February’s retail sales, industrial production, housing construction, & existing home sales; January’s business inventories & JOLTS

major monthly reports released over the past week included the Retail Sales report for February and Business Sales and Inventories for January from the Census Bureau, the February report on Industrial Production and Capacity Utilization from the Fed, the February report on New Residential Construction, also from the Census Bureau, and the Existing Home Sales Report for February from the National Association of Realtors (NAR)…in addition, the Bureau of Labor Statistics released both the Job Openings and Labor Turnover Survey (JOLTS) for January and the Regional and State Employment and Unemployment Report for January during this same week… this week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +12.9 in February to an eleven year low of -21.5 in March, the largest drop on record, suggesting the sudden onset of a recession in 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 fell to a nine year low of -12.7 in March from +36.7 in February, also the largest drop for that index on record and also indicating a sudden contraction of that region’s manufacturing activity this month…

Retail Sales Down 0.5% in February after Revisions to December and January

seasonally adjusted retail sales decreased 0.5% in February after retail sales for January were revised higher…the Advance Retail Sales Report for February (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $528.1 billion during the month, which was 0.5 percent (±0.4%) lower than January’s revised sales of $530.9 billion, but still 4.3 percent (±0.7 percent) above the adjusted sales in February of last year…January’s seasonally adjusted sales were revised up from $529.8 billion to $530.9 billion, while December’s sales were revised from $528.4 billion down to $527,646 million; as a result, the December to January change was revised up from up 0.3 percent (±0.4 percent)* to up 0.6 percent (±0.3 percent)…the downward revisions to December sales would indicate that 4th quarter personal consumption expenditures will be revised lower at about a $2.1 billion annual rate, which would thereby reduce 4th quarter GDP by about 0.04 percentage points…estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down 0.8%, from $483,330 million in January to $479,583 million in February, while they were up 7.8% from the $444,794 million of sales in February of a year ago..  

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the February Census Marts pdf….the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the January revised figure to this month’s February “advance” report in the first sub-column, and then the year over year percentage sales change since last February is in the 2nd column…the second double column pair below gives us the revision of the January advance estimates (now called “preliminary”) as of this report, with the new December to January percentage change under “Dec 2019 (r)” (revised) and the January 2019 to January 2020 percentage change as revised in the last column shown…for your reference, our copy of the table of last month’s advance estimate of January sales, before this month’s revisions, is here, should you be interested in more detail in how it was revised.….

February 2020 retail sales table

To compute February’s real personal consumption of goods data for national accounts from this February retail sales report, the BEA will use the corresponding price changes from the February consumer price index, which we reviewed last week…to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on the above table, we can see that February retail sales excluding the 2.8% price-related decrease in sales at gas station were down by 0.3%…..then, subtracting the figures representing the fractional decrease in grocery & beverage store sales and the 0.5% decrease in food services sales from that total, we find that core retail sales were down by less than 0.3% for the month (-0.268%)…since the CPI report showed that the composite price index for all goods less food and energy goods was 0.2% higher in February, we can thus approximate that real retail sales excluding food and energy will on average be down by nearly 0.5%…..however, the actual adjustment in national accounts data 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 and parts dealers were down 0.9%, the price index for transportation commodities other than fuel was 0.2% higher, which would suggest that real sales at vehicle and parts dealers fell by roughly 1.1%…similarly, while nominal sales at clothing stores were 1.2% lower in February, the apparel price index was 0.4% higher, which means that real sales of clothing probably fell around 1.6%…on the other hand, while nominal sales at sporting goods, hobby, music and book stores rose 0.1%, the price index for recreational commodities fell 0.1%, so we can figure real sales of recreational goods were up by roughly 0.2%….

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately…the February CPI report showed that the food price index was 0.4% higher, with the index for food purchased for use at home 0.5% higher, while prices for food bought to eat away from home were 0.2% higher… thus, while nominal sales at food and beverage stores were unchanged, real sales of food and beverages would be roughly 0.5% lower in light of the 0.5% higher prices…meanwhile, the 0.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell about 0.7% during the month….on the other hand, while sales at gas stations were down 2.8%, there was a 3.3% decrease in the retail price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 0.5%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales….averaging real sales that we have thus estimated together, but leaving out real restaurant and bar sales, we can then estimate that the income and outlays report for February will show that real personal consumption of goods fell by more than 0.4% in February, after rising by a revised 0.2% in January, but after being unchanged in December, also revised…at the same time, the 0.7% decrease in real sales at bars and restaurants would reduce the growth rate of February’s real personal consumption of services by almost 0.1%…

Industrial Production Up 0.6% in February on 7.1% Jump in Utility Output

The Fed’s February G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 0.6% in February after falling by a revised 0.5% in January, which left industrial output unchanged from a year ago…the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 109.6 in February, after the January index was revised down from 109.2 to 109.0, the December index was revised up from 109.5 to 109.6, and the November index was left unchanged at 110.0..

The manufacturing index, which accounts for more than 77% of the total IP index, rose to 104.9 in February, after the January index was revised down from 104.9 to 104.8…with the prior months unrevised, the manufacturing index now sits 0.4% below its year ago level….meanwhile, the mining index, which includes oil and gas well drilling, fell 1.5%, from 135.0 in January to 133.0 in February, after the January index was revised down from 136.2, which still left the mining index 2.1% higher than it was a year earlier…finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 7.1% in our cooler February, from 98.4 to 105.4, after our warm January’s utility index was revised from 98.0 to 98.4, now down 4.9% from December…with this February’s temperatures below the warmer levels seen across much of the US last February, the utility index is 0.4% higher than it was a year ago, after the January utility index had been reported 6.2% lower than it was in January 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 rose to 77.0% in February from 76.6% in January, which was revised down from the  76.8% reported last month …capacity utilization of NAICS durable goods production facilities rose from a revised 74.5% in January to 74.7% in February, while capacity utilization for non-durables producers slipped from an upwardly revised 76.5% to 76.4%…capacity utilization for the mining sector fell to 88.4% in February from 89.9 % in January, which was originally reported as 90.7%, while utilities were operating at 75.8% of capacity during February, up from their 71.0% of capacity during January, which was previously reported at 70.6%…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, Permits Reported Lower in February

The February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,599,000, which was 1.5 percent (±12.4 percent)* below the revised estimated January annual rate of 1,624,000, but was 39.2 percent (±17.7 percent) above last February’s rate of 1,149,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month, with the figures in parenthesis the most likely range of the change indicated; in other words, February housing starts could have been up by 10.9% or down by as much as 13.9% from those of January, with revisions of a greater magnitude in either direction still possible…in this report, the annual rate for January housing starts was revised from the 1,567,000 reported last month to 1,624,000, while December starts, which were first reported at a 1,608,000 annual rate, were revised from last month’s initial revised figure of 1,626,000 annually back down to a 1,601,000 annual rate with this report….

The 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 113,000 housing units were started in February, down from the 113,200 units that were started in January but up from the 108,300 units that were started in December….of those housing units started in February, an estimated 75,300 were single family homes and 36,300 were units in structures with more than 5 units, up from the revised 68,000 single family starts in January but down from the 44,600 units started in structures with more than 5 units in December…

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 February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,464,000, which was 5.5 percent (±1.5 percent) below the revised January rate of 1,550,000 permits, but was 13.8 percent (±2.1 percent) above the rate of building permit issuance in February a year earlier…the annual rate for housing permits issued in January was a 13 year high for building permits and was revised up from the originally reported 1,551,000….

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 100,800 housing units were issued in February, down from the revised estimate of 112,800 new permits issued in January….of those issued in February, 70,600 were permits for single family homes and 27,000 were permits for units in structures of more than 5 units, up from the 70,400 single family permits in January, but down from the 39,500 permits for units in structures of more than 5 units…for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.599 Million Annual Rate in February and Comments on February Housing Starts… 

Job Openings Jumped in January; Hiring and Layoffs Fell, Quits were Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for January from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 411,000, from 6,552,000 in December to 6,963,000 in January, after December job openings were revised 129,000 higher, from 6,423,000 to 6,552,000, as part of an annual revision of 2019’s job openings and labor turnover data…January’s jobs openings were still 7.4% lower than the revised 7,520,000 job openings reported for January a year ago, as the job opening ratio expressed as a percentage of the employed increased to 4.4% from the 4.1% logged in December, but was down from the 4.8% rate of January a year ago…(details on job openings by industry and region can be viewed in Table 1)…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 January, seasonally adjusted new hires totaled 5,824,000, down by 103,000 from the revised 5,927,000 who were hired or rehired in December, as the hiring rate as a percentage of all employed fell from 3.9% in December to 3.8% in January, and was also down from the 3.9% hiring rate in January a year earlier (details of hiring by sector since September are in table 2)….meanwhile, total separations fell by 148,000, from 5,762,000 in December to 5,614,000 in January, as the separations rate as a percentage of the employed fell from 3.8% to 3.7%, which was also down from 3.8% in January a year ago (see table 3)…subtracting the 5,614,000 total separations from the total hires of 5,824,000 would imply an increase of 210,000 jobs in January, somewhat less than the revised payroll job increase of 273,000 for January reported in the February establishment survey of two weeks ago but still within the expected +/-115,000 margin of error in these incomplete samplings

Breaking down the seasonally adjusted job separations, the BLS finds that 3,532,000 of us voluntarily quit our jobs in January, up from the revised 3,528,000 who quit their jobs in December, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, while it was down from the 2.4% quits rate of a year earlier (see details in table 4)….in addition to those who quit, another 1,684,000 were either laid off, fired or otherwise discharged in January, down by 209,000 from the revised 1,893,000 who were discharged in December, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.2% a year earlier….meanwhile, other separations, which includes retirements and deaths, were at 399,000 in January, up from 341,000 in December, for an ‘other separations rate’ of 0.3%, up from 0.2% in December and from 0.2% in January 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…   

January Business Sales Up 0.6%, Business Inventories Down 0.1%

After the release of the February retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for January (pdf), which incorporates the revised January retail data from that February report and the earlier published January 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 $1,471.2 billion in January, up 0.6 percent (±0.2 percent) from December’s revised sales, and 2.1 percent (±0.3 percent) higher than January sales of a year earlier…note that total December sales were concurrently revised up from the originally reported $1,461.0 billion to $1,462.940 billion, now a 0.1% increase from November, rather than the 0.1% decrease previously reported….manufacturer’s sales fell 0.5% to $501,825 million in January, while retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, rose 0.6% to $464,818 million, and wholesale sales rose 1.6% to $504,570 million…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,035.3 billion at the end of January, down 0.1 percent (±0.1 percent)* from the end of December, but still 1.1 percent (±0.4 percent) higher than in January a year earlier…at the same time, the value of end of December inventories was revised from the $2040.0 billion reported last month to $2,038.1 billion, now unchanged from November, which would imply a downward revision of about 0.03 or 0.04 percentage points to 4th quarter GDP….seasonally adjusted inventories of manufacturers were estimated to be valued at $703,403 million, down 0.1% from December, and inventories of retailers were valued at $660,227 million, statistically unchanged from in December, while inventories of wholesalers were estimated to be valued at $671,621 million at the end of January, 0.4% lower than in December…

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for January, which indicated finished goods prices were 0.1% higher…two weeks ago, we looked at real factory inventories with producer price adjustments for goods at various stages of production, and judged those inventories would have a modest negative impact on 1st quarter GDP…also two weeks ago, we found that January’s wholesale inventories decrease alone would not yet be enough to hit 1st quarter GDP….since the nominal value of retail inventories for January has now been shown to be 0.1% lower, real retail inventories for the month, after the 0.1% finished goods price adjustment, thus would have thus decreased by 0.2% from December, after a fourth quarter that saw real retail inventories decrease at a 2.6% annual rate…therefore, what is shaping up to be a much smaller real retail inventory decrease in the 1st quarter to date would have a noticeable positive impact on 1st quarter GDP…

February’s Existing Home Sales Rose 6.5%

The National Association of Realtors (NAR) reported that existing home sales increased by 6.5% from January to February on a seasonally adjusted basis, projecting that 5.77 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was the highest since 2007 and 7.2% above the annual sales rate projected in February of last year….however, the January home sales pace was revised from the 5.46 million annual rate reported a month ago to a 5.42 million rate with this report…the NAR also reported that the median sales price for all existing-home types was $270,100 in February, 8.0% higher than in February a year earlier, which they report “marks 96 straight months of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Jump 6.5% in February“, 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 usually look at the raw data overview (pdf) to see what actually happened with home sales during the month…this unadjusted data indicates that roughly 335,000 homes sold in February, up 5.7% from the revised 317,000 homes that sold in January, and 7.7% more than the 311,000 homes that sold in February of last year….that same pdf indicates that the median home selling price for all housing types rose by 1.5%, from a revised $266,200 in January to $270,100 in February, while the average home sales price rose by less than one percent to $302,900 from the $305,800 average sales price in January, which was also up 6.0% from the $288,500 average home sales price of February a year ago…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 Increased to 5.77 million in February and Comments on February 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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