Tom Moeller

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The Mortgage Bankers Association's Loan Applications Index rose 2.3% (-37.3% y/y) in the week ended January 14 following a 1.4% increase in the previous week. Purchase applications strengthened 7.9% (-12.2% y/y) after a 2.2% rise in the previous week. Applications for loans to refinance fell 3.1% (-49.2% y/y) after easing 0.1% in the previous week.

The share of applications for refinancing fell to 60.3% in the week ended January 14 from 64.1% in the previous week. The adjustable-rate mortgage (ARM) share of activity increased to 3.8% from 3.1% in the prior week.

The effective interest rate on a 30-year mortgage rose to 3.77% in the week ended January 14 from 3.65% in the previous week. It was the highest level since March 2020. The effective rate on a 15-year mortgage increased to 3.05% from 2.82% while the rate on a Jumbo 30-year mortgage increased to 3.67% from 3.53%. The interest rate on a 5-year adjustable-rate mortgage increased to 3.13%, after surging to 3.10% in the previous week.

Applications for fixed-rate loans rose 1.5% (-38.4% y/y) in the second week of 2022, the same as in the previous week. Applications for adjustable-rate mortgages soared 24.9% (16.7% y/y) after falling in both of the previous two weeks.

The average size of a mortgage loan increased 2.6% (5.9% y/y) to $346,800 in the week ended January 14 following a 1.0% rise in the previous week. The average size of a loan for purchase jumped 4.2% (9.0% y/y) to $418,500 in the latest week. The average size of a refinanced loan fell 0.9% last week (-2.0% y/y) to $299,500.

This survey covers over 75% of all U.S. retail residential mortgage applications and has been conducted weekly since 1990. Respondents include mortgage bankers, commercial banks, and thrifts. The base period and value for all indexes is March 16, 1990=100. The figures for weekly mortgage applications and interest rates are available in Haver's **SURVEYW** database.

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- Purchase applications rise again while refinancing applications fall for third week.
- 30-year mortgage interest rate continues to increase.

U.S. Mortgage Applications Increase Again

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Housing starts rose 1.4% (2.5% y/y) during December to 1.702 million units (SAAR) from 1.678 million in November, revised from 1.679 million. They reached the highest level since March of 2021. During all of last year, 1.598 million units were started, up 14.4% from 1.397 million in 2020 and the most since 2006. A December level of 1.660 million starts had been expected in the Action Economics Forecast Survey.

The rise in starts overall in December reflected a 10.6% gain (53.2% y/y) in multi-family starts to 530,000, the highest level since February 2020. During all of 2021, multi-family starts rose 20.0% to 472,000. Starts of single-family units declined 2.3% in December (-10.9% y/y) to 1.172 million, but for the whole year, single-family starts rose 12.3% to 1.127 million.

Building permits increased 9.1% (6.5% y/y) to 1.873 million from 1.717 million in November. It was the highest level of permits since January 2021. During all of 2021, permits rose 15.8% to 1.713 million. Permits to build single-family homes gained 2.0% in December (-8.5% y/y) to 1.128 million. Permits to build multi-family homes rose 21.9% (41.9% y/y) in December to 745,000.

By region, housing starts in the Northeast rose 20.2% (0.7% y/y) in December to 137,000. Starts in the Midwest increased 36.5% (17.1% y/y) to 288,000. Working lower were housing starts in the South by 1.9% (+9.3% y/y) to 915,000. Starts in the West fell 13.8% (-18.1% y/y) to 362,000.

The housing starts and permits figures can be found in Haver's **USECON** database. The expectations figure is contained in the **AS1REPNA** database.

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- Multi-family starts increase while single-family building eases.
- Regional changes are mixed.
- Building permits strengthen.

U.S. Housing Starts Are Unexpectedly Strong in December

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The Empire State Manufacturing Index of General Business Conditions fell sharply to -0.7 in January from 31.9 in December as New York became the epicenter of the Omicron outbreak. A decline to 25.5 had been expected in the Action Economics Forecast Survey. A greatly lessened 22.1% of respondents reported improved business conditions in January versus 45.2% in December, while 22.8% reported that conditions had worsened, increased from 13.2% in December. The latest survey was conducted between January 3 and January 10.

Haver Analytics constructs an ISM-adjusted Empire State diffusion index using methodology similar to the ISM series. The latest reading fell to 54.4 in January from 60.8 in December. It was well below the July high of 63.4. A reading above 50 signifies growth. In contrast to the ISM index, the headline Empire Index reflects the answer to a single question, not calculated from its components.

Declines in the Empire State component series were widespread in January. The new orders measure fell from 27.1 to -5.0, the first negative reading since August 2020. Shipments fell to 1.0 from 27.1 as 23.1% reported a decline in shipments versus 17.3% in December and 24.1% of respondents reported higher shipments versus 44.4% in the prior month. The delivery time index fell to 21.6 after declining sharply to 23.1 in December. A lessened 29.3% of respondents reported increased delivery times versus 34.7% in December, while 7.8% reported shorter deliver times versus 11.6% in December. The unfilled orders series fell to 12.1 from 19.0 in December. Working higher was the inventory index to 10.3, its highest level in three months.

Employment indicators weakened sharply this month. The number of employees index fell to 16.1 from 21.4 in December. Twenty percent of respondents reported increases in employment versus 26.7% in December, while 3.9% reported a decline in employment after 5.3% did so in December. The average workweek series eased to 10.3 this month after falling sharply in December to 12.1.

Inflation pressures weakened in January. The prices paid index declined to 76.7, its lowest point since September of last year. The record high was 83.5 in May 2021. A lower 77.6% of respondents paid higher prices, down from 81.8% in December while a lessened 0.9% paid less. The prices received measure fell sharply to 37.1 from 44.6 in December.

The index of expected business conditions in six months eased to 35.1 in January from 36.4 in December, compared to 72.0 in October. Expectations for shipments, delivery times and employment fell while expectations for prices received rose. Expectations for both capital spending and technology spending improved slightly.

The Empire State data, reported by the Federal Reserve Bank of New York, reflect business conditions in the manufacturing sector in New York, northern New Jersey and southern Connecticut. The headline measure is constructed from the answer to a single question on business conditions. The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from the percent reporting gains. The data are available in Haver's **SURVEYS** database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's **AS1REPNA** database.

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- Negative reading is worst since May 2020.
- Component declines include new orders, shipments & employment.
- Prices paid & received indexes weaken.

U.S. Empire State Index Weakens in January

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The Composite Housing Market Index from the National Association of Home Builders-Wells Fargo fell 1.2% in January to 83 (unchanged y/y) and reversed its December gain to 84. The decline followed four consecutive monthly increases. Stability had been expected in the INFORMA Global Markets survey.

The Home Builders indicated that "NAHB analysis indicates the aggregate cost of residential construction materials has increased almost 19% since December 2021," due to supply chain issues.

The index of expected sales in the next six months fell 2.4% and was unchanged y/y at 83. The index measuring traffic of prospective buyers fell 2.8% (+1.5% y/y) to 69 and reversed December's rise. The index of present sales conditions held steady both m/m and y/y at 90 in January.

This month's regional movement was mixed. The index for the Northeast fell 11.3% (+4.4% y/y) to 71 following a 15.9% December gain. In the South, the home builder index declined 2.2% (+6.1% y/y) to 87 and reversed December's rise. In the Midwest, the index fell 2.6% (-7.5% y/y) to 74 following a 1.3% December improvement. Rising 1.1% (-4.3% y/y) was the index for the West as it reversed December's decline. These regional series begin in December 2004.

The NAHB has compiled the Housing Market Index since 1985. It reflects survey questions which ask builders to rate sales and sales expectations as "good," "fair" or "poor" and traffic as "very high," "average" or "very low." The figures are diffusion indexes with values over 50 indicating a predominance of "good"/"very high" readings. In constructing the composite index, the weights assigned to the individual index components are: 0.5920 for single-family detached sales, present time, 0.1358 for single-family detached sales, next six months, and 0.2722 for traffic of prospective buyers. These data are included in Haver's **SURVEYS** database. The Informa Global Markets survey is in Haver's **MMSAMER** database.

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- Decline reverses December improvement.
- Future sales & traffic fall but current sales hold steady.
- Weakness extends throughout the country except the West.

U.S. Home Builder Index Slips in January

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The Industrial Materials Price Index from the Foundation for International Business and Economic Research (FIBER) rose 2.8% during the four weeks ended January 14. The gain followed a 52-week increase of 18.3% in 2021.

**Crude oil & benzene** costs rose 6.3% in the last four weeks and 28.7% in 2021. Last year's increase followed a 9.7% decline in 2020. The cost of crude oil rose to $80.66 per barrel last week, up 52.4% y/y. The price of the petro-chemical benzene gained 8.5% during the last four weeks after rising by one-half in 2021. Excluding crude oil, industrial commodity prices rose 2.2% in the last four weeks and 16.3% last year.

Prices in the **metals** group jumped 4.3% in the last four weeks and 31.8% last year. Aluminum costs improved 12.1% in the recent four weeks after increasing 41.3% in 2021. Zinc prices increased 7.0% in the last four weeks after rising 28.5% last year. Copper scrap prices rose 3.3% in four weeks after rising by roughly one-quarter in 2021. Offsetting these recent increases was a 0.2% easing in the cost of steel scrap, but it rose 10.3% in all of 2021.

The **miscellaneous** price index rose 1.2% during the last four weeks but framing lumber prices surged 14.1% on top of a 27.4% rise last year. Natural rubber prices eased 1.4% in four weeks following an 11.7% decline in 2021.

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Prices in the **textile** group rose 1.2% during the last four weeks after increasing 9.5% in 2021. Cotton prices gained 8.2% in four weeks after rising by one-half in 2021. The cost of burlap, used for sacks, bags and gardening eased 0.7% in the last four weeks after rising 25.7% during all of last year.

Industrial commodity prices should remain strong. The National Association for Business Economics calls for a 4.0% rise in industrial output in 2022.

The Foundation for International Business and Economic Research (FIBER) develops economic measurement techniques as applied to business cycles and inflation in the U.S. and other market economies. The commodity price data can be found in Haver's **DAILY, WEEKLY, USECON** and **CMDTY** databases.

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- Crude oil prices rebound.
- Metals prices surge.
- Lumber costs skyrocket.

FIBER: Industrial Commodity Prices Strengthen

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Total retail sales including food service and drinking establishments declined 1.9% (+16.9% y/y) during December following a 0.2% November increase, revised from 0.3%. No change in December sales had been expected in the Action Economics Forecast Survey. During all of last year, retail sales rose 19.4%. October sales rose an unrevised 1.8%. Sales excluding motor vehicles and parts fell 2.3% in December (+18.8% y/y) following a 0.1% November uptick, revised from 0.3%. A 0.2% increase had been expected. During all of last year, nonauto sales increased 18.4%. October's 1.8% increase was unrevised.

Sales in the retail control group, which excludes autos, gas stations, building materials and food services, fell 3.1% last month (+12.9% y/y) following a 0.5% November decline, revised from -0.1%.

Motor vehicle sales fell 0.4% (+10.2% y/y) in December after a 0.2% November increase. Unit motor vehicle sales increased declined 3.1% last month (-22.9% y/y) after weakening 0.8% in November.

Retail purchases via the internet plummeted 8.7% (+10.7% y/y) last month following a 1.5% decline. Furniture & home furnishing store sales weakened 5.5% in December (+11.1% y/y) after rising 0.5% in November. Electronics & appliance store sales declined 2.9% (+14.6% y/y) after falling 9.7% in the prior month. Sporting goods, hobby and book store sales weakened 4.3% (+18.1% y/y) after a 2.1% increase. Apparel store sales declined 3.1% last month (+29.5% y/y) after three months of firm gain. General merchandise store sales fell 1.5% last month (+14.6% y/y) and added to the prior month's 1.2% fall. Within that category, department store sales weakened 7.0% (+22.5% y/y) after falling 5.5% in November.

Gasoline service station sales eased 0.7% (+41.0% y/y) following a 2.2% November increase. December's sales decline reflected a 1.8% drop in gasoline prices (seasonally adjusted by Haver) which followed a 3.3% increase. Building materials & garden equipment sales rose 0.9% last month (12.5% y/y) after two months of strong increase.

In the nondiscretionary sales categories, food & beverage store sales eased 0.5% during December (+8.4% y/y) and reversed the November increase. Health & personal care store sales rose 0.5% (8.4% y/y) after rising 0.9%.

Sales at restaurants & drinking establishments fell 0.8% last month (+41.3% y/y) after a 0.6% November increase. 

The retail sales data can be found in Haver's **USECON** database. The Action Economics forecast is in the **AS1REPNA** database.

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- Emergence of Omicron dampens demand & disrupts supply.
- Vehicle sales & gasoline sales ease.
- Online sales plummet.

U.S. Retail Sales Unexpectedly Tumble at Yearend

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Total business inventories increased 1.3% (8.7% y/y) during November as they did in October, revised from 1.2%. A 1.0% gain had been expected in the Informa Global Markets Survey. Business sales rose 0.7% (17.6% y/y) in November following a 2.2% October gain. The inventory-to-sales ratio edged higher to 1.25 in November but remained near its ten-year low.

Retail inventories surged 2.0% (0.6% y/y) after a 0.3% October rise. Retail inventories excluding motor vehicles rose 1.3% (10.7% y/y) in November after rising 0.7% in October. Motor vehicle inventories surged 4.2% (-21.3% y/y) following three months of significant decline. Apparel inventories strengthened 1.7% (5.2% y/y) after two months of similar increase. General merchandise store inventories rose 0.8% (11.1% y/y) following a 1.1% increase. Home furnishings & appliance inventories declined 0.4% (+17.5% y/y), off for the second straight month. Wholesale sector inventories surged 1.4% (15.9% y/y) following a 2.5% October jump. Factory inventories increased 0.7% (9.0% y/y) in November after a 0.9% October rise.

Retail sales edged 0.1% higher (16.2% y/y) in November following a 2.0% October surge. Sales excluding motor vehicles also improved just 0.1% (16.2% y/y). Wholesale sales surged 1.3% (23.2% y/y), the third month of strong increase. Factory shipments increased 0.7% (13.0% y/y) following a 2.0% gain in October.

With the inventory rise outpacing sales, the overall inventory-to-sales ratio rose slightly to 1.25 in November. The retail I/S ratio rose to 1.09 and retraced its October decline. The wholesale I/S ratio was unchanged at 1.22 and the manufacturing I/S ratio remained steady as well at 1.46, its lowest since June 2019.

The manufacturing and trade data are in Haver's **USECON** database.

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- Broad-based inventory growth led by retail.
- Sales increase moderates across sectors.
- Inventory-to-sales ratio edges higher.

U.S. Business Inventories Stay Strong & Steady in November

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The Producer Price Index for Final Demand increased 9.7% y/y with the index rising 0.2% in December following a 1.0% November gain. A 0.4% December rise had been expected by the Action Economics Forecast Survey. The PPI excluding food and energy rose 8.3% during all of last year and 0.5% in December after increasing 0.9% in November. Expectations had been for a 0.5% gain. The PPI less food, energy and trade services rose 6.9% y/y including a 0.4% December gain and a 0.8% November rise. These series date back to 2010.

Lower energy prices held back the increase in the December PPI dropping 3.3% as the Omicron variant emerged. Energy prices rose, however, by roughly one-third y/y. Gasoline prices fell 6.1% (+65.8% y/y) and reversed November's increase. Home heating oil prices weakened 2.7% (+52.2% y/y) and also reversed the prior month's increase. Natural gas prices fell 1.4% last month (+25.3% y/y) but the cost of electric power rose 1.2% (6.3% y/y).

Food prices eased 0.6% (+12.9% y/y) following a 1.3% November increase. Beef & veal prices declined 8.6% (+28.9% y/y) but the cost of dairy products increased 2.7% (7.0% y/y). Vegetable prices rose 20.4% y/y while egg prices strengthened 81.9% y/y.

Final demand for goods prices less foods & energy rose 0.5% (9.4% y/y) after a 0.8% November rise. Finished consumer goods prices less good & energy rose 0.6% in December (6.4% y/y), the same as in November. Core nondurable consumer goods prices improved 0.6% (5.8% y/y) following a 0.7% rise. Durable consumer goods prices rose 0.6% last month (7.4% y/y) after moving 0.5% higher in November. Prices for private capital equipment strengthened 0.6% (5.9% y/y), the same as in November.

Services prices rose 0.5% in December (7.9% y/y) following a 0.9% rise. Trade services prices rose 0.8% (13.3% y/y). Services prices less trade, transportation & warehousing rose 0.2% (4.5% y/y) following a 0.6% increase in November.

Construction product prices rose 0.3% (12.4% y/y) for the second consecutive month. Construction costs for private capital investment rose 0.4% (13.4% y/y) after improving 0,3% in November.

Intermediate goods prices jumped fell 0.3% (+24.4% y/y) due to a 4.1% decline (+34.1% y/y) in processed fuel costs.

The PPI data are published by the Bureau of Labor Statistics and can be found in Haver's **USECON** database. Further detail is contained in **PPI** and **PPIR**. The expectations figures are available in the **AS1REPNA** database.

The Fed's latest **Beige Book** covering regional economic conditions may be found [here](https://www.federalreserve.gov/monetarypolicy/beigebook202201.htm).

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- Core goods prices accelerate sharply y/y.
- Service prices jump.
- Energy & food prices soar y/y.

U.S. Producer Price Index Posts Record Increase in 2021

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Price inflation spiked last year in response to strength in demand & liquidity. The Consumer Price Index rose 0.5% during December, after increasing an unrevised 0.8% in November. The 7.0% y/y gain was the largest since February 1982. The m/m increase matched expectations in the Action Economics Forecast Survey. The CPI excluding food & energy increased 0.6% last month following a 0.5% November rise. The 5.5% y/y core price increase was the strongest since October 1982. A 0.5% December rise had been expected.

During the last three months, the CPI overall has risen at a 9.1% annual rate. The core CPI rose at a strengthened 6.9% rate during the last three months.

Goods prices excluding food & energy surged 1.2% in December (10.7% y/y) after rising 0.9% in November. Used car & truck prices surged 3.5% (37.3% y/y) after strong gains in the prior two months. The cost of new vehicles rose 1.0% (11.8% y/y), nearly the same as in each of the prior seven months. Apparel prices strengthened 1.7% (5.8% y/y) after a 1.3% November rise. Household furnishings prices surged 1.3% (7.4% y/y) after gaining 0.7%, while prices of appliances strengthened 1.1% (6.0% y/y) after easing slightly in both of the prior two months. Recreation product prices eased 0.4% (+3.3% y/y) after gaining 0.3%, as the cost of televisions fell for the fourth straight month (+4.4% y/y). Medical care product prices held steady (0.4% y/y) after a 0.1% gain. Education & communication product costs declined 0.4% last month (+0.2% y/y), off for the third straight month.

Services prices rose 0.3% last month (3.7% y/y) after two 0.4% increases. Shelter prices increased 0.4% (4.1% y/y) following two 0.5% increases. Owners' equivalent rent of primary residences improved 0.4% (3.8% y/y) for the fourth straight month. Rents of primary residences gained 0.4% (3.3% y/y) for the third consecutive month while the cost of lodging away from home jumped 1.2% (23.9% y/y), strong for the third straight month. Recreation services prices eased 0.1% in December (+3.3% y/y) following a 0.5% decline. Transportation services prices eased 0.3% in December (+4.2% y/y) after gaining 0.7% in November, but public transportation costs surged 2.0% (2.4% y/y) after strengthening 3.0%. Prices of medical care services rose 0.3% (2.5% y/y), the same as in November. Education & communication services costs edged 0.1% higher last month (1.7% y/y) after holding steady in November.

Energy prices eased 0.4% (+29.3% y/y) following six months of strong increase. Gasoline prices slipped 0.5% (+49.6% y/y), also following six months of strength. Fuel oil & other fuels prices fell 3.4% (38.0% y/y) after rising 1.5% in November. Natural gas prices fell 1.2% (+24.1% y/y) after a 0.6% gain, while the cost of electricity rose 0.3% (6.3% y/y) for the second consecutive month.

Food price inflation was strong again, rising 0.5% (6.3% y/y) last month. Fruit & vegetable prices surged 0.9% (5.0% y/y) in December, about as they did in November. Nonalcoholic beverage prices rose 0.8% (5.2% y/y) after strength in five of the prior six months Dairy prices rose 0.7% (1.6% y/y) following two months of 0.2% increase. Cereal & bakery product costs improved 0.4% (4.8% y/y) after strong gains in four of the prior five months. Offsetting these gains, meat, poultry & fish prices eased 0.4% (+12.6% y/y) following a 1.2% increase, and egg prices held steady (+11.1% y/y) after falling 2.7%.

The Consumer Price Index data can be found in Haver's **USECON** database with additional detail in **CPIDATA**. The Action Economics survey figure is in the **AS1REPNA** database.

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- Annual gain in core prices also is highest since 1982.
- Core goods prices surge and services prices strengthen y/y.
- Energy prices jump and food prices firm.

U.S. Consumer Price Index 2021 Gain is Strongest in Forty Years

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**Retail gasoline prices** increased to $3.30 per gallon (42.2% y/y) in the week ended January 10 after holding steady in the previous week. It was the highest price since the second week of December. Haver Analytics adjusts the gasoline price series for normal seasonal variation. The seasonally adjusted price eased to $3.40 per gallon from $3.41 per gallon in the previous week.

The price of **West Texas Intermediate crude oil** improved 2.3% (55.0% y/y) to $77.84 per barrel in the first week of January from $76.08 in the prior week. It was the highest price since late-November after falling to $66.90 in the first week of December. Yesterday, the price was $78.23 per barrel. The average price of **Brent crude oil** rose 2.5% (51.9% y/y) to $80.72 per barrel from $78.73 per barrel in the prior week. The price was $80.62 per barrel yesterday.

The price of **natural gas** rose 6.7% to $3.80/mmbtu (38.7% y/y) in the week ended January 7 and reversed most of its w/w decline to $3.56/mmbtu in the previous week. The price remained down, nevertheless, from its recent high of $5.87/mmbtu reached in the second week of October. Yesterday, the price increased to $4.16/mmbtu.

In the four weeks ended December 31, **gasoline demand** rose an improved 15.2% y/y. Demand for **all petroleum products** grew a greatly improved 14.4% y/y. **Crude oil input to refineries** rose 10.9% y/y. **Gasoline inventories** fell 3.4% y/y, while **crude oil inventories** declined 10.0% y/y.

The **supply of gasoline** inventories in the week ending December 31 rose to 25.6 days from 24.0 days in the previous week but remained well below the recent high of 32.9 days in the third week of February 2021. The supply of crude oil fell to 26.5 days, the lowest level since late-August.

These data are reported by the Energy Information Administration of the U.S. Department of Energy. The price data can be found in Haver's **WEEKLY** and **DAILY** databases. Greater detail on prices, as well as the demand, production and inventory data are in **USENERGY**.

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- Gasoline prices are highest in four weeks.
- Crude oil prices rise again.
- Natural gas prices rebound.

U.S. Energy Prices Firm

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The Small Business Optimism Index of 98.9 in December remained little changed from 98.4 in November as small business owners remained concerned about inflation in prices and labor costs. Seven of the index's ten components rose modestly while three eased. The NFIB Uncertainty Index rose to the highest level in three months.

The net balance of respondents expecting the economy to improve over the next six months improved slightly to -35% in December, the highest level in three months. The figure remained well below its June 2020 peak of 39%. Expected higher real sales rose minimally. Plans to expand the business edged up to 11% from 10% but remained below the June 2021 high of 15%. An increased 29% of firms expected to make capital outlays compared to a recent low of 20% in March of last year.

Employment readings improved slightly. The net balance of firms planning to raise employment edged up to 28% in December from 25% in November, placing it at the highest level since August. Finding qualified candidates to fill job openings became a little harder. The index measuring few or no qualified applicants rose to 57% from 56%, though it remained below the September high of 62%. The percentage of firms raising worker compensation surged to a record 48% and the percentage planning to raise compensation was steady at the record 32%.

Price inflation pressures continued to intensify with a net 57% percent of respondents raising average selling prices, down slightly from November's record 59%. It was increased from 16% in December 2020. The percentage planning to raise prices fell to 49% from November's record 54%, but compared to 22% in December 2020.

Twenty-five percent of respondents cited the quality of labor as their most important problem, down from the record 29% in November, while a record 13% cited labor costs. Inflation surged to 22% of respondents reporting it as the single most important problem, up from two percent in December 2020. Government requirements where cited by a steady 10% of respondents as the single most important problem, down from a May 2013 high of 23%.

Roughly 24 million small businesses exist in the U.S. and they create 80% of all new jobs. The typical NFIB member employs 10 people and reports gross sales of about $500,000 a year. The NFIB figures can be found in Haver's **SURVEYS** database.

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- Optimism reading, however, remains below June level.
- Component increases are modest.
- Pricing power slips.

U.S. Small Business Optimism Index Edges Up in December

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Wholesale inventories rose 1.4% (15.9% y/y) during November compared to a 1.2% gain in the advance report issued on December 29. October's inventory increase was revised to 2.5% from 2.3%. The Informa Global Markets Survey expected a 1.2% November gain.

Durable goods inventories increased 2.1% in November (17.0% y/y) after rising 2.5% during October. Furniture & home furnishings led the gain with a 4.5% rise (31.1% y/y). Motor vehicle & parts inventories rose a steady 2.7% (2.4% y/y). Metals & minerals inventories increased 2.5% (41.7% y/y). Electrical equipment inventories gained 1.8% (22.9%) while machinery inventories rose 1.2% (5.2% y/y). Professional & commercial equipment inventories increased 0.9% (16.6% y/y). In the nondurable sector, inventories edged 0.3% higher (14.4% y/y) after a 2.5% October increase. A 5.4% decline (+33.8% y/y) in inventories of petroleum & petroleum products held back the November increase. Apparel inventories gained 3.9% (12.1% y/y) and grocery inventories increased 2.6% (16.1% y/y). Paper & paper product inventories rose 1.5% (11.9% y/y) while chemicals inventories edged 0.1% higher (19.4%).

Wholesale sales rose 1.3% (23.3% y/y) during November after increasing 2.5% in October, revised from 2.2%. A 1.2% rise was anticipated in the Action Economics Forecast Survey.

Sales of nondurable goods rose 2.0% in November (32.4% y/y) following a 3.6% October rise. Sales of petroleum products rose 4.8% (115.9% y/y) with higher prices. Chemical purchases rose 3.3% (34.1% y/y) and apparel sales rose 2.0% (20.7% y/y). Grocery sales rose 1.4% (19.5% y/y) but sales of paper product sales declined 1.1% (+17.9% y/y). Durable goods sales improved 0.6% in November (14.1% y/y). Lumber sales strengthened 3.0% (24.3% y/y). Electrical equipment sales increased 2.1% (2.8% y/y) and sales of metals gained 1.5% (77.6% y/y). Machinery sales rose 1.6% (19.6% y/y) but purchases of motor vehicles gained just 0.4% (1.4%). Hardware product sales increased 0.9% (14.1% y/y) while furniture & home furnishings sales held steady (9.1% y/y). 

The inventory-to-sales ratio held steady in November at 1.22 where it's been for three straight months. The durable goods I/S ratio surged to 1.58, up from a May low of 1.48. The nondurable I/S ratio eased to 0.92, the lowest point since November 2014.

The wholesale trade figures are available in Haver's **USECON** database. The expectations figure for inventories is contained in the **MMSAMER** database. Expectations for sales are in the **AS1REPNA** database.

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- Durable goods lead inventory rise.
- Total sales firm for a third consecutive month.
- I/S ratio holds steady.

U.S. Wholesale Inventories & Sales Rise in November

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