the major economic releases this past week were the May report on industrial production from the Fed, the May report on residential construction from the Census Bureau, and the May consumer price index release from the BLS...we also saw the first two regional surveys on manufacturing from Fed District banks; on Monday, the Empire State Manufacturing Survey for June from the New York Fed, covering manufacturers in New York and northern New Jersey, reported that their broadest diffusion index for general business conditions was at 19.3, up fractionally from from 19.0 last month, and the highest since February 2012...with any positive number in these Fed surveys indicating improving conditions, a 19.3 reading implies fairly robust growth for area manufacturers....then on Thursday, the Philadelphia Fed released their June Business Outlook Survey, covering manufactures in most of Pennsylvania, southern New Jersey, and Delaware; their broadest gauge of manufacturing activity came in at 17.8, an increase from last month's 15.4 and like the New York survey, also indicating solid expansion in June...
May Industrial Production at Record High on Increase in Manufacturing and Mining
the Fed's G17 release on Industrial production and Capacity Utilization for May indicated that industrial production rose by 0.6% over an April reading which was revised from a 0.6% drop in output to a 0.3% decline...the industrial production index, which is benchmarked to 2007 production equal to 100.0, rose to a record high 103.7 from 103.0 in April, 4.3% higher than a year ago...April's index was revised up from 102.7 while March's reading was left unchanged at 103.0...the manufacturing index, which accounts for roughly 70% of the composite, rose 0.6% in May to 99.5, while the April manufacturing reading was revised from a drop of 0.4% at 98.6 to a decline of just 0.1% at 98.9, and thus the manufacturing index is now up 3.6% from a year earlier...the utility index, continuing to retreat to normal levels after wintertime increases, fell another 0.8% in May to 100.8, after falling a revised 4.5% in April; utility output in May was just 0.6% greater than last May.... meanwhile, the mining index, which includes oil & gas production, increased 1.3% to 129.1 in May, after increasing 1.6% in April and 1.9% in March...the mining index is now up 6.2% year to date, and 9.7% higher than a year ago...
in addition to the breakdown of industrial production into those three main three industry groups, this G17 release also reports on industrial production by market group...among final products and nonindustrial supplies, May production of consumer goods rose 0.1% after falling 0.5% in April, as seasonally adjusted production of durable goods increased by 0.9% after a 0.1% decline in April, as a 1.5% increase in production of automotive products and a 0.9% increase in production of durable appliances, furniture and carpeting led the advance, while production of home electronics increased by 0.3%...for the 12 months from ending in May, durable goods production rose 6.1% on a 7.5% increase in production of automotive products, a 7.6% increase in production of appliances, furniture and carpeting, a 1.6% increase in home electronics production, and a 3.7% increase in production of miscellaneous durable goods...production of non-durable goods, meanwhile, fell 0.1% in May even after falling 1.4% in April as output of non-energy non-durable goods fell 0.2% on a 0.5% drop in food and tobacco production, a 0.2% decrease in clothing production and a 0.4% decline in output of paper products, while output of chemical products rose 0.3%...for the year ending May, non-durable goods production excluding energy rose 1.8% as food and tobacco production rose 2.0%, clothing production rose 4.9%, chemical products production rose 1.9% while the output of paper products fell 2.4%...meanwhile, output of energy, also included in non-durable totals, fell 0.1% in May after falling 4.6% in April but was nonetheless 3.8% higher than last May...
seasonally adjusted production of business equipment rose 0.8% in May after rising 0.1% in April as production of industrial equipment rose 1.1%, production of transit equipment rose 0.5%, and production of information processing equipment rose 0.4%..for the year ending May, production of business equipment rose 5.3%, as production of industrial equipment rose 7.0%, production of transit increased by 4.2%, and production of information processing equipment rose 2.1%...however, production of defense and space equipment fell by 0.3% in May, while it was up 2.3% for the year...in addition, production of supplies for use in construction rose by 0.8% in May and by 4.4% for the year, while production of business supplies rose by 0.1% in May and 2.6% rate for the year ending May...meanwhile, production of raw and intermediate materials that would input into other production processes rose at a 0.9% rate In May, led by a 1.4% increase in equipment parts, a 1.1% increase in energy materials, and a 1.0% increase parts for consumer goods, while output of textile materials fell 2.1%,…the preceding year's production of such materials to be processed further in the industrial sector grew by 5.1%, lead by a year over year 7.0% increase in output of energy materials...
with industrial production increasing in May, capacity utilization, which is the percentage of our plant and equipment that was in use during the month, likewise rose, but by a smaller percentage change, from 78.9% in February to 79.1% in March, suggesting plant capacity was added during the month...77.0% of our total manufacturing capacity was in use during May, up from 76.7% in April, and up from the manufacturing utilization rate of 75.8% in May of last year...the operating rate for NAICS classified durable goods manufacturers was at 76.8%, up from 76.4%, let by an 84.4% operating rate for manufactures of electrical equipment, appliances, and components, while the May operating rate for NAICS classified manufacturers of non-durables was at 78.6%, up from 78.4% in April, with the oil and coal products industry operating at 84.5% of capacity.... meanwhile, capacity utilization by the 'mining' industry rose from 90.2% to 90.1%, reflecting both higher production and the likelihood that oil and gas rig counts probably rose during the month; while the operating rate for utilities fell from 79.9% to 79.1%.......our FRED graph for this report below shows the percentage of capacity in use for all industries monthly since 2007 in pink, while it shows the the seasonally adjusted industrial production index values for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0…
No Discernable Trend Change in May New Home Construction
the May Report on New Residential Construction (pdf) from the Census Bureau gives us broad estimates of new housing permits, new housing starts, and housing completions based on a survey of a small percentage of permit offices visited by Census field agents, is widely watched and reported on for new housing starts with virtually no mention of the wide margin of error inherent in the small Census sampling...in May, starts on new housing units were estimated to be at a seasonally adjusted annual rate of 1,001,000, which was 6.5 percent (±10.2%)* below the revised April estimate of 1,071,000 annually, and 9.4 percent (±11.0%)* above the annual rate of 915,000 housing starts estimated a year ago....in the footnote, the Census tells us the asterisk means they don't have sufficient statistical evidence to determine whether there was an increase or decrease in new housing starts for the month or even for the year, but that there's a 90% likelihood that seasonally adjusted new starts in May were in a range between 16.7% less than April’s and 3.7% more than April's, and a similar likelihood that May's new housing starts were in a range between 1.6% less than a year earlier and 20.4% more than a year earlier...the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 59,700 single family homes were started in May, while an estimated 33,600 apartment units were started in buildings with 5 or more units; the margin of error on single family starts was ± 12.7%, while the margin of error on apartment units started was ± 21.8%...
the monthly data on new building permits have a much smaller margin of error; but since not all permits to build actually result in construction, this again is just an estimate of intention rather than activity; in May, new permits were issued at a seasonally adjusted annual rate of 991,000, which was 6.4 percent (±0.8%) below the revised April annual rate of 1,059,000 and 1.9 percent (±1.4%) below the 1,010,000 annual rate estimated in May of last year...those estimates were extrapolated from the unadjusted estimate of 91,000 permits issued in May, which was down from the estimated 94,700 permits issued in April...of those, 59,500 were for single family homes, and 29,300 represented permits for housing units in building with 5 or more units; the margin of error on both single family and multifamily permits issued in June was ± 1.2%..
May CPI Up 0.4% on Broad Based Increase in Prices
the trend toward higher consumer prices, which began early this year after months near long term lows, continued in May as the Consumer Price Index for All Urban Consumers (CPI-U) for May from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.4%, the largest one month increase since February 2013, with prices for food, energy and several other sectors contributing....core prices, which are for all items except food and energy, rose by 0.3%, the largest increase for the Core CPI since August 2011, on higher prices for medical commodities and most services....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 234.781 in February to 236.293 in March and was 2.13%% above the 232.945 reading of a year ago….the unadjusted core index rose from 237.509 in April to 238.029 in May and was 1.96% ahead of its year ago level of 233.462...
the seasonally adjusted energy index increased by 0.9% in May as the cost of energy services rose 1.4% and prices for energy commodities rose 0.6%...driving the energy services price increase was a 2.3% increase in the electricity index, which was actually a 4.1% one month jump before the seasonal adjustment, but only 3.6% higher than a year ago...moderating the energy services increase, utility natural gas prices fell 1.7% in May; however they were 7.5% higher than last May...driving the increase in the energy commodity index was an 0.8% increase in the motor fuel composite, most of which is gasoline, which was up 0.7% over April and 2.3% higher than a year ago...meanwhile, prices for fuel oil fell 1.4% in May while they were 5.3% higher than a year earlier, and prices for other fuels, including propane, kerosene and firewood, fell by 1.3% but remained 6.6% higher than last May...
the seasonally adjusted food index rose 0.5% in May, the largest single month increase for food since August 2011, after rising 0.4% in April and was 2.1% higher than last May....prices for food away from home rose 0.2% as meals at full service restaurants were 0.2% higher, prices at fast food restaurants rose 0.1% and prices for other food away from home, including food at work and at school, rose 0.3%....meanwhile, the price index for food at home rose 0.7% in May, led by meat and produce prices, many of which have been impacted by the ongoing drought in California...prices in the meats, poultry, fish, and eggs group rose 1.4% for the month as bacon prices rose 5.1%, fresh chicken prices rose 3.3% and prices for fresh fish and seafood were 2.2% higher than in April...for the year ending May, beef prices averaged 10.7% higher than a year earlier, pork prices were up 12.2%, and egg prices were 10.1% higher than last May...in addition, the fruit and vegetable price index was 1.1% higher in May as apples rose 2.5%, lettuce prices rose 2.0% and fresh vegetables other than lettuce, tomatoes and potatoes were 2.8% higher, while prices for processed fruits and vegetables averaged a 0.6% increase; for the year, prices for citrus fruits were 22.5% higher, with oranges rising 17.1% since last May...meanwhile, dairy products prices were up 0.6% in May as cheese prices rose 2.0%, while ice cream was 0.9% lower; and milk is now 7.3% higher than a year ago....in the only food group to see lower prices in May, the index for cereal and bakery goods was 0.1% lower in May and only 0.1% above prices of a year earlier, as white bread prices fell 1.7%, flour prices fell 0.3%, while cakes and cupcakes were 1.2% higher than in April...meanwhile, prices in the beverage group rose 0.4% as non-carbonated juices fell 0.2% while coffee prices rose 0.4% and tea rose 0.7%, while beverage prices were 0.9% lower than a year earlier...lastly, prices for other foods at home rose 0.3% as spices, seasonings and condiments rose 1.2%, baby food and snacks rose 0.5%, while prices for sugars and sweets were 0.5% lower...
even though the rise in the CPI was driven by higher food and energy prices, most seasonally adjusted prices of core CPI components were higher as well....the index for shelter, which is almost 32% of the CPI, rose 0.3%, with rent of shelter rising 0.3%, owner's equivalent rent rising 0.2%, while prices for lodging away from home rose 2.0%...meanwhile, household furnishings and supplies, the commodity component of housing, fell 0.2% on a 2.0% drop in prices for laundry appliances and 3.2% lower prices for dishes and flatware...the price index for apparel, which had been down 0.3% year to date, rose 0.3% in May as women's outerwear rose 2.0% and boys and girls footwear rose 3.0%...the aggregate index for medical care was also up 0.3% as medical care commodities rose 0.5% on a 0.7% increase in prescription drug prices, while medical care services were up 0.3% on 1.1% higher priced glasses and eye care, 0.5% higher inpatient hospital services, 0.4% higher physicians' services, while the cost of health insurance fell 0.2% and was down 0.1% from a year earlier..and while the transportation composite index showed a 0.6% increase, that index includes gasoline; transportation commodities less fuel were actually unchanged, as prices for new cars and trucks rose 0.2% while the price of used cars fell 0.1%, the price of tires fell 0.2%, and the price of other automotive parts and accessories fell 0.3%, while, the transportation services index rose 1.0% despite a 2.3% drop in prices for car and track rentals on airfares that were 5.8% higher than in April...meanwhile, the recreation index was unchanged in May as recreation commodities fell 0.3% on a 1.9% decrease in TV prices and a 2.2% decrease in prices for sports vehicles and bicycles, which were partially offset by a 0.8% increase in prices for pets, pet supplies and pet accessories, while recreation services rose 0.1% on a 0.4% increase in prices for photographers and film processing which was partially offset by a 0.3% decrease in admissions to sporting events...finally, the aggregate education and communication index rose 0.1% even though education and communication commodities fell 0.4% on a 0.7% decline in prices for personal computers and peripheral equipment because education and communication services rose 0.1% on a 0.4% increase in postage and delivery services and 0.3% higher college tuition.... on a year over year basis, just two line items among CPI components other than food and energy showed price changes greater than 10%; prices for dishes and flatware are 10.2% lower, and televisions are 14.0% cheaper than they were a year earlier...
our FRED graph below shows the overall change in each of the major component indexes of the CPI since January 2000, with all indexes reset to 100 as of that month for an apples to apples comparison of the price changes in each; note that in these aggregate indexes, home energy costs are included in the housing index, and gasoline prices are included in the transportation index...in blue, we show the relative track of the price index for food and beverages; in bright green, we show the reset price index for all housing components, which includes rent, homeowners equivalent rent, utilities, insurance & household maintenance; in red, we have the price changes for apparel, the only index to show a net price decline over the decade; while the relative change in the price index for medical care shown in violet has obviously seen the greatest price increase over the period…next, the transportation price index is in orange, and shows the impact of volatile fuel prices on the cost of transportation, while the price change for education and communication over the period is tracked in brown, and in dark green, is the relative strength of the index for recreation prices...finally, we’ve added the track of the overall CPI-U in black, which tends to track close to the large housing component, which makes up 41.5% of the total index…this graph can also be viewed as an interactive, wherein you can track the monthly changes in all of these relative indexes by dragging your cursor across the graph…
Real Earnings and Regional Employment
coincidental with the release of the CPI, the BLS also released the Real Earnings Report for May, which reported that seasonally adjusted real average hourly earnings for all employees fell 0.2% from April to May, and was down by 0.1% for the year ending May...this is a rather simple metric meant to show the purchasing power of employees earnings and is derived by taking the monthly percentage increase in the average hourly earnings from the establishment survey of the employment report, which was 0.2% in May, and reducing it by the percentage change in the Consumer Price Index for All Urban Consumers (CPI-U), which we've just seen rose 0.4% over the same period...computing in the same manner for nonsupervisory and production employees only, seasonally adjusted real average hourly earnings fell 0.1% in May and were up 0.3% from May of last year...
finally, on Friday the Bureau of Labor Statistics released the Regional and State Employment and Unemployment Summary for May, a report which uses the same establishment survey and household survey data that we saw in the national employment report two weeks ago and breaks it down by state and region...considering that the margin of error in the national employment rate is ± 0.2%, this summary reports that 20 states saw their unemployment rates decrease, 16 states saw unemployment rate increases, and the unemployment rate in 14 states and the District of Columbia was unchanged...the table with the state by state data is here; it shows the count of those in the labor force and the number of unemployed and hence the unemployment rate for each of the 50 states, DC, and Puerto Rico..as with the national report, the sections of this report that correspond to the establishment survey are more informative, in that they show the estimated number of jobs added or lost in each state, and the change in the total payroll jobs by selected industries for each state...in May, the largest monthly increases in employment were in Texas, Pennsylvania and New York, which added 56,400, 24,700 and 23,400 jobs respectively, while Florida saw the largest decrease in payroll jobs at 17.900...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change since last May, see the following two BLS tables accompanying this release: Table 5. Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted and Table 6. Employees on nonfarm payrolls by state and selected industry sector, not seasonally adjusted ...
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