March retail sales, industrial production, & new home construction; February’s business inventories

major monthly reports released this week included the Retail Sales report for March and the Business Sales and Inventories report for February from the Census Bureau, the March report on Industrial Production and Capacity Utilization from the Fed, and the March report on New Residential Construction from the Census Bureau…the week also saw the release of the Regional and State Employment and Unemployment Summary for March from the BLS and the first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell to +15.8, down from +22.5 in March, suggesting a slower growth rate for First District manufacturing… meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose to +23.2 in April from +22.3 in March, indicating a significant plurality of the region’s manufacturing firms reported increases in their activity again this month…

Retail Sales Rose 0.6% in March after February and January Sales Revised Lower

seasonally adjusted retail sales increased by 0.6% in March after retail sales for January and February were both revised a bit lower…the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $494.6 billion during the month, which was up by 0.6 percent (±0.5%) from February’s revised sales of $491.8 billion and 4.5 percent (±0.5%) above the adjusted sales in March of last year…February’s seasonally adjusted sales were revised from $492.0 billion down to $491.8 billion, while January’s sales were revised down from $492.3 billion to $492,169 million; as a result, the change from January to February remained at -0.1 percent (±0.2%)*…..estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were up 16.5%, from $437,340 million in February to $509,362 million in March, while they were up 5.1% from the $484,550 million of sales in March of a year ago…

below we include the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf…to once again explain what this table 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 2018 r” (revised) and the February 2017 to February 2018 percentage change as revised in the 2nd column of that pair…(for your reference, our copy of this same table from last month’s advance February estimates, before this month’s revisions, is here)…. lastly, 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 the 1st quarter a year ago….

March 2018 retail sales table

as we can see from this table, the increase in seasonally adjusted March sales was underpinned by a 2.0% increase to $101,295 million in sales at motor vehicle and parts dealers, without which nominal sales would have only increased by 0.2%…but remember, to determine real sales, all these nominal amounts and percentage changes must be adjusted for change in price….as we saw in last week’s release of the March consumer price index, the composite price index for all goods less food and energy goods fell by 0.1%, and gasoline prices fell 4.9%, while both restaurant and grocery prices rose 0.1%…that means we’ll see higher real sales than the nominal sales change for most retail categorizes except for food, and much higher real sales of gasoline…to make a more precise estimate we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales…that would mean, for instance, that March’s clothing store sales, which fell by 0.8% in dollars, should be adjusted with the price index for apparel, which indicated clothing prices were down by 0.6%, to show us that real retail sales of clothing were only down 0.2% in March…then, to get a GDP relevant quarterly change, we’d have to compare such adjusted real clothing sales for the 3 months of the first quarter, January, February and March, with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer…

however, we can more easily get an idea of what GDP quarterly change would show by checking the 5th column of the table above, which shows the percentage change of January thru March sales vis a vis those of October thru December…as you can see, 1st quarter retail sales were up by just 0.2% from those of the 4th quarter, largely due to a 1.6% drop in sales at motor vehicle and parts dealers…over the same period, the composite price index for all goods less food and energy goods rose by 0.4% in January and by 0.1% in February before falling 0.1% in March….hence, the inflation adjustment for the majority of first quarter sales strongly suggests that real retail sales were actually lower in the first quarter than in the last quarter of last year…so despite the apparent jump in March sales, it appears that real retail sales will be a small drag on first quarter GDP…

February Business Sales Up 0.4%, Business Inventories Up 0.6%

after the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February 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 $1,430.4 billion in February, up 0.4 percent (±0.2 percent)* from January’s revised sales, and up 5.8 percent (±0.3 percent) from February sales of a year earlier…note that total January sales were concurrently revised down from the originally reported $1,426.0 billion to $1,424,953 million, now a 0.3% decrease from December….manufacturer’s sales rose 0.2% to $500,514 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 0.1% to $434,004 million, while wholesale sales rose 1.0% to $495,873 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,928.8 billion at the end of February, up 0.6 percent (±0.1%) from the end of January, and 4.0 percent (±0.3%) higher than in February a year earlier…at the same time, the value of end of January inventories was revised up from the $1,917.0 billion reported last month to $1,918.0 billion, still 0.6% higher than January….seasonally adjusted inventories of manufacturers were estimated to be valued at $675,200 million, up 0.3% from January, and inventories of retailers were valued at $628,049 million, 0.4% more than in January, while inventories of wholesalers were estimated to be valued at $625,577 million at the end of February, 1.0% higher than in January… 

Industrial Production Up 0.5% in March on Return to More Normal Temperatures

industrial production increased in March on a jump in the seasonally adjusted output of utilities, which saw greater than normal demand on cooler weather in March, after warmer than normal temperatures had reduced demand across much of the US in February…the Fed’s G17 release on Industrial production and Capacity Utilization for March reported that industrial production rose 0.5% in March after rising by a revised 1.0% in February, which left production 4.5% higher than a year ago…however, this month’s data now reflects the results of an annual revision on March 23rd which left the IP indexes for most months around 1.6% lower than the previously published numbers….hence, the industrial production index, with the benchmark set for average 2012 production to equal to 100.0, was at 107.2 in March, after the February index, which had been published at 108.2 a month ago, was revised up from 106.5 to 106.6, the revised January index was revised up from 105.5 to 105.6, and the revised December index was revised from 105.7 to 105.8…

the manufacturing index, which accounts for more than 77% of the total IP index, rose to 104.2 in March, after the February index was revised from 105.9 to 104.1 in the annual revision and then unrevised in this report….on the other hand, the January manufacturing index was revised from the revised 102.7 to 102.6, and the revised December index was revised from 102.9 to 103.0…taking into account all revisions, the manufacturing index now stands 3.0% above its year ago level, while first quarter manufacturing has grown at a 3.1% annual rate over that of the 4th quarter of 2016….meanwhile, the mining index, which includes oil and gas well drilling, rose 1.0%, from 117.0 in February to 118.2 in March, after the February index was revised down from last month’s reported 117.4, which left the mining index 10.8% higher than it was a year earlier…finally, the utility index, which typically fluctuates due to deviations from normal temperatures, rose by 3.0% in March, from 102.8 to 106.6, after the February utility index was revised from 103.7 to 102.8, down 5.0% from January…

this report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 78.0% in March from 77.7% in February, which was revised from the 78.1% reported in the annual revision …capacity utilization of NAICS durable goods production facilities rose from a revised 75.7% in February to 75.9% in March, while capacity utilization for non-durables producers fell from a revised 77.3% to 77.0%…capacity utilization for the mining sector rose to 90.1% in March from 89.6% in February, which had been reported as 87.6% last month, while utilities were operating at 79.0% of capacity during March, up from their 76.8% of capacity during February, which was previously reported at 76.9%…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..

March Housing Starts and Building Permits Reported Higher

the March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were started at a seasonally adjusted annual rate of 1,319,000 in March, which was 1.9 percent (±12.4 percent)* above the revised estimated annual rate of 1,295,000 in February, and 10.9 percent (±10.0 percent) above last March’s rate of 1,189,000 housing starts a year….the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during March, with the figures in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been down by 10.5% or up by as much as 14.3% from those of February, with revisions of a greater magnitude in either direction still possible…in this report, the annual rate for February housing starts was revised from the 1,236,000 reported last month to 1,295,000, while January starts, which were first reported at a 1,326,000 annual rate, were revised from last month’s initial revised figure of 1,329,000 annually to a 1,339,000 annual rate 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 106,900 housing units were started in March, up from the 90,200 units that were started in February and the 91,300 units that were started in January…

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 housing starts data…in March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,354,000, which was 2.5 percent (±1.4 percent) above the revised February rate of 1,321,000 permits, and was 7.5 percent (±1.4 percent) above the rate of building permit issuance in March a year earlier…the annual rate for housing permits issued in February was revised up from the originally reported 1,298,000….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 115,300 housing units were issued in March, up from the revised estimate of 92,100 new permits issued in February…. for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.319 Million Annual Rate in March and Comments on March 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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