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NAM: Monday Economic Report

  1. Last week brought some very disappointing economic releases, and one cannot help but wonder if something is amiss. Perhaps the partial government shutdown hampered data collection. That thinking is likely the reason why markets mostly dismissed this news, and why economists—including me—anticipate rebounds in the data moving forward that are more consistent with our expectations.

  2. For instance, manufacturing production fell 0.9 percent in January, pulled sharply lower by reduced motor vehicle and parts production and broad-based weaknesses in the durable goods sector overall. Still, manufacturing production has risen 2.9 percent over the past 12 months, with durable and nondurable goods output up 3.9 percent and 2.4 percent year-over-year, respectively. In contrast, the Empire State Manufacturing Survey indicated slightly better growth in February, buoyed by higher sales and a strong outlook for the next six months.

  3. Likewise, retail sales decreased by 1.2 percent in December, ending the year on a bit of a sour note. It was the largest monthly decline in retail sales since September 2009, suggesting that Americans were quite cautious in their purchases. Over the past 12 months, retail sales were up a very modest 2.3 percent, the lowest since August 2016. Yet, consumer spending had been a bright spot for much of 2018, and the data should bounce back in 2019.

  4. Indeed, the University of Michigan and Thomson Reuters said preliminary figures indicate that consumer sentiment recovered somewhat in February after dropping in January to its lowest levels since September 2016. Americans reacted positively to the end of the partial government shutdown and the Federal Reserve’s anticipated pause in rate hikes. More importantly, current confidence figures are consistent with personal spending growth of 2.7 percent in 2019.

  5. There was mixed news on employment last week. Encouragingly, nonfarm payroll job openings reached a new all-time high, with 7,335,000 postings for the month. Also, for the 11th straight month, there were more job openings in the U.S. economy than the number of people looking for work.

  6. With that said, job postings in the manufacturing sector pulled back from highly elevated levels, down sharply from 495,000 in November to 428,000 in December. Even with that finding, job openings have averaged near 500,000 over the past six months, highlighting why difficulties in finding talent remain a top concern for business leaders.

  7. Consumer and producer prices reflect reduced energy costs in January. Overall, core pricing inflationary pressures have stabilized in recent months. This takes pressure off the Federal Reserve to increase rates, at least for now.

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