1 % to 0.3 % 0.1 %
CPI – Y/Y change 2.7 % 2.4 % 2.4 % to 2.7 % 2.3 %
CPI less food & energy- M/M change 0.1 % 0.2 % 0.1 % to 0.3 % 0.1 %
CPI less food & energy – Y/Y change 2.2 % 2.3 % 2.2 % to 2.4 % 2.2 %

Highlights
Don’t expect criticism of Federal Reserve rate hikes to ease any after today’s very subdued consumer price report. The September CPI inched only 0.1 percent higher with the ex-energy ex-food core rate also at 0.1 percent. Year-on-year rates inched 1 tenth lower for both, now at 2.3 percent overall and 2.2 percent for the core. All of these readings are below Econoday’s consensus.

A 0.5 percent monthly decline in energy, reflecting drops for gasoline and electricity, held down the overall rate as did food which was unchanged in the month (throwing in beverages, the result is plus 0.1 percent). Year-on-year, energy is up 4.8 percent which, though far from severe, is the highest of any major component. The yearly rate for food is up only 1.4 percent and is reminder of how low prices are right now in the farm sector.

Transportation held down September’s core, falling 0.3 percent as used vehicles dropped a sharp 3.0 percent in the month with new vehicle prices down 0.1 percent. Housing is the CPI’s largest component and is very soft, at only a 0.1 percent gain. The closely watched owners’ equivalent rent subcomponent managed a 0.2 percent gain, again subdued.

Apparel was the strongest component in September, jumping 0.9 percent after, however, three straight months of declines. This year-on-year rate is the only major component in the outright negative column, at minus 0.6 percent.

Wages may be tilting higher this year but they have yet, to say the least, to spillover into overall prices which remain remarkably flat given the strength of the economy and especially the labor market. Unless inflation does begin to show life, either perhaps in tomorrow’s import and export price report or coming CPI reports, expectations for a Fed rate hike at the December FOMC could begin to fade.

Consensus Outlook
Only modest pressure is what forecasters see for September’s consumer price index, at a consensus increase of 0.2 percent which would match the rise in August which was held down by a contraction in medical costs and apparel. The consensus for the ex-food ex-energy core rate is also 0.2 percent vs August’s marginal 0.1 percent increase. Year-on-year rates for September are seen at 2.4 percent overall, vs 2.7 percent in August, and 2.3 percent for the core vs August’s 2.2 percent.

https://us.econoday.com/byshoweventfull.asp?fid=485636&cust=us&year=2018&lid=0&prev=/byweek.asp#top

 

Payroll Report
ADP Employment Report 

Released On 10/3/2018 8:15:00 AM For Sep, 2018
Prior Prior Revised Consensus Consensus Range Actual
ADP employment 163,000 168,000 179,000 155,000  to 215,000 230,000 

Highlights
ADP estimates that private payrolls in Friday’s employment report will rise a higher-than-expected 230,000. Forecasters pegged ADP’s estimate at 179,000 and see Friday’s private payrolls coming in at 175,000.

Consensus Outlook
Econoday’s consensus for ADP’s private payroll estimate in September is 179,000 which would compare with 163,000 for ADP’s August estimate and against 204,000 in the government’s data for August.

Definition
The national employment report from Automated Data Processing Inc. is computed from ADP records that represent approximately 400,000 U.S. business clients and approximately 23 million U.S. employees working in all private industrial sectors. ADP contracted with Moody’s Analytics to compute a monthly report that would ultimately help to predict monthly nonfarm payrolls from the Bureau of Labor Statistic’s employment situation. The ADP report only covers private (excluding government) payrolls.

https://us.econoday.com/byshoweventfull.asp?fid=485672&cust=us&year=2018&lid=0&prev=/byweek.asp#top