June’s retail sales, industrial production and new housing construction; May’s business inventories

major reports that were released this week included Retail Sales for June, the Business Sales and Inventories Report for May, and the June report on New Residential Construction, all from the Census Bureau, and the June report on Industrial Production and Capacity Utilization from the Fed…the week also saw the release of the Regional and State Employment and Unemployment Report for June from the Bureau of Labor Statistics and the first two regional Fed manufacturing indexes for July: the Empire State Manufacturing Survey from the New York Fed, which covers New York state, southwestern Connecticut, and northern New Jersey, saw their headline general business conditions index fall from +25.0 in June to +22.6 in July, still suggesting an ongoing strong expansion of First District manufacturing, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose from +19.9 in June to +25.7 in July, suggesting a more robust expansion of that region’s manufacturing…

June Retail Sales Up 0.5% After May Sales Revised Higher

seasonally adjusted retail sales rose 0.5% in June after retail sales in May rose 1.3%, revised from the 0.8% increase reported a month ago….the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $506.8 billion during the month, which was a increase of 0.5 percent (±0.4%) from May’s revised sales of $504.3 billion, and 6.6 percent (±0.5 percent) above the adjusted sales of June of last year…May’s seasonally adjusted sales were revised from the $502.0 billion reported last month to $504.34 billion, while April sales were revised a bit lower, from $497.9 billion to $497.776 billion…the combined increase of nearly $2.5 billion in sales revisions for those two months would add almost $10 billion at an annual rate to 2nd quarter PCE, which would in turn add roughly 23 basis points to our previous estimate of the contribution of April and May PCE to 2nd quarter GDP…estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 3.3% in June, from $531,045 million in May to $513,622 million in June, while they were up 6.3% from the $483,338 million of sales in June 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 pair of columns below gives us the seasonally adjusted percentage change in sales for each type of retail business from May to June and the year over year percentage change for those businesses since last June; the second pair of columns gives us the revised figures for May’s report, with April to May and the May 2017 to May 2018 change shown; for your reference, our copy of this table as it appeared in the May report, before this month’s revisions, is here….lastly, the third pair of columns shows the percentage change of the recent 3 months of sales (April, May and June) from the preceding three months (January, February and March) and from the same three months of a year ago…. 

to generate real personal consumption of goods data from this retail sales report, the BEA uses corresponding price changes from the consumer price index, which we reviewed last week…since that report showed that the composite price index for all goods less food and energy goods was unchanged in June, the overall impact of price changes on real sales will generally be minimal; however, there will be some significant impacts for certain types of sales..for instance, while nominal sales at car dealers were up 1.0%, the price index for transportation commodities other than fuel was up 0.5%, with prices for new cars and trucks up 0.4% and prices for used cars and trucks up 0.7%; that means that real sales at auto dealers were only up around 0.5%…on the other hand, while sales at clothing stores were 2.5% lower in June, the apparel price index was down 0.9%, meaning a portion of that sales drop was due to lower prices, and that real sales of clothing probably only fell around 1.6%…in addition, adjusting food and energy sales for price changes must be done separately; the CPI report showed that the food price index rose 0.2% in June, with both the indexes for food purchased for use at home and food bought for eating away from home 0.2% higher in June…with nominal sales at food and beverage stores down 0.3% in June. that price increase means that real sales of food were down about 0.5%…likewise, the 1.5% nominal increase in sales at bars and restaurants would be reduced to a real sales increase of about 1.3%…meanwhile, while sales at gas stations were up 1.0%, there was a 0.5% increase in the retail price of gasoline, so real sales of gasoline were likely only up about 0.5%…

Industrial Production Up 0.6% in June After May’s Output is Revised Lower

the Fed’s G17 release on Industrial production and Capacity Utilization for June indicated that seasonally adjusted industrial production rose by 0.6% in June after falling by a revised 0.5% in May and rising by a revised 1.1% in April, and is now up 3.8% from a year ago, as it rose at a 6.0% annual rate in the 2nd quarter…to the extent that this report plays into GDP, that quarterly increase suggests a net addition to GDP of that magnitude across the components that this report covers…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 107.7 in June from 107.1 in May, which was originally reported at 107.3…at the same time, the April reading for the IP index was revised up from 107.4 to 107.6, which meant that the May industrial production decrease was revised from -0.1% to -0.5%…

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.8%, from 103.1 in May to 103.9 in June, after the May index was revised from 103.5 to 103.1, now down 1.0% from April…meanwhile, the mining index, which includes oil and gas well drilling, increased for the 5th consecutive month, rising from 122.2 in May to a record high of 123.7 in June, 12.9% higher than it was a year ago….finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, fell 1.5% to 106.2 in June, after falling by a revised 0.7% to 107.8 in May, while it still remains 5.0% above its year earlier reading…

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 rose to 78.0% in June from 77.7% in May, which had originally been reported at 77.9%, before estimates for industrial capacity for 2018 were revised for this release….capacity utilization by NAICS durable goods production facilities rose from 74.5% in May to 75.6 in June, while capacity utilization for non-durables was unchanged at 76.6%….capacity utilization for the mining sector rose to 92.7% in June, up from 92.1% in May, which was originally reported as 92.4%, while utilities were operating at 78.9% of capacity during June, down from a revised 80.2% May, which was originally published as 79.4%…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….   

New Housing Construction and Permits Down in June

the June report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units that were started in June was at a seasonally adjusted annual rate of 1,173,000, which was 12.3 percent (±8.3 percent) below the revised May estimated annual rate of 1,337,000 units started, and 4.2 percent (±10.2 percent)* below last June’s pace of 1,225,000 housing starts a year…the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, June’s housing starts could have been up by 6.0% or down by as much as 14.4% from those of a year ago, with correspondingly large revisions outside of that range possible…in this report, the annual rate for May housing starts was revised from the 1,350,000 reported last month to 1,337,000, while April starts, which were first reported at a 1,278,000 annual rate, were revised down from last month’s initial revised figure of 1,286,000 annually to a 1,276,000 annual pace with this report….those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 111,500 housing units were started in June, down from the 123,800 units started in May and the 117,200 starts in April…of those housing units started in June, an estimated 83,800 were single family homes and 26,700 were units in structures with more than 5 units, down from the revised  89,000 single family starts and the 33,800 units started in structures with more than 5 units in May…

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 broadly revised housing starts data…in June, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,273,000 housing units, which was 2.2 percent (±1.2 percent) below the revised May rate of 1,301,000 permits, and 3.0 percent (±1.1 percent) below the rate of building permit issuance in June a year earlier…the “revised” annual rate for housing permits issued in May was unchanged from what was reported last month….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 119.800 housing units were issued in June, down from the revised estimate of 125,000 new permits issued in May…the June permits included 81,300 permits for single family homes, down from 84,400 in May, and 35,000 permits for housing units in apartment buildings with 5 or more units, down from 37,600 such multifamily permits a month earlier… for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.173 Million Annual Rate in June and Comments on June Housing Starts

Business Sales Up 1.4% in May, Business Inventories Up 0.4%

following the release of the June retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for May (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 $1,449.7 billion in May, up 1.4 percent (±0.2 percent) from April’s revised sales, and up 8.6 percent (±1.2 percent) from May sales of a year earlier…note that total April sales were revised from the originally reported $1,425.9 billion to $1,429.3 billion…manufacturer’s sales were up 0.6% from April at $496,074 million in May, and retail trade sales, which exclude restaurant & bar sales from the revised May retail sales reported earlier, rose 1.1% to $444,614 million, while wholesale sales rose 2.5% to $508,990 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,936.9 billion at the end of May, up 0.4 percent (±0.1%) from April, and 4.4 percent (±1.2 percent) higher than in May a year earlier…the value of end of April inventories was revised down from the $1,930.0 billion reported last month to $1,929.4 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $668,435 million, 0.2% more than in April, while inventories of retailers were valued at $634,939 million, 0.4% more than in April, and inventories of wholesalers were estimated to be valued at $633,547 million at the end of May, up 0.6% from April…

in national accounts reports, the various categories of business inventories will be adjusted for price changes using item appropriate price indexes from the producer price index….the May producer price index reported that prices for finished goods were on average 1.0% higher, that prices for intermediate processed goods were 1.5% higher, and prices for unprocessed goods averaged 2.5% higher…together those price increases indicate that corresponding real inventories will be lower than the nominal amounts by those percentages…since 1st quarter real business inventories were modestly higher but still a small drag on GDP growth, any real inventory decreases in the 2nd quarter will subtract from the growth rate of 2nd quarter GDP in their entirety…


(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 picked from the aforementioned GGO posts, contact me…)     

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