U.S. CPI Increase Slowed Last Month; Core Pricing Picked Up

The consumer price index increased 0.2% (1.7% y/y) during November following an unrevised 0.4% October rise. The gain matched expectations in the Action Economics Forecast Survey. Prices excluding food & energy gained 0.2% (2.1% y/y) following two months of 0.1% rise. A 0.2% increase had been expected.

Stronger energy prices continued to lead overall pricing with a 1.2% rise (1.1% y/y). It was the third straight month of strong increase. Gasoline prices increased 2.7% ( 1.0% y/y). Fuel oil prices declined 1.2% (-2.0% y/y) while natural gas prices eased 0.4% (+6.2% y/y). Electricity costs held steady (0.2% y/y).

Food prices remained unchanged (-0.4% y/y) for the third straight month. Dairy product prices declined 0.6% (-1.7% y/y). Fruit & vegetable prices fell 0.2% (-1.5% y/y) along with meat prices (-5.1% y/y). Cereal & bakery product costs improved 0.1% (-0.7% y/y) as did egg prices (-33.3% y/y). Nonalchoholic beverage prices increased 0.3% (-0.7% y/y). 

Non-energy services prices increased 0.3% (3.0% y/y), the quickest gain in three months. Transportation services prices increased 0.4% (2.5% y/y) as motor vehicle insurance costs strengthened 1.0% (6.7% y/y). Shelter prices rose 0.3% (3.6% y/y) while owners' equivalent rent of primary residences increased 0.3% (3.5% y/y). Rental prices of primary residences also rose 0.3% (3.9% y/y), but prices for housing away from home fell 1.1% (-2.2% y/y). Recreation services prices improved 0.3% (3.2% y/y), and tuition costs rose 0.2% (2.4% y/y). Medical care services prices gained 0.2% (3.9% y/y) following two months of remaining unchanged. 

Prices for goods other than food & energy declined 0.3% (-0.7% y/y) after a 0.1 rise. Appliance costs fell 0.9% (-4.0% y/y) and household furnishings prices fell 0.4% (-2.0 y/y). Apparel prices were off 0.5% (+0.3% y/y) as were medical care goods prices (+4.3 y/y). Recreation goods prices fell 0.3% (-3.8% y/y) while new vehicle prices eased 0.1% (+0.2 y/y). 

The consumer price data is available in Haver's USECON database while detailed figures can be found in CPIDATA. The expectations figure is from Action Economics and is found in the AS1REPNA database.

The U.S. current account deficit eased to $119.9 billion in the second quarter from $131.8 billion Q1'16, revised from -$124.7 billion. The Q2 deficit figure compared to $121.9 billion expected in the Action Economics Forecast Survey. The deficit has been trending sideways since early last year. As a percent of GDP, the deficit last quarter of 2.6% was less than half the size in late 2006.

The modest narrowing in the deficit last quarter was due to a 0.5% rise in services exports (-1.5% y/y) which outpaced the 0.4% gain in imports (+2.1% y/y). The surplus on services trade has nevertheless fallen to $61.5 billion from its peak of $67.0 billion in Q1'15. The balance on merchandise trade has been trending sideways, last quarter to $186.7 billion. Exports rose 1.7% (-6.2% y/y) and imports gained 1.2% (-4.8% y/y). The surplus on primary income fell sharply to $42.9 billion from its Q4'13 peak of $57.2 billion. The deficit on secondary income has been trending lower since early 2014.

Balance of Payments data are in Haver's USINT database, with summaries available in USECON. The expectations figure is in the AS1REPNA database.

The Philadelphia Federal Reserve reported that its General Factory Sector Business Conditions Index remained positive in November. At 7.6, it was fourth consecutive reading above zero, and followed an unrevised 9.7 in October. It was improved versus December's low of -10.2. The reading compared to expectations for 8.0 in the Action Economics Forecast Survey.

The ISM-Adjusted General Business Conditions Index, constructed by Haver Analytics surged to 55.3 this month, the highest level in two years. The ISM-Adjusted headline index is the average of five diffusion indexes: new orders, shipments, employment, supplier deliveries and inventories with equal weights (20% each). This figure is comparable to the ISM Composite Index. During the last ten years, there has been a 71% correlation between the adjusted Philadelphia Fed Index and real GDP growth.

There was broad-based improvement amongst the component series. New orders improved to the highest level in two years, while shipments similarly rose. Unfilled orders and delivery times improved, but inventories jumped to the highest level of the economic expansion.

The employment component, though still slightly negative, increased to the highest point since July. During the last ten years, there has been an 81% correlation between the jobs index and the m/m change in manufacturing sector payrolls.

Prices paid and prices received both strengthened to the highest levels since 2014. The index of expected prices paid eased slightly.

The future business activity index declined m/m to the lowest level since March due to broad-based declines amongst the component series.

The survey panel consists of 150 manufacturing companies in Federal Reserve District III (consisting of southeastern PA, southern NJ and Delaware). The diffusion indexes represent the percentage of respondents indicating an increase minus the percentage indicating a decrease in activity. The ISM adjusted figure, calculated by Haver Analytics, is the average of five diffusion indexes: new orders, production, employment, supplier deliveries and inventories with equal weights (20% each). Each diffusion index is the sum of the percent responding "higher" and one-half of the percent responding "same."

The figures from the Philadelphia Federal Reserve can be found in Haver's SURVEYS database. The Action Economics figure is available in AS1REPNA.

The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo surged to 70 during December (16.7% y/y) following unrevised stability at 63 in November. It was the highest level since July 2005. The NAHB figures are seasonally adjusted. During the last ten years, there has been an 72% correlation between the y/y change in the home builders index and the y/y change in housing starts.

The index of present conditions in the housing market firmed 10.1% to 76 (16.9% y/y). The index for the next six months increased 13.0% to 78 (18.2% y/y).

Home builders reported that the traffic index jumped 12.8% to 53 (15.2% y/y), also the highest level since July 2005.

Amongst the regional indexes, the index for the Northeast surged 25.5% (20.4% y/y). The index for West posted a 13.2% increase (14.7% y/y). In the Midwest, the index rose 11.9% (22.2% y/y). For the South, the index rose 7.7% (14.8% y/y).

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions asking builders to rate market conditions as "good," "fair," "poor" or "very high" to "very low." The figure is thus a diffusion index with numerical results over 50 indicating a predominance of "good" readings. The weights assigned to the individual index components are .5920 for single-family detached sales, present time, .1358 for single-family detached sales, next six months and .2722 for traffic of prospective buyers. The results are included in Haver's SURVEYS database. The expectations figure is available in Haver's MMSAMER database.

Initial claims for unemployment insurance fell to 254,000 (-7.6% y/y) in the week ended December 10 following an unrevised decline to 258,000 in the prior week. Expectations had been for 255,000 claims in the Action Economics Forecast Survey. The four week moving average of claims rose to 257,750. During the last ten years, there has been a 75% correlation between the level of claims and the monthly change in nonfarm payrolls.

Continuing claims for unemployment insurance increased to 2.018 million (-10.1% y/y) from 2.007 million. The four week moving average of claimants also rose to 2.038 million.

The insured rate of unemployment held near the record low at 1.5%.

Insured rates of unemployment across states continue to vary. For the week ended November 26, the lowest rates were in South Dakota (0.53%), Nebraska (0.58%), North Carolina (0.59%), Florida (0.60%), Indiana (0.76%) and Georgia (0.83%). The highest rates were found in Illinois (1.81%), Massachusetts (1.90%), Pennsylvania (2.09%), Connecticut (2.18%), New Jersey (2.51%) and Alaska (4.50%). The state data are not seasonally adjusted.

Data on weekly unemployment insurance are contained in Haver's WEEKLY database and they are summarized monthly in USECON. Data for individual states are in REGIONW. The expectations figure is from the Action Economics survey, carried in the AS1REPNA database.