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PRODUCER PRICE INDEXES - OCTOBER 2018

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The Producer Price Index for final demand rose 0.6 percent in October, seasonally adjusted, the U.S. Bureau of Labor Statistics reported today. Final demand prices advanced 0.2 percent in September and declined 0.1 percent in August. (See table A.) On an unadjusted basis, the final demand index increased 2.9 percent for the 12 months ended in October.

In October, over 60 percent of the rise in final demand prices can be traced to a 0.7-percent advance in the index for final demand services. Prices for final demand goods moved up 0.6 percent.

The index for final demand less foods, energy, and trade services rose 0.2 percent in October after climbing 0.4 percent in September. For the 12 months ended in October, prices for final demand less foods, energy, and trade services advanced 2.8 percent.


Final Demand

Final demand services: The index for final demand services increased 0.7 percent in October, the largest advance since climbing 0.8 percent in January 2016. Nearly three-fourths of the broad-based October rise can be traced to margins for final demand trade services, which moved up 1.6 percent. (Trade indexes measure changes in margins received by wholesalers and retailers.) Prices for final demand services less trade, transportation, and warehousing and for final demand transportation and warehousing services increased 0.2 percent and 0.6 percent, respectively.

Product detail: About one-fifth of the October advance in prices for final demand services is attributable to a 1.2-percent rise in margins for machinery, equipment, parts, and supplies wholesaling. The indexes for food and alcohol retailing; health, beauty, and optical goods retailing; inpatient care; apparel, jewelry, footwear, and accessories retailing; and traveler accommodation services also moved higher. In contrast, prices for loan services (partial) fell 0.5 percent. The indexes for hospital outpatient care and furniture retailing also declined.

Final demand goods: The index for final demand goods climbed 0.6 percent in October, the largest rise since advancing 0.9 percent in May. Nearly three-fourths of the October increase can be traced to prices for final demand energy, which moved up 2.7 percent. The index for final demand foods rose 1.0 percent. Prices for final demand goods less foods and energy were unchanged. 

Product detail: Over 60 percent of the October increase in prices for final demand goods is attributable to the gasoline index, which jumped 7.6 percent. Prices for diesel fuel, fresh and dry vegetables, beef and veal, cigarettes, and jet fuel also moved higher. Conversely, the motor vehicles index fell 0.7 percent. (In accordance with usual practice, most new-model-year passenger car and light motor trucks were introduced into the PPI in October. See Report on Quality Changes for 2019 Model Vehicles at http://www.bls.gov/web/ppi/ppimotveh.htm.) Prices for liquefied petroleum gas and for fresh fruits and melons also decreased. 

U.S. Market Weekly Summary – Week Ending 11.09.2018

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The Standard & Poor’s 500 index rose 2.1% this week as the health-care and real-estate sectors led a broad climb that only left out communication services.

The market benchmark ended the week at 2,781.01, up from last week’s close of 2,723.06.

The gain came in a week that included midterm elections in which Democrats won control of the House while Republicans retained control of the Senate. Stock investors often see such potential for legislative gridlock as a good thing, slowing down the chances for big changes to be made that could negatively impact the economy and market, and a 2.1% Wednesday climb in the S&P 500 following Tuesday’s Election Day showed many investors continue to share that sentiment.

The health-care sector had the largest percentage increase this week, up 4.0%, followed by a 3.6% advance in real estate. All other sectors also rose on the week, with the exception of communication services, down 0.2%.

The health-care sector’s rise came as the results of the midterm elections were seen as likely to slow down Republicans’ efforts to roll back the protections of the Affordable Care Act.

Among the health-care sector’s gainers this week, shares of UnitedHealth Group (UNH) rose 6.0% and Aetna (AET) climbed 5.6%. Aetna’s increase also came as CVS Health (CVS) reported Q3 earnings that topped expectations and revenue that was in line, and said its acquisition of Aetna should close by the end of November. CVS shares jumped 9.2% this week.

In the real-estate sector, gainers this week included Simon Property Group (SPG), up 4.6% on the week, and American Tower (AMT), up 5.3%.

Meanwhile, the drop in recently formed communication-services sector, which includes communications-related stocks that previously were in the technology, consumer-discretionary and now-defunct telecommunications sectors, came amid disappointing quarterly results from companies including Activision Blizzard (ATVI) and Take-Two Interactive (TTWO).

Activision Blizzard’s shares tumbled 20% this week as the company’s Q3 revenue and earnings per share missed consensus estimates while guidance for Q4 and the full year also missed Street views. Shares of Take-Two, meanwhile, dropped 12% this week as the company’s fiscal Q2 results came in below Street views although the company lifted its guidance for fiscal 2019.

BUSINESS EMPLOYMENT DYNAMICS – FIRST QUARTER 2018

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From December 2017 to March 2018, gross job gains from opening and expanding private-sector establishments were 7.4 million, a decrease of 420,000 jobs from the previous quarter, the U.S. Bureau of Labor Statistics reported today. Over this period, gross job losses from closing and contracting private-sector establishments were 6.7 million, a decrease of 181,000 jobs from the previous quarter. The difference between the number of gross job gains and the number of gross job losses yielded a net employment gain of 740,000 jobs in the private sector during the first quarter of 2018.

The change in the number of jobs over time is the net result of increases and decreases in employment that occur at all private businesses in the economy. Business Employment Dynamics (BED) statistics track these changes in employment at private-sector establishments from the third month of one quarter to the third month of the next. The difference between the number of gross job gains and the number of gross job losses is the net change in employment. (See Technical Note.) The BED data series include gross job gains and gross job losses by industry subsector, for the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands, as well as gross job gains and gross job losses at the firm level by employer size class.


Gross Job Gains

In the first quarter of 2018, gross job gains represented 6.0 percent of private-sector employment. Gross job gains are the sum of increases in employment due to expansions at existing establishments and the addition of new jobs at opening establishments. Gross job gains at expanding establishments totaled 6.1 million in the first quarter of 2018, a decrease of 312,000 compared to the previous quarter. Opening establishments accounted for 1.3 million of the jobs gained in the first quarter of 2018, a decrease of 108,000 jobs from the previous quarter.


Gross Job Losses

In the first quarter of 2018, gross job losses represented 5.4 percent of private-sector employment. Gross job losses are the result of contractions in employment at existing establishments and the loss of jobs at closing establishments. Contracting establishments lost 5.5 million jobs in the first quarter of 2018, a decrease of 21,000 jobs from the prior quarter. In the first quarter of 2018, closing establishments lost 1.1 million jobs, a decrease of 160,000 jobs from the previous quarter.


Establishment Births and Deaths

In the first quarter of 2018, the number of establishment births (a subset of the openings data) increased by 4,000, to a total of 250,000 establishments. These new establishments accounted for 817,000 jobs, a decrease of 36,000 jobs from the previous quarter. Data for establishment deaths (a subset of the closings data) are available through the second quarter of 2017, when 760,000 jobs were lost at 225,000 establishments, an increase of 101,000 jobs from the first quarter of 2017.


Industries

Gross job gains exceeded gross job losses in 11 of 13 industries in the first quarter of 2018. The service-providing industries experienced a net job increase of 524,000 jobs in the first quarter of 2018. Within service-providing industries, leisure and hospitality had the largest over-the-quarter net job increase, with a gain of 148,000 jobs. The net job increase in leisure and hospitality was the result of 1.3 million gross job gains and 1.2 million gross job losses. The transportation and warehousing industry had the only decrease among service-providing industries, with a loss of 70,000 jobs. The goods-producing industries experienced a net job increase of 216,000 jobs in the first quarter of 2018. Of the goods-producing industries, construction added 132,000, manufacturing added 66,000 jobs, and natural resources and mining experienced a net increase of 18,000 jobs.

News Leaks About Amazon HQ Pick, and an Exec Is Not Happy

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The Washington Post thinks it might have figured out where Amazon will locate its second headquarters: Crystal City, Virginia. The locale is in the DC metro area, and the newspaper reports that Amazon and local officials are in “advanced discussions” about the company setting up shop there with an anticipated 50,000 jobs. After the report surfaced, CNBC confirmed that the two sides had a “very productive” and long conference call on Friday. Among other things, Crystal City was reportedly coming up with ways to ease Amazon’s concern about DC traffic. But CNBC adds that Austin, Texas, appears to be a finalist as well.

The Post adds plenty of caveats to its story about Crystal City, noting that Amazon might very well be holding similar discussions with other cities on a short list. In addition to Austin, cities previously mentioned include Chicago, New York City, and Newark, New Jersey. But the apparent scoop clearly caught the attention of Amazon, as evidenced by a not-so diplomatic tweet issued by an exec. “Memo to the genius leaking info about Crystal City, VA as #HQ2 selection,“ wrote Mike Grella, Amazon’s director of economic development. “You’re not doing Crystal City, VA any favors. And stop treating the NDA you signed like a used napkin.“

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