August retail sales, consumer and producer prices, and industrial production; July’s business inventories

reports released this past week included Retail Sales for August and Business Sales and Inventories for July from the Census bureau, August Industrial Production and Capacity Utilization from the Fed, and the August Consumer Price Index, the August Import-Export Price Index, and the August Producer Price Index, all from the Bureau of Labor Statistics… the Fed also released the 2nd Quarter Flow of Funds report, a 198 page pdf report that tracks the flow of money throughout the economy as it moves between households, businesses, and government, and which is usually reported on for household net worth, which tends to fluctuate with the stock market and the value of homes, as measured by the CoreLogic Home Price Index…this week’s report showed that household net worth rose from $88.0 trillion in the 1st quarter of this year to a record $89.1 trillion in the 2nd quarter, as the value of real estate owned by households rose by $474 billion and the value of corporate stock owned by households increased by $452 billion….. 

this week also saw the release of the first two regional Fed manufacturing surveys for September: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from -4.21 in August to -1.99 in September, suggesting that First District manufacturing was still contracting, but at a slower pace, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from +2.0 in August to +12.8 in September, suggesting more robust growth than the region’s manufacturing has seen in any month over the past year…

Retail Sales Fall by 0.3% in August

seasonally adjusted retail sales were down in August while retail sales for July now indicates an increase, despite being unchanged, due to the downward revision of June sales…the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $456.3 billion during  the month, which was down 0.3 percent (±0.5%)* from July’s revised sales of $457.9 billion but 1.9 percent (±0.7%) above the adjusted sales in August of last year…July’s seasonally adjusted sales were statistically unrevised at $457.7 billion, while June sales were revised lower, from $457.9 billion to $457.4 billion, with this release….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 1.8%, from $461,851 million in July to $470,250 million in August, while they were up 3.0% from the $456,340 million of sales in August a year ago…the revision to June sales means that 2nd quarter sales were roughly $0.5 billion lower than previously reported, which would be enough to dock 0.4 percentage points from 2nd quarter GDP when the 3rd 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 August Census Marts pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the June to July change under “Jun 2016 (r)evised” and the revised July 2015 to July 2016 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance July sale estimates, before this month’s revision, is here….

August 2016 retail sales table

from the above table, we can see that the 0.3% decrease in August sales was largely driven by the 0.9% decrease to $92,862 million in seasonally adjusted sales at motor vehicle and parts dealers; without which retail sales would have only shown a 0.1% decrease for the month…in addition, there was an 0.8% decrease to $33,115 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 August retail sales would be still be down nearly half of 0.1%, which would be considered statistically unchanged from the previous month…also notice the other large month over month decreases: miscellaneous store retailers saw sales drop by 2.4% to $10,293 million, while sales at building material & garden equipment & supplies dealers fell 1.4% to $28,695 million…considering that, as we’ll see next, prices except for food were generally higher, this report suggests a reduction in the contribution of personal consumption expenditures for goods to 3rd quarter GDP…

August Consumer Price Index Up 0.2% on Higher Medical Care, Rents

the consumer price index increased by 0.2% in August, as price increases for most core services were only partially offset by lower prices for groceries and energy commodities…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.2% in August after it had been unchanged in July and rose 0.2% in June, 0.2% in May, 0.4% in April and 0.1% in March….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 240.647 in July to 240.853 in August, which left it statistically 1.064% higher than the 238.316 index reading of last August, which is reported as a 1.1% increase….regionally, prices for urban consumers have risen 1.6% in the West, 1.1% in the Northeast, 1.0% in the South, and 0.6% in the Midwest over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people…with flat to lower prices for food and energy commodities offsetting higher prices for services, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 247.768 to 248.284, which put it 2.32% ahead of its year ago reading of 242.651…

the volatile seasonally adjusted energy price index was unchanged in August after falling by 1.6% in July, but rising by 1.3% in June, 1.2% in May and 3.4% in April….however, since the energy price index fell by more than 11.5% over this past winter, it still remained 9.2% below its level in August of a year ago….prices for energy commodities were 0.9% lower while the index for energy services rose by 0.8%, after rising by 0.9% in July….the decrease in the energy commodity index included a 0.9% reduction in the price of gasoline, the largest component, and a 2.5% decrease in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, fell by an average of 2.7%…within energy services, the index for utility gas service rose by 2.1% after increasing by 3.1% in July, and hence utility gas is now priced 1.1% higher than it was a year ago, while the electricity price index rose by 0.5%, after also increasing by 0.5% in July…energy commodities are now priced 17.3% below their year ago levels, with gasoline prices averaging 17.8% lower than they were a year ago…meanwhile, the energy services price index is still 0.4% lower than last August, as electricity prices have fallen 0.7% over that period..

the seasonally adjusted food price index was unchanged in August, just as it was in July, as 0.2% lower prices for food purchased for use at home offset 0.2% higher prices for food bought to eat away from home, where average prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.3%..the food price index is also unchanged from a year ago, as a 1.9% decrease in the price of food at home offset a 2.8% increase in prices for food away from home, which included a 12.0% jump in prices of lunches at elementary and secondary schools…

in the food at home categories, the price index for cereals and bakery products was unchanged in August as 1.5% lower prices for breakfast cereals and a 0.9% decrease in white bread prices offset a 1.7% increase in prices of crackers and a 1.2% increase in prices for bread other than white bread…the price index for the meats, poultry, fish, and eggs group fell by 0.4% as egg prices averaged 6.6% lower and a 0.5 increase in the beef index was offset by a 0.5% decrease in pork prices…meanwhile, the index for dairy products was unchanged as a 1.2% increase in prices for fresh whole milk was offset by a 0.6% decrease in prices for cheese while other dairy products were also lower… in addition, the fruits and vegetables index was also unchanged, as a 1.5% increase in tomato prices was offset by a 3.0% drop in prices for oranges and a 0.7% decrease in the index for processed fruits and vegetables…the beverages index was 0.1% lower as a 1.0% decrease in the price of roast coffee more than offset 0.6% higher prices for noncarbonated juices and drinks…lastly, prices in the other foods at home category were on average 0.2% lower, as a 4.0% drop in prices of olives, pickles, relishes and 1.5% lower salad dressing offset 1.2% higher prices for peanut butter and 1.0% higher prices for sugar…..among food at home line items, only eggs, which are now priced 37.9% lower than a year ago, and apples, which are 10.3% higher, have seen a price change greater than 10% over the past year…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 0.3% in August after rising by 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods rose by 0.1%, while the composite for all services less energy services was 0.3% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust August retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.2% lower on a 1.8% decrease in prices for living room, kitchen, and dining room furniture, while the apparel price index was 0.2% higher as 3.9% higher prices for girl’s apparel and a 4.5% increase in prices for men’s outwear was only partially offset by a 6.6% drop in prices for women’s outwear…prices for transportation commodities other than fuel were down 0.2%, as prices for used cars and trucks were down another 0.6% after falling 1.0% in July, 1.1% in June and 1.3% in May…at the same time, prices for medical care commodities were 1.1% higher on a 1.3% increase in prescription drug prices…meanwhile, the recreational commodities index rose 0.1% as another 2.1% drop in TV prices was more than offset by a 1.5% increase in photographic equipment, a 5.3% increase in recreational book prices, and 1.0% higher prices for toys, games, hobbies and playground equipment…meanwhile, the education and communication commodities index was unchanged as a 1.3% price drop for computer software and accessories offset a 1.6% increase in prices for college textbooks….lastly a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ was up 0.4% on a 0.9% increase in prices for infants equipment and an 0.8% increase in cigarette prices..

within core services, the price index for shelter rose 0.3% on a 0.4% increase in rents, a 0.3% increase in owner’s equivalent rent, and a 2.3% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.2% and other household operation costs were 0.1% lower….at the same time, the index for medical care services rose 0.9% as hospital services rose 1.7% and health insurance was up 1.1%….meanwhile, the transportation services index was up 0.1% despite a 3.4% decrease in car and truck rentals as intercity transportation services rose 1.5% and motor vehicle insurance rose 0.5%…on the other hand, the recreation services index fell 0.1% as video & audio rental services fell 0.8% and admissions to sporting events fell 0.4%…meanwhile, the index for education and communication services rose 0.1% as land-line telephone services rose 0.6% while college tuitions fell 0.4%…lastly, the index for other personal services was up 0.1% with no increase greater than the 0.2% increase in haircut prices…among core prices, only televisions, which are now 20.6% cheaper than a year ago, saw prices change by more than 10% over the past year…

Industrial Production and Capacity Utilization Both Down 0.4% in August

the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.4% in August after rising by a revised 0.6% in July…as a result, industrial production is now down 1.1% from a year ago, as it had previously seen three consecutive quarter over quarter decreases…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 104.4 in August from 104.9 in July, which was unchanged from what was reported for July a month ago…at the same time, the June reading for the index was revised up from 104.1 to 104.3..

the manufacturing index, which accounts for more than 77% of the total IP index, fell by 0.4, from 103.4 in July to 103.0 in August, after July’s manufacturing index was revised down from 103.6…. meanwhile, the mining index, which includes oil and gas well drilling, rose from 104.5 in July to 105.6 in August, after the July index was revised up from 104.2….nonetheless, the mining index still remains 9.3% lower than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.4% in August after rising 2.1% in July and a revised 2.9% in June…we would look for that August utility index to ultimately be revised higher, since population adjusted temperatures in August were slightly more above normal than the population adjusted temperatures of July

this report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell from 75.9% in July to 75.5% in August…capacity utilization of NAICS durable goods production facilities rose fell from 76.3 in July to 75.8 in August, after July’s figure was revised down from 76.5%, while capacity utilization for non-durables producers fell from a downwardly revised 74.8% to 74.6%…capacity utilization for the mining sector rose to 76.2% in August, up from 75.2% in July, which was originally reported as 74.9%, while utilities were operating at 80.4% of capacity during August, down from their 81.7% of capacity during July, which was revised up from 81.0%…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 capacity utilization for a handful of other special categories….

Producer Prices Flat in August on Lower Food and Energy Prices, Higher Core Services

the seasonally adjusted Producer Price Index (PPI) for final demand netted no change in August as prices for finished wholesale goods fell by 0.4%, while margins of final services providers rose by 0.1%…this followed a July report that showed the overall PPI had decreased 0.4%, with prices for finished goods down 0.4% while final demand for services fell 0.3%….producer prices are now unchanged from a year ago, since most of the price decreases relating to lower oil and commodity prices went by the boards in early 2015…

as we noted, the index for final demand for goods, aka ‘finished goods’, fell by 0.4% in August, after falling 0.4% in July but rising by 0.8% in June, 0.7% in May and 0.2% in April, as the index for wholesale energy prices fell 0.8% from July to August and the price index for wholesale foods was 1.6% lower, while the index for final demand for core wholesale goods (ex food and energy) rose 0.1%…major wholesale price changes included a 32.2% drop in wholesale prices for eggs and an 11.5% drop in prices for fresh and dried vegetables, while lower wholesale prices for heat oil (down 7.6%), diesel fuel (-6.1%) and LP gas (-5.8%) dragged the energy index lower…

meanwhile, the index for final demand for services rose by 0.1% in August after falling by 0.3% in July and rising 0.4% in June, as the index for final demand for trade services fell 0.6%, the index for final demand for transportation and warehousing services fell 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.5% higher….noteworthy among trade services was a 6.0% increase in seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers, a 4.2% increase in margins for a apparel wholesaling, a 2.9% drop in margins for machinery and equipment wholesaling and a 5.2% drop in margins for chemicals and related products wholesaling…among transportation and warehousing services, margins for air transport of freight fell 1.8% and margins for airline passenger services fell 1.7%…in the core final demand services index, margins for securities brokerage, dealing, investment advice, and related services, margins for passenger car rental services, and margins for residential property sales and leases, brokerage fees and commissions were all 2.8% higher..

this report also showed the price index for processed goods for intermediate demand decreased by 0.1%, after rising 0.2% in July, 0.9% in June, 0.8% in May but also after falling monthly from last July through March, as prices for intermediate processed goods still remain 3.7% lower than in August a year ago…. the price index for intermediate energy goods fell by 1.1%, prices for intermediate processed foods and feeds fell 1.9%, while the price index for processed goods for intermediate demand less food and energy was 0.3% higher…meanwhile, the price index for intermediate unprocessed goods was down by 2.8%, after falling by 0.4% in July but 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 August decrease was a 6.8% drop in the index for crude energy goods, as prices for crude oil fell 9.1%; at the same time, the index for unprocessed foodstuffs and feedstuffs fell 1.8%, while the index for core raw materials other than food and energy materials was 0.8% higher…. this raw materials index is now 8.4% lower than it was a year ago, but more than 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 unchanged in August, after rising 0.3% higher in July and 0.8% in June, as the index for trade services for intermediate demand fell 1.3%, while the index for transportation and warehousing services for intermediate demand was 0.1% higher, and the core price index for services less trade, transportation, and warehousing for intermediate demand was up 0.4%…driving the increase in prices for services for intermediate demand was a 2.8% increase in the index for intermediate services related to portfolio management; in addition, the indexes for loan services (partial); broadcast and network television advertising time sales; courier, messenger, and  U.S. postal services; and machinery and equipment parts and supplies wholesaling also rose…over the 12 months ended in August, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 1.4% higher than it was a year ago…    

July Business Sales Down 0.2%, Business Inventories Unchanged

after the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July (pdf), which incorporates the revised July retail data from that August 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 $1,303.6 billion in July, down 0.2 percent (±0.1%) from June revised sales, and down 0.8 percent (±0.4%) from July sales of a year earlier…note that total June sales were also revised down from the originally reported  $1,307.8 billion to $1,306.2 million….manufacturer’s sales were down 0.2% to $458,864 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 0.1% to $402,872 million, while wholesale sales fell 0.4% to $441,865 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,813.2 billion at the end of July, virtually unchanged (±0.1%)* from June, but 0.5 percent (±0.6%)* higher than in July a year earlier…the value of end of June inventories was revised up slightly from the $1,813.7 billion reported last month to $$1,813.8 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $620,329 million, 0.1% higher than in June, inventories of retailers were valued at $601,564 million, 0.3% less than in June, while inventories of wholesalers were estimated to be valued at $591,261 million at the end of July, statistically unchanged from June…

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index, which was down 0.4% in the aggregate in July…two weeks ago, we looked at real factory inventories with that adjustment, and judged they would provide a substantial boost to 3rd quarter GDP; similarly, last week we found that real wholesale inventories would also provide a boost to GDP…this week’s real retail inventories for July, after a 0.4% price adjustment of the 0.3% nominal value decline, would have increased by about 0.1% over June, in a second quarter that saw producer price index increases of 0.5%, 0.7%, and 0.8% in April, May and June reduce real inventories…thus it appears that retail inventories are also on track to add incrementally to the growth of 3rd quarter GDP..

 

(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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