July’s retail sales, industrial production, and new home construction; June’s business inventories

The past week’s key reports were the Retail Sales for July and Business Sales and Inventories for June, both from the Census bureau, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau…other reports released this week included Regional and State Employment and Unemployment for July and the July Import-Export Price Index, both from the Bureau of Labor Statistics, and the first two regional Fed manufacturing surveys for August: 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 +22.6 in July to +25.6 in August, suggesting a broad based expansion of First District manufacturing, 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 fell from +26.7 in July to +11.9 in August, still suggesting ongoing growth of that region’s manufacturing industries, as any positive reading would…

July Retail Sales Rose 0.5% After May and June Sales were Revised Lower

Seasonally adjusted retail sales were 0.5% higher in July after retail sales for May and June were revised lower….the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $507.5 billion during  the month, which was 0.5 percent (± 0.4 percent) higher than June’s revised sales of $504.9 billion and 6.4 percent (±0.5 percent) above the adjusted sales in July of last year…June’s seasonally adjusted sales were revised from the $506.8 billion reported last month to $504.9 billion, while May sales were revised from $504.3 billion to $503.955 billion with this release….estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually fell 0.7%, from $510,929 million in June to $507,575 million in July, while they were up 6.4% from the $476,983 million of sales in July a year ago…combined, the revisions to May and June indicate that 2nd quarter sales were roughly $2.25 billion lower than previously reported, which would subtract about $9.0 billion from the BEA’s calculation of 2nd quarter personal consumption expenditures at an annual rate before the inflation adjustment, which should be enough to reduce 2nd quarter GDP by 0.06 percentage points when the 2nd estimate is published at the end of the month…

Included below we have 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 18 (r)evised” and the revised June 2017 to June 2018 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 2018 retail sales table

In computing the real personal consumption of goods data for national accounts from this July retail sales report, the BEA will use corresponding price changes from the July 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 up 0.1% in July, we can thus figure that real retail sales excluding food and energy will on average be 0.1% lower than core retail sales shown above…however, the impact of price changes for different types of sales will vary considerably; for instance, while nominal sales at car dealers were up 0.2%, the price index for transportation commodities other than fuel was up 0.7%, as prices for new cars and trucks rose 0.3% and prices for used cars and trucks rose 1.3%…that means that real unit sales at auto dealers was actually on the order of 0.5% lower…for sales of goods for which prices fell, the impact will be the opposite; ie, while sales at clothing stores were 1.3% higher in July, the apparel price index was down 0.3%, meaning that real sales of clothing probably rose around 1.6%…in addition to those core sales, adjusting food and energy sales for price changes must be done separately; the CPI report showed that the food price index rose 0.1% in July, with the index for food purchased for use at home 0.2% higher, while prices for food bought for eating away from home were 0.1% higher, hence, with nominal sales at food and beverage stores up 0.6% in July. that 0.2% price increase means that real volume sales of food were up about 0.4%…likewise, the 1.3% nominal increase in sales at bars and restaurants would be adjusted to a real sales increase of about 1.2%…meanwhile, while sales at gas stations were up 0.8%, there was a 0.6% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 1.4%, with the caveat that gasoline stations do sell more than gasoline…averaging real sales computed thusly together, we’d estimate that income and outlays report for July will show that real personal consumption of goods rose 0.4% in July… the single month of that metric will account for 8% of 3rd quarter GDP…

Industrial Production Up 0.1% in July After Prior Months Manufacturing Revised Higher

The Fed’s G17 release on Industrial production and Capacity Utilization for July indicated that industrial production rose by 0.1% in July after rising by 1.0% in June but after falling 0.8% in May…however, after revisions, industrial production is now up 4.2% from a year ago, as compared to last month’s 3.8% year over year increase…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 108.0 in July from 107.9 in June, which was revised from the 107.7 reported for June a month ago…at the same time, the May reading for the IP index was revised up from 107.1 to 106.8, the April reading for the index was revised up 107.6 to 107.7, and the March index reading was revised from 106.4 to 106.5…

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3% to 103.4 in July, after June’s manufacturing index was revised from 103.9 to 104.3, May’s manufacturing index was revised from 103.1 to 103.4, April’s manufacturing index was revised from 104.2 to 104.4, the March manufacturing index was revised up from 103.6 to 103.7, and the February manufacturing index was revised from 103.7 to 103.8…. meanwhile, the mining index, which includes oil and gas well drilling, slipped from 123.7 in June to 123.4 in July, which, after 5 consecutive months of strong growth, is still 12.9% higher than it was a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 0.5% to 104.5 in July, after the June utility index was revised from 106.2 to 105.0, the May index was revised from 107.8 to 105.7, and prior months were revised lower as well…nonetheless, the utility index still remains 2.3% above its year ago reading of 102.1..

This report also provides capacity utilization figures, which are 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 was unchanged at 78.1% in July, after capacity utilization for June was revised from 78.0% to 78.1%, and after capacity utilization for the prior 4 months was revised as well….capacity utilization by NAICS durable goods production facilities rose from 75.7 in June to 75.9 in July, as capacity utilization of motor vehicles and parts manufacturers rose from 78.6% to 79.3%, while capacity utilization for non-durables producers rose from 76.9% to 77.0% at the same time….on the other hand, capacity utilization for the mining sector fell to 92.0% in July from 92.8% in June, which was originally reported as 92.7%, while utilities were operating at 77.5% of capacity during July, down from their 78.0% of capacity during June, a figure that was originally reported at 78.9%…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….

New Housing Starts and Building Permits are Reportedly Higher in July

The July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,168,000, which was 0.9 percent (±11.5 percent)* above the revised June estimated annual rate of 1,158,000 housing units started, but was 1.4 percent (±11.7 percent)* below last July’s pace of 1,185,000 housing starts annually…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, July’s housing starts could have been down by 10.6% or up by as much as 12.4% from those of June, with even larger revisions eventually possible…in this report, the annual rate for June housing starts was revised from the 1,173,000 reported last month to 1,158,000, while May starts, which were first reported at a 1,350,000 annual rate, were revised down from last month’s initial revised figure of 1,337,000 annually to an annual rate of 1,329,000 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 110,400 housing units were started in July, down from the 110,600 units started in June…of those housing units started in July, an estimated 81,800 were single family homes and 28,300 were units in structures with more than 5 units, down from the revised 83,900 single family starts in June, but up from the 25,800 units started in structures with more than 5 units in June…

As we’ve pointed out previously, 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 July, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,311,000 housing units per year, which was 1.5 percent (±1.3 percent) above the revised June annual rate of 1,292,000 permits, and was 4.2 percent (±1.7 percent) above the rate of building permit issuance in July a year earlier…the annual rate for housing permits issued in June was revised from 1,273,000 to 1,292,000 ….again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 114,000 housing units were issued in July, down from the revised estimate of 121,600 new permits issued in June…the July permits included 77,600 permits for single family homes, down from 81,700 single family permits in June, and 33,500 permits for housing units in apartment buildings with 5 or more units, down from 36,600 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 at 1.168 Million Annual Rate in July and Comments on July Housing Starts… 

June Business Sales Up 0.3%, Business Inventories Up 0.1%, Lower than Estimated by the BEA

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 June retail data from that July retail 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 $1,452.2 billion in June, up 0.3 percent (±0.1%) from May revised sales, and up 8.2 percent (±1.2 percent) from June sales of a year earlier…note that total May sales were revised from the originally reported $1,449.7 billion to $1,447.55 billion, now up 1.3% from April, rather than up 1.4% as had previously been reported….manufacturer’s sales were up 1.0% to $501,383 million in June, while retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, were statistically unchanged at $444,154 million, while wholesale sales fell 0.1% to $506,658 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,937.2 billion at the end of June, up 0.1 percent (±0.1%) from May, and 4.0 percent (±1.3%)* higher than in June a year earlier…the value of end of May inventories was revised down from the $1,936.9 billion reported last month to $1,935.563 billion…seasonally adjusted inventories of manufacturers were estimated to be valued at $669,270 million at the end of June, 0.1% higher than those at the end of May, inventories of retailers were valued at $635,510 million, 0.1% more than in May, while inventories of wholesalers were estimated to be valued at $632,402 million at the end of June, also up 0.1% from May…

The Key source data and assumptions that accompanied the release of the advance estimate of 2nd quarter GDP indicates that the BEA had assumed that total seasonally adjusted June manufacturing and trade inventories (on a Census basis) would increase by $1.5 billion from the previously published May figures…while this report shows that total June inventories increased by $1.6 billion, May inventories were revised down by about $1.3 billion at the same time…that means that the advance estimate of 2nd quarter GDP overestimated end of June inventories by about $1.2 billion…assuming there is no major change relating to the inflation adjustment on those inventories, a revision to reflect these new figures would be enough to subtract about 0.05 percentage points from 2nd quarter GDP, when the 2nd estimate is released at the end of August…


(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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