Major monthly reports released this past week included the Retail Sales report for March and the associated Business Sales and Inventories report for February, both from the Census Bureau, the March report on Industrial Production and Capacity Utilization from the Fed, the March report on New Residential Construction from the Census bureau, and the Existing Home Sales Report for March from the National Association of Realtors (NAR)….In addition, the week also saw the release of the Regional and State Employment and Unemployment Report for March from the Bureau of Labor Statistics, a report which breaks down the two employment surveys from the monthly national jobs report by state and region …while the text of that report provides a useful summary of the state and regional data, the serious statistical aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands..
This week also saw the release of the first two regional Fed manufacturing surveys for April: 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 rose from -20.9 in March to -14.3 in April, which would indicate that the ongoing contraction of First District manufacturing was less widespread than a month earlier……meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from +3.2 in March to +15.5 in April, its third consecutive positive reading and the highest one since April 2022, which they report was as “almost 38 percent of the firms reported increases in general activity this month, while 22 percent reported decreases; 40 percent reported no change”….notice that +15.5 is the difference between those reporting increases and those reporting decreases, which is how these diffusion indices are computed
Retail Sales Rose 0.7% in March, PCE Goods would Add ~92 Basis Points to Q1 GDP
Seasonally adjusted retail sales increased by 0.7% in March, after retail sales for January and February were revised higher…the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $709.6 billion during the month, which was up by 0.7 percent (±0.5%) from February’s revised sales of $704.5 billion, and 4.0 percent (±0.5 percent) above the adjusted sales in March of last year… February’s seasonally adjusted sales were revised from $700.7 billion to $704.5 billion, while January’s sales were revised from $696.7 billion to $697.954 billion; as a result, the percent change from January to February was revised from up 0.6 percent (±0.5 percent) to up 0.9 percent (±0.2 percent)…..estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 10.1%, from $647,464 million in February to $712,659 million in March, while they were up just 2.4% from the $695,933 million of sales in March 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 March Census Marts pdf….the first double column of this table shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month’s March “advance” report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called “preliminary”) as of this report, with the new January to February percentage change under “Jan 2024 r” (revised) and the February 2023 to February 2024 percentage change as revised in the 2nd column of that pair…(for your reference, our copy of this same table from the advance February estimate, before this month’s revisions, is here)…. lastly, the third pair of columns shows the percentage change of the first 3 months of this year’s sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter of a year ago….as you can see from that fifth column, overall retail sales for the 1st quarter of 2023 were roughly 0.4% lower than the 4th quarter of 2021, which implies that nominal personal consumption of goods for the 1st quarter will be down by roughly the same amount, before any inflation adjustments…
To compute March’s real personal consumption of goods data for national accounts from this March retail sales report, the BEA will initially use the corresponding price changes from the March consumer price index, which we just reviewed… 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 March retail sales excluding the 2.1% price-related increase in sales at gas stations were up by 0.6%….then, by subtracting the dollar values representing the 0.5% increase in grocery & beverage sales and the 0.4% increase in food services sales out from that total, we find that core retail sales were up by almost 0.7% for the month…since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% lower in March, we can thus estimate that real retail sales excluding food and energy will have increased around 0.9%…however, the actual adjustment in national accounts 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 1.6% lower in March, the apparel price index was 0.7% higher, which means that real sales of clothing likely fell around 2.3%… similarly, while sales at health and personal care stores were 0.4% higher, the price index for medical care commodities was 0.2% higher, which suggests real sales of drugs and health products were only up by around 0.2%….
In addition to figuring those core retail sales, we should also adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.1% higher in March, as the price index for food purchased for use at home was unchanged while the index for food bought away from home was 0.3% higher, as prices at fast food outlets rose 0.3% while prices at full service restaurants rose 0.2%…hence, since there was no change in average prices at food and beverage stores, the change in real sales of food and beverages would be equal to their nominal sales change, or up around 0.5%…meanwhile, the 0.4% increase in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants only rose around 0.1% during the month…and while sales at gas stations were up 2.1%, there was a 1.7% increase in the price of gasoline during the month, which would suggest that real sales of gasoline were up about 0.4%, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices…reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for March will show that real personal consumption of goods rose by nearly 0.8% in March, after rising by a revised 0.6% in February but after falling by a revised 1.1% in January…at the same time, the 0.1% increase in real sales at bars and restaurants would boost March real personal consumption of services by a small fraction of a percent…
Now that we have estimates of the percentage change in PCE goods for all three months of the first quarter, we can also estimate the contribution that PCE goods will make to 1st quarter GDP…. the February income and outlays report gives the change in real PCE goods for the 4th quarter months as down 0.2% in October, up 0.4% in November, and up 0.7% in December…based on the revisions to retail sales in the March retail report, we now estimate real PCE goods for January at –1.1%, PCE goods for February at +0.6%, and PCE goods for March at +0.8%…to simplify our calculations, we’ll now convert those percentage changes in PCE goods into an index, and set October with an index value of 1.000…thus Nov = 1.0040, Dec = 1.0110, Jan = .9999, Feb = 1.0059, and March = 1.0139.…hence, to estimate the growth rate of 1st quarter PCE goods, we have this calculation ((( .9999 + 1.0059 + 1.039) / 3) / ((1.0000+ 1.0040 + 1.0110)/ 3)) ^ 4 = 1.040126.…that means that PCE goods rose at about a 4.01% annual rate in the 1st quarter…since PCE goods has usually been around 23% of GDP, that means that the contribution of PCE goods to first quarter GDP should be around 0.92 percentage points…
Industrial Production Rose 0.4% in March on Higher Auto Output and Cooler Weather
The Fed’s G17 release on Industrial production and Capacity Utilization for March indicated that industrial production rose 0.4% in March after rising by a revised 0.4% in February, but after falling by a revised 0.8% in January, which left production unchanged from December and from a year ago… the industrial production index, with the benchmark set for average 2017 production to be equal to 100.0, rose to 102.7 in March from 102.3 in February, which was revised but essentially unchanged.…however, the January index was revised down from 102.2 to 101.8, the December index was revised down from 102.7 to 102.6, and the November index was revised down from 103.0 to 102.9…after those revisions and the March increase, US industrial production was down at a 1.8% annual rate for the first quarter as a whole…
The manufacturing index, which accounts for around 77% of the total IP index, rose 0.5% to 99.9 in March from 99.4 in February, which had previously been reported at 99.2…at the same time, the January manufacturing index was revised from 98.4 to 98.2, and the December manufacturing index was revised from 99.5 to 99.4….after those revisions, the manufacturing index now sits 0.8% above its year ago level, while first quarter manufacturing fell at a 0.1% annual rate from that of the 4th quarter of 2022….meanwhile, the mining index, which includes oil and gas well drilling, fell 1.4%, from 117.3 in February to 115.7 in March, after the February mining index was revised down from last month’s reported 119.2, which left the mining index 2.0% below where it was a year earlier…finally, the utility index, which typically fluctuates due to deviations from normal temperatures, rose by 2.0% from our warmer than normal February, from 101.4 to 103.5, after February’s utility index had fallen 7.6% from our cold January…including this month’s revisions, the utility index is now 3.1% below that of a year ago, mostly because last March’s temperatures averaged colder than normal…
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…seasonally adjusted capacity utilization for total industry rose to 78.4% in March from 78.2% in February, which was revised down from the 78.3% utilization reported a month ago…capacity utilization of NAICS durable goods production facilities rose from a revised 75.1% in February to 75.2% in March on a 3.1% increase in automotive production, while capacity utilization for non-durables producers was up from 79.0% to 79.5%…capacity utilization for the mining sector fell to 91.0% in March from 92.3% in February, which had been reported as 93.8% last month, while utilities were operating at 69.1% of capacity during March, up from 67.9% in February, after February’s utility utilization was revised up from the previously reported 67.8%%….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..
February Business Sales Rose 1.6%, Business Inventories Rose 0.4%
After the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….note that wholesale sales and inventories were revised on March 27th, which thus significantly revised the figures that were reported a month ago, even before the usual revisions to the prior month’s data that accompany this report….
According to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,866.5 billion, up 1.6% (±0.2 percent)* from January, and up 1.0 percent (±0.4 percent) from sales of February last year…January’s sales were revised from the originally reported $1,833.3 billion to $1,836.0 billion, now a 1.0% decrease from December, vs the 1.3% decrease previously reported….the seasonally adjusted value of manufacturer’s sales rose 1.4% to $581,575 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, were 1.0% higher at $611,172 million, while wholesale sales rose 2.3% to $673,736 million…
Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,567.5 billion at the end of February, up 0.4 percent (±0.1%) from the end of January, and 1.0 percent (±0.4 percent) higher than in February a year earlier…at the same time, the value of end of January inventories was revised from the $2,555.0 billion reported last month to $2,556.1 billion, still shown as statistically unchanged from December….seasonally adjusted inventories of manufacturers were estimated to be valued at $857,734 million, up 0.3% from January, while inventories of retailers were valued at $808,724 million, 0.6% higher than January, and inventories of wholesalers were estimated to be valued at $901,082 million at the end of February, 0.5% higher than in January…
For GDP purposes, all those inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, which was up by 1.2% for finished goods…two weeks ago, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged that the inflation adjusted decrease in real factory inventories would first subtract the factory inventories 4th quarter increase and then also the first quarter decrease from the growth rate of first quarter GDP….then last week, we similarly judged to that the decrease in real wholesale inventories would reverse the 4th quarter increase and also subtract both January’s and February’s real decreases from 1st quarter GDP…Since the nominal value of retail inventories for February has now been shown to be 0.6% higher, real retail inventories for the month, after the 1.2% finished goods price adjustment, thus would have thus decreased by 0.6% from January, after a 0.5% increase in that month…therefore, what is thus far a small real retail inventory decrease in the 1st quarter would also have a negative impact on 1st quarter GDP, first by reversing the relatively sharp 4th quarter increase, then by also subtraction the small real decrease in real retail inventories we have so far in the first quarter…
Housing Starts Down 14.7% in March; Building Permits 4.3% Lower
The March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,321,000 in March, 14.7 percent (±9.9 percent) below the revised estimated annual rate of 1,549,000 starts in February, and 4.3 percent (±9.4 percent)* below last March’s annual rate of 1,380,000 starts….the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell from a year ago, with the figures in parenthesis representing the most likely range of the change indicated. In other words, March housing starts could have been up by 5.1% from those of a year ago, or down by a much as 13.7%, with revisions of a greater magnitude in either direction still possible…in this report, the annual rate for February housing starts was revised from the 1,521,000 reported last month to 1,549,000, while January starts, which were first reported at a 1,331,000 annual rate, were revised from last month’s initial revised figure of 1,374,000 annually to a 1,375,000 annual rate with this report….
These annual rates of housing 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 110,900 housing units were started in March, up from the 110,300 units that were started in February and the 97,900 units that were started in January….of those housing units started in March, an estimated 87,100 were single family homes and 23,000 were units in structures with more than 5 units, up from the revised 81,700 single family starts in February but down from the 27,200 units started in structures with more than 5 units in February…
The monthly data on new building permits, with a smaller margin of error, are usually a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,458,000, which was 4.3 percent below the revised February rate of 1,523,000 permits, bit was 1.5 percent above the rate of building permit issuance in March a year earlier…the annual rate for housing permits issued in February was revised up from the originally reported 1,518,000..
Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 123,500 housing units were issued in March, up from the revised estimate of 119,100 new permits issued in February…of those permits issued in March, 84,300 were permits for single family homes and 34,800 were permits for units in structures of more than 5 units, up from the 79400 single family permits issued in February, but down from the February’s 35600 permits for units in structures of more than 5 units…
For graphs and commentary on this report, see the following posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.321 million Annual Rate in March and Single Family Starts Up 22% Year-over-year in March; Multi-Family Starts Down Sharply, which in turn links to his Real Estate Newsletter post on the same subject…
Existing Home Sales Fell 4.3% in March on Prices 4.8 Higher than a Year Ago
The National Association of Realtors (NAR) reported that existing home sales fell at a 4.3% rate from February to March after seasonal adjustment, projecting that 4.19 million existing homes would sell over an entire year if the March home sales pace were extrapolated over that year, a pace that was also 3.7% below the annual sales rate projected for March of a year ago….February homes sales, indicated at a 4.38 million annual rate, were revised but unchanged from the report of a month ago….the NAR also reported that the median sales price for all existing-home types was at $393,500 in March, which was 4.8% higher than in March a year earlier, and which they report is “the ninth consecutive month of year-over-year price gains.“, even though it’s only the second month over month price increase in those mine months….the NAR press release, which is titled “Existing-Home Sales Descended 4.3% in March“, is in easy to read plain English, so if you’re interested in a regional breakdown, or 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 during the month….the unadjusted data estimates that roughly 324,000 homes sold in March, up 19.6% from the 271,000 homes that sold in February, but down 9.7% from the 359,000 homes that sold in March of last year, so we can see that it was the effect of a large springtime seasonal adjustment that caused the headline to show a decrease from February….that same pdf indicates that the median home selling price for all housing types rose by 2.5%, from a revised $383,800 in February to $393,500 in March, and was up 4.8% from $375,300 in March of 2023, with regiona median home prices ranging from $292,600 in the Midwest to $603,000 in the West…..for both seasonally adjusted and unadjusted graphs and additional commentary on this report, again see the following posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 4.19 million SAAR in March and NAR: Existing-Home Sales Decreased to 4.19 million SAAR in March; Median House Prices Increased 4.8% Year-over-Year, which serves as a link to his free Real Estate Newsletter coverage of this report…
(the above is the synopsis that accompanied my regular sunday morning news 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 of which are picked from the aforementioned GGO posts, contact me…)
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