There were lots of important reports on the U.S. economy released this morning. First, data from the Bureau of Labor Statistics (BLS) showed that headline household inflationary pressures firmed slightly last month, with the consumer price index (CPI) for all urban consumers rising by 0.4 percent in October. That was the largest sequential gain since April, and the seventh month-over-month increase in the past eight months. However, “core” CPI, which excludes the more volatile food and energy components, rose by just 0.1 percent in October, below the consensus forecast and soft enough to pull the pace of annual growth down to 2.1 percent. That is still above the Federal Reserve’s “target” but CPI is not the preferred measure of U.S. inflation used by policymakers. Elsewhere in the report, apparel prices lifted ahead of holiday season discounting, and shelter costs (rent) remained a big driver of consumer inflation in America.
Next, a report from the Census Bureau showed that privately-owned housing starts in October grew at a seasonally adjusted annual rate (SAAR) of 1.323 million units. That was a sharp 25.5 percent increase from September’s upward-revised print and the largest such spike since 1982. The strong gain was due mainly to an astounding 74.5 percent surge in multi-family units (rentals) but single-family housing starts still rose by a healthy 10.7 percent last month. Regionally, housing starts increased across the country in October but the largest gains occurred in the Northeast (+44.8%) and the Midwest (+44.1%). Total building permits, a popular gauge of future construction activity, also rose in October but only by 0.3 percent. That could be related to the recent uptick in mortgage rates but continued strength in the labor market (wage growth) and accelerating Millennial household formation should remain supportive of U.S. home construction going forward.
Elsewhere, data from the Department of Labor showed that the number of Americans making first-time claims for unemployment benefits totaled 235K in the week ending November 12th. That was a decrease of 19K from the prior week’s figure, the largest such decline since February, and the lowest headline reading since 1973. Further, this was the 89th weekly print below 300K in a row, one of the longest such streaks on record and a pattern believed to be consistent with an overall healthy labor market. Since initial jobless claims have fallen markedly during the first two weeks of November, many economists now expect to see a rebound in nonfarm payrolls growth this month. More importantly, the fact that unemployment claims continue to make new multi-decade lows is encouraging because each of the past six recessions was preceded by a spike in initial claims, suggesting that this current expansion may still have some room to run.
Finally, a report from the Federal Reserve Bank of Philadelphia showed that manufacturing activity in the Mid-Atlantic region of the country cooled in November, as the general business conditions index slid from +9.7 to +7.6. That was slightly worse than economists anticipated and the second monthly decline in a row but still the fifth positive (expansionary) reading in the past six months. Measures of new orders, shipments, unfilled orders, inventories, employment, and hours worked all improved in November but prices paid (input cost inflation) jumped. Surveyed managers’ outlooks for business conditions six months from now deteriorated across the board and capital expenditure plans fell slightly.
Sources: Econoday, Bloomberg, Twitter, ZH, U.S. Census Bureau, FRBP, FRBSLPost author: Charles Couch