the major economic releases this past week were all on June data, including the advance report on retail sales from the Census Bureau, the G17 on industrial production from the Fed, and the Census report on residential construction, which were all weaker than expected, and the June producer price index release from the BLS, which showed wholesale prices rose more than thought...we also saw the first two regional surveys on manufacturing from Fed District banks; on Tuesday, the July Empire State Manufacturing Survey from the New York Fed, covering manufacturers in New York and northern New Jersey, reported that their broadest diffusion index for general business conditions rose to a four year high at 25.6, up from from 19.3 last month, in an index where any positive number indicates improving business for area manufacturers....then on Thursday, the Philadelphia Fed released their July Business Outlook Survey (pdf), covering manufactures in most of Pennsylvania, southern New Jersey, and Delaware, reporting that their broadest diffusion index of manufacturing activity rose to 23.9 from last month's 17.8, their highest reading since March 2011...
Retail Sales Increase 0.2% in June, Grow at a 9.5% Annual Rate in 2nd Quarter
the Advance Retail Sales Report for June (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $439.9 billion in June, which was an increase of 0.2 percent (±0.5%)* from revised May sales of $438.8 billion, and 4.5% (±0.7%) above sales in June of last year....May’s seasonally adjusted sales were originally reported at $437.6 billion, and with the upward revision the April to May increase was revised from the previously reported 0.3 percent (±0.5%)* to an increase of 0.5% (±0.2%), while April sales were revised up by over 1%, from $436.2 billion to $436.73 billion...recall that an asterisk after Census percentage ranges indicates they do not yet have enough data to determine whether sales actually rose or fell during the period cited....estimated unadjusted sales in May, extrapolated from surveys of a small sampling of retailers, indicated sales fell to $438,468 million in June from $464,425 million in May, and up from $420,523 million in June a year ago, so we can see there was a fairly large seasonal adjustment to May's sales data, complicating month over month comparisons....
to break down the details and explain what they mean, we'll again start by including a picture of the table of monthly and yearly percentage changes in sales by business type from the Census pdf...notice there are three double columns in the table; the first double column shows us the percentage change in sales for each kind of business from the May revised figure to this June "advance" report in the first sub-column, and then the year over year percentage sales change since last June in the 2nd column; the second double column set below gives us the revision of the May advance estimates (now called "preliminary") as of this report, with the new April to May percentage change under "Apr 2014 r" (revised) and the May 2013 to May 2014 percentage change as revised in the 2nd column of the pair....then, the third double column shows the percentage change of the last 3 months of this year's sales (April, May and June) from the preceding three months (January thru March) and from the same three months of a year ago....with estimates for those 3 months now in place, we'll be able to speculate about the contribution of this report to 2nd quarter GDP...
looking at the details for June in the first two column above it's fairly clear that the seasonally adjusted 0.3% decline in motor vehicle and parts sales to $87,952 million was the major reason for the weaker than expected headline increase in June; excluding motor vehicles and parts, retail sales rose 0.4% to $351,939…you may recall that reports two weeks ago indicated June light vehicle sales were at an eight year high; it's possible the discrepancy between that report and this one may have arisen from differences in the seasonal adjustment method (there 24 selling days in June, down from the 27 selling days in May), or that this report, with its small sampling, might be revised higher when more complete data is available to the Census survey next month...excluding vehicles, June retail sales were stronger in general merchandise stores, where sales rose 1.1% to $56,037 million, non-store retailers, who saw sales rise 0.9% to $39,965 million, drug stores, where sales rose 0.9% to $24,962 million, specialty stores such as sporting goods, book and music stores, where sales rose 0.6% to $7,184 million, and food and beverage stores, where sales rose 0.4% to $55,386 million; the only areas seeing significant declines in June sales were building material and garden supply outlets, where sales fell 1.0% to $26,967 million, and retaurants and bars, where sales fell 0.3% to $46,830 million..
looking at the revisions to May in the table above and comparing them to the table from the advance report for May released last month, we find that sales at auto and other vehicle dealers, which were originally reported increasing by 1.4%, have now been revised to an increase of just 0.8%; hence, the overall revision from 0.3% growth in May sales to 0.5% growth was driven by major revisions in sales at other business types, as May sales excluding automotive were revised from a increase of 0.1% to an increase of 0.4%; driving that change were revisions to sales for two business types; sales at restaurants and bars, originally reported as down 0.2%, have been revised to show an increase of 0.9%, while sales at drug stores, which were reported 0.1% lower last month, are now seen to have increased by 1.1%...other major revisions were to May sales by general merchandize sores, first reported down 0.6%, are now revised to down just 0.1%, and May sales at food stores, last reported as down 0.1%, are now seen to have increased by 0.3%...meanwhile, sales at building material and garden supply stores, previously reported as increasing 1.1%, are now shown to have only increased 0.6%...
despite exceptionally weak retail sales as reported in each of the monthly advance reports during the 2nd quarter, the subsequent strong revisions to the upside have resulted in what is so far a respectable increase to sales for this past quarter, which you can see in the last pair of columns above; overall, retail sales in the 2nd quarter (April to June) were 2.3% higher than sales in the first quarter of this year, and 4.5% greater than retail sales in the second quarter of last year...on its face, that 2.3% increase, which implies quarterly growth at a 9.5% annual rate, would suggest a decent contribution from goods sales to the personal consumption expenditures component of GDP...however, before goods sold at retail are applied to the change in real GDP, they must first be adjusted for inflation, and as of this writing, our quarterly inflation data is incomplete (June CPI data will be released this coming week)...with what we've seen so far, prices for durable goods have been on a long term downtrend, so there wont likely be much of an inflation adjustment for durable catagories above, such as automotive, appliance and furniture sales....however, with increasing prices for non-durable goods, and especially food and energy, we'd rather suspect that sales increases we see above for business types such as gas stations, groceries, restaurants and drug stores will be somewhat lower once adjusted for inflation by the BEA when they report on second quarter GDP two weeks hence..
Industrial Production Increases 0.2% in June; 2nd Quarter Growth at 5.5% Annual Rate
the Fed's June G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.2% over a May reading which was revised down from a 0.6% increase in output to growth of 0.5%...the industrial production index, which is benchmarked to 2007 production equal to 100.0, rose to a record high 103.9 from a revised 103.7 in May, 4.3% higher than a year ago, while April was revised from 103.0 to 103.2, March was revised from 103.3 to 103.2, and February's index was revised from 102.5 to 102.2...the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 0.1% in June to 99.7, while the May manufacturing reading was revised from an increase of 0.6% at 99.5 to an increase of 0.4% at 99.6 and the April manufacturing index was revised from a 0.1% drop to 98.9 to a 0.3% gain to 99.1; net of all the revisions, the manufacturing index is now up 3.5% from a year earlier...the utility index, reflecting another milder than normal month, fell another 0.3% in June to 100.3, after falling 0.4% in May and 5.1% in April and is now just 1.8% higher than last May.... meanwhile, the mining index, which includes oil & gas production, increased by 0.8% to 130.3 in June, after increasing a revised 1.1% to 129.2 in May, 2.0% in April and 2.0% in March...the mining index is now up 7.2% year to date, and 9.7% higher than a year ago...
in addition to the breakdown of industrial production into the three major industry groups, this release also reports on industrial production by market group...among final products and nonindustrial supplies, which rose by 0.1% in June, seasonally adjusted production of consumer goods was statistically unchanged after falling a revised 0.3% in May...production of durable goods rose by 0.7% carried by a 4.0% in production of consumer electronics and a 0.7% increase in the heavily weighted automotive products sector...meanwhile, production of non-durable goods fell 0.2% as output of consumer energy products fell 1.2% while output of non-energy non-durables rose 0.2% as a 1.5% decline in clothing production and a 0.4% decrease in food and tobacco output was offset by a 1.1% increase in the output of chemical products and a 0.8% increase in paper products production...for the second quarter, production of durable goods increased at a 10.3% annual rate, led by annualized growth rates of 22.7% in home electronics, 17.5% in appliances, furniture, carpeting, and 13.8% in automotive production, while 2nd quarter production of non-durable goods fell at a 1.3% annual rate on a decrease in output of consumer energy products at a 16.5% annual rate, while non energy non durable goods production showed a 4.7% annualized increase...
seasonally adjusted production of business equipment rose 0.1% in June after rising by a revised 0.6% in May as production of transit equipment rose 1.6% while production of information processing equipment and production of industrial equipment both fell 0.3%...for the second quarter, output of business equipment rose at a 9.2% annual rate, as production of transit equipment rose at a 17.3% rate, output of industrial production equipment rose at a 10.1% rate, while production of information processing equipment fell at a 1.6% rate....meanwhile, production of defense and space equipment rose by 0.4% in June and grew at a 4.1% annual rate over the 2nd quarter...in addition, production of supplies for use in construction were up by 0.5% for the month and at a 4.2% rate for the quarter, while production of business supplies fell by 0.1% in June, reducing their annual growth rate in the second quarter to 0.6%...meanwhile, production of raw and intermediate materials that would input into other production processes rose by 0.4% in June and at an 8.2% rate for the quarter, boosted by June's 0.5% growth in durable goods parts and 0.6% growth in the output of energy materials...
in reporting on capacity utilization for June, which is the percentage of our plant and equipment that was in use during the month, the Fed found that the utilization rate for total industry was unchanged in June at 79.1%, which suggests that plant capacity increased by 0.2% during the month.....77.1% of our total manufacturing capacity was in use during June, down from 77.2% in May but up 1.0% from the factory operating rate of 76.1% in June of last year...the operating rate for NAICS classified durable goods manufacturers was at 77.3%, up from 77.1% in May with capacity utilization ranging from 84.0% for manufactures of electrical equipment, appliances, and components to 63.3% for manufactures of non-metallic mineral products, while the June operating rate for NAICS classified manufacturers of non-durables was at 78.4%, down from 78.7% in May, with the oil and coal products industry operating at 84.5% of capacity while textile mills were operating at a 70.0% rate.... meanwhile, capacity utilization by the 'mining' industry rose from a revised 89.9% to 90.0%, reflecting the likelihood that the oil and gas industry is continuing to add capacity, while the operating rate for utilities fell from 79.0% to 78.7%....our FRED graph for this report below, which can also be viewed as an interactive graph at FRED, 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…
June Producer Prices Increase 0.4% as Wholesale Gasoline Prices Rise 6.4%
the Producer Price Index for June released by the BLS reported that the seasonally adjusted producer price index for final demand rose 0.4% after falling 0.2% in May and rising by 0.6% in April, and is now 1.9% above year ago levels...the index for final demand for services rose by 0.3%, as the index for final demand for trade services rose 0.2%, the index for final demand of transportation and warehousing services rose 0.3%; and producer prices for services other than trade, transportation, and warehousing also rose 0.3%; within the later, producer prices for deposit services rose 3.2% while prices for arrangement of vehicle rentals and lodging fell 4.6%...the price index for final demand for goods, aka 'finished goods', rose 0.5% after falling by 0.2% in May, as the price index for final demand energy rose 2.1% as a 6.4% increase in wholesale prices for gasoline accounted for most of the increase; meanwhile, the price index for final demand food fell 0.2%, the same drop as in May, as finished consumer foods rose 0.4% and wholesale prices of food for export fell 3.6%, with wholesale grain prices 12.5% lower and oilseeds priced 6.5% less than May...excluding food and energy, the core producer price index for final demand goods rose 0.1% as wholesale pharmaceuticals rose 1.4% and paper products rose 1.1%, while producer prices for travel trailers and campers fell 1.1%...
this report also showed the price index for processed goods for intermediate demand rose 0.4% on a 1.3% increase in prices for intermediate processed energy goods, while prices for intermediate processed foods and feeds fell 0.1% and intermediate core producer prices rose 0.1%...meanwhile, the price index for unprocessed goods fell 0.9% on a 3.0% drop in producer prices for for unprocessed foods and feeds and a 1.1% decline in the index for unprocessed nonfood materials less energy, while raw energy materials rose 1.2%...finally, the price index for services for intermediate demand rose 0.6% in June, the largest increase since a 0.7% increase in October 2012, mostly on a 1.3% jump in the index for trade services for intermediate demand, while prices for intermediate services less trade, transportation, and warehousing moved up 0.5% and prices for transportation and warehousing services for intermediate demand saw a 0.3% rise...over the 12 months ended in June, the index for services for intermediate demand rose 1.5%...
New Housing Starts and Permits Continue to Trend Below 1 Million Annually
the June Report on New Residential Construction (pdf) from the Census Bureau includes 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 without a mention of the wide margin of error inherent in the small Census sampling...in June, starts on new housing units were estimated to be at a seasonally adjusted annual rate of 963,000, which was 9.3 percent (±10.3%)* below the revised May estimate of 985,000 annually, but 7.5 percent (±14.4%)* 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 June were in a range between 1.0% more than or 19.6% less than May's, and a similar likelihood that June's new housing starts were in a range between 6.9% less than a year earlier and 21.9% more than a year earlier...the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 58,500 single family homes were started in May, while construction on an estimated 25,700 apartment units was started in buildings with 5 or more units, with the margin of error on single family starts at ±10.3%, while the margin of error on apartment units started was ±19.7%...with this release, previously reported single family starts in May were revised up from 59,700 to 60,900 while units starting in buildings with more than 5 units were revised down from 33,600 to 31,400...
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 June, Census estimated new permits were issued at a seasonally adjusted annual rate of 963,000, which was 4.2 percent (±1.5%) below the revised May annual rate of 1,005,000 and 2.7 percent (±1.8%) below the 938,000 annual rate estimated for new permits in May of last year...those estimates were extrapolated from the unadjusted estimate of 91,400 new permits issued in June, which was down from the estimated 92,200 permits issued in May...of those permitted in June, 60,800 (±1.2%) were for single family homes, and 27,700 (±1.0%) represented permits for housing units in building with 5 or more units...our FRED graph on this report below, which can also be viewed as an interactive at the FRED site, shows the seasonally adjusted annual rate of housing units started in thousands monthly in blue, and the annual rate of housing units authorized by building permits monthly in red since 2000…ie, the number shown monthly for either metric is an estimate of how many units would be permitted or started in a year if that month’s pace were continued over 12 months…
Regional and State Employment and Unemployment for June
finally, on Friday the Bureau of Labor Statistics released the Regional and State Employment and Unemployment Summary for June, which basically takes the same data that we saw in the national employment report two weeks ago and breaks it down by state and region.....so while they tell us in opening that 22 states had unemployment rate decreases, 14 states had increases, and 14 states had no change, we know that comes from the household survey with its large margin of error, and they make that point later when they tell us just six states had statistically significant monthly unemployment rate decreases, led by Illinois whose unemployment rate fell from 7.5% to 7.1%, and only Vermont, whose unemployment rate rose from 3.3% to 3.5%, saw a statistically significant monthly unemployment rate increase....as with the national report, the sections of this report that correspond to the establishment survey are more informative, in that they show the number of jobs added or lost in each state, ranging from the 37,400 jobs added in Florida to the loss of 9,100 in West Virginia...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change since last April, 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 ...for an even more detailed and graphic look at state employment data, statistician Nathan Yau of the data visualization and statistics blog FlowingData.com has created a new interactive graphic of specific jobs by state and salary with boxes representing the respective size of each job category and their subcategories, with an interactive slider to highlight those jobs that come with a median salary at or above a preset level...
(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were 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 that accompanies these commentaries, most from the aforementioned GGO posts,contact me…)