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

major reports released during the past week included Retail Sales for May and Business Sales and Inventories for April, both released by the Census bureau, the May Consumer Price Index, the May Producer Price Index, and the May Import-Export Price Index, all from the Bureau of Labor Statistics, the report on Industrial Production and Capacity Utilization for May from the Fed, and the May report on New Residential Construction from the Census Bureau…in addition, this week also saw the release of the Regional and State Employment and Unemployment for May from the BLS, and the release of the first two regional Fed manufacturing indexes for June: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -1.0 in May to + 19.8 in June, suggesting a return to expansion in First District manufacturing after an anomalous slow month, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions fell from +38.8 in May to +27.6 in June, still suggesting an ongoing robust expansion in that region’s manufacturing…

Consumer Price Index Down 0.1% in May on Lower Energy Costs

the consumer price index was 0.1% lower in May, as a drop in the price of gasoline and core commodities more than offset modestly higher priced food and rent…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell 0.1% in May after rising 0.2% in April but after falling 0.3% in March….the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually rose from 244.524 in April to 244.733 in May, which left it statistically 1.875% higher than the 240.229 index reading in May of last year…with lower prices for energy a major reason for the decrease in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 251.642 to 251.835, which left the core index 1.733% ahead of its year ago reading of 247.544…

the volatile seasonally adjusted energy price index decreased by 2.7% in May, after it had risen 1.1% in April, fallen by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% in September…thus, energy prices are still averaging 5.4% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016…prices for energy commodities were 6.2% lower in May, while the index for energy services rose by 0.7%, after rising 0.9% in April….the decrease in the energy commodity index included a 6.4% drop in the price of gasoline, the largest component, and a 2.8% seasonally adjusted decrease in the index for fuel oil, even as the underlying price of fuel oil only fell 0.8% on an unadjusted basis…within energy services, the index for utility gas service rose by 1.9% after rising by 2.2% in April, and hence utility gas is now priced 12.8% higher than it was a year ago, while the electricity price index was up 0.3%, after it rose 0.6% in April….energy commodities are still priced 6.1% above their year ago levels, with gasoline prices averaging 5.9% higher than they were a year ago, while the energy services price index is 4.8% higher than last May, as even electricity prices have increased by 2.7% over that period…

the seasonally adjusted food price index rose 0.2% in May, after rising 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as prices for food purchased for use at home rose 0.1% in May while prices for food bought to eat away from home rose 0.2%, with average prices at fast food outlets and at full service restaurants both 0.2% higher…in the food at home categories, the price index for cereals and bakery products increased by 0.3% as prices for flour and mixes were 0.9% higher…the price index for the meats, poultry, fish, and eggs group was also up 0.3% as fresh chicken prices rose 1.9%, and fish and seafood prices rose 1.7%, while the index for dairy products was also 0.3% higher on 1.8% increase in the price of ice cream….the fruits and vegetables index, on the other hand, was 0.6% lower on a 1.5% decrease in prices for fresh fruits and 0.8% decreases for both canned and frozen fruits and vegetables….the beverages index was 0.1% higher as noncarbonated juices and drink prices rose 0.9%….lastly, prices in the ‘other foods at home’ category were on average 0.1% lower, even as sugar prices rose 2.2% and salad dressings rose 2.3%…..among food at home line items, only eggs, which are still priced 14.5% lower than a year ago, have seen price changes 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 0.1% in both May and in April after falling by 0.1% in March but after rising by 0.2% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% last April, May and June, the composite of all goods less food and energy goods was down 0.3% in May, while the more heavily weighted composite for all services less energy services was 0.2% higher….among the goods components, which will be used by the Bureau of Economic Analysis to adjust May retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.2%, as the index for window and floor coverings fell 2.6%…the apparel price index was also 0.2% lower, led by a 1.5% decrease in prices for women’s apparel….prices for transportation commodities other than fuel were also down 0.2%, as prices for new vehicles fell 0.2% and prices for used cars and trucks also fell 0.2%…on the other hand, prices for medical care commodities were 0.4% higher on a 0.7% increase in prices for medical equipment and supplies….but the recreational commodities index also fell 0.2% on 3.8% lower prices for audio equipment, while the education and communication commodities index was 0.5% lower on a 0.9% decrease in prices for college textbooks and a 1.3% decrease in prices for telephone hardware…lastly, a separate price index for alcoholic beverages was up 0.3%, while the price index for ‘other goods’ was down 0.1% on a 0.5% decrease in the index for personal care products…

within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents, a 0.2% increase in homeowner’s equivalent rent, and a 0.5% increase in the household operations services index….the index for medical care services was down 0.1% as prices for health insurance and physicians services both fell 0.2%…meanwhile, the transportation services index was 0.3% higher on a 2.3% increase in car and truck rental and a 1.1% increase in vehicle insurance…the recreation services price index was up 0.1% on a 0.6% hike in cable and satellite television service, while the index for education and communication services was unchanged as elementary and high school tuition and fees rose 0.4% and delivery services were 0.6% lower…lastly, the index for other personal services was unchanged as tax preparation services rose 0.3% and legal services were 0.3% lower…among core prices, only televisions, which are still 16.0% cheaper than a year ago, and wireless phone services, which have now dropped 12.5% from a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude.. 

May Retail Sales Down 0.3%,  Mostly on Lower Prices

seasonally adjusted retail sales fell 0.3% in May after retail sales for April rose 0.4%….the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $473.8 billion for the month, which was an decrease of 0.3 percent (±0.5%)* from April’s revised sales of $475.0 billion but still 3.8 percent (±0.7%) above the adjusted sales of May of last year…April’s seasonally adjusted sales were revised from the $475.0 billion originally reported to $474.9 billion, while March sales were also revised a bit lower, from $473.1 billion to $473.0 billion, with this report….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 6.0%, from $467,843 million in April to $495,814 million in May, while they were up 5.2% from the $471,434 million of sales in May a year ago…

included below is the table of the monthly and yearly percentage changes in sales by business type taken from the Census pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly estimates (now called “preliminary”) as revised in this report, likewise for each business type, with the March to April change under “Mar 2017 revised” and the revised April  2016 to April 2017 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance April estimates, before this month’s revision, is here….

May 2017 retail sales table

as we saw in our review of the consumer price index, the composite price index for all goods less food and energy goods was down 0.3% in May, which suggests that real retail sales will be close to unchanged month over month, not likely positive, but certainly not as bad as the headlines look…for instance, sales at car dealers were down 0.2% while prices of new and used cars were both down 0.2%, which suggests unit sales of vehicles were close to flat…in a similar manner, grocery store sales, nominally up 0.1% in May, were also really unchanged when the 0.1% increase in prices is applied to that increase in dollar sales…also note that the 2.4% drop in sales at gas stations was entirely due to the 6.4% drop in the price of gasoline; and hence real gas station sales were likely higher…so we don’t expect this report to reflect much of a downturn, if any, in real personal consumption expenditures of goods for May, when the BEA computes those figures in the Income and Outlays report scheduled for release two weeks from now…

Producer Prices Flat in May as Increases in Margins for Services Offset Lower Wholesale Energy Prices

the seasonally adjusted Producer Price Index (PPI) for final demand was unchanged in May, as prices for finished wholesale goods decreased 0.5%, while margins of final services providers increased by 0.3%…this followed an April report that indicated the PPI was 0.5% higher, with prices for finished wholesale goods up 0.5%, while margins of final services providers increased by 0.4%, and a March report that indicated the PPI was 0.1% lower, with prices for finished wholesale goods down 0.1%, while margins of final services providers also decreased by 0.1%….on an unadjusted basis, producer prices are now 2.4% higher than a year earlier, down from the 2.5% YoY increase indicated a month ago, which had been the largest year over year increase in the PPI since February 2012…

as noted, the price index for final demand for goods, aka ‘finished goods’, fell by 0.5% in May, after rising by 0.5% in April, falling by 0.1% in March, and rising by 0.3% in February, 1.0% in January, 0.6% in December, 0.1% in November, 0.3% in October, and 0.5% in September.. the index for wholesale energy prices fell 3.0%, the price index for wholesale foods fell 0.2%, while the index for final demand for core wholesale goods (ex food and energy) rose 0.1%…the largest wholesale energy price change was a 11.2% decrease in wholesale prices for gasoline, while the wholesale food price index moved down on decreases of 12.3% for fresh fruits and of 16.9% for fresh and dry vegetables….among wholesale core goods, prices for tires increased 2.1%, while the index for pharmaceutical preparations moved up 0.6%…

at the same time, the index for final demand for services rose by 0.3% in May, after rising by 0.4% in April, falling by 0.1% in March but after after rising by a revised 0.2% in February, and by 0.4% in January, as the index for final demand for trade services was up 1.1%, while the index for final demand for transportation and warehousing services fell 0.5%, and the index for final demand for services less trade, transportation, and warehousing services was 0.1% lower….among trade services, seasonally adjusted margins for major fuels and lubricants retailers increased 16.1% while margins for hardware, building materials, and supplies retailers rose 2.8%…among transportation and warehousing services, margins for airline passenger services were 2.1% lower…in the core final demand for services index, margins for passenger car rental rose 4.7% and margins for arrangement of vehicle rentals and lodging fell 6.3%..

this report also showed the price index for processed goods for intermediate demand was 0.1% higher, after rising 0.5% in April, 0.1% in March, and by a revised 0.3% in February and 1.2% in January….the price index for intermediate energy goods fell 0.3%, while prices for intermediate processed foods and feeds rose 0.5%, and the core price index for processed goods for intermediate demand less food and energy was 0.2% higher…prices for intermediate processed goods are now 4.8% higher than in May a year ago, now the seventh consecutive year over year increase, after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016….

meanwhile, the price index for intermediate unprocessed goods fell 3.0% in May, after rising 3.3% in April, falling 4.2% in March and 0.2% in February, but after rising 4.0% in January and 7.3% in December…the index for crude energy goods fell 9.3%, as crude oil prices fell 19.3%, while the price index for unprocessed foodstuffs and feedstuffs rose 1.8%, as the index for slaughtered steers and heifers jumped 9.1%…in addition, the index for core raw materials other than food and energy materials fell 0.7%, as wholesale prices for iron and steel scrap fell 2.3% and wholesale prices for paper scrap fell 8.5% … this raw materials index is now up just 7.5% from year ago, in contrast to the year over year increase of 19.3% that we saw in February, just 3 months ago..

lastly, the price index for services for intermediate demand was unchanged in May, after being 0.9% higher in April, 0.2% lower in March, and a revised 0.4% higher in February and in January.. the index for trade services for intermediate demand was 1.1% higher, as margins for paper and plastics products wholesalers rose 5.4 percent…the index for transportation and warehousing services for intermediate demand was down 0.1%, as intermediate prices for air transportation of passengers fell 2.1%…meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.3% lower, as margins for intermediate services related to securities brokerage and dealing fell 4.5%…over the 12 months ended in May, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.8% higher than it was a year ago…  

Industrial Production Unchanged in May; Capacity Utilization Down 0.1%

May saw a pullback in durable goods manufacturing, after April saw the largest increase in 26 months, and hence the Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production was unchanged in May after rising by a revised 1.1% in April…industrial production remains 2.2% higher than a year ago, also unchanged from last month’s figure…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was unchanged at 105.0 in May, after April’s index was revised down from the originally reported at 105.1…at the same time, the March reading for the index was revised down from 104.1 to 103.9, while the prior months remain statistically unchanged from previously reported figures…..the average of the April and May production indexes is still more than 1.2% above the average of the 1st quarter months, so to the extent that this report plays into GDP, this report suggests a net addition to GDP of that magnitude in the components that this report influences…

the manufacturing index, which accounts for more than 77% of the total IP index, decreased by 0.4, from 103.7 in April to 103.3 in May, after the manufacturing index for April was revised down from 103.8, the manufacturing index for March was revised down from 102.8 to 102.6, and the manufacturing index for February was revised up from 103.2 to 103.4…the May decrease was driven by a 2.0% pullback in the production of motor vehicle assemblies, which had risen 6.5% in April…. meanwhile, the mining index, which includes oil and gas well drilling, increased for the 4th time in 5 months, as it rose from 108.0 in April to 109.7 in May, and is now 8.3% higher than it was a year ago….finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 0.4% in May after increasing a revised 0.7% in April, as the utility index rose from 102.2 in April to 102.6 in May and hence is now 0.1% above it’s year earlier level…

this report also includes capacity utilization figures, which are expressed as the percentage of our  plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry slipped to 76.6% in May from 76.7% in April, with April’s figure unrevised….capacity utilization for all manufacturing industries fell from a downwardly revised 75.8% in April to 75.5 in May, as utilization of NAICS durable goods production facilities fell from 75.4% in April to 74.7% in May, while capacity utilization for non-durables rose from 77.3% to 77.4%….capacity utilization for the mining sector rose to 84.3% in May, from 83.2% in April, which was originally published as 8.3%, while utilities were operating at 76.6% of capacity during May, up from the revised 76.3% of capacity during April, which was the same as was originally reported….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…. 

April Business Sales Flat%, Business Inventories Down 0.2%

following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April (pdf), which incorporates the revised April retail data from that May report and 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 $1,352.0 billion in April, virtually unchanged (±0.2 percent)* from March revised sales, but up 5.6 percent (±0.3 percent) from April sales of a year earlier…note that total March sales were revised from the originally reported $1,361.0 billion to $1,351.9 billion….manufacturer’s sales were statistically unchanged from March at $470,833 million in April, and retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 0.5% to $418,865 million, while wholesale sales fell 0.4% to $462,344 million..

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,854.2 billion at the end of April, down 0.2 percent (±0.1%) from March, but 1.0 percent (±0.4%) higher than in April a year earlier…the value of end of March inventories was revised from the $1,840.8 billion reported last month to $1,858.3 billion with this release, implying a large upward revision to 1st quarter GDP…seasonally adjusted inventories of manufacturers were estimated to be valued at $649,700 million, 0.1% higher than in March, inventories of retailers were valued at $613,545 million, 0.2% less than in March, while inventories of wholesalers were estimated to be valued at $590,976 million at the end of April, down 0.5% from March…all categories of business inventories are adjusted for price changes for national accounts data using appropriate price index components from the producer price index…since April producer prices averaged a 0.5% increase, real business inventories for April will thus be lower than the end of the 1st quarter by an average of 0.7%, which would be a major negative for 2nd quarter GDP,  if that’s not changed by real increases during May or June…

New Housing Construction, Permits Reported Down in May

the May report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started was at a seasonally adjusted annual rate of 1,092,000, which was 5.5 percent (±11.9 percent)* below the revised April estimated annual rate of 1,156,000 housing units started, and was 2.4 percent (±11.4 percent)* below last May’s rate of 1,119,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, May housing starts could have been up by 6.4% or down by as much as 17.4% from those of April, with even larger revisions possible…in this report, the annual rate for April housing starts was revised from the 1,172,000 reported last month to 1,156,000, while March starts, which were first reported at a 1,215,000 annual rate, were revised from last month’s initial revised figure of 1,203,000 annually down to 1,189,000 annually with this report….these annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 102,300 housing units were started in May, down from the 105,700 units started in April…of those housing units started in May, an estimated 76,800 were single family homes and 24,300 were units in structures with more than 5 units, down from the revised 77,300 single family starts and 27,100 units started in structures with more than 5 units in April…

the monthly data on new building permits, with a smaller margin of error and hence smaller revisions, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in May, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,168,000 housing units, which was 4.9 percent (±0.9 percent) below the revised April permit rate of 1,228,000 and 0.8 percent (±1.1%) below the rate of permit issuance in May a year earlier…the annual rate for housing permits issued in April was revised from 1,229,000 to 1,228,000..quoting the report on the types of permits: Single-family authorizations in May were at a rate of 779,000; this is 1.9 percent (±1.0 percent) below the revised April figure of 794,000. Authorizations of units in buildings with five units or more were at a rate of 358,000 in May.….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 112,900 housing units were issued in May, up from the revised estimate of 102,600 new permits issued in April… for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.092 Million Annual Rate in May and Comments on May 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 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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