June’s and July’s retail sales, July’s consumer prices and industrial production, & the 2nd quarter report on household debt

  according to the Advance Retail and Food Services Sales Report for July (pdf) from the Census Bureau, the seasonally adjusted advance estimate of retail and food services sales for the month was $424.5 billion, an increase of 0.2 percent (±0.5%)* over June’s revised sales of $432.6 billion and 5.4% (±0.7%) above last July’s $402.7 billion …the asterisk tells us that the Census Bureau does not have sufficient statistical evidence to conclude that the actual change in July sales is different than zero, since this widely followed report is just an advance estimate of sales collected by phone, fax or mail from a sample of approximately 4,900 firms and will be revised when more complete data is available next month, and the month thereafter…more specifically, their opening statement means they’re 90% confident that seasonally adjusted retail sales for July were between $431.3 billion and $435.6 billion, or between 0.3% less and 0.7% greater than June’s…the unadjusted estimate of July’s retails sales was at $427,547 million, up from $421,636 million in June but down from the spring sales high of $444,370 million in May…year to date unadjusted sales, including this preliminary data, is estimated to be $2,896,307 million, which is 4.2% higher than the year to date for the first 7 months of last year…neither the seasonally adjusted figures nor this data is adjusted for price changes..

  the real story of this July retail sales report was not July’s weaker than expected 0.2% month over month growth, but the revision of June’s sales from a 0.4% increase over May to a 0.6% increase, which was treated as a footnote elsewhere; the fact is that the change to June’s earlier estimated sales figures was greater than the entire increase in sales reported for July…as originally reported, the advance estimate of June retail sales was at $422,794 million; that has now been revised to a preliminary $423,649 million, an $855 million correction….July’s sales gain of just $832 million to $424,481 million was calculated from that new, revised June baseline…so on net, this report is indicating a larger jump in retail sales than was indicated by last month’s headline 0.4% increase with a less than 0.1% downward revision for May

  moreover, the revisions to June data brought significant revisions to sales in most retail trade sectors vis a vis what we reported last month; on the left below, we have the image of the table showing the sales percentage for the major retail sectors from this month’s report; lined up approximately next to that on the right we have the original June percentage table from last months report (archived pdf here); just to clarify the headings, the first estimate of each census report is labeled “advance”, the second estimates, a month later, are the “preliminary” report, and the third estimate is called the “revised” report…here below, we see the “advance” estimate of June retail sales on the right showing a 0.4% increase in the top line total retail sales from May (as published last month), and in the middle columns we have the “preliminary” correction to that change from May at 0.6% and to the change from a year earlier at 5.9%…but that’s not all; note the change for each of the major retail business types; sales at car dealers, for instance, were originally reported up 2.1% for June; now they’re indicated as up 3.3%; on the other hand, for instance, clothing stores had been showing a 0.7% gain over May, but now they show flat sales at 0.0%….

July retail table plus

June advance retail for July

since the revision of the June report actually accounted for more of the increase in July retail sales over what was last reported than the July change, we’ll take a brief look at some of the major changes that resulted in that swing…first, as we’ve already alluded to, June’s seasonally adjusted sales at vehicle & parts dealers were originally reported to have risen 1.8% from a seasonally adjusted $79,028 million in May to $80,461 million in June; that’s now been revised to an increase of 2.9% from $79,300 million to $81,584 million in June, so combined with the May revision, the increase in June auto sales was rewritten 1.4% higher than it was reported last month…but even with that big jump in revised auto sales, retail sales ex auto still managed to eke out a 0.1% increase, from May’s $341,720 million to $342,065 million in June, versus the nearly flat sales increase without autos & parts reported last month, because of additional upward revisions for other retail sales…

two major retail businesses which had been thought to have been off substantially in June weren’t as bad as originally reported…at building and garden supply stores, where sales were first reported to have fallen 2.2% to $25,772 million in June from $26,346 million in May, sales actually only fell 1.6%, to $25,909 million from a revised May sales total of $26,330 million; then sales at bars and restaurants, where June’s sales were first reported at $45,251 million, 1.2% below May’s level of $45,821 million, Junes sales have now been revised to a much smaller decline of 0.5%, from a seasonally adjusted $45,771 million in May to a preliminary sales figure of $45,559 million in June…meanwhile, non-store retailers, who had been thought to have seen sales rise 2.1% from $37,154 million in May to $37,936 million in June, were revised this month to show a 1.5% June sales gain from a much lower revised May figure of $36,739 million to a preliminary sales total of $37,276 million in June…

  so, now that we understand that the widely followed “advance” retail sales estimated this week for July are less than dependable and subject to large revisions (median standard errors and coefficients of variation for various businesses are explained on the last page of the release), we can look at those estimates with an appropriate grain of salt…seasonally adjusted sales at motor vehicle & parts dealers, which account for a bit less than 20% of aggregate retail sales, were down 1.0% in July, from $81,584 million in June to $80,799 million in July; however, unadjusted motor vehicle & parts sales were at $86,010 million, up from June’s $82,652 million but down from May’s unadjusted $86,431 million, highly suggesting that seasonal adjustments, which anticipated a greater fall in June sales, skewed the reported changes in sales for these businesses over both June and July…seasonally adjusted sales at motor vehicle & parts dealers were still 11.8% higher than last years at $72,284 million, while unadjusted sales for those auto related businesses were 15.0% higher than last July’s, which is odd because we had thought July was in the same season this year as it was last year….with the apparent large hit to auto sales, the widely watched retail sales ex-autos, aka “core retail sales” were up 0.5% for the month, from a seasonally adjusted $342,065 million in June to $343,682 million in July…

among retail trade sectors showing better than average adjusted sales increases in July, the broad category of stores specializing in sporting goods, hobbies, books or music saw sales rise 1.0% from $7,421 million in June to $7,498 million, while sales at clothing & accessories stores were up 0.9% from $20,860 million in June to 21,046 million July, and sales at food and beverage stores were up 0.8%, from $53,935 million in June to.$54,355 million in July…in addition, sales at gas stations rose 0.9% from $45,390 million in June to $45,784 million in July as gasoline prices were up 1.0%…year over year sales gains for all of these better than average July retailers, however, was below the 5.4% YoY gain posted for all sales; sales at sporting goods, hobbies, books & music stores was were up just 2.3% from last July, clothing stores saw sales rise 4.2% from a year ago, food and beverage stores posted a one year sales increase of 3.9%, and July sales at gas stations were 4.9% greater than last years..

other than automotive, retail sectors that saw seasonally adjusted sales decrease in July included furniture and home furnishing stores, where sales fell 1.4% to $8,398 million in July, after rising 2.5% to $8,516 million in June; since furniture sales wouldn’t seem to be subject to much volatility, this also seems like it may be another seasonal adjustment aberration…July sales at building materials and garden supply stores were down another 0.4% to $25,802 million in July after being down 1.6% to $25,909 million in June, suggesting more of a slowdown in home building and remodeling than is evident from other data; nonetheless, sales for this retail group were still 7.9% above those of a year earlier…meanwhile, sales at electronic and appliance stores were off 0.1%, from $8,411 million in June to $8,402 million in July, and down 0.4% year over year…other than electronic and appliance retailing, only department stores, where sales fell 4.8%, saw worse year over year sales results…

our FRED pie chart below was constructed to give us visual picture of the relative size of each of the component retail business groups included in this report (click on any piece for a large pie); note that since FRED limits us to a maximum of 12 data sets per graph, we have omitted the “miscellaneous store retailers”, which accounted for $10,595 million of sales in July, or less than 2.5% of the total…these retailer groups are arranged around the pie from those with the most sales to those with the least, so in the upper right corner, we have motor vehicle & parts dealers in blue at 19.5% of the remaining sales, and then, counterclockwise from there, general merchandise stores in red at 13.3% of sales ex “other”; food and beverage stores in green, accounting for 13.1% of sales; gas stations in orange and restaurants and bars in grey, both accounting for 11.1% of sales; non-store retailers, or online & mail order sales, in medium blue at 9.0%; building material & garden supply retailers in light green at 6.1%; drug stores in mustard coloring at 5.7%; clothing and accessory stores at 5.1% in pink; electronic and appliance stores in purple and furniture and furnishings stores in yellow, both at 2.0% each; and lastly, stores specializing in sporting goods, hobbies, books or music in light blue accounting for 1.8% of July retail sales, all ex “other”..

,FRED Graph

real retail sales, a oft cited metric, is simply the seasonally adjusted retail sales change adjusted for inflation using the consumer price index for the same period…and this week, as is often the case, saw the release of the Consumer Price Index for All Urban Consumers (CPI-U) for July two days after the July retail sales release; since the CPI also came in 0.2 higher in July, real retail sales for July put up a goose-egg in the records; however, as June retail sales were revised to a to show an increase of 0.6%, and the June CPI increase remained at 0.5%, real retail sales for June are now seen as having risen 0.1%…as we’ve noted previously, the caveat to this metric is that the CPI includes prices for expenses not included in retail sales, as well as different weightings for components….methodology for computing the CPI, and various components, is here

while rising gasoline prices accounted for the lion’s share of the CPI increase in June, the July increase in prices was broader based, with a number of components contributing…seasonally adjusted gasoline prices were up 1.0%, but that was offset by 0.3% lower prices for electricity and  a 2.8% price reduction in natural gas, resulting in a minor increase of 0.2% for the energy index…food prices were up just 0.1%, as food away from home was up 0.2% and food at home was up 0.1%, as a seasonally adjusted 1.5% increase in prices for fruits and vegetables was offset by a 0.3% decrease in prices for cereal and baked goods and a 0.6% decrease in beverage prices .. the Core CPI, which measures the price change for everything except food and energy, was up by the same 0.2% as the overall index…the unadjusted CPI for July, at 233.596, was statistically unchanged from June’s 233.504; all indexes in this report are based on 1982 to 1984 prices equal to 100 unless otherwise noted… 

the cost of shelter, the largest component of the CPI at 31.585% of the total index, was also up 0.2% in July, as the unadjusted shelter index also rose 0.2% from 286.024 to 286.617; rent of primary residence was up 0.1%, owner’s equivalent rent was up 0.2%, and prices for lodging away from home was up 0.2%…prices for household commodities were broadly lower, with both window and floor coverings and furniture and bedding 0.6% cheaper, while prices for appliances fell 1.3%…the price of new vehicles was up 0.1% while the price of used cars and trucks fell 0.4%, and transportation services rose 0.4% as the cost of vehicle maintenance and repair rose 0.3%, car insurance rose 1.3% and airline fares fell 1.3%…the transportation services index, which is not seasonally adjusted, rose 0.2% from 286.024 in June to 286.617 in July…prices for medical services rose 0.1% as hospital costs rose 0.3% and prices for physicians services fell 0.2%, while prices for medical commodities rose 0.4% as the major component of prescription drugs rose 0.5% even though prices for medical equipment and supplies fell 0.8%; the combined medical care price index rose by a a little more than 0.1%, from 424.264 in June to 424.836 in July….prices within the broad category of education and communication services were up 0.1% overall, as elementary and high school costs were up 0.6% while prices for internet services and electronic information fell 0.7%…education and communication commodities, meanwhile, were down 0.6%, as computers and peripheral equipment fell 1.6% while prices for textbooks were up 0.5%…prices for apparel, which had been stable most of the past year, rose 0.6% as 2.1% higher prices for women’s & girl’s apparel more than offset a 1.2% decline in prices for men and boy’s wear and a 0.3% decrease in prices for footwear….recreation equipment prices fell 0.2% as TV prices fell 2.6% and photographic equipment was 3.0% cheaper in July than in June, while prices for recreation services were up just 0.1%, with only movie, theater, and concert tickets seeing an increase as large as 0.6%…the combined unadjusted recreation index, which is based on 1997=100, fell by a statistically insignificant percentage, from 115.407 to 115.384…

the pie graph above is from doug short, and like our retail pie graph, provides us with a visual picture of the relative size of each of the major components of the CPI…we should note that in this rendering, energy components of the energy price index are for the most part included within the housing and transportation wedges of that pie; you’ll note that the total index for housing is actually more than 41% of the CPI, and since home prices are not included in that metric, it tends to moderate the CPI…the number of price indexes that BLS generates out of the various CPI components can be confusing, as many overlap; here’s a table of over 40 special aggregate indexes, which doesn’t even include the specialized sub-category indexes such as for fruits and vegetables

our FRED graph below captures the track of the major aggregate price indexes shown above going back to 1997, a date chosen because that’s when two of those composite indexes originated; the rest represent recent prices based on prices from 1982 to 1084 = 100… the price index for food and beverages is in blue and and the price index for housing is in red, which together account of over half of the CPI and which both have tracked near the overall index since 1982…meanwhile, the apparel index in violet, which is just 3.564% of the CPI, has actually been falling since the 1990s until just recently…the orange line at the top of the chart is the medical care composite index; if you look closely you might notice the moderation in the steady increase in the price of health care everyone’s been talking about…next, in light green, we have the volatile transportation index, which reflects the gyrating cost of gasoline and fuel related costs of transportation services, moderated by the slow steady rise in the cost of vehicles; lastly, we have our two indexes benchmarked to 1997: education and communication in dark green and recreation in bright blue, neither of which has risen much over that shorter timespan…

FRED Graph

another key release of the past week was on Industrial production and Capacity Utilization for July from the Fed, which showed that the seasonally adjusted industrial production index, which is benchmarked to  2007 = 100, was unchanged from the June reading of 98.9…the manufacturing index, the major component of the overall index, was down for the first time in three months, 0.1% lower than June at 95.6, while the utilities index, reflecting less than normal use of air conditioning, was down 2.1%, and the output of “mines” saw a 2.1% increase to 120.3, reflecting record high gas and oil extraction in July…the overall index has not moved much over the last 6 months, as it read 98.8 at the end of February, again with both manufacturing and utility output lower over 6 months while the mining component rose…the manufacturing slowdown is only recently, however, as over the past year manufacturing has seen a 1.3% increase, boosting the industrial composite index to a 1.4% year over year increase, as “mining” output grew 5.7% while utility output shrunk 3.7% from last year…

in addition to the indexes for those major industry groups, this report also indexes industrial production by market group; the index for production of consumer goods, which accounts for 27.14% of the total industrial production index, fell 0.5% in July to 94.1, which was the same index reading as February’s; production of non-durable goods fell 1.5% as automotive products production fell 2.4% in July and output of home electronics was off 1.0%, while the index for consumer nondurables slipped 0.2% as a 0.3% increase in output of consumer energy products was offset by a 0.6% decline in clothing production and a 0.9% fall in paper products output…output of consumer goods is now 1.3% higher than it was last July, with most of that growth taking place last year; durable goods production was up 5.0% over the year, bolstered by double digit annualized growth rates in automotive products over the last three quarters, while production of consumer non-durables was up 0.3% as output of non-energy nondurables fell 0.1% since July of last year…

production of business equipment, which accounts for 9.61% of the industrial production index, was unchanged in July but is still 2.1% higher than a year ago; the production of information processing equipment fell 0.7%, while the index for transit equipment was unchanged and the index for industrial and other equipment was up 0.2%; in addition, production of defense and space equipment rose 1.0%, the first monthly increase since last year in that index as a preliminary 0.1% gain in June was revised to show a 0.1% decrease…meanwhile, the output of construction supplies increased 0.5% and is now 4.4% above a year ago, while July production of business supplies declined 0.7%, turning the year over year figures negative at -0.5%…production of materials to be processed further, which accounts for 46.54% of industrial output, saw a 0.4% increase in July and was 1.7% higher than a year ago; these were bolstered by a 1.2% increase in the output of energy materials due to gains in oil and natural gas extraction…inputs into durable goods were unchanged, as a 0.7% decline in output of equipment parts offset a 0.3% increase in consumer durable parts and a 1.0% increase in other durable goods inputs, while production of nondurable materials was down 0.5% due to 1.3% lower textiles output, 0.8% less paper production, and a 0.7% decrease in chemical materials output….

FRED Graph

capacity utilization for total industry was down 0.1 percentage point to 77.6% in July; this is the percentage of our plant and equipment that was in use during the month, and it was being used at a 0.3% lower rate than a year ago; manufacturing utilization declined 0.1% to 75.8%, while the operating rate for mining equipment, including drilling rigs, rose 1.5 percentage points to 89.5%; meanwhile capacity utilization by utilities declined 1.6% to 76.2%, a rate 10.0% below its long-run average…utilization at the crude stage of processing increased 0.9% to 87.4%, while primary and semifinished stage utilization declined 0.2% to 75.5% and finished stage utilization fell 0.5% to 75.6%…our FRED graph for this release, above, shows capacity utilization for total industry in pink since January 2005, expressed on the scale as a percentage of capacity in use; on the same graph we have the industrial production indexes over the same period, using the same scale on the left based on index values in 2007=100…the production index for all industry is in black, while the manufacturing production index is in blue, the utility production index is in green, and the mining production index, driven by gas and oil production, is in red…

   the 2nd Quarter Report on Household Debt and Credit (pdf) from the NY Fed is another of those reports that tells it’s story mostly in graphics, although the NY Fed has an accompanying press release and a blog post discussing the rise of subprime auto loans, which now number more than home loans, but have not yet reached the proportions seen before the crisis…much of the detail in this report is not a surprise, ie, that housing related debt is declining and that student loan debt is rising, but in that this broad sweep covers much of the same data we’ve seen in other reports, such as the G19s on Consumer Credit and the privately issued LPS Mortgage Monitor, it’s interesting to put bring it all type of debt together in one place and in context…the data in this report is derived from the NY Fed’s own consumer credit panel and drawn from anonymous Equifax credit data..

according to the NY Fed, outstanding consumer credit fell $78 billion from $11.23 trillion to $11.15 trillion at the end of the 2nd quarter, a decline of 0.7% from the 1st quarter…mortgage balances fell by $91 billion, or 1.1%, to $7.84 trillion, and home equity lines of credit decreased by $12 billion, or 2.2%, to $540 billion, while the non-housing components of household debt increased 0.9%; total credit card debt was up $8 billion to $668 billion, outstanding student loan debt increased $8 billion to $994 billion, and auto loan balances increased $20 billion to $814 billion, the largest quarterly increase in auto loans since 2006…these components are shown graphically in the bar graph below from page 5 of the report, which shows the components of total debt for each quarter since the beginning of 2003…the bar at the far right represents the 2nd quarter and shows mortgage debt in orange has continued to shrink and now represents 71% of household debt…meanwhile home equity loans in purple accounted for 5% of 2nd quarter debt, auto loans in green accounted for 7%, credit card debt in blue accounted for 6%, and student loans in red have now risen to 9% of the total debt outstanding..(uncategorized debt in grey is 3% of the total)…we should note that this report does not distinguish between mortgage debt that has been paid off and mortgage debt that has been extinguished through a foreclosure or a short sale…
NY Fed Total Household Debt Composition

   the next graph below, from page 10 of the report, shows the percentage of all that debt for each of those years that was either current or delinquent during the given quarter; in each bar the percentage of loans by dollar value that is current is represented by the dark green, while the percentage of debt that is more than 30 but less than 60 days delinquent is shown in green, while the percentage over 60 days overdue is shown in blue, over 90 days unpaid debt in yellow, and the percentage of debt over 120 days in arrears is shown in orange…the red in each column represents the percentage of debt in that quarter which was severely derogatory, which includes foreclosures, debt referred to a third party for collection, or debt charged off as bad debt…roughly $845 billion of 2nd quarter debt was delinquent, with $635 billion of that seriously delinquent, or more than 90 days behind in payments…as of the end of June, 7.6% of all debt was in some stage of delinquency, compared to the 8.1% delinquency rate at the end of the first quarter…the 90+ day delinquent balances of student loan debt that made this report newsworthy the past two quarters moderated, as seriously delinquent student debt fell from 11.2% of that outstanding in Q1 to 10.9% in the 2nd quarter…if we compare this graph to the mortgage delinquency and foreclosure graph from the MBA we saw last week, it’s fairly clear that the delinquency status shown here over time aligns fairly closely with that of the mortgage debt for the corresponding quarters..

NY fed Household debt by delinquency

NY Fed Household Debt collections

next, the abovet chart, from page 17 of the pdf report, shows the percentage of consumer loans that have been referred to a 3rd party for collection in blue, and the average size of such loans for each quarter since the first quarter of 2003 in red; this is surprising on two counts; first, that well over 14% of loans are now in the hands of a collection agency or lawyer, and second, that the average loan balance that is referred for collection is comparatively low, now near $1400..much of this is said to be medical debt; we would have thought the average amounts collectors were making the effort to go after would be higher…

the 2nd half of the report (after page 18) is a series of charts for selected states; 12 states are included on each graph, and those chosen appear to be the 10 largest states plus Arizona and Nevada, the two states at the center of the housing bust and subsequent mortgage debt crisis…pages 21 and 22 have the equivalent of the two charts above broken down by state; the first graph we’ll include here below is from page 20 of the pdf report and it shows the total debt outstanding per capita for each of those 12 selected states…we can note that both California in red and Nevada in dark blue peaked near $90,000 per capita debt, and now both states, which have seen significant foreclosures and distressed home sales, are well off their peaks; however, not much has changed in New Jersey, another high debt but judicial state in green, where foreclosures are moving so slowly it would take over 40 years at the current pace to process them all…also note that outstanding debt per capita in Ohio, Michigan, Pennsylvania, and Texas never got much over $40,000 per capita, and outstanding per capita debt hasn’t fallen much for any of them during this so-called deleveraging period either…

NY Fed Debt per capita by state

the next chart below, from page 24 of the report, shows the percentage of mortgage debt in each of our selected states that was 90 or more days delinquent in each quarter since 2003…again, not surprising that both Nevada and Florida saw seriously delinquent mortgage debt peak at over 20% of all housing related debt outstanding in those states, nor that both are still showing more than 12% of the mortgage loan amounts outstanding not currently being paid back..note that the percentage of seriously delinquent mortgage debt is increasing this year in both New York and New Jersey, and is now over 9% for both.. we saw last week that LPS showed that nearly half the states still have over 10% of their mortgages in some stage of delinquency in June, and that the MBA showed a seriously delinquency rate of 5.88% at the end of the 2nd quarter …the metric shown here is a bit different than those in the LPS and MBA mortgage delinquency data, in that they give the percentage of loans in trouble, whereas the chart below shows the percentage of aggregate mortgage debt in dollars that has been unpaid for 90 days or more…

NY Fed 90 day mortgage by state

lastly, we’ll include this graph of the percentage of new bankruptcies by state, which comes from page 28 of the pdf report, and note that bankruptcies appear to have increased in every state graphed (and nationally, too, as per the national graph on page 16); the NY Fed makes no comment on this uptick, but only notes that 380,000 consumers had a bankruptcy notation added to their credit reports in 2013 Q2, a 4.8% drop from the same quarter a year earlier…there may be a seasonal pattern in bankruptcies at work here, but the chart is a bit too noisy to accurately discern that…

NY Fed bankruptcies by state

(the above is my weekly commentary that accompanied my sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…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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