October’s consumer & producer prices, retail sales, industrial production; September’s business inventories..

Major reports released this week included Retail Sales Report for October and the Business Sales and Inventories Report for September from the Census Bureau, the October Consumer Price Index, the October Producer Price Index, and the October Import-Export Price Index from the Bureau of Labor Statistics, and the October report on Industrial Production and Capacity Utilization from the Fed…in addition, this week also saw the release of the first regional Fed manufacturing survey for November: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a suburban NYC county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +4.0 in October to +2.9 in November, suggesting sluggish growth of First District manufacturing…

Consumer Prices Rose 0.4% in October on Higher Prices for Food, Energy & Health Care

The consumer price index rose 0.4% in October, as higher prices for food, energy, health care and used cars were only slightly offset by lower prices for clothing, new vehicles, and most consumer durable goods…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.4% in October after being unchanged in September, rising 0.1% in August, 0.3% in July, 0.1% in June, 0.1% in May, 0.3% in April, 0.4% in March, 0.2% in February, and after they had been unchanged in January, in December and in November, and had risen 0.3% last October…the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 256.759 in September to 257.346 in October, which left it statistically 1.764% higher than the 252.885 index reading of October of last year, which is reported as a 1.8% year over year increase….with prices for food and energy being major contributors to the overall increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core price index rose from 264.522 to 265.059, which left the core index 2.3145% ahead of its year ago reading of 259.063, which is reported as a 2.3% year over year increase, down from 2.4% in September…

The volatile seasonally adjusted energy price index rose 2.7% in October, after falling 1.4% in September. falling 1.9% in August. rising 1.3% in July, falling 2.3% in June, falling 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, and rising by 2.1% last October, and hence is still 4.2% lower than in October a year ago…the price index for energy commodities was 3.5% higher in October, while the index for energy services was 1.8% higher, after falling 0.1% in September….the energy commodity index was up 3.5% due to a 3.7% increase in the price of gasoline, the largest component, and a 0.8% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.5% higher…within energy services, the price index for utility gas service rose 2.4% after falling 0.7% in September and is now 0.2% higher than it was a year ago, while the electricity price index rose 1.6% after being unchanged in September….energy commodities are still averaging 7.4% lower than their year ago levels, with gasoline prices averaging 7.3% lower than they were a year ago, while the energy services price index is now 0.4% higher than last October, as electricity prices are also 0.4% higher than a year ago…

The seasonally adjusted food price index rose 0.2% October, after rising 0.1% September, being unchanged in June, July & August, rising 0.3% in May, falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3% in December, 0.2% in November, and being unchanged last October, and rising 0.1% last September, as the price index for food purchased for use at home was 0.3% higher in October, while the index for food bought to eat away from home was 0.2% higher, as prices at fast food outlets and prices at full service restaurants both rose 0.2% while food prices at employee sites and schools were on average 0.4% higher…

In the food at home categories, the price index for cereals and bakery products was 0.1% lower as average bread prices were unchanged while the price index for flour and prepared flour fell 0.6% and the index for fresh cakes and cupcakes fell 2.5%…on the other hand, the price index for the meats, poultry, fish, and eggs group was 0.6% higher, as the beef and veal price index rose 1.3%, average pork prices rose 0.7%, and fresh fish and seafood prices averaged 1.8% higher…in addition, the seasonally adjusted index for dairy products was 0.1% higher, as average prices for milk rose 0.3%, cheese prices rose 1.2% and ice cream prices rose 1.0%…at the same time, the fruits and vegetables index was 0.9% higher on a 1.6% increase in the price index for fresh fruits and a 1.0% increase in the price index for frozen fruits and vegetables, even as tomato prices fell 1.0%…meanwhile, the beverages index was 0.3% lower, as prices for instant coffee fell 1.7% and carbonated drink prices were 1.4% lower….lastly, the index for the ‘other foods at home’ category was 0.2% higher, as the price index for sugar and sugar substitutes rose 0.5% and peanut butter prices rose 2.9%….the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall…since last October, none of the food line items have seen a price change of more than 10% over the past year…

Among the seasonally adjusted core components of the CPI, which rose by 0.2% October after rising by 0.1% in September, 0.3% in August, 0.3% in July, 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for each of  the five months prior to that, the composite price index of all goods less food and energy goods was 0.1% lower, 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 June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was down 0.3%, as the price index for living room, kitchen, and dining room furniture fell 0.8%, the index for major appliances fell 2.6%, and the price index for window coverings fell 4.3%….in addition, the apparel price index was 1.8% lower on a 5.7% drop in the price index for women’s suits and separates, a 2.9% decrease in the index for girls’ apparel, and a 3.9% decrease in the price index for boys apparel… on the other hand, the price index for transportation commodities other than fuel was 0.4% higher even as prices for new cars and trucks fell 0.2% because prices for used cars and trucks rose 1.3% and the price index for vehicle parts and equipment other than tires rose 0.5%… meanwhile, prices for medical care commodities averaged 1.2% higher as prescription drugs prices rose 1.8%….at the same time, the recreational commodities index was 0.4% higher despite a 1.5% decrease in TV prices because the price index for sporting goods rose 0.5% and the price index for recreational reading materials rose 3.0%….however, the education and communication commodities index was 1.9% lower on a 2.4% decrease in the price index for computers, peripherals, and smart home assistant devices and a 2.9% decrease in the price index for telephone hardware, calculators, and other consumer information items…lastly, a separate price index for alcoholic beverages was 0.3% lower, while the price index for ‘other goods’ was 0.2% higher on an 0.8% increase in the index for hair, dental, shaving, and miscellaneous personal care products and a 2.3% increase in the price index for miscellaneous personal goods…

Within core services, the price index for shelter rose 0.1% as rents were unchanged and homeowner’s equivalent rent rose 0.2% while prices for lodging away from home at hotels and motels fell 4.4%, while the shelter sub-index for water, sewers and trash collection rose 0.5%, and household operation costs were on average 0.4% higher….at the same time, the price index for medical care services was 0.9% higher, as the index for hospital services rose 1.4% and health insurance rose 2.2%…in addition, the transportation services price index was 0.1% higher as the price index for car and truck rental rose 5.6% and motor vehicle registration and license fees rose 0.6%, while airline fares fell 0.4% and intercity bus fares fell 2.6%….on the other hand, the recreation services price index rose 0.9% as photographer fees rose 1.5% and the index for admission to events rose 2.1%….meanwhile, the index for education and communication services was 0.2% higher as the index for elementary and high school tuition and fees rose 0.5% and land-line telephone services rose 1.1%….lastly, the index for other personal services was up 0.2% as the price index for apparel services other than laundry and dry cleaning services was 1.3% higher…

Among core line items, prices for televisions, which now average 19.6% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.2% since last October, and the price index for computer software and accessories, which is down 10.2% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 20.1% over the past year, the price index for infants’ furniture, which has increased 14.9% year over year, and intercity bus-fare, which has increased by 19.9% since last October, are the only line items to have increased by a double digit magnitude over that span….

Retail Sales Rise 0.3% in October after September Sales Revised Lower

Seasonally adjusted retail sales increased in October after retail sales for August and September were revised lower…the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that seasonally adjusted retail and food services sales totaled $526.5 billion nationally during the month, which was 0.3 percent (±0.4%)* higher than September’s revised sales of $525.2 billion and 3.1 percent (±0.7 percent) above the adjusted sales in October of last year… September’s seasonally adjusted sales were revised from the $525.6 billion reported last month to $525.2 billion, while August’s sales were revised from $526.889 billion to $526.862 billion, and those changes managed to leave the August to September percent change unrevised at -0.3% (now ±0.2%)….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 5.2%, from $499,153 million in September to $524,989 million in October, while they were up 3.7% from the $506,360 million of sales in October a year ago…the total $0.43 billion downward revision to August and September’s retail sales should reduce the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.03 percentage points, assuming the distribution of price adjustments in the revised figures is similar to that of those originally published…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the October Census Marts pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each kind of business from the September revised figure to this month’s October “advance” report in the first sub-column, and then the year over year percentage sales change since last October in the 2nd column…the second double column pair below gives us the revision of the September advance estimates (now called “preliminary”) as of this report, with the new August to September percentage change under “Aug 2019 r” (revised) and the September 2018 to September 2019 percentage change as revised in the last column shown…for your reference, the table of last month’s advance estimate of September sales, before this month’s revisions, is here.…

October 2019 retail sales table

To compute October’s real personal consumption of goods data for national accounts from this October retail sales report, the BEA will use the corresponding price changes from the October consumer price index, which we reviewed above…to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals…from the third line on the above table, we can see that October retail sales excluding the 1.1% jump in sales at gas stations were up by 0.2%….then, subtracting the figures representing the 0.5% increase in grocery & beverage sales and the 0.3% decrease in food services sales from that total, we find that core retail sales were up by a bit more than 0.2% for the month….since the CPI report showed that the composite price index for all goods less food and energy goods was down 0.1% in October, we can thus approximate that real retail sales excluding food and energy were on average 0.3% higher for the month…however, the actual 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 clothing stores were 1.0% lower in October, the apparel price index was 1.8% lower, which means that real sales of clothing actually rose around 0.8%….similarly, while sales at furniture stores were down 0.9%, the price index for household furnishings and supplies decreased by 0.3%, which would suggest that real sales at furniture stores only fell 0.6%…on the other hand, while nominal sales at sporting goods, hobby, music and book stores fell 0.8%, the price index for recreational commodities rose 0.4%, so real sales of recreational goods were down roughly 1.2%…

In addition to figuring those core retail sales, to make a complete estimate of real October PCE, we’ll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do….the CPI report showed that the food price index was 0.2% higher in October, with the price index for food purchased for use at home 0.3% higher, while prices for food bought to eat away from home were 0.2% higher… hence, with nominal sales at food and beverage stores 0.5% higher, real sales of food and beverages would only be roughly 0.2% higher in light of the 0.3% higher prices…likewise, the 0.3% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell 0.5%…meanwhile, while sales at gas stations were up 1.1%, there was a 3.7% increase in the retail price of gasoline, which would suggest real sales of gasoline were down on the order of 2.6%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we can estimate that the income and outlays report for October will show that real personal consumption of goods rose by 0.2% for the month, after rising by a revised 0.3% in September, and by an unrevised 0.3% in August….at the same time, the 0.5% decrease in real sales at bars and restaurants will have a small negative impact on October’s real personal consumption of services..

Industrial Production was Down 0.8% in October, Partly Due to the GM Strike

The Fed’s G17 release on Industrial production and Capacity Utilization reported that industrial production fell by 0.8% in October after falling by a revised 0.3% in September and rising by a revised 0.7% in August, as all three production components registered declines in October….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 108.7 in October from 109.6 in September, which was revised from the 109.5 index level reported last month…at the same time, the May index was revised from 109.3 to 109.2, while the index readings for June, July, & August remained unchanged at 109.3, 109.1, and 109.9 respectively…after revisions, industrial production is now 1.1% lower than a year ago…

The manufacturing index, which accounts for more than 75% of the total IP index, decreased by 0.6%, from 104.7 in September to 104.0 in October, after September’s manufacturing index was revised down from 104.8 to 104.7, August’s index was unchanged at 105.2, July’s index was revised down from 104.7 to 104.6, and May’s index was revised down from 104.5 to 104.4….the manufacturing index was impacted by a 7.1% drop in the output of motor vehicles and parts due to the strike at General Motors, but was still down 0.1% excluding that automotive figure and is now 1.5% below it’s level of a year ago…meanwhile, the mining index, which includes oil and gas well drilling, fell by 0.7%, from 133.0 in September to 132.1 in October, after the September mining index was revised up from 131.8, and the August index was revised from 133.5 to 134.1, which left the mining index 2.7% higher than it was a year ago, actually higher than the 2.6% year over year gain reported last month….meanwhile, the utility index, which often fluctuates due to above or below normal temperatures, fell by 2.6% in October, from 106.6 to 103.8, after the September utility index was revised from 106.8 to 106.6, leaving the utility index 4.1% lower than it was a year earlier..

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 fell to 76.7% in October from 77.5% in September, same as was reported for September a month ago…capacity utilization of NAICS durable goods production facilities fell from 75.1% in September to 74.1% in October, after September’s figure was revised down from 75.4%, while capacity utilization for non-durables producers fell from 76.3% in September to 76.2% in October, after September’s nondurables utilization was revised up from 76.0%…capacity utilization for the mining sector fell to 88.8% in October from 89.8% in September, which was originally reported as 88.9%, while utilities were operating at 75.4% of capacity during October, down from their 77.5% of capacity during September, which was revised from the previously reported 77.7%…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…. 

Producer Price Index Rose 0.4% in October On Higher Food & Energy, Margins for Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in September, as prices for finished wholesale goods rose 0.7% and margins of final services providers increased by 0.3%…that followed a September report that showed producer prices fell 0.3%, with prices for finished wholesale goods 0.4% lower while margins of final services providers decreased by 0.2%, an August report that showed the PPI rose 0.1%, even prices for finished wholesale goods fell by 0.5%, because the more heavily weighted margins of final services providers increased by 0.3%, a revised July report that indicated the PPI rose 0.3%, as prices for finished wholesale goods increased 0.4%, while margins of final services providers increased by 0.1%, and a revised June report that now shows the PPI fell 0.3%, as prices for finished wholesale goods decreased 0.5%, while margins of final services providers were unchanged….on an unadjusted basis, producer prices are now only 1.1% higher than a year ago, down from the 1.4% year over year change indicated by last month’s report, and the lowest annual increase since the year ended October 2016…meanwhile, the core producer price index, which excludes food, energy and trade services, was up 0.1% for the month, and is now 1.5% higher than in October a year ago, down from the 1.7% YoY increase shown in September…

As noted, the price index for final demand for goods, aka ‘finished goods’, was 0.7% higher in October, after being 0.4% lower in September, 0.5% lower in August, 0.4% higher in July, 0.5% lower in June, 0.2% lower in May, 0.4% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, 0.6% lower in December, 0.5% lower in November, and 0.8% higher in October of 2018….the finished goods index rose in October because the wholesale price index for energy was 2.8% higher, after falling by 2.5% in both August & September, rising by 2.3% in July, but after falling by a revised 3.9% in June and by a revised 0.4% in May, while the price index for wholesale foods rose 1.3% in October after rising 0.3% in September but falling 0.6% in August, and while the index for final demand for core wholesale goods (excluding food and energy) was unchanged after falling 0.1% in September….wholesale energy prices were higher due to a 7.3% increase in wholesale prices for gasoline and 3.3% higher wholesale prices for home heating oil, while the wholesale food price index rose on a 28.6% increase in the wholesale price index for fresh and dry vegetables and a 8.5% increase in the wholesale price index for grains….among wholesale core goods, wholesale prices for computers and computer equipment rose 0.4% while wholesale prices for iron and steel scrap fell 15.7%..

At the same time, the index for final demand for services rose 0.3% in October, after falling 0.2% in September, rising 0.3% in August and a revised 0.1% in July, and after being unchanged in June, as the index for final demand for trade services rose 0.8%, the index for final demand for transportation and warehousing services rose 0.3%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.1% higher….among trade services, seasonally adjusted margins for both apparel, jewelry, footwear, and accessories retailers and for food and alcohol retailers rose 2.6%, margins for lawn, garden, and farm equipment and supplies retailers rose 1.9%, and margins for automobile retailers rose 1.7%, while margins for furniture retailers fell 4.3%… among transportation and warehousing services, margins for air transportation of freight rose 0.6% and margins for airline passenger services rose 0.5%…among the components of the core final demand for services index, margins for passenger car rentals rose 2.9% and margins for hospital outpatient care rose 1.5% while margins for securities brokerage, dealing, investment advice, and related services fell 8.4%..

This report also showed the price index for intermediate processed goods rose 0.4% in October, after falling by 0.4% in September, 0.7% in August, rising a revised 0.4% in July, and falling a revised 1.2% in June….the price index for intermediate energy goods rose 1.8%, as refinery prices for gasoline rose 7.3%, refinery prices for jet fuels rose 3.1%, and prices for natural gas sold to electric utilities rose 1.4%…meanwhile, prices for intermediate processed foods and feeds rose 0.4%, as the producer price index for prepared animal feeds rose 2.7% and producer prices for refined sugar and byproducts rose 0.6%… at the same time, the core price index for intermediate processed goods less food and energy rose 0.1% as producer prices for prices for basic organic chemicals rose 4.9% and producer prices for building paper and board increased 1.0%… however, prices for intermediate processed goods are now 3.7% lower than in October a year ago, the sixth consecutive year over year decrease following 29 months of year over year increases, which had been preceded by 16 months of negative 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 rose 1.0% in October, after falling 1.4% in September, 1.0% in August, rising a revised 0.4% in July, and falling by a revised 2.9% in June…that was as the October price index for crude energy goods fell 3.0% as crude oil prices fell 9.3% even as unprocessed natural gas prices rose 7.7%, while the price index for unprocessed foodstuffs and feedstuffs rose 6.4% on a 9.1% increase in producer prices for corn, a 8.3% increase in producer prices for slaughter chickens, and a 10.8% increase in producer prices for slaughter steers and heifers….at the same time, the index for core raw materials other than food and energy materials fell 1.3%, as prices for aluminum base scrap fell 4.1% and prices for unprocessed iron and steel scrap fell 15.7%…this raw materials index is now 12.3% lower than a year ago, as the year over year change on this index has been negative all year…

Lastly, the price index for services for intermediate demand fell 0.2 percent in October after rising 0.1 percent in September, 0.5% in August, but after falling a revised 0.2% in July, and being unchanged in June (revised)…however, the price index for intermediate trade services was 0.8% higher, as margins for metals, minerals, and ores wholesaling rose 4.7%, margins for intermediate food wholesalers rose 3.5%, and margins for intermediate paper and plastic product wholesalers rose 1.5% …meanwhile, the index for transportation and warehousing services for intermediate demand was 0.1% lower, as the price index for intermediate arrangement of freight and cargo transportation fell 3.8% while the price index for water transportation of freight fell 0.4%…at the same time, the core price index for intermediate services less trade, transportation, and warehousing fell 0.5%, as the intermediate price index for securities brokerage, dealing, investment advice, and related services dropped 8.4% and the price index for television advertising time sales fell 3.0%..over the 12 months ended in October, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 1.6% higher than it was a year ago, down from 2.4% a month ago…

Business Sales Down 0.2% in September, Business Inventories Flat

After the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September 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 $1,459.4 billion in September, down 0.2 percent (±0.2 percent)* from August’s revised sales, but up 0.5  percent (±0.3 percent) from September sales of a year earlier…note that total August sales were concurrently revised down from the originally reported $1,463.9 billion to $1,462.6 billion, and are now only up 0.1% from July….manufacturer’s sales were down 0.2% to $501,115 million in September, and retail trade sales, which exclude restaurant & bar sales from the revised September retail sales that we reported earlier, fell 0.5% to $459,640 million, while wholesale sales were statistically unchanged at $498,597 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,041.5 billion at the end of September, statistically unchanged (±0.1 percent)* from August, but 3.7 percent (±0.5 percent) higher than in September a year earlier…the value of end of August inventories were revised from the $2,042.1 billion reported last month to $2,040.5 billion, and are now down 0.1% from July, rather than unchanged…seasonally adjusted inventories of manufacturers were estimated to be valued at $697,876 million, up 0.3% from August, inventories of retailers were valued at $666,947 million, 0.2% more than in August, while inventories of wholesalers were estimated to be valued at $676,710 million at the end of September, 0.4% lower than in August…

We had previously estimated that 3rd quarter GDP was overestimated by around 0.06 percentage points based on what the wholesale inventory showed, and that 3rd quarter GDP was underestimated by around 0.14 percentage points based on what the factory inventories report showed….in the advance report on 3rd quarter GDP of two weeks ago, retail inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release…that report estimated that our seasonally adjusted retail inventories were valued at $667,130 billion at the end of September, up 0.3% from a revised $665,333 billion in August….that’s $0.186 billion more than the $666,947 billion for the end of the quarter that this report shows, which would mean that the quarterly change in 3rd quarter retail inventories was overestimated at roughly a $0.75 billion annual rate…combined with our previous figures on factory and wholesale inventories, then, this report would suggest that the growth rate of 3rd quarter GDP should be revised upwards by around 0.06 percentage points when the 2nd estimate is released at the end of November…

 

(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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