June reports on retail sales, consumer and producer prices, industrial production and home construction; May’s business inventories

there were several major monthly reports released this week, beginning with retail sales for June and the business inventories report for May, both released by the Census bureau on Tuesday, followed by the June report on Industrial Production and Capacity Utilization from the Fed and the June Producer Price Index from the Bureau of Labor Statistics on Wednesday, and concluding with the June Consumer Price Index from the Bureau of Labor Statistics and the New Residential Construction report for June (pdf) from the Census Bureau on Friday….in addition, this week also saw the Import and Export Price Indexes for Junefrom the BLS, and the release of the first two regional Fed manufacturing indexes for July: the Empire State Manufacturing Surveyfrom the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -2.0 to +3.9, indicating a return to slow growth, while the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from 15.2 in June to 5.7 in July, indicating a much slower expansion rate than previously….

June Retail Sales 0.7% Lower than Reported for May Last Month

seasonally adjusted retail sales unexpectedly fell in June, and revisions knocked 0.4% off the advance May retail sales report…the Advance Retail Sales Report for June (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $442.0 billion, which was a decrease of 0.3 percent (±0.5%) from May’s revised sales of $443,236 million, which were revised down from the originally reported $444.9 billion, but up 1.4 percent (±0.9%) above June of last year…April’s sales, which had been revised up from $436.8 billion to $439.6 billion last month, were revised down to $438,717 million; hence, we would expect a downward revision to both April and May PCE, and as a result a smaller contribution from real PCE to 2nd quarter GDP than previously estimated…estimated unadjusted sales in May, extrapolated from surveys of a small sampling of retailers, indicated actual sales fell 3.5%, from $461,911 million in May to $445,819 million in June, while they were up 2.8% from the $433,388 million of sales in May a year ago…

again, we’ll include the table from this report showing retail sales by business type that we’ve been including here for years, as it shows more that we can verbalize…again, to explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the May revised figure to this month’s June “advance” report in the first sub-column, and then the year over year percentage sales change since last June in the 2nd column; the second double column pair below gives us the revision of the May advance estimates (now called “preliminary”) as of this report, with the new April to May percentage change under “Apr 2015 r” (revised) and the May 2014 to May 2015 percentage change as revised in the 2nd column of the pair….then, the third pair of columns shows the percentage change of the last 3 months of this year’s sales (April, May and June) from the preceding three months of the 1st quarter (January, February and March) and from the same three months of a year ago….that pair of columns gives us a snapshot comparison of first quarter sales to second quarter sales, which is useful in estimating the impact of this report on 2nd quarter GDP….

June 2015 retail sales

as you can see from the above, the 1.1% decrease to $91,776 million in sales at vehicle and parts dealers was a major drag on June sales, but even excluding automotive sales from the total, other retail sales were still down 0.1% to $350,256 million…several types of retailers saw major sales declines in June; furniture store sales fell 1.6% to $8,533 million; clothing store sales fell 1.5% to $21,083 million, and building materials and garden supply store sales were off 1.3% to $26,708 million…on the other hand, electronics and appliance store sales rose 1.0% to $8,768 million…also note that the 0.8% increase in gas station sales to $37,824 million was not a distorting factor in this report, as it was during the months when oil & fuel prices were falling…

June Prices Increase 0.3% on Higher Food, Energy and Housing

a broad based increase in June prices brought us the fifth consecutive increase in the consumer price index, which turned the year over year index change positive for the first time since February…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.3% in June after rising 0.4% in May, 0.1% in April and by 0.2% in both March and February, while falling in each of the 5 months prior to that, mostly on lower energy costs..the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 238.638 in June from 237.805 in May, which left it 0.1% higher than the 238.343 reading of June of last year…regionally, prices for urban consumers have risen 1.1% in the West, while they have fallen 0.1% in the South, 0.7% in the Midwest and were unchanged in the Northeast over the past year, with greater increases within regions in cities of more than 1,500,000 people…since both energy and food prices increases were significant contributors to the June CPI index, core prices, which exclude food and energy, rose by 0.2% in June, as the unadjusted core index rose from 242.119 to 242.354, to a level 1.76% ahead of its year ago reading of 238.157… 

the seasonally adjusted energy price index rose by 1.7% in June after rising 4.3% in May; nonetheless, energy prices are still averaging 15.0% lower than they were in June a year ago…prices for energy commodities were 3.1% higher in June while the index for energy services saw a 0.2% increase after three down months….the increase in the energy commodity index was driven by a 3.4% increase in the price of gasoline, the largest component, while fuel oil prices fell 1.9% and prices for other fuels, including propane, kerosene and firewood, averaged a 0.4% increase…within energy services, the index for utility gas service rose for the first time this year but just by 0.3%, leaving utility gas priced 13.0% below a year ago, while the electricity price index rose by 0.2% after it fell by 1.2% in May…energy commodities are still priced 23.2% below their year ago levels, with gasoline still 23.3% lower than a year ago, while the energy services price index is now 2.9% lower than last June, as electricity prices were unchanged over that period…  

the seasonally adjusted food index rose by 0.3% in June, after it was was statistically unchanged in April and May, as prices for food at home rose 0.4% and prices for food away from home rose 0.2% on a 0.4% average price increase at full service restaurants, while fast food outlets left prices unchanged…among food at home categories, prices for the meat, poultry, fish, and egg group rose 1.4% on a 1.7% increase in chicken prices and an 18.3% jump in egg prices; the index for cereals and bakery products rose 0.5% on a 1.3% increase in bread prices and 1.2% higher priced crackers, and the beverages index rose 0.1% as a 2.0% increase in tea prices was offset by a 0.9% decrease in coffee prices…offsetting those increases, prices for dairy and related products fell 0.6% on a 1.2% drop in prices for fresh whole milk, and the fruit and vegetable index fell 0.4% on a 3.1% drop in prices for potatoes, 1.5% lower tomatoes and 1.4% lower priced bananas; meanwhile, the index for other foods at home rose 0.3% on 2.8% higher prices for sauces and gravies and 2.3% higher prices for salt and other seasonings and spices….over the past year, egg prices are up by 21.8% and average beef prices have risen by 10.9%, while breakfast pork prices have declined 11.0%….the itemized list for price changes in 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 CPI items overall

among the seasonally adjusted core components of the CPI, which rose by 0.2% in June, the composite of all commodities less food and energy commodities fell by 0.1%, while the composite for all services less energy services rose by 0.3% on 0.4% higher owner equivalent rent…lower prices for commodities suggests a more modest decline in real June retail consumption than we saw in this week’s retail report, with the caveat that retail sales of gasoline and food will be adjusted separately with their appropriate price change index…otherwise, noteworthy price increases in June included a 5.2% increase in intercity train fares, a 2.3% increase in prices for women’s outerwear, a 2.1% increase in dues and fees for participant sports and group exercises, and a 2.0% increase in airline fares….meanwhile, telephones and other consumer information items were 2.9% cheaper, rentals of video and audio media were 2.8% lower, prices for infants’ equipment saw a 2.8% decrease, and hotel and motel prices fell 2.0%…other than the aforementioned eggs, beef, pork, and energy commodities, only telephones, which fell by 12.9%, televisions, which were 12.6% cheaper, and video discs and similar media, which were 10.0% lower, saw their prices change by more than 10% over the past year…

Producer Prices Rise 0.4% on Eggs and Energy

meanwhile, wholesale prices saw a relatively large increase for the second month in a row in June as the seasonally adjusted Producer Price Index (PPI) for Total Final Demand showed a 0.4% increase as final demand for wholesale goods rose by 0.7% while final demand for services was 0.3% higher; this followed a May increase of 0.5% in the overall index, when final demand for wholesale goods rose by 1.3% while final demand for services was unchanged…the year over year change in producer prices remains negative, however, as the annual change in the index moved up from a negative 1.1% in May to a negative 0.7% in June….

the index for final demand for goods, aka ‘finished goods’, rose by 0.7% in June after rising 1.3% in May and falling 9 out of 10 of the prior months, as the index for energy prices rose by 2.4% as wholesale gasoline prices rose 4.3% and wholesale residential gas prices rose 3.1%…the price index for final demand for foods was 0.6% higher, as wholesale fresh egg prices rose by 69.6% after rising 42.9% in May while wholesale fresh vegetable prices fell 6.0% and wholesale fresh fruit fell 5.5% (see table 4)…excluding food and energy, the index for final demand for wholesale core goods rose by 0.2% in May, as a 1.2% increase in wholesale drug prices was the only core price change greater than 1%….excluding food and energy, the index for final demand for wholesale core goods rose by 0.4% in June after an increase of 0.2% in May, as a 2.6% increase in wholesale cigarette prices and a 2.5% increase in wholesale drug prices were the largest price increases in June, while wholesale prices for computers and computer equipment fell 1.4%

as previously noted, the index for final demand for services was rose 0.2% in June after being unchanged in May, as the index for final demand for transportation and warehousing services rose 0.6%, the index for final demand for trade services rose by 0.2%, and the index for final demand for services less trade, transportation, and warehousing services was up 0.2%……margins for passenger car rentals rose 8.2% and margins for fuels and lubricants retailing, major appliances retailing, and furnishings wholesaling all rose more than 4%, while margins for food and alcohol retailing fell 3.7%…

in addition, this report showed the price index for processed goods for intermediate demand rose by 0.7% in June after a 1.0% increase in May broke a string of 9 consecutive monthly price declines; this still left intermediate processed goods 6.3% lower priced than in June a year ago….the June increase was driven by a 2.8% jump in prices for intermediate energy goods, and a 1.4% increase in the index for processed foods and feeds, while the price index for processed goods for intermediate demand less food and energy rose 0.2%…moreover, the price index for intermediate unprocessed goods rose by 1.2% after rising 3.3% in May, on a 2.2% increase in the price of crude energy materials and a 1.0% increase in the index for unprocessed foodstuffs and feedstuffs, while the index for other raw materials rose 0.3%…nonetheless, this raw materials index still remains 21.7% lower than it was a year ago, as it saw prices fall 10 out of the 11 months prior to April, only eking out a 0.1% increase in September of last year…

finally, the price index for services for intermediate demand rose by 0.4% in June following a 0.5% decrease in May, as 0.6% increases in both the index for transportation and warehousing services for intermediate demand and the price index for services less trade, transportation, and warehousing for intermediate demand offset a 0.4% decrease in the index for trade services for intermediate demand ..over the 12 months ended in June, the price index for services for intermediate demand has risen 1.6%… 

Industrial Production Up 0.3% in June; Down at a 1.4% Rate in Second Quarter

industrial production rose 0.3% in June after falling 0.7% over April and May and hence fell at an annual rate of 1.4% over the second quarter as the important manufacturing sector remained weak…the Fed’s G17 release on Industrial production and Capacity Utilization for June showed that the 0.3% increase in seasonally adjusted industrial production came after a May decrease of 0.2%, an April decrease of 0.5%, and a revision to March output that left it 0.2% above February vs the unchanged March reported last month… the industrial production index, the benchmark with 2007 production set equal to 100.0, rose to 105.7 in June after the index for March was revised from 105..8 to 106.1, the index for April was revised from 105.3 to 105.6, and the index for May was revised from 105.1 to 105.4…to the extent that this report plays into GDP, the upward revision to March would suggest a stronger than originally reported 1st quarter when the annual revision is released at month end, but still leaves us with a 2nd quarter downturn in comparison..

the manufacturing index, which accounts for roughly 70% of the industrial composite, was unchanged at 101.7 in June after May’s index was revised from 101.3 to 101.7, the index for April was revised from 101.5 to 101.6, and the index for every prior month this year was revised upwards by 0.1%; those revisions improved the manufacturing index to a reading 1.8% higher than a year earlier…the mining index, which is now dominated by oil and gas activity, rose 1.0% in June after falling a revised 2.1% in May and a revised 0.2% in April, which were previously reported as declines of 0.3% and 1.3% respectively; as a result of revisions, the mining index at 130.1 is now 0.8% lower than a year earlier, in contrast with the year over year 0.3% decrease reported for this sector last month……the utility index, meanwhile, increased 1.5% in June after rising a revised 1.2% in May as this weather influenced index also saw major revisions; from a decrease of 3.7% to a decrease of 5.1% in April and from an increase of 0.2% to an increase of 1.2% in May, as both May and June were warmer than usual in heavily populated regions, resulting in increased use of air conditioning…the June utility index reading of 103.6 now represents a 4.3% increase from a year ago…

this report also gives us capacity utilization by industry, which is expressed as the percentage of plant and equipment that was in use during the month, and which rose from 78.2% in May to 78.4% in June, with the utilization rate for May revised up from 78.1%…seasonally adjusted capacity utilization for manufacturing industries was down 0.1% to 77.2% after May manufacturing utilization was revised from 77.0% to 77.3%…capacity utilization for mining rose from 83.4% in May to 84.1% in June after the May utilization rate for ‘mining’ equipment’, including drilling rigs, was revised from 83.3%, while utilities were operating at 80.7% of capacity during June, up from 79.5% in May, which was previously reported as an operating rate of 80.0%…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….

Business Sales Rose 0.4% in May; Business Inventories Rose 0.3%

following the release of retail sales report, Census released the composite Manufacturing and Trade Inventories and Sales report for May, incorporating the revised May retail data, the wholesale trade data we looked at last week, and the full factory orders report of two weeks ago, to give us a complete picture of the business contribution to the economy for May…according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,323.6 billion in May, 0.4 percent (±0.2%) higher than April revised sales, but down 2.2 percent (±0.4%) from May a year earlier…total April sales were revised down 0.1%, from $1,318.8 billion to $1,318.0 billion, 0.5% higher than March…manufacturer’s sales slipped by a barely significant $252 million to $482,323 million, retail trade sales, which exclude bar & restaurant sales from the retail sales reported earlier, rose by 1.1% to $391,647, and wholesale sales rose by 0.3% to $449,838 million..

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be at a seasonally adjusted $1,797.8 billion at the end of May, 0.3 percent (±0.1%) higher than April and up 2.4 percent (±0.5%) from May a year earlier…seasonally adjusted inventories of manufacturers were estimated to be valued at $649,664 million, a $95 million increase over April which is so small that it’s considered unchanged, inventories of retailers were valued at $566,310 million, $40 million higher than April, also statistically unchanged, and inventories of wholesalers were estimated to be valued at $581,850 million at the end of May, up 0.8% from April…to get the change in real inventories that will be applied to 2nd quarter GDP, new factory inventories would need to be adjusted for inflation with the manufactured goods components of the producer price index, for which the 0.4% increase in final demand goods less foods and energy would be a close approximation; new retail inventories would be deflated with goods components of the May CPI, which averaged a 0.1% decrease, and new wholesale inventories could be deflated with the 1.3% increase in the producer price index for finished goods, with the caveat that energy has a larger weighting in the price indexes than in inventories…moreover, the portion of the inventories in all three business types that were inventoried before May would remain at its earlier value…while we aren’t given the percentage for the later metric, it appears that new real inventories decreased in May, which could imply a decrease in overall real inventories for the month, following on the heels of a large inventory build in April….

New Housing Permits at Post Recession High in June

the June 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 1,174,000 in June, which was 9.8 percent (±19.9%)* above the revised May estimate of 1,069,000 annually and 26.6 percent (±19.6%) above last June’s rate of 927,000 housing starts a year…the asterisk indicates that the Census does not have sufficient data to determine whether housing starts rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, housing starts could have risen 29.7% or fallen 10.1% in June, for all they know….those annual rates of starts indicated by the headline change are extrapolated from a survey of a small percentage of permit offices visited by Census field agents, which estimated that 110,400 housing units were started in June, up from 99,700 units started in May, which was initially estimated at 96,800 housing starts…single family houses accounted for 69,400 of the June starts, while 39,900 units were started in apartment buildings with 5 or more units…housing starts were up in the Northeast and South while they were down slightly in the Midwest and West, with only the 16.9% increase to 53,900 units started in the South greater than the margin of error for that region…

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 housing construction trends than the volatile and often revised starts data… in June, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,343,000, which was 7.4 percent (±1.2%) above the revised May rate of 1,250,000 permits annually and 30.0 percent (±2.3%) above the rate of permit issuance a year earlier, and the most permits issued in any month since July 2007….those estimates were extrapolated from the unadjusted estimate which showed permits for 134,800 housing units were issued in June, which was up from the estimated 111,100 new permits issued in May, and driven by a jump from 25,600 to 32,500 in new permits issued in the Northeast, up from 12,500 a year ago, all but 5,200 of which were permits for units in multifamily structures…for graphs and additional commentary on this new housing report, see the following two posts from Bill McBride: Housing Starts increased to 1.174 Million Annual Rate in June and Comments on June Housing Starts

(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 theglobal 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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