April 2021 Consumer and Producer Price Indices (incl. Forest Products)

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Consumer Price Index

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8% in April (+0.2% expected) after rising 0.6% in March. The index for used cars and trucks rose 10.0% in April. This was the largest one-month increase since the series began in 1953, and it accounted for over a third of the seasonally adjusted all-items increase. The food index increased in April, rising 0.4% as the indexes for food at home and food away from home both increased. The energy index decreased slightly, as a decline in the index for gasoline in April more than offset increases in the indexes for electricity and natural gas.

The index for all items less food and energy rose 0.9% in April, its largest monthly increase since April 1982. Nearly all major component indexes increased in April. Along with the index for used cars and trucks, the indexes for shelter, airline fares, recreation, motor vehicle insurance, and household furnishings and operations were among the indexes with a large impact on the overall increase.  

The all-items index rose 4.2% for the 12 months ending April, the largest 12-month increase since a 4.9% increase for the period ending September 2008. Similarly, the index for all items less food and energy rose 3.0% over the last12 months, a larger increase than the 1.6% rise over the 12 month period ending in March. The energy index rose 25.1% over the last 12-months, and the food index increased 2.4%.

Producer Price Index

The Producer Price Index for final demand (PPI-FD) increased 0.6% in April (+0.3% expected). Final demand prices rose 1.0% in March and 0.5% in February. About two-thirds of the April advance in the final demand index can be traced to a 0.6% increase in prices for final demand services. The index for final demand goods also moved up 0.6%.

The final demand index moved up 6.2% for the 12 months ended in April, the largest advance since 12-month data were first calculated in November 2010.The index for final demand less foods, energy, and trade services rose 0.7% in April following an increase of 0.6% in March. For the 12 months ended in April, prices for final demand less foods, energy, and trade services moved up 4.6%, the largest advance since 12-month data were first calculated in August 2014.

Final Demand

Final demand services: Prices for final demand services rose 0.6% in April, the fourth consecutive advance. Half of the broad-based increase in April is attributable to the index for final demand services less trade, transportation, and warehousing, which moved up 0.5%. Margins for final demand trade services also rose 0.5%, and the index for final demand transportation and warehousing services jumped 2.1%. (Trade indexes measure changes in margins received by wholesalers and retailers.)

Product detail: Within the index for final demand services in April, prices for portfolio management rose 1.5%. The indexes for airline passenger services; food retailing; fuels and lubricants retailing; physician care; and hardware, building materials, and supplies retailing also moved higher. Conversely, margins for machinery and vehicle wholesaling fell 5.6%. The indexes for apparel wholesaling and for securities brokerage, dealing, investment advice, and related services also declined.

Final demand goods: Prices for final demand goods climbed 0.6% in April, after rising 1.7% in March. Leading the April advance, the index for final demand goods less foods and energy increased 1.0%. Prices for final demand foods moved up 2.1%. In contrast, the index for final demand energy fell 2.4%.

Product detail: A major factor in the April increase in prices for final demand goods was the index for steel mill products, which jumped 18.4%. Prices for beef and veal, pork, residential natural gas, plastic resins and materials, and dairy products also moved higher. Conversely, the index for gasoline fell 3.4%. Prices for chicken eggs and for carbon steel scrap also declined.

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The not-seasonally adjusted price indexes we track all rose on both MoM and YoY bases.

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2021 Employment Report

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The Bureau of Labor Statistics’ (BLS) establishment survey showed non-farm employers added a disappointing 266,000 jobs in April (well below consensus expectations of +1 million). “Adding insult to injury,” February and March employment changes were revised down by a combined 78,000 (February: +68,000; March: -146,000). Meanwhile, the unemployment rate (based upon the BLS’s household survey) ticked up fractionally to 6.1% as (re)entrants to the civilian labor force grew (+430,000) faster than the ranks of the employed (+328,000). 

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Observations from the employment reports include:

* Goods-producing industries lost 16,000 jobs; service-providers: +282,000. Notable job gains in leisure and hospitality (+331,000), other services (+44,000), and local government education (+31,100) were partially offset by declines in temporary help services (-111,400), and couriers and messengers (-77,400). Manufacturing contracted by 18,000 jobs. That result is somewhat consistent with the Institute for Supply Management’s (ISM) manufacturing employment sub-index, which expanded more slowly in April. Wood Products employment fell by 7,200 (ISM decreased); Paper and Paper Products: -1,600 (ISM decreased); Construction: Unchanged (ISM increased).

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* The number of employment-age persons not in the labor force fell (330,000) to 100.1 million. As a result, the employment-population ratio (EPR) ticked up to 57.9%; i.e., nearly six in 10 of the employment-age population are presently employed. 

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* Because the civilian labor force expanded by 430,000 in April, the labor force participation rate rose to 61.7%. Although average hourly earnings of all private employees increased by $0.21 (to $30.17), the year-over-year increase slumped to just +0.3%. For all production and nonsupervisory employees (shown above), the tale was much the same: hourly wages rose by $0.20, to $25.45 (+1.2% YoY). Since the average workweek for all employees on private nonfarm payrolls expanded by 0.1 hour (to 35.0 hours), average weekly earnings increased by $10.35, to $1,055.95 (+2.5% YoY). With the consumer price index running at an annual rate of +2.6% in March, those who are employed appear to be keeping up with the official inflation rate.

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* Full-time jobs rose (+358,000) to 126.2 million. Workers employed part time for economic reasons (shown in the graph above) -- e.g., slack work or business conditions, or could find only part-time work -- fell by 583,000, whereas those working part time for non-economic reasons retreated by 45,000; multiple-job holders advanced by 99,000.

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For a “sanity test” of the job numbers, we consult employment withholding taxes published by the U.S. Treasury. Although “noisy” and highly seasonal, the data show the amount withheld in April dropped by $58.6 billion, to $228.0 billion (-20.5% MoM; +24.9% YoY). To reduce some of the monthly volatility and determine broader trends, we average the most recent three months of data and estimate a percentage change from the same months in the previous year. The average of the three months ending April was 12.8% above the year-earlier average.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2021 ISM and Markit Surveys

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The Institute for Supply Management‘s (ISM) monthly sentiment survey showed a decrease in the proportion of U.S. manufacturers reporting expansion in April. The PMI registered 60.7%, a decline of 3.9 percentage points (PP) from the March reading. (50% is the breakpoint between contraction and expansion.) ISM’s manufacturing survey represents under 10% of U.S. employment and about 20% of the overall economy. The input prices sub-index exhibited the only significant increase (+4.0PP); the production sub-index dropped the most (-5.6PP).

Despite the headline retreat, “manufacturing performed well for the 11^th straight month, with demand, consumption and inputs registering strong growth compared to March,” observed Timothy Fiore, Chair of ISM’s Manufacturing Business Survey Committee. “Labor-market difficulties at panelists’ companies and their suppliers persist. End-user lead times (for refilling customers’ inventories) are extending. This is due to very high demand and output restrictions, as supply chains continue to respond to strong demand amid COVID-19 impacts.”

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The services sector -- which accounts for 80% of the economy and 90% of employment -- edged lower from March’s all-time high of service-sector respondents reporting expansion (-1.0PP, to 62.7%). The most noteworthy changes in the sub-indexes included new orders (-4.0PP), slow deliveries (+5.1PP), and order backlogs (+5.5PP).

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Of the industries we track, only Ag & Forestry contracted. Respondents included the following:

Construction. “Consistent with the past year, labor continues to be the biggest issue we are facing. Finding and retaining labor -- skilled and unskilled -- is highly challenging and frustrating. As the challenges continue, we are not accepting all the work that we could if we had the labor.”

Real Estate. “Business levels are quite strong as we head into the spring construction season.”

 

Findings of IHS Markit‘s April survey results were generally consistent with their ISM counterparts.

Manufacturing. Strongest improvement in operating conditions on record amid marked uptick in client demand

Key findings:

* New order growth accelerates to 11-year high
* Greatest deterioration in vendor performance on record leads costs to soar
* Job creation quickens as backlogs of work accumulate markedly

 

Services. Business activity expands at fastest pace on record amid marked uptick in client demand

Key findings:

* Most marked upturns in output and new orders on record
* Employment growth accelerates
* Cost pressures strongest on record

 

Commentary by Chris Williamson, Markit’s chief business economist:

Manufacturing. “U.S. manufacturers reported the biggest boom in at least 14 years during April. Demand surged at a pace not seen for 11 years amid growing recovery hopes and fresh stimulus measures.

“Supply chain delays worsened, however, running at the highest yet recorded by the survey, choking production at many companies. Worst affected were consumer-facing firms, where a lack of inputs has caused production to fall below order book growth to a record extent in over the past two months as household spending leapt higher.

“Suppliers have been able to command higher prices due to the strength of demand for inputs, pushing material costs higher at a rate not seen since 2008.

“Attempts to expand capacity via hiring extra staff gained further momentum, though in some cases staff shortages were an additional constraint on production. However, with confidence in the outlook continuing to run at one of the highest levels seen over the past seven years, buoyed by vaccine roll-outs and stimulus, further investment in production capacity should be seen in coming months, helping alleviate some of the price pressures.”

 

Services. “Thanks to the cocktail of a successful vaccine roll-out, the reopening of the economy, ultra-accommodative monetary policy and injection of fresh fiscal stimulus, businesses are reporting the strongest surge in demand seen for at least a decade.

“The upswing in demand has led to one of the strongest months of job creation yet recorded by the survey as business prepares for better times ahead.

“The biggest threat to the outlook remains new virus variants, which will inevitably mean international travel and associated business activity will stay under pressure for some time to come, but in the meantime the domestic economy is faring very well, especially consumer facing industries.

“Another concern is prices, with a record increase in service sector charges highlighting how inflationary pressures are by no means confined to the manufacturing sector. Indicators of price pressures and capacity constraints will need to be monitored closely to assess whether such price rises are transitory.”

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2021 Monthly Average Crude Oil Price

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The monthly average U.S.-dollar price of West Texas Intermediate (WTI) crude oil nudged $0.62 (-1.0%) lower, to $61.72 per barrel in April. That decrease occurred within the context of a marginally weaker U.S. dollar (broad trade-weighted index basis -- goods and services), the lagged impacts of February’s weather-induced drop of 1.15 million barrels-per-day (BPD) in the amount of petroleum products demanded/supplied (to 17.4 million BPD, and a decline in accumulated oil stocks (April average: 492 million barrels).

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From the 3 May 2021 issue of The Energy Bulletin:

Futures prices rose [in April] with much positive economic data and signs of a fuel consumption revival in key economies offsetting a worsening coronavirus crisis elsewhere. Futures in New York rose last week, extending their monthly gain to 7.5%. The near-certain likelihood of higher fuel consumption in the US, China, and the UK has brightened the overall demand outlook, even as a resurgent pandemic in India, Brazil, and Japan cloud those prospects. OPEC and its allies see world consumption rebounding by 6 million b/d this year, while Goldman Sachs says demand could post a record jump as vaccination rates increase.

Despite high vaccination rates in many parts of the world, people appear to be still wary of public transit, opting for personal vehicles. Called "the great car comeback" by Bloomberg, the trend is visible in locations as diverse as Tel Aviv, Moscow, and Bucharest. Car sales in Europe soared by 63 percent last month to 1.39 million, which was high not just compared to the previous year when sales of everything but handwash and toilet paper were subdued.

However, India's worsening COVID outbreak could disturb the nearly balanced global oil market, which will show a surplus of as much as 1.4 million b/d next month amid a sizeable loss of demand from the world's third-largest oil importer. India has seen fuel demand decline in recent weeks as record-high new coronavirus infections prompt lockdowns and curfews in many states in the country of 1.3 billion. India's combined demand for diesel and gasoline is set to drop by as much as 20% in April compared to March.

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Selected highlights from the 30 April 2021 issue of OilPrice.com’s Oil & Energy Insider include:

Shale CEOs stick with restraint, mostly. Ovintiv CEO Doug Suttles told Bloomberg that the industry is maintaining capital discipline. At the same time, Continental Resources said that it would ramp up activity in the Bakken this year.

U.S. Senate rescinds Trump methane rule. The Senate voted to repeal a Trump-era rule that weakened methane regulations. If signed into law as expected, the move will restore Obama-era regulations.

India's covid crisis could lead to a global oil surplus. India’s worsening COVID outbreak is set to disturb the nearly balanced global oil market, which will show a surplus of oil supply of as much as 1.4 million barrels per day (bpd) next month amid a sizeable loss of demand from the world’s third-largest oil importer, Rystad Energy says.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

March 2021 Manufacturers’ Shipments, Inventories, and New & Unfilled Orders

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According to the U.S. Census Bureau, the value of manufactured-goods shipments in March increased $10.8 billion or 2.1 percent to $513.6 billion. Durable goods shipments increased $7.0 billion or 2.8 percent to $257.6 billion, led by transportation equipment. Meanwhile, nondurable goods shipments increased $3.8 billion or 1.5 percent to $256.0 billion, led by petroleum and coal products. Shipments of wood products rose by 4.5%; paper: +0.7%.

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Inventories increased $5.2 billion or 0.7 percent to $707.7 billion. The inventories-to-shipments ratio was 1.38, down from 1.40 in February. Inventories of durable goods increased $4.3 billion or 1.0 percent to $431.9 billion, led by transportation equipment. Nondurable goods inventories increased $0.9 billion or 0.3 percent to $275.8 billion, led by petroleum and coal products. Inventories of wood products rose by 1.0%; paper: +0.1%.

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New orders increased $5.8 billion or 1.1 percent to $512.9 billion. Excluding transportation, new orders rose by $7.1 billion or 1.7% (+12.1% YoY). Durable goods orders increased $2.0 billion or 0.8 percent to $256.9 billion, led by fabricated metal products. New orders for non-defense capital goods excluding aircraft -- a proxy for business investment spending -- increased by $0.9 billion or 1.2% (+13.7% YoY). New orders for nondurable goods increased $3.8 billion or 1.5 percent to $256.0 billion.

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Unfilled durable-goods orders increased $4.5 billion or 0.4 percent to $1,087.8 billion, led by fabricated metal products. The unfilled orders-to-shipments ratio was 6.21, down from 6.30 in February. Real unfilled orders, which had been a good litmus test for sector growth, show an even more-negative picture; in real terms, unfilled orders in June 2014 were back to 97% of their December 2008 peak. Real unfilled orders then jumped to 102% of the prior peak in July 2014, thanks to the largest-ever batch of aircraft orders. Since then, however, real unfilled orders have been trending lower.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

April 2021 Currency Exchange Rates

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In April the monthly average value of the U.S. dollar (USD) depreciated versus Canada’s “loonie” (-0.6%) and euro (-0.5%), but appreciated against the Japanese yen (+0.3%). On the broad trade-weighted index basis (goods and services), the USD strengthened by 1.2% against a basket of 26 currencies. 

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The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.

March 2021 Construction Spending

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Construction spending during March 2021 was estimated at a seasonally adjusted annual rate (SAAR) of $1,513.1 billion, 0.2% (±0.8%)* above the revised February estimate of $1,509.9 billion (originally $1,516.9 billion); consensus expectations were for +2.0%. The March figure is 5.3% (±1.0%) above the March 2020 SAAR of $1,436.7 billion; the not-seasonally adjusted YoY change (shown in the table below) was +5.9%.

During the first three months of this year, construction spending amounted to $328.3 billion, 4.5% (±1.0%) above the $314.1 billion for the same period in 2020.

* 90% confidence interval includes zero. The U.S. Census Bureau does not have sufficient statistical evidence to conclude that the actual change is different from zero.

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Private Construction

Spending on private construction was at a SAAR of $1,169.2 billion, 0.7% (±0.7%)* above the revised February estimate of $1,160.9 billion (originally $1,165.7 billion):
* Residential. $725.2 billion, +1.7% (±1.3%);
* Home improvement. $241.9 billion, +2.0% (+18.5% YoY);
* Nonresidential. $444.0 billion, -0.9% (±0.7%).

Public Construction

Public construction spending was $343.9 billion, 1.5% (±1.3%) below the revised February estimate of $349.0 billion (originally $351.2 billion):
* Educational. $85.3 billion, -2.0% (±2.5%)*;
* Highway. $98.8 billion, -2.2% (±4.4%)*.

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Click here for a discussion of March’s new residential permits, starts and completions. Click here for a discussion of new and existing home sales, inventories and prices.

The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.