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A Flurry Of Economic Data

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Unexpectedly, and for basically the first time in calendar 2018, we see economic data that is weaker than expected. Both weekly Initial Jobless Claims and the December Producer Price Index (PPI) both underdelivered from expectations ahead of the opening bell today, and one day ahead of the beginning of Q4 earnings season.

Monthly PPI numbers had been headed north over the past several months, along with Consumer Price Index (CPI) tallies — both indicating economic growth in the U.S., as economists and market participants had been expecting over the past couple years. But this morning, borne of weaker food prices last month, the PPI headline reached only -0.1%, lower than the +0.2% expected. This amounts to half a full percentage point beneath November’s +0.4% read.

Ex-food & energy was also -0.1%, again lower than the +0.2% expected and the +0.3% from the previous month. Final demand year over year hit +2.6% — not too shabby, but lower than the 3.0% expected and the 3.1% from November. Food prices themselves fell -0.7% last month, offset somewhat by higher oil prices, but not enough to push PPI to the positive. Analysts had been expecting a downturn in food prices for December, but this result outpaced even these expectations.

Last week’s Initial Jobless Claims also swung out of the “normal” comfort zone, posting a total of 261K new claims. Following an unrevised 250K claims the previous week, we now see the largest weekly jobless claims reads since the hurricane-affected headlines late last summer. Aside from these short-term anomalies, we had previously seen jobless claims in a range between 225K-250K over the past 100 weeks or longer.

Continuing claims, on the other hand, dropped to a lower level than we’d seen for a while — 1.867 million continuing claims dips beneath the previous week’s 1.902 million, and stays well below the psychologically pleasing 2 million longer-term jobless claims. We won’t worry too much at this point about jobless claims skewing employment levels based on one week’s totals; in general, we see an historically robust labor market in the U.S., and only successive disappointing reads in these sorts of metrics would begin to change our opinion about this.

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