March retail sales, industrial production, producer % consumer prices, and new home construction; February business inventories

most of the important monthly reports that are usually spread over two or three weeks in the middle of the month were released this week, including retail sales for March from the Census Bureau, Industrial production and Capacity Utilization for March from the Fed, the consumer price index and the producer price index for March, both from the Bureau of Labor Statistics, and New Residential Construction for March and February business inventories, also both from the Census…in addition, we also had the release of the first two regional Fed manufacturing surveys for April; the Empire State Manufacturing Survey from the New York Fed, covering New York and northern New Jersey, which reported its broadest business index turned negative for the first time since December, falling from +6.9 to -1.2, while the Philadelphia Fed Manufacturing Survey, covering eastern Pennsylvania, southern New Jersey, and Delaware, indicated ongoing modest growth as their broadest diffusion index of current manufacturing activity rose to 7.5 from last month’s 5.2..

March Retail Sales Rose 0.9% on 2.8% Higher Auto Sales

retail sales rose for the first time in 4 months in March, boosted by strong auto sales……the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales totaled $441.4 billion for the month, which was an increase of 0.9 percent (±0.5%) from the February sales of $437.6 billion, and 1.3% (±0.9%) above the seasonally adjusted sales in March of last year…February’s sales were revised up by more than 0.1%, from $437.0 billion to $437.6 billion, so on net this report met expectations of a 1% increase from depressed February levels…however, March sales were still below those of October and November, in part due to lower gasoline prices…estimated unadjusted sales in March, extrapolated from surveys of a small sampling of retailers, indicated actual sales rose 14.1%, from $390,684 million in February to $445,583 million in March, while they were up 1.6% from the $438,560 million of sales in March a year ago…

as you’re all familiar with the table from this report showing retail sales by business type that we’ve been including in this space for at least two years, we’ll again post a copy of it here…to once again explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month’s March “advance” report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called “preliminary”) as of this report, with the new January to February percentage change under “Jan 2015 r” (revised) and the February 2014 to February 2015 percentage change as revised in the 2nd column of the pair….then, the third pair of columns shows the percentage change of the first 3 months of this year’s sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of a year ago….

March 2015 retail sales table
what you can see from this table is that the increase in March sales was driven by that 2.8% increase in sales at auto dealers, but that even excluding automotive sales, other retail sales still notched a 0.4% increase…we can also easily note that big March sales increases were also scored by building material and garden supply stores, where sales rose 2.1%, and by furniture stores and by department stores, both where sales rose 1.4%…and while grocery stores saw sales fall 0.6%, most of that was due to 0.5% lower food prices in March…we’d also note that the 0.6% decrease in sales at gas stations looks to be in error, as gasoline prices were up 3.9%, so we would not be surprised to see a significant revision in that figure when the advance report for April is released a month from now….

again, the revision to February’s retail sales are in the middle pair of columns above, while the copy of them as originally reported last month is here…as you can see, the reduction of the decrease in automotive sales from 2.5% lower to 2.1% lower was a major factor in the revision that added more than 0.1% to the new reported total…other major upward revisions to February sales included gas station sales, originally reported up 1.5%, are now seen 2.3% higher, food service sales, originally reported 0.6% lower, are now shown as 0.2% higher, and drug store sales, originally reported down 0.7%, are now unchanged…meanwhile, February furniture stores sales, reported 0.1% lower last month, are now seen to be 1.2% lower, while sales at general merchandise stores were revised from down 1.2% to down 1.9%…

also note in the 3rd set of columns that although retail sales were down by 1.3% for the January to March quarter; that was entirely due to the 14.5% drop in sales at gasoline stations, which had made up around 10% of 4th quarter sales…as we saw when we reviewed the incomes and outlays report 2 weeks ago, that once falling prices were taken into account, real personal consumption expenditures for January and February made a small positive contribution to GDP….March sales are 0.9% above those, and while they will be deflated by roughly 0.3% on higher prices, real goods sales for March should add incrementally to the real PCE increase we computed at that time…

March Industrial Production Falls 0.6% on Normal Weather and Reduced Oil & Gas Drilling

industrial production fell 0.6% in March, largely on a reversal of the record jump in utility output in February….the Fed’s G17 release on Industrial production and Capacity Utilization for March showed that seasonally adjusted industrial production fell 0.6% in March after January’s decrease was revised from 0.3% to 0.4%, leaving March industrial production 1.0% below the level of December, but still 0.2% higher than a year earlier…the industrial production index, which is benchmarked to 2007 production being equal to 100.0, fell to 105.2 in March, after February’s index was revised from 105.8 to 105,9, January’s index was revised from 105.7 to 105.8, and December’s index was revised from 105.1 to 106.2…the manufacturing index, which accounts for roughly 70% of the industrial composite, eked out a 0.1% increase after falling 0.2% in February, while the manufacturing index rose from 101.1 to 101.2, after February’s manufacturing index was revised from 101.3, and January’s manufacturing index was revised from 101.5 to 101.3…the mining index, which is dominated by oil and gas drilling, fell 0.7% in March after falling 1.6% in February and 1.7% in January, but it nonetheless remains 3.7% higher than a year ago with a March index reading of 129.7…the utility index, meanwhile, fell 5.9% in March after rising 5.7% in February and 3.0% in January as our abnormal weather, the major reason for the fluctuation in this index, returned to more normal levels…

of the major market groups, production of consumer goods fell 0.6% after rising 0.6% in February, while first quarter output of consumer goods rose at a 2.5% annual rate over the 4th quarter, solely on the strength of production of consumer energy products, which were up at a 17.3% rate, while first quarter production of durable goods fell at 3.2% rate in contrast…production of business equipment rose 0.2% in March after rising 0.8% in February but was indicated to have decreased at a 2.1% annual rate in the 1st quarter, as January production had fallen 0.8%…production of construction supplies was also down at a 2.8% rate in the first quarter, after output fell 0.9% in March after falling by the same in January and 0.3% in February, while output of intermediate materials fell 0.5% in March and was down at a 0.9% annual rate in the first quarter…further breakdown on industrial production by market group can be gleaned from Table 1 and Table 4 of the report, with table 1 showing the percentage change from the prior month, quarter or year, and table 4 giving the index values for the same…

this report also covers capacity utilization, which is the percentage of our plant and equipment that was in use during the month, and which fell from 79.0% in February to 78.4% in March…seasonally adjusted capacity utilization for manufacturing industries was unchanged at 77.1% after manufacturing utilization for February was revised down from 77.3%…capacity utilization for mining fell from 85.4% in January to 84.4 in February as drilling rigs continued to be idled each week in March; finally, utilities were operating at 80.0% of capacity during March, a drop from their operating rate of 85.1% in February, as seasonally adjusted output of utilities returned to near normal…for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and a handful of other special categories……for broader coverage of this report, see Robert Oak’s post Industrial Production Hasn’t Been This Bad Since Q2 2009, which includes nine FRED graphs of the most important data sets covered here..

Producer Prices Rise 0.2% in March as Wholesale Gasoline Rise 7.2%

the report on producer prices for March was pretty much in line with expectations, as the seasonally adjusted March Producer Price Index (PPI) for Final Demand indicated a 0.2% increase, as final demand for wholesale goods rose 0.3% while final demand for services increased by 0.1%, following on a 0.5% decrease in February, when lower margins for trade, transportation and warehousing dragged the services index lower…the headline year over year wholesale price change edged further into negative territory, falling from 0.6% in February to 0.8% in March, which would correspond to the greatest drop in wholesale prices since 2009..

the 0.3% increase in the index for final demand for goods was the first increase in 9 months, as a rebound in wholesale energy prices drove the index, with a 7.2% increase in wholesale gasoline outweighing decreases of 1.7% in residential natural gas and 1.9% in home heating oil…meanwhile, the index for final demand for food  fell by 0.8% with drops of 7.6% for wholesale seafood, 6.9% for wholesale fruit, and 5.1% for producer pork…eliminating the volatile food and energy indexes left core producer prices for finished goods 0.2% higher for the month, with a 1.5% increase in producer prices for industrial chemicals the largest change in any line item component…

meanwhile, the index for final demand for services rose by 0.1% after falling 0.5% in February, as both the margins for final demand for trade services and the index for final demand for transportation and warehousing services dropped 0.2%, while the index for final demand for services less trade, transportation, and warehousing services rose 0.3%…the largest increase in the services was an 11.3% increase in margins for major household appliances retailers, who have seen their margins increase by over 35% over the last 4 months…

this report also showed the price index for processed goods for intermediate demand fell by 0.1% in March, the eighth drop in a row, leaving intermediate processed goods 6.7% lower priced than a year ago….that included a 0.8% drop in the index for processed foods and feeds and a 0.2% decrease in the price index for processed goods for intermediate demand less food and energy, while prices for intermediate energy goods rose by 0.5%, their first increase in 7 months….in addition, the price index for intermediate unprocessed goods fell by 1.7%, after falling 3.9 in February and 9.4% in January and is now 26.5% below the level of a year ago, on a 1.4% drop in the index for unprocessed foodstuffs and feedstuffs, while raw energy goods also fell by 1.4% and the index for unprocessed goods less food and energy was 2.3% lower…

finally, the price index for services for intermediate demand rose 0.2% in March, as a 0.4% decrease in the index for transportation and warehousing services for intermediate demand was offset by a 0.4% increase in prices for intermediate services less trade, transportation, and warehousing and a 0.2% increase in the index for trade services for intermediate demand…over the 12 months ended in March, the price index for services for intermediate demand has risen 1.0%…

Consumer Prices Rise 0.2% on Fuel and Housing

the change in the March Consumer Price Index was also in line with expectations, as both the CPI and core prices rose by a modest 0.2%….the Consumer Price Index Summary from the BLS showed that the March 0.2% increase in overall seasonally adjusted prices followed a similar increase in February after 5 months of lower readings precipitated by the drop in oil prices, which left the all items index 0.1% lower than it was a year ago, while the index for all items less food and energy rose 0.2% for the 3rd month in a row and was 1.8% higher than a year earlier… .the unadjusted CPI-U (for urban consumers), which was set with prices of the 1982 to 1984 period equal to 100, rose to 236.119 in March from 234.722 in February, a 0.6% increase, but a level 0.07% lower than the 236.293 reading from March of last year….

the seasonally adjusted energy price index rose by 1.1% in March on 3.8% higher prices for energy commodities which was partially offset by a 1.5% drop in the index for energy services…gasoline prices were 3.9% higher and fuel oil prices rose by 5.9% while electricity prices were 1.1% lower and utility natural gas prices fell 2.7%…the seasonally adjusted food index fell by 0.2% and was reduced to 2.3% higher than a year ago as prices for food at home fell 0.5% and prices for food away from home rose 0.2%…among food at home categories, prices for fruits and vegetables fell 1.4%, leaving them 1.1% lower than a year ago, as fresh fruits saw a 2.5% decrease in prices leaving them 4.6% below a year earlier…March meat poultry and fish prices were also off by 0.5% as the pork price index fell 2.6% while other meats were mixed…in addition, the dairy price index fell 0.5%, beverages and beverage materials were 0.5% lower, while prices for cereals and bakery products rose 0.4%..the itemized list for prices of over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 items overall…other tables we usually cite include: Table 1. Consumer Price Index by expenditure category and Table 3. Consumer Price Index special aggregate indexes..

Core prices, or the price changes for “All items less food and energy” are also included on the first two tables, with price changes for commodities (aka durable and non-durable goods) preceding price changes for services…it’s here we learn that prices for all commodities less food and energy rose 0.3% in March after a 0.2% increase in February, which suggests a similar deflator will be used on retail sales for March when computing personal consumption expenditures of goods for the month….generally, retail sales excluding gas stations, restaurants and groceries will be deflated with components here, while sales from those aforementioned retailers will be deflated with their appropriate CPI index by the BEA in arriving at the price indexes for personal consumption expenditures for goods…similarly, prices for services less energy services, shown here as up 0.2% in March, will be used in computing the personal consumption expenditures price index for services…the differences between this consumer price index, and the PCE price index, then, is not in the prices for individual items, but in their weighting…the housing components of the CPI account for nearly 40% of the index, with rent and owners equivalent rent, both up 0.3% in March, accounting for nearly a third of the total index…for the PCE price index, they are prorated on their real contribution to overall consumption, which meant that for the 4th quarter, housing and utilities counted as just 17.8% of the PCE price index….

New Housing Construction Remains Stagnant in March

the March report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing starts were at a seasonally adjusted annual rate of 926,000 in March, which was 2.0 percent (±13.0%)* above the revised February estimate of 908,000 annually but 2.5 percent (±11.5%)* below the March 2014 rate of 950,000 a year…the asterisk indicates that the Census does not have sufficient data to determine whether housing starts rose or fell for the month or over the past year, thus indicating ongoing weakness in new construction….the annual rates given in the headline change are extrapolated from a survey of a small percentage of permit offices visited by Census field agents which estimated that 77,400 housing units were started in March, up from 63,600 in February, which was initially reported as 62,400 starts…single family houses accounted for 52,500 of the March starts, while 23,200 were units in apartment buildings with 5 or more units…8,100 of those were started in the Northeast, up from 2,900 in February, while March starts fell in the South and the West, so while February’s weakness may have been weather related, it does not appear that March was so affected..

as we’ve noted previously, the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new construction trends than the volatile and often revised starts data… in January, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,039,000, which was 5.7 percent (±2.0%) below the revised February annual rate of 1,102,000, but was 2.9 percent (±0.9%) above the estimate of March in last year…so while up from last year, new permits issued in March were below the level of January and February….those estimates were extrapolated from the unadjusted estimate which showed 90,900 new permits issued in March, which was up from the estimated 77,500 new permits issued in February, so the seasonal adjustment was a major factor in the headline change on permits…

February Business Inventories Rose 0.3% on Flat Sales

following the release of retail sales report, Census released the composite Manufacturing and Trade Inventories and Sales report for February, which is covered in the media as the “business inventories” report, and which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers’ shipments was at $1,313.1 billion in February, virtually unchanged (±0.2%) from January, but down 1.2 percent (±0.4%) from the total monthly sales of February of last year, mostly due to lower prices for energy goods…manufacturers sales were estimated at $481,345 million, 0.7% higher than January, retailer’s sales were estimated to be down 0.5% at $387,541 million, and sales of merchant wholesalers were down 0.2% and accounted for $444,240 million of the overall total….

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be at a seasonally adjusted $1,790.2 billion at the end of February, 0.3% (±0.1%) higher than January, which was up 3.3 percent (±0.4%) from February a year earlier…seasonally adjusted inventories of manufacturers were estimated to be valued 0.1% higher at $650,961 million, inventories of retailers were estimated to be 0.4% higher and valued at $565,236 million, and inventories of wholesalers were estimated to be valued at $574,010 million at the end of February, up 0.3% from January…the month end total business inventories to total sales ratio, the metric which is widely watched to determine if inventories are becoming excessive, was at 1.36, unchanged from January but up from 1.30 in February a year ago, again likely distorted by record high petroleum inventories, which is being stored to take advantage of low prices… remember, before inclusion in GDP, each component of inventories needs to be adjusted with the appropriate price change from the CPI or PPI to arrive at the change in real inventories…

(the above is the synopsis that accompanied my regular 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 receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)

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