July retail sales, CPI, industrial production, new housing starts, state unemployment rates, et al

the first economic release that we’ll cover this week is the advance estimate of retail sales for july from the census bureau, which showed the first monthly increase in seasonally adjusted sales in 4 months, with the headline reading up 0.8% in july over june…as reported, total retail and food services sales for July, not for adjusted for price changes, were $403.9 billion, an increase of 0.8 percent (±0.5%) from june and 4.1 percent (±0.7%) over last year… in addition, the May to June change was revised from minus 0.5% (±0.5%) to a decrease of 0.7% (±0.2%)….since autos & parts typically amount to around 20% of the total, census also quotes sales ex-auto, which were also up 0.8 for july…the largest gains were in sporting, hobby, book & music stores, which registered a 1.6% MoM gain, and non-store retailers (catalog & online) which had sales increase 1.5% for the month; they also registered among the largest year over year gains, with nonstore retailers sales up 11.8% (±3.1%) and sporting goods, hobby, book and music stores up 10.6 percent (±4.3%) from last year, while home furnishings sales also increased 9.3% YoY…all sectors posted a positive sales for the month, with food & beverage stores, up 0.3% and gas stations. up 0.5%, showing the weakest sales gains for the month…given the volatile nature of gasoline prices, retail sales ex-gas are also often quoted; as of July, total sales ex-gas were up 5.0% over last year…there were some who questioned this month’s report; zero hedge, for instance, noted that retail sales in July actually declined by 0.9% from $405.8 to $402 billion, but was only shown as an increase due to the first upward july seasonal adjustment in the 10 year census data (see their graph, above, which shows with pink highlight the $1.9 billion seasonal adjustment that was added this year)…this drew a response from analysts at morgan stanley, who defended census methodology, noting that adjustments were unusual this year in that the 4th fell on a wednesday (hence no holiday weekend) and that there were only 4 shopping weekends this past July…to test this theory, we can try adding june & july unadjusted sales together, encompassing 9 weekends, which shows a total of $807,808 billion sales for those months this year, and compare them to last years unadjusted sales (p 2, pdf) of $388,749B and $392,888B, a total of $781,637B, which means actual year over sales for the two months increased only 3.35%, less than the seasonally adjusted annual increase of 4.1% which census gives, but still within the ±0.7% margin of error…another complaint came from Mish, who noticed a discrepancy between reported retail sales and reported state sales tax collections, which were down 40% from last july in california; this has been an unresolved ongoing inconsistency in the two reported data sets we first noticed in 2009

as noted, retail sales are reported unadjusted for inflation; however, there hasnt been much inflation to adjust for, in that the BLS reported that the consumer price index was unchanged in July for the second consecutive month and 3rd time in the past four months on a seasonally adjusted basis…(we should note, though, that CPI shouldnt be used to adjust retail sales, as we have cited such done in the past, as the CPI includes non-retail expenses such as rent, medical & education)…of the CPI sub-indexes, the 0.3% monthly decline in the energy index offset the 0.1% increase the core index, which is all items less food & energy; overall energy prices declined despite a 0.3% month over month increase in gasoline prices due to a 1.3% monthly decline in the price of electricity, as more utilities passed on savings resulting from conversions to cheaper gas for generation…the energy index is now down 5.0% year over year while the composite CPI has risen 1.4%….annual CPI core inflation, ex food & energy was up 2.22% in July, which the BLS rounds to 2.2%, however it is the slightly less volatile PCE inflation which was reported two weeks ago as up 1.80% that the Fed now cites…housing, the largest component of the CPI at 41% of the total, was up 2.1% for the year as rents increased 2.8%, and medical care services with a 4.4% price increase were again the component up the most year over year...the BLS also released the Producer Price Index data for July, which showed that prices for finished goods rose at a seasonally adjusted rate of 0.3% for the month…at earlier stages of processing. earlier stages of processing, prices received by manufacturers of intermediate goods were down 0.9% in July, and the crude goods index advanced 1.8%the finished goods core index (again, ex food & energy) was up 0.4% for the month, the largest price increase since january’s 0.6%, driven by a 1.6% increase in the price of light trucks..

another major economic release this week was the July Industrial production and Capacity Utilization from the Fed, and again, the numbers were better than they’ve been recently…industrial production increased at a seasonally adjusted rate of 0.6% in July after having risen 0.1% in both May & June, after revisions from the previously reported -0.1% and 0.4% respectively…from a year ago, industrial production is now up 4.4%, but it’s still 2.0% below prerecession levels…this report is divided into three industry groups: manufacturing, which makes up about 3/4ths of total production, rose 0.5% for a second consecutive month, as the production index for durable goods increased 0.8%, led by production increases of more than 1% in primary metals, computers and electronics, automotive products & aerospace, with only wood products, nonmetallic products, and machinery posting declinesdefense aerospace was up 2.8% for the month, reflecting the end of a strike at an aircraft manufacturing plantthe mining industry, which includes oil & gas, increased 1.2%, while utilities, which had retreated 3.3% in june, rebounded & were up 1.3%…year over year, manufacturing production was up 5.0%, mining was up 6.0%, and utility output printed as down 2.4%, (with electric usage showing down 1.9%), which must be an error considering the record heat in july…overall capacity utilization increased 0.4% to 79.3%, which was still below the long run average; the factory operating rate rose 0.2% to 77.8%, which was 1.2% greater than a year agocapacity utilization for durable goods manufacturing was at 78.6%, up 5.1% from a year ago; capacity utilization for non durable goods was at 78.2%, which was unchangedcapacity utilization for “mining” increased 0.9% to 90.4%, 2.1% above a year ago, while the operating rate for utilities rose 0.8% in July to 75.7%, which was 2.3% above a year ago and inconsistent with the reported production decline…

ISM PMIwhile the industrial production report from the Fed gives us hard data as to what has actually been produced in the month just past, the regional Fed banks also conduct real time surveys of manufacturing business conditions in their districts, where manufacturers are queried as to the direction of change in various measures of activity at their plants: employment, working hours, new and unfilled orders, shipments, inventories, prices, et al…we have the results of the first two regional Fed surveys for August, and the outlook isnt good; the Empire State Manufacturing Survey from the NY Fed (pdf), which includes part of new jersey & connecticut in its area, saw its overall index go negative for the first time since october 2011, as it fell 13 points to read -5.9, with numbers below zero indicating contraction…its new orders index was negative for the 2nd month, at a -5.5, unfilled orders declined 3 points to -13.6 and the shipments index fell 6 points but remained positive at 4.1…the NY Fed employment index, however, remained solidly positive, down only 2 to 16.5, suggesting there was still room to add employeesthe Philly Fed’s Business Outlook Survey for August (pdf) also came in negative, the 4th consecutive month that the 3rd Fed district, which includes PA, delaware & the rest of New Jersey, showed contraction…the overall reading for August was –7.1, not as severe as the readings of -12.9 in July and -16.6 in June but still definitively contracting nonetheless; indexes for new orders and shipments remained negative; new orders improved one point to –5.5 while the shipments index fell 3 points to 11.3Philly area firms also reported slight decreases in employment and shorter work hours, dropping their employment index to -8.6, the lowest since September 2009…Bill McBride at calculated risk produces a graph, included here, showing the correlation between these first two regional Fed surveys, shown as dashed green including august, the composite of all the regional Fed surveys, in blue and only up to July, the final monthly PMI as released by ISM, shown in red, and the recessionary periods marked by vertical blue bars…as we noted two weeks ago, our national PMI has shown contraction for the past two months for the first time since 2009, and clearly these regional Fed surveys have led the way…
New Home Sales and Housing Starts by Intent

the Census bureau also released a couple reports on housing this week…the monthly report for July on Housing Permits, Starts and Completions is one we’re familiar with; it’s usually reported in the media as just new housing starts…the headline, that housing starts fell 1.1% to 746,000 in July, was a disappointment to housing analysts, but with the margin of error at ±9.6%, we cant confidently says whether starts decreased or not for the month…for the year, however, census reports this July’s starts 21.5% (±14.2%) above the July 2011 rate of 614,000, so although the upturn may not be smooth, home construction is slowly increasing from a very depressed level…for july, single family starts were at a rate of 502,000, 6.5%  (±8.7%) below June’s revised 537,000, and the start rate for units in buildings with five units or more was 229,000building permits authorized in July were at a seasonally adjusted annual rate of 812,000, which was 6.8% (±1.5%) above the revised June rate of 760,000 and 29.5% (±1.6%) above the estimate of 627,000 last July; 513,000 of permits issued in July were for single family homes, 4.5% (±0.8%) above the revised June figure of 491,000…home completions in July were at a seasonally adjusted annual rate of 668,000, 7.1% (±15.9%) above the revised June estimate of 624,000 and 5.4% (±15.8%) above the July 2011 total of 634,000….in addition to this report, Census also released a quarterly report on New Housing Units Started by Intent and Design for the 2nd Quarter (pdf); breaking out homes built for sale, by owner & by contractor, & the covers the same categories for multiple unit housing starts…the tables in this report are rather difficult, but bill mcbride covers it in plain englishhe has charted the 38 years of data in this report, and we’ve included it here; in red are single family homes which were built for sale – this would be the category in this report comparable to the monthly new home sales report we’ll see next week…in blue are housing units built for rent, in yellow are homes built or contracted to be built by the intended occupier, and violet shows the currently very depressed rate of condos being built for sale…

we normally dont cover the Regional and State Employment and Unemployment Summary from the BLS, since it tends to echo the national unemployment report, which is released roughly two weeks earlier each month, but the July regional report produced some depressing numbers that are worth taking an extra look at…the bleak headline was that unemployment rates increased in 44 of our states this past month, strangely co-incidental with the recent termination of the additional weeks of emergency federal unemployment rations, which had been wound down because every state’s unemployment rate had fallen enough to be triggered off the program; as a result, ongoing jobless claims are falling rapidly, as the number of us receiving any type of jobless ration has fallen by 4.3 million over the last two yearsonly Idaho, Rhode Island, and the District of Columbia reported lower unemployment rates in Friday’s report, while two states had half point increases in their jobless rate; Alabama’s rate jumped to 8.3% from 7.8% while Alaska’s rate climbed from 7.2% to 7.7%the highest jobless rates were recorded by Nevada, with 12.0% unemployed, Rhode Island with 10.8% jobless, and California, with 10.7% of those able & looking for work unable to find even part time jobs….other states with unemployment rates above 9.0% were New Jersey at 9.8%, North and South Carolina, both at 9.6%, New York, at 9.1%, and Georgia at 9.3%…and even North Dakota, the state with the lowest jobless rate, saw an increase from 2.9% to 3.0%…for a complete picture of all 50 states, we’ll include bill mcbride’s updated graph of unemployment rate by state, which shows the current jobless rate in red, and the recession maximum for each state in blue…note that New York and New Jersey are now both at their all time high jobless rates..State Unemployment

(the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

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