Monday Economic Report: Consumer Inflation at a 40-Year High in December

AICC, through its membership in the Council of Manufacturing Associations, is pleased to present the "Monday Economic Report" from the NATIONAL ASSOCIATION OF MANUFACTURERS (NAM).

By Chad Moutray, Ph.D., CBE – January 17, 2022

NAM Economic Toplines:

• Consumer prices rose 0.5% in December. The consumer price index has risen 7.1% over the past 12 months (seasonally adjusted), the fastest year-over-year pace since June 1982. At the same time, core inflation (which excludes food and energy) increased 5.5% year-over-year in December, the most since February 1991.

• The cost of used cars and trucks jumped 3.5% in December, with prices for new vehicles up 1.0%. The automotive sector continues to be challenged by supply chain disruptions and the chip shortage. New vehicles and used cars and trucks have seen price growth of 11.8% and 37.3% year-over-year.

• Producer prices for final demand goods and services rose 0.2% in December, the slowest monthly gain since November 2020. Over the past 12 months, producer prices for final demand goods and services jumped 9.8% (seasonally adjusted), just shy of November’s record 9.9%. Core producer prices increased 6.9% year-over-year in December, the same pace as in November and remaining an all-time high.

• The Index of Consumer Sentiment declined to 68.8 in January, according to preliminary data from the University of Michigan and Thomson Reuters. This was not far from November’s reading (67.4), which was a 10-year low. Consumer sentiment has declined largely on worries about inflation and the continued spread of COVID-19.

• Retail sales fell 1.9% in December, the first decline since July and well below the consensus estimate, which was for spending to have edged down just 0.1%. Indeed, the data declined for the most part across the board. This could be the result of a multitude of factors, including the purchase of holiday gifts earlier than normal (as encouraged because of supply chain issues), the spread of the omicron variant and consumer worries about inflation.

• Despite the disappointing figures in the latest data, retail spending has soared 16.9% over the past 12 months, or 16.5% with gasoline stations and motor vehicles and parts sales excluded.

• Manufacturing production declined 0.3% in December, pulling back from November’s 0.6% increase, which was the best level since December 2018. Manufacturers have been challenged by supply chain bottlenecks, workforce shortages, rising production costs and, more recently, the spread of the omicron variant.

• Manufacturing capacity utilization edged down from 77.2% in November, also the strongest since December 2018, to 77.0% in December. Overall, manufacturing production has risen 3.5% year-over-year, with 1.5% growth relative to February 2020’s pre-pandemic pace.

• Total industrial production edged down 0.1% in December, easing marginally after rebounds of 1.2% and 0.7% in October and November, respectively. The level of industrial production in November was the highest since September 2019, and the current reading is just shy of that threshold.

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