July retail sales and producer prices; June wholesale sales, business inventories, and JOLTS

the three key reports of this past week, Retail Sales for July and Business Sales and Inventories for June from the Census bureau, and the July Producer Price Index from the Bureau of Labor Statistics, were all released on Friday…earlier in the week, the BLS also released the July Import-Export Price Index and the Job Openings and Labor Turnover Survey (JOLTS) for June, while the Census Bureau released the June report on Wholesale Trade, Sales and Inventories in advance of the composite business inventories report of Friday…quarterly reports released this week included the 2nd Quarter Household Debt and Credit Report, which reported that household debt increased by $35 billion or 0.3% to $12.29 trillion, the MBA’s 2nd Quarter National Delinquency Survey, which indicated that mortgage delinquencies were at a 10 year low, and the 2nd Quarter Labor Productivity and Costs report from the BLS, which reported labor productivity decreased at a 0.5% annual rate, as output increased 1.2 percent while hours worked increased 1.8 percent, and that unit labor costs increased 2.0% over the quarter, as hourly compensation rose 1.5% and labor productivity decreased 0.5%….

July Retail Sales Unchanged After June Sales Revised 0.2% Higher

seasonally adjusted retail sales were little changed in July after retail sales for June were revised higher, while May sales were revised a bit lower….the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $457.7 billion during  the month, which was statistically unchanged (±0.5%)* from June’s revised sales of $457.9 billion but 2.3 percent (±0.7%) above the adjusted sales in July of last year…June’s seasonally adjusted sales were revised from the $457.0 billion originally reported to $457.9 billion, while May sales were revised lower, from $454.4 billion to $454.1 billion, with this release….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 0.6%, from $463,844 million in June to $469,523 million in July, while they were up just 0.7% from the $457,710 million of sales in July a year ago…revisions to May and June indicate that 2nd quarter sales were roughly $0.6 billion higher than previously reported, or that they increased at a $2.4 billion annual rate, which should be enough to lift 2nd quarter GDP by 0.5 percentage points when the 2nd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the May to June change under “May 2016 (r)evised” and the revised June 2015 to June 2016 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance June sale estimates, before this month’s revision, is here….

July 2016 retail sales table

from the above table, we can see that without the 1.1% increase to $93,210 million in seasonally adjusted sales at motor vehicle and parts dealers, retail sales would have shown a 0.3% decrease for the month, but that decrease was conversely mostly caused by the 2.7% decrease to $33,329 million in sales at gas stations, which we figure to be mostly due to lower prices…if we take out gas station sales in addition to motor vehicles and parts, we find July retail sales are still statistically unchanged from the previous month…also notice the other larger month over month changes: non-store retailers, including catalog and online, saw sales rise by 1.3% to $47,705 million, which puts their sales 14.1% ahead of last July, while sales at specialty stores, such as sporting goods, book & music stores fell 2.2% to $7,835 million…the 0.9% drop to $53,116 million in sales at normally stable groceries stores is also suspect, but we’ll have to wait till the release of the July consumer price index next week to judge that and determine the real economic impact of July sales…

Producer Prices Drop 0.4% in July on Lower Food Prices and Retail Margins

the seasonally adjusted Producer Price Index (PPI) for final demand decreased by 0.4% in July as prices for finished wholesale goods fell by 0.4%, while margins of final services providers fell by 0.3%…this followed a June report that showed the overall PPI had increased 0.5%, with prices for finished goods up 0.8% while final demand for services rose 0.4%….producer prices are now down 0.2% from a year ago, the largest year over year decrease since December 2015, as most of the price decreases relating to lower oil and commodity prices were seen in early 2015…

as we noted, the index for final demand for goods, aka ‘finished goods’, fell by 0.4% in July, after rising by 0.8% in June, 0.7% in May and 0.2% in April, as the index for wholesale energy prices fell1.0% from June to July and the price index for wholesale foods was 1.1% lower, while the index for final demand for core wholesale goods (ex food and energy) was unchanged…major wholesale price changes included a 6.6% drop in prices for gasoline, an 18.7% drop in grain prices, and an 11.5% drop in prices for oilseeds…despite the drop in wholesale foods overall, wholesale eggs were priced 43.3% higher, for the largest increase in this final demand for goods category…

meanwhile, the index for final demand for services fell by 0.3% in July after rising  0.4% in June, 0.2% in May, and 0.1% in April, as the index for final demand for trade services fell 1.3%, while the index for final demand for transportation and warehousing services rose 0.1%, and the core services index for final demand for services less trade, transportation, and warehousing services was 0.2% higher….noteworthy among trade services was a 6.0% drop in seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers, which accounted for 60% of the drop in the index…margins for machinery and equipment wholesaling (-2.2%); health, beauty, and optical goods retailing (-2.3%); food retailing (-1.2%) and automotive fuels and lubricants retailing (-2.0%) were also lower…among transportation and warehousing services, margins for courier, messenger, and postal services were 0.6% higher…in the core final demand services index, margins for computer training school services rose 5.4%, margins for traveler accommodation services rose 3.9% and margins for securities brokerage, dealing, investment advice, and related services were 1.9% higher, while margins for passenger car rental services fell 13.9%…..

this report also showed the price index for processed goods for intermediate demand increased by 0.2%, after rising 0.9% in June, 0.8% in May and 0.3% in April but falling in each of the prior nine months, as prices for intermediate processed goods still remain 3.7% lower than in July a year ago…. the price index for intermediate energy goods rose by 0.8%, prices for processed foods and feeds were unchanged, and the price index for processed goods for intermediate demand less food and energy was 0.1% higher…meanwhile, the price index for intermediate unprocessed goods was down by 0.4%, after rising by  2.8% in June, 1.3% in May, 3.0% in April and 1.6% in March, in the only increases in that index since June of last year…driving the July decrease was a 3.6% drop in the index for unprocessed foodstuffs and feedstuffs, which fell on a 22.2% drop in the price of unprocessed corn; at the same time, the index for for crude energy goods rose 5.0%, while the index for core raw materials other than food and energy materials was 0.8% lower…. this raw materials index is now 8.7% lower than it was a year ago, but almost two thirds of the year over year decrease of 26.4% seen in November 2015 has since been retraced…

lastly, the price index for services for intermediate demand was 0.3% higher in July, after rising 0.8% in June and falling 0.2 in May, as the index for trade services for intermediate demand rose 0.4%, the index for transportation and warehousing services for intermediate demand was 0.3% higher, and the core price index for services less trade, transportation, and warehousing for intermediate demand was up 0.2%…driving the increase in prices for services for intermediate demand was a 1.9% increase in the index for intermediate services related to securities brokerage and dealing; in addition, the indexes for chemicals and allied products wholesaling, television advertising time sales; metals, minerals, and ores wholesaling, deposit services (partial), and courier, messenger, and postal services also rose…over the 12 months ended in July, the year over year price index for services for intermediate demand, which has never turned negative, is still 1.6% higher than it was a year ago…    

June Wholesale Sales Up 1.9%, Inventories Up 0.3%

the June report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $444.6 billion, up 1.9 percent (+/-0.5%) from the revised May level, but still down 0.4% percent (+/-1.1%) from wholesale sales of June 2015… the May preliminary estimate was revised up $0.9 billion or 0.2% to $436.4 billion from the $435.5 billion sales reported last month … May wholesale sales of durable goods were up 1.2 percent (+/-0.9%) from last month and were up 1.8 percent (+/-1.8%) from a year earlier, with a 7.7% increase in wholesale sales of hardware, and plumbing and heating equipment leading the increase for the month, while the value of wholesale sales of electrical and electronic goods also rose 2.5%….wholesale sales of nondurable goods were up 2.5 percent (+/-0.7%) from May, but were down 2.5 percent (+/-1.6%) from last June, with wholesale sales of both petroleum and petroleum products and farm product raw materials up 5.1%, mostly on higher prices…as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold….

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this June report estimated that wholesale inventories were valued at a seasonally adjusted $590.9 billion at month end, an increase of 0.3 percent (+/-0.2%) from the revised May level but just 0.2 percent (+/-1.6%) higher than in June a year ago, with the May preliminary estimate revised upward from $589.2 billion to $589.3 billion at the same time….inventories of durable goods were down 0.3 percent (+/-0.4%)* from May and down 2.4 percent (+/-1.4%) from a year earlier, with inventories of lumber and other construction materials up 1.8%, while inventories of electrical and electronic goods were down 0.9%…at the same time, the value of wholesale inventories of nondurable goods were up 1.1 percent (+/-0.5%) from May and were up 4.5 percent (+/-2.5%) from last June, as the value of inventories of raw farm products rose 4.0% and wholesale inventories of drugs and drug store supplies rose 4.5%…

the BEA’s technical note for 2nd quarter GDP indicates that they had estimated that the value of wholesale inventories in June to be virtually unchanged from May, based on the new Advance Economic Indicators Report from the Census Bureau, which had been released before the advance GDP report…this report thus revises that and reports that June wholesale inventories were actually $1.55 billion more than had been indicated in the GDP report, or a revision to annualized nominal growth in inventories at $6.2 billion rate, thus implying an upward revision of 0.13 percentage points to 2nd quarter GDP…note that i am not adjusting these GDP revision estimates for inflation because i am assuming the same deflators as were used in the advance report on 2nd quarter GDP will be used in the revisions…

June Business Inventories Up 0.2%, Less than Estimated by the BEA

on Friday, following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June (pdf), which incorporates the revised May retail data from that June report and the earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,307.8 billion in June, up 1.2 percent (±0.2%) from May revised sales, but still down 0.6 percent (±0.4%) from June sales of a year earlier…note that total May sales were revised from the originally reported $1,291.8 billion to $1,292.9 million….manufacturer’s sales were up 0.7% to $460,027 million in June, while retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, rose 0.9% to $403,186 million, and as we noted earlier, wholesale sales rose 1.9% to $444,596 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,813.7 billion at the end of June, up 0.2 percent (±0.1%) from May, and 0.5 percent (±0.6%)* higher than in June a year earlier…the value of end of May inventories was revised down slightly from the $1,810.0 billion reported last month to $1,809.9 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $619,119 million, 0.1% lower than in May, inventories of retailers were valued at $603,694 million, 0.5% more than in May, while inventories of wholesalers were estimated to be valued at $590,864 million at the end of May, up 0.3% from May…

last week we looked at June factory inventories and judged that the BEA’s 2nd quarter GDP factory inventory component was roughly $18.8 billion higher than what was eventually reported, implying a 0.57 percentage point hit to GDP…conversely, earlier today we judged that June wholesale inventories were under-reported at a $6.2 billion rate, implying an upward revision of 0.13 percentage points to 2nd quarter GDP…for retail inventories, the BEA’s technical note for 2nd quarter GDP indicates that they had estimated that the value of June retail inventories in June to be $604.2 billion, up from $601.2 billion in May…this report thus revises that and reports that June wholesale inventories were actually $0.5 billion less than had been indicated in the GDP report, which would be a revision to annualized nominal growth in inventories at $2.0 billion annual rate, thus suggesting a downward revision of 0.04 percentage points to 2nd quarter GDP, based on those overestimated retail inventories…together, the BEA’s overestimation of 2nd quarter business inventories would thus imply a 0.48 percentage point reduction to 2nd quarter GDP when the 2nd estimate is released at the end of August…

Job Openings and Hiring Up in June, Job Quitting and Firings Down

the Job Openings and Labor Turnover Survey (JOLTS) report for June from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 110,000, from 5,514,000 in May to 5,624,000 in June, after May job openings were revised higher, from 5,500,000 to 5,514,000…June jobs openings were also 8.8% higher than the 5,168,000 job openings reported in June a year ago, as the job opening ratio expressed as a percentage of the employed rose from 3.7% in May to 3.8% in June, which was also up from 3.5% a year ago…job openings increased in several sectors, with the 37,000 job opening increase to 1,021,000 openings in health care and social assistance the largest increase for the month (see table 1 for more details)…like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in June, seasonally adjusted new hires totaled 5,131,000, up by 84,000 from the revised 5,047,000 who were hired or rehired in May, as the hiring rate as a percentage of all employed rose from 3.5% to 3.6%, the same as in June a year earlier (details of hiring by industry since January are in table 2)….meanwhile, total separations fell by 69,000, from 4,978,000 in May to 4,909,000 in June, while the separations rate as a percentage of the employed slipped from 3.5% to 3.4%, which was also down from the 3.5% separations rate of June a year ago (see table 3)…subtracting the 4,909,000 total separations from the total hires of 5,131,000 would imply an increase of 222,000 jobs in June, somewhat less than the revised payroll job increase of 292,000 for June reported by the July establishment survey last week, but still not an unusual difference and within the expected +/-115,000 margin of error in these incomplete samplings

breaking down the seasonally adjusted job separations, the BLS finds that 2,909,000 of us voluntarily quit our jobs in June, down by 33,000 from the revised 2,942,000 who quit their jobs in May, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 2.0% of total employment, which was still up from 1.9% a year earlier (see details in table 4)….in addition to those who quit, another 1,643,000 were either laid off, fired or otherwise discharged in June, down by 58,000 from the revised 1,701,000 who were discharged in May, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from a discharges rate of 1.3% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 357,000 in June, up from 334,000 in May, for an ‘other separations rate’ of 0.2%, which was unchanged from May but down from 0.3% in June last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

(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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