September’s retail sales, industrial production, new housing construction, and existing home sales; August’s business inventories and job openings

Major reports released this past week included Retail Sales for September and Business Sales and Inventories for August from the Census Bureau, Industrial production and Capacity Utilization for September from the Fed, the September report on New Residential Construction from the Census Bureau, the Existing Home Sales Report for September from the National Association of Realtors (NAR), and both the the Job Openings and Labor Turnover Survey (JOLTS) for August and the Regional and State Employment and Unemployment report for September from the Bureau of Labor Statistics…this week also saw the release of the first two regional Fed manufacturing surveys for October: the Empire State Manufacturing Survey for October from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +19.0 in September to +21.1 in October, suggesting that First District manufacturing was growing at a substantial pace, while the Philadelphia Fed Manufacturing Survey for October, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions slipped from +22.9 in September to +22.2 in October, also suggesting ongoing strong growth in that region’s manufacturing…

Retail Sales Increased by 0.1% in September after July and August Sales were Revised Lower

Seasonally adjusted retail sales inched up 0.1% in September after retail sales for July and August were both revised 0.1% lower…the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $509.0 billion during the month, which was 0.1 percent (±0.5%) higher than August’s revised sales of $508.5 billion and 4.7 percent (±0.5 percent) above the adjusted sales in September of last year…August’s seasonally adjusted sales were revised from $509.0 billion to $508.5 billion, while July sales were also revised lower, from $508.6 billion to $508,230 million, with this release….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 7.5%, from $525,319 million in August to $485,752 million in September, while they were up 3.1% from the $471,043 million of sales in September a year ago…

Since it’s the end of the quarter for retail sales, we’ll include the entire table from this report showing retail sales by business type, including the quarter over quarter data…again, to explain what it shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month’s September “advance” report figure in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called “preliminary”) as of this report, with the new July to August percentage change under “Jul 2018 (r)” (revised) and the August 2017 to August 2018 percentage change as revised in the 2nd column of the pair; for your reference, the table of last month’s advance estimate of August sales, before this month’s revisions, is here…. then, the third pair of columns shows the percentage change of the most recent 3 months of this year’s sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and then from the same three months (July, August and September) of a year ago….that first column of that pair gives us a snapshot comparison of 2nd quarter sales to third quarter sales which, after adjustment for price changes, can be useful in estimating the impact of this report on 3rd quarter GDP:

September 2018 retail sales table

To compute the real personal consumption of goods data for national accounts from this September retail sales report, the BEA will used the corresponding price changes from the September consumer price index, which we reviewed last week..since the CPI report showed that the composite price index for all goods less food and energy goods was down 0.3% in September, we can thus figure that real retail sales excluding food and energy will on average be 0.3% higher than the core retail sales shown above, or show an increase of roughly 0.5%…however, the adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 0.8%, the price index for for transportation commodities other than fuel were down 1.2%, as prices for used cars and trucks fell 3.0% while new vehicle prices slipped 0.1%; that would mean that real unit sales at auto & parts dealers was actually on the order of 2.0% higher…on the other hand, while sales at clothing stores were 0.5% higher in September, the apparel price index was 0.9% higher, which means that real sales of clothing actually fell around 0.4%…similarly, since sales at furniture stores were up 1.1% while the price index for household furnishings and supplies increased by 0.2%, that would suggest that real sales at furniture stores only rose 0.9%…on the other hand, while nominal sales at sporting goods, hobby, music and book stores rose 0.7%, the price index for recreational commodities fell 0.6%, so real sales of recreational goods were up roughly 1.3%…

In addition to those core sales, adjusting food and energy retail sales for price changes must be done separately; the CPI report showed that the food price index was unchanged in September, with the price index for food purchased for use at home 0.1% lower, while prices for food bought for eating away from home were 0.2% higher… hence, with nominal sales at food and beverage stores 0.2 higher, real sales of food at groceries would also be roughly 0.3% higher.…on the other hand, the 1.8% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell 2.0%…meanwhile, while sales at gas stations were down 0.8%, there was a 0.2% decrease in the retail price of gasoline, which would suggest  real sales of gasoline were down on the order of 0.6%, with the caveat that gasoline stations do sell more than gasoline…averaging real sales computed thusly together, we’d estimate that the income and outlays report for August will show that real personal consumption of goods rose 0.4% in September, after rising by a revised 0.2% in August and a revised 0.4% in July… each single month of that metric will account for almost 8% of 3rd quarter GDP…

Business Sales and Business Inventories Both Rose 0.5% in August

After the release of the September retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data from that September report and the earlier published August 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 $1,461.9 billion in August, up 0.5 percent (±0.1%) from July revised sales, and up 7.8 percent (±1.2 percent) from August sales of a year earlier….note that total July sales were concurrently revised up from the originally reported $1,454.1 billion to $1,455.246 billion, still a 0.2% increase from June….manufacturer’s sales were 0.5% higher at $504,009 million in August, while retail trade sales, which exclude restaurant & bar sales from the revised August retail sales we reported earlier, were statistically unchanged at $446,798 million, while wholesale sales rose 0.8% to $511,138 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,960.8 billion at the end of August, also up 0.5 percent (±0.1%) from July, and 4.2 percent (±1.2%) higher than in August a year earlier…the value of end of July inventories were revised to $1,950.6 billion from the $1,950.0 billion reported last month…seasonally adjusted inventories of manufacturers were estimated to be valued at $675,610 million, down 0.1% from July, while inventories of retailers were valued at $642,458 million, 0.7% more than in July, and inventories of wholesalers were estimated to be valued at $642,706 million at the end of August, 1.0% higher than in July…

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index…while we reviewed the September index last week, the producer price index for August indicated that aggregate prices for finished goods were unchanged in August, that prices for intermediate processed goods were also unchanged, and that prices for unprocessed goods were 5.8% lower….retail inventories are all finished goods, as are the majority of wholesale inventories, while factory inventories, which we looked at two weeks ago, are roughly evenly split between the three stages of production…a gross increase of 0.5% in nominal inventories thus implies a significant real increase in inventories at all stages, in addition to the real increase in inventories that was seen in July…since real 2nd quarter inventories were down by the most since the 4th quarter of 2009, these real inventory increases in the 3rd quarter will all substantially boost 3rd quarter GDP…

Job Openings at a Record High in August, Hiring and Layoffs Higher; Job Quitting Lower

The Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 59,000, from 7,077,000 in July to a record high of 7,136,000 in August, after July job openings were revised 138,000 higher, from 6,939,000 to 7,077,000…August jobs openings were also 18.1% higher than the 6,044,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed rose from 4.5% in July to 4.6% in August, which was also up from 4.0% a year ago…although job openings increased in many sectors, the largest percentage increase was the 30,000 job opening increase to 339,000 openings in the finance and insurance sector (see table 1 for more details)…like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release…

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which includes retirements and deaths….in August, seasonally adjusted new hires totaled 5,784,000, up by 71,000 from the revised 5,713,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed rose from 3.8% to 3.9%, which was also up from 3.7% in August a year earlier (details of hiring by sector since March are in table 2)….meanwhile, total separations rose by 110,000, from 5,596,000 in July to 5,706,000 in August, while the separations rate as a percentage of the employed remained unchanged at 3.8%, which was still up from 3.6% in August a year ago (see table 3)…subtracting the 5,706,000 total separations from the total hires of 5,784,000 would imply an increase of 78,000 jobs in August, somewhat less than the revised payroll job increase of 270,000 for August reported by the September establishment survey last week, and outside of the expected +/-115,000 margin of error in these incomplete samplings, meaning one or both of those employment figures is in error by a statically significant amount…

Breaking down the seasonally adjusted job separations, the BLS finds that 3,577,000 of us voluntarily quit our jobs in August, down by 31,000 from the revised 3,608,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.4% of total employment, up from 2.2% a year earlier (see details in table 4)….in addition to those who quit, another 1,798,000 were either laid off, fired or otherwise discharged in August, up by 176,000 from the revised 1,622,000 who were discharged in July, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, same as the discharges rate of a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 332,000 in August, down from 365,000 in July, for an ‘other separations rate’ of 0.2%, the same as in July and as in August of last year….both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

Industrial Production Rose 0.3% in September

The Fed’s G17 release on Industrial production and Capacity Utilization indicated that industrial production increased by 0.3% in September after rising by 0.4% in August; at the same time, the percentage change from June to July was revised from up 0.4% to up 0.3%….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose from 108.2 in August to 108.5 in September; at the same time, the index for June was revised from the previously reported 107.4 to 107.5, while the May index was revised from 106.7 to 106.8, and the April reading for the index was revised from 107.6 to 107.7, thus leaving the percentage increases on all of those months unchanged from the previous report….for the 3rd quarter as compared to the 2nd quarter, industrial production rose at a 3.3% annual rate, while total industrial production was 5.1% higher than in September a year earlier….

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.2, from 104.6 in August to 104.8 in September, after increasing by 0.3% in August and July and 0.7% in June, and is now 3.5% higher than a year ago…meanwhile, the mining index, which includes oil and gas well drilling, rose from 124.3 in August to 124.8 in September, after the August index was revised up from 124.1….the mining index is now 13.4% higher than it was a year ago, having risen every month this year….finally, the utility index, which often fluctuates due to above or below normal temperatures, was unchanged at 105.2 in September, after the August index was revised 105.4 to 105.2, now an increase of 1.1% from 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 was unchanged at 78.1% in September, as the utility and mining industries continued to add new capacity …capacity utilization of NAICS durable goods production facilities rose from 76.0% in August to 76.3% in September, while capacity utilization for non-durables producers fell from 77.1% to 77.0%…capacity utilization for the mining sector fell to 92.1% in September from 92.2% in August, which was originally reported as 92.0%, while utilities were operating at 77.7% of capacity during September, down from their 77.9% of capacity during August, which was revised down from 78.0%…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…. 

Housing Starts, Building Permits Both Reported Lower in September

The September report on New Residential Construction (pdf) from the Census Bureau reported that their widely watched estimate of new housing units that were started during the month was at a seasonally adjusted annual rate of 1,201,000, which was 5.3 percent (±11.3 percent)* below the revised August estimated annual rate of 1,268,000 housing unit starts, but was 3.7 percent (±12.1 percent)* above last September’s pace of 1,158,000 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, September’s housing starts could have been up by 6.0% or down by as much as 16.6% from those of August, with even larger revisions possible after a number of months…in this report, the annual rate for August housing starts was revised from the 1,282,000 reported last month to 1,268,000, while July starts, which were first reported at a 1,168,000 annual rate, were revised up from last month’s initial revised figure of 1,174,000 annually to a 1,184,000 annual rate 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 canvassing Census field agents, which estimated that 106,100 housing units were started in September, down from the 112,600 units started in August…of those housing units started in September, an estimated 74,200 were single family homes and 11,100 were units in structures with more than 5 units, down from the revised 79,600 single family starts in August, but up from the 8,400 units started in structures with more than 5 units in August…

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 September, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,241,000 housing units, which was 0.6 percent (±1.2 percent) below the revised August rate of 1,249,000 permits, and was 1.0 percent (±1.2 percent)* below the rate of building permit issuance in September a year earlier…the annual rate for housing permits issued in August was revised from an annual rate of 1,229,000 to 1,249,000 annually, a rather large revision for permits….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 96,600 housing units were issued in September, down from the revised estimate of 116,900 new permits issued in August…the September permits included 64,700 permits for single family homes, down from 78,500 single family permits in August, and 7,800 permits for housing units in apartment buildings with 5 or more units, down from 9,000 such multifamily permits a month earlier…

for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.201 Million Annual Rate in September and Comments on September Housing Starts

September Existing Home Sales Fall for 6th Straight Month

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell by 3.4% from August to September, the sixth consecutive decrease, projecting that 5.15 million homes would sell over an entire year if the September home sales pace were extrapolated over that year, a pace that was also 4.5% below the annual sales rate projected in September of a year ago; August sales at a 5.33 million annual rate were revised from the 5.34 million rate reported a month ago …the NAR also reported that the median sales price for all existing-home types was $258,100 in September, down from $265,600 in August but 4.2% higher than in September a year earlier, which they say “marks the 79th straight month of year-over-year gains“…the NAR press release, which is titled “Existing-Home Sales Decline Across the Country in September“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month…this unadjusted data indicates that roughly 420,000 homes sold in September, down by 22.1% from the 539,000 homes that sold in August, and 9.1% fewer than the 462,000 homes that sold in September of last year, so we can see that the seasonal adjustment gave a considerable boost to the annualized figures published in the press release…that same pdf indicates that the median home selling price for all housing types fell 2.8%, from a revised $265,600 in August to $258,100 in September, while the average home sales price was $296,800, down 2.4% from the $304,000 average sales price in August, but up 2.5% from the $289,600 average home sales price of September a year ago, with the regional average home sales prices ranging from a low of $229,000 in the Midwest to a high of $407,700 in the West… for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Declined to 5.15 million in September and A Few Comments on September Existing Home Sales

 

(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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