Written by rjs, MarketWatch 666
May’s reports on retail sales, industrial production, producer prices and new home construction; April’s business inventories
Major economic reports released the past week included the Retail Sales report for May and its companion the Business Sales and Inventories report for April, as well as the May report on New Residential Construction, all from the Census Bureau; the report on Industrial Production and Capacity Utilization for May from the Fed, and the May Producer Price Index and the May Import-Export Price Index, both from the Bureau of Labor Statistics…the later indicated that US export prices rose by a record 17.4% over the past year, topping the 14.9% record set a month ago, while import prices were 11.3% higher, their largest jump since September 2011.
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This week also saw the release of the first two Fed regional manufacturing reports for June: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell to + 17.4 in June, from +24.3 in May, indicating a slightly less broad based expansion among First District manufacturing firms.. meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions slipped from +31.5 in May to +30.7 in June, suggesting that the broad based expansion of that district’s manufacturing is still intact.
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May Retail Sales Fell 1.3% After April Sales Were Revised 1.4% Higher
Seasonally adjusted retail sales fell 1.3% in May after retail sales for April were revised 1.4% higher….the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $620.2 billion for the month, which was a decrease of 1.3 percent (±0.5%) from April’s revised sales of $628.7 billion, but 28.1 percent (±0.7 percent) above the adjusted sales of May of last year…April’s seasonally adjusted sales were revised from the $619.9 billion reported last month to $628.7 billion, while March sales were revised from $619.8 billion to $623.12 billion, which meant that March to April percent change was revised from virtually unchanged (±0.5%) to an increase of 0.9 percent (± 0.2 percent)…the $3.3 billion upward revision to March sales should increase nominal first quarter PCE at around a $13 billion annual rate and add about 0.23 percentage points, give or take, to 1st quarter GDP when the 3rd estimate is released at the end of the month….estimated sales before seasonal adjustments, which were extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 3.0% before the adjustment, from $625,636 million in April to $644,362 million in May, while they were up 27.7% from the $504,607 million in actual sales of May a year ago…
Included below is the table of the monthly and yearly percentage changes in sales by business type taken from the Census pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly estimates (now called “preliminary”) as revised with this report, likewise for each business type, with the March to April change under “Mar 2021 r” (revised) and the revised April 2020 to April 2021 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance April estimates, before this month’s revision, is here….
Significant revisions to April sales with this report are almost a larger story than the May sales themselves…for example, motor vehicle sales were originally reported as up 2.9% to $129,911 million in April; they’re now shown to have been up 4.3% to $131,562 million…at the same time, restaurant and bar sales were originally reported as up 3.0% to $64,872 million in April; they’re now shown to have been up 4.5% to $66,095 million…similarly, clothing store sales had been reported down 5.1% to $23,497 million in April; they’re now indicated to be down just 2.0% to $24,521 million…on the other hand, sales at building material and supplies dealers were originally reported down 0.4% to $43,204 million; they’re now shown to be down 2.3% to $42,437 million…the pdf for the April advance report, as originally published, is here, should you want more details on those April sales revisions…
To compute May’s real personal consumption of goods data for national accounts from this May retail sales report, the BEA will use the corresponding price changes from the May 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 May retail sales excluding the 0.7% increase in sales at gas stations were down by 1.5%…then, by subtracting the actual dollar amounts representing the 1.0% increase in grocery & beverage sales and the 1.8% increase in food services sales from that total, we find that core retail sales were down by more than 2.4% for the month….since the May CPI report showed that the the composite price index of all goods less food and energy goods was 1.8% higher in May, we can thus figure that the change in real retail sales excluding food and energy sales will amount to a decrease of more than 4.1%…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 motor vehicle & parts dealers were down 3.9% in May, the May price index for transportation commodities other than fuel was 4.0% higher, which would suggest that real unit sales at auto & parts dealers were probably on the order of 7.6% lower once price increases are taken into account… similarly, while nominal sales at clothing stores were 3.0% higher in May, the apparel price index was 1.2% higher, which suggests that real sales of clothing only rose around 1.8%…
In addition to figuring those core retail sales, to make an estimate of the month’s change in real sales, we’ll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the May CPI report showed that the food price index was 0.4% higher, as the price index for food purchased for use at home rose 0.4% while the index for food bought away from home was 0.6% higher…thus, while nominal sales at food and beverage stores were 1.0% higher, real sales of food and beverages would have been around 0.6% higher in light of the 0.4% higher prices…meanwhile, the 1.8% increase in nominal sales at bars and restaurants, once adjusted for 0.6% higher prices, suggests that real sales at bars and restaurants only rose around 1.2% during the month…on the other hand, while sales at gas stations were up 0.7%, there was also a 0.4% decrease in the price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 1.1% higher, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the actual increase in real sales at gas stations was likely a bit smaller…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 May will show that real personal consumption of goods fell by around 3.3% in May, after rising by a revised 0.1% in April and rising by a revised 9.4% in March, but after falling by 3.4% in February and rising by 7.3% in January…at the same time, the 1.2% increase in real sales at bars and restaurants will add a solid 0.1% to the growth rate of May’s real personal consumption of services….note that despite the 3.3% decrease in real personal consumption of goods in May, the 9.4% increase in March PCE goods means that real May sales were still significantly higher than those of January and February, and thus will have a similarly significant positive impact on 2nd quarter GDP.
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Industrial Production Up 0.8% in May After March Output Revised 0.4% Higher; Capacity Utilization Rose 0.6% After April Revised 0.4% Lower
Industrial production increased in May after the usual revisions to prior months were complicated by the annual revision to industrial production and capacity utilization that was published on May 28th, which not only revised prior months and years IP data, but also reset the benchmark for industrial production to have average 2017 production equal to 100.0, whereas previously average 2012 production was equal to 100.0…the effect of that was to change the industrial production index for April from the 106.3 reported last month to 99.0, and to of course revise other industrial production indices by a similar magnitude accordingly…hence, where we can’t compare indices to those previously reported, we’ll just quote percentage changes for this report, then pick up on the new industrial production indices going forward, when we have a bit of a history of what they’ve done in prior months..
tThat said, he Fed’s G17 release on Industrial production and Capacity Utilization for May reported that industrial production increased 0.8% in May after rising by a revised 0.1% in April and by a revised 2.6% in March, as total output is now 16.3% higher than a year ago, which is actually less than the 16.5% year over year increase reported a month ago…the industrial production index, which is now benchmarked for average 2017 production to be equal to 100.0, rose from 99.0 in April to 99.9 in May, after the March index was revised up from 98.5 to 98.9 while the February index remained unrevised at 96.4…the net of the March revision and the rebenchmarking of the index was to revised the April percentage change from the 0.7% increase reported a month ago to an increase of 0.1%..
The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.9%, from 97.4 in April to 98.2 in May, after the April manufacturing index was revised from 97.5 to 97.4, the March index was revised from 97.3 to 97.5, the February manufacturing index was revised from 94.5 to 94.6, and the January manufacturing index was revised from 98.0 to 98.1, even as manufacturing output was 18.3% higher than it was a year ago… meanwhile, the mining index, which includes oil and gas well drilling and now includes new information on the mining of metallic and nonmetallic minerals, rose 1.2% or from 105.1 in April to 106.3 in May, after the April change was revised from the originally reported 0.7% increase to a decrease of 0.4%, even as the mining index was still 16.5% higher than it was a year earlier….finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 0.2% to 101.1 in May, after the April change was revised from an increase of 2.6% to an increase of 1.9%, leaving the utility index 3.6% above it’s year earlier level…
This report also includes capacity utilization figures, which are 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 75.2% in May from 74.6% in April, after capacity utilization for April was revised down from the 74.9% reported a month ago….capacity utilization for all manufacturing industries rose from a downwardly revised 74.9% in April to 75.6% in May, as utilization of NAICS durable goods production facilities rose from a revised 73.7% in April to 74.4% in May, while capacity utilization for non-durables manufacturers rose from 76.6% to 77.3%…at the same time, capacity utilization for the mining sector rose to 75.2% in May, from 74.3% in April, which was originally reported as 82.1%, while utilities were operating at 72.8% of capacity during May, now the same as the 72.8% of capacity during April, which was was originally reported at 71.4%….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.
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Producer Price Index YoY Records for Final Demand and Intermediate Services; 46 year High for Intermediate Goods, 48 year High for Raw Materials
The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.8% in April, as prices for finished wholesale goods rose 1.5% while margins of final services providers rose 0.6%…that increase followed an April report that the PPI was 0.6% higher, as prices for both finished wholesale goods and margins of final services providers rose 0.6%, a March report that had the PPI 1.0% higher, as prices for finished wholesale goods rose 1.7% while margins of final services providers rose 0.7%, a revised February report that now has the PPI 0.6% higher, with prices for finished wholesale goods on average 1.4% higher, while margins of final services providers increased by 0.2%, and a re-revised January report that now has the PPI 1.2% higher, with average prices for finished wholesale goods rising 1.6%, while margins of final services providers increased by 1.0%….on an unadjusted basis, producer prices are now a record 6.8% higher than a year ago, up from the 6.2% year over year increase indicated by last month’s report, while, the core producer price index, which excludes food, energy and trade services, rose by 0.7% for the month, and is now 5.3% higher than in May a year ago, up from the 4.6% year over year increase as was shown in April…
As noted, the price index for final demand for goods, aka ‘finished goods’, was 1.5% higher in April, after being 0.6% higher in April, 1.7% higher in March, 1.4% higher in February, 1.6% higher in January, 0.9% higher in December, 0.4% higher in November, 0.5% higher in October, 0.4% higher in September, 0.4% higher in August, 0.5% higher in July, 0.4% higher in June, and 1.4% higher in May of last year, and hence is now up by a record 11.1% from a year ago….the finished goods price index rose 1.5% in May because the price index for wholesale foods rose 2.6%, after rising by 2.1% in April, 0.5% in March, rising a revised 1.4% in February, and rising a revised 1.6% in January, and because the price index for wholesale energy goods was 2.2% higher, after it had fallen by 2.4% in April, risen by 5.9% in March, 5.8% in February, and by 5.1% in January….meanwhile, the index for final demand for core wholesale goods (excluding food and energy) was 1.1% higher, after it had risen by 1.0% in April, 0.9% in March, 0.3% in February and 0.8% in January….wholesale energy prices averaged 2.2% higher due to a 2.2% increase in wholesale prices for gasoline, a 9.2% increase in wholesale prices for No.2 diesel fuel, and a 7.1% increase in wholesale prices for LP gas, while the wholesale food price index rose 2.6% on a 10.5% increase in the wholesale price index for beef and veal, a 19.5% increase in the wholesale price index for oilseeds, and a 25.7% increase in wholesale price index for grains…among core wholesale goods, the wholesale price index for nonferrous metals rose 6.9%, the wholesale price index for iron and steel scrap rose 5.0%, the wholesale price index for commercial furniture rose 2.4%, the wholesale price index for transformers and power regulators rose 4.6%, and the wholesale price index for mobile homes rose 3.5% ..
At the same time, the index for final demand for services rose 0.6% in may, after rising 0.6% in April, 0.7% in March, a revised 0.2% in February and a revised 1.0% in January, as the index for final demand for trade services rose 0.7%, the index for final demand for transportation and warehousing services rose 1.9%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.2% higher…among trade services, seasonally adjusted margins for automobile retailers jumped 27.3%, margins for hardware, building materials, and supplies retailers rose 6.9%, margins for cleaning supplies and paper products retailers rose 3.6%, margins for apparel, jewelry, footwear, and accessories retailers rose 4.1%, and margins for RVs, trailers, and campers retailers rose 3.0%, while margins for fuels and lubricants retailers fell 7.0%…among transportation and warehousing services, margins for truck transportation of freight rose 3.9% and average margins for rail transportation of freight and mail rose 1.1%…among the components of the core final demand for services index, the index for portfolio management rose 2.0%, margins for passenger car rental rose 5.4%, the index for arrangement of cruises and tours rose 8.3%, and the index for arrangement of vehicle rentals and lodging rose 4.3%, while margins for consumer loans (partial) fell 1.7% …
This report also showed the price index for intermediate processed goods rose 2.8% in May, after rising 1.6% in April, 4.0% in March, a revised 2.4% in February, a revised 1.8% in January,and 1.4% in December, 0.9% in November, 0.9% in October, 0.6% in September, 0.9% in August, 1.4% in July, and 1.2% in June, but after being unchanged in May of last year… the price index for intermediate energy goods rose 4.8% in May, as producer prices for natural gas to electric utilities rose 34.0%, refinery prices for jet fuel rose 6.7%, refinery prices for No. 2 diesel fuel rose 9.2%, producer prices for LP gas rose 7.1%, and producer prices for industrial natural gas rose 4.8%… meanwhile, the price index for intermediate processed foods and feeds rose 2.5%, as the producer price index for meats rose 4.5%, the producer price index for processed poultry rose 2.7%, and the producer price index for fats and oils rose 7.9%…at the same time, the core price index for intermediate processed goods less food and energy rose 2.3% as the producer price index for inedible fats and oils rose 15.3%, the producer price index for phosphates rose 11.3%, the producer price index for softwood lumber rose 19.2%, the producer price index for plywood rose 14.0%, the producer price index for copper and brass mill shapes rose 8.0%, the producer price index for primary nonferrous metals rose 13.6%, and the producer price index for building paper and board rose 10.8%…prices for intermediate processed goods are now 21.9% higher than in May a year ago, the largest year over year price increase since the year ended February 1975, but just the sixth increase after 19 consecutive year over year decreases, which had followed 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016….
Meanwhile, the price index for intermediate unprocessed goods rose 8.4% in May, after falling 3.8% in April, rising 9.3% in March, rising a revised 3.0% in February, rising a revised 5.3% in January, and after rising by 2.1% in December, by 6.3% in November, 1.3% in October, 5.2% in September, 4.0% in August, 0.6% in July, 5.4% in June and by 8.4% last May ….that was as the May price index for crude energy goods rose 9.6% as crude oil prices rose 12.8% and unprocessed natural gas prices rose 9.8%, while coal prices fell 0.1%, while the price index for unprocessed foodstuffs and feedstuffs rose 6.3% on a 28.9% increase in the price of corn, a 19.5% increase in the price index for oilseeds, a 17.0% increase in producer prices for alfalfa hay, and a 10.7% increase in producer prices for raw milk….at the same time, the index for core raw materials other than food and energy materials rose 9.3%, as the price index for copper base scrap rose 10.7%, the producer price index for nonferrous metal ores rose 10.3%, and the price index for iron and steel scrap rose 5.0%… this raw materials index is now 57.9% higher than a year ago, the largest annual price rise since the year ended August 1973, but just the seventh year over year increase in more than 2 years, as the annual change on this index had been negative from the beginning of 2019 through October of last year…
Lastly, the price index for services for intermediate demand rose 0.8% in May, after rising 0.8% in April, 0.4% in March, a revised 0.4% in February, a revised 1.1% in January, and rising 0.7% in December after being unchanged in November, rising 0.7% in October, rising 1.1% in September, 0.8% in August, 0.5% in July, and 0.3% last June….the price index for intermediate trade services was 1.7% higher, as margins for intermediate metals, minerals, and ores wholesalers rose 6.4%, margins for intermediate hardware, building material, and supplies retailers rose 6.9%, margins for intermediate building materials, paint, and hardware wholesalers rose 3.6%, margins for chemicals and allied products wholesalers rose 2.8% and margins for intermediate paper and plastics products wholesalers rose 2.4%, …meanwhile, the index for transportation and warehousing services for intermediate demand was 1.5% higher, as the intermediate price index for arrangement of freight and cargo rose 6.0%, the intermediate price index for truck transportation of freight rose 3.6%, and the intermediate price index for rail transportation of freight and mail rose 1.1%….at the same time, the core price index for intermediate services other than trade, transportation, and warehousing services rose 0.3%, as the intermediate price index for passenger car rental rose 5.4%, the intermediate price index for investment banking rose 3.7%, the intermediate price index for internet advertising space sales other than ads sold by print publishers rose 3.5%, and the intermediate price index for portfolio management rose 2.0%, while the intermediate price index for television advertising time sales fell 4.4%…over the 12 months ended in May, the year over year price index for services for intermediate demand is now 7.9% higher than it was a year ago, the ninth consecutive positive annual change since it briefly turned negative year over year from April to August of last year, and the largest 12-month advance in the eleven year history of this index.
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April Business Sales Up 0.6%, Business Inventories Down 0.2%
Following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April (pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….note that revised historical data from the Manufacturers’ Shipments, Inventories, and Orders Survey were released on May 14, 2021 and are reflected in this month’s report, which thereby 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 $1,621.1 billion in April, up 0.6 percent (±0.1 percent) from March revised sales,and up 40.0 percent (±0.6 percent) from April sales of a year earlier…after the revisions to the historical data,, total March sales were revised from the originally reported $1,638.2 billion to $1,611,857 million, and the March increase from February was revised from 5.7% to 5.8%….manufacturer’s sales were up 0.4% from March at $487,805 million in April, and retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 0.5% to $562,583 million, while wholesale sales rose 0.8% to $570,755 million..
Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,024.0 billion at the end of April, down 0.2 percent (±0.1%) from March, but 1.3 percent (±0.5 percent) higher than in April a year earlier…the value of end of March inventories was revised from the $2,014.3 billion reported last month to $2,027.1 billion with this release, and is now a 0.2% increase from February…seasonally adjusted inventories of manufacturers were estimated to be valued at $723,582 million, 0.3% higher than in March, inventories of retailers were valued at $602,378 million, 1.8% less than in March, while inventories of wholesalers were estimated to be valued at $698,039 million at the end of April, up 0.8% from March.
With the release of the factory inventory data two weeks ago, we judged that the real change in April’s factory inventories could have a small positive impact on the growth rate of 2nd quarter GDP, if only on the strength of falling less than they did in the first quarter; meanwhile, with the release of the wholesale inventory data last week, we felt the change in 2nd quarter real wholesale inventories was trending to be negative and modestly subtract from the growth rate of 2nd quarter GDP……since the April producer price index reported that prices for finished goods were on average 0.6% higher, that means that the real decrease in retail inventories was around 2.4% for the month…since the key source data and assumptions (xls) for the second estimate of 1st quarter GDP indicated that 1st quarter real retail inventories were only modestly negative in the 1st quarter, the large drop so far in the 2nd quarter’s real retail inventories would thus have a substantial negative impact on 2nd quarter GDP.
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May’s New Housing Starts Reported 3.6% Higher After April Starts Revised 3.3% Lower
The May 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 1,572,000 in May, which was 3.6 percent (±10.3 percent)* above the revised April estimated annual rate of 1,517,000 housing unit starts, and was s 50.3 percent (±15.1 percent) above last May’s pandemic hit rate of 1,286,000 housing starts a year…the asterisk indicates that Census does not have sufficient data to determine whether housing starts actually rose or fell from April to May, with the figure in parenthesis the most likely range of the change indicated; in other words, May’s housing starts could have just as easily been down by 6.7% or up by as much as 13.9% from those of April, with even larger revisions possible…in this report, the annual rate for April’s housing starts was revised from the 1,569,000 estimated last month to 1,517,000, while March housing starts, which were first reported at a 1,739,000 annual rate, were revised from last month’s initial revised annual figure of 1,733,000 down to 1,725,000 annually with this report….
The 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 143,100 housing units were started in May, up from the 135,800 units started in April and up from the 140,600 units started in March…of those housing units started in May, an estimated 100,600 were single family homes and 41,700 were units in structures with more than 5 units, up ftom the revised 96,600 single family starts in April, and up from the 37,800 units started in structures with more than 5 units at the same time…
The monthly data on new building permits, with a smaller margin of error and hence usually smaller revisions, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in May, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,681,000 housing units, which was 3.0 percent (±1.4 percent) below the revised April permit rate of 1,733,000 units, but 34.9 percent (±2.4 percent) above the rate of permit issuance in May a year earlier….the annual rate for housing permits issued in April was revised from the 1,760,000 reported a month ago to 1,733,000…quoting the report for the annualized figures on the types of permits being issued: “Single‐family authorizations in May were at a rate of 1,130,000; this is 1.6 percent (±0.9 percent) below the revised April figure of 1,148,000. Authorizations of units in buildings with five units or more were at a rate of 494,000 in May.”
Again, the annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed that permits for roughly 142,000 housing units were issued in May, down from the revised estimate of 157,600 new permits issued in April, and down from the 157,900 units permitted in March….the May figure included permits for an estimated 98,700 single family units, down from 107,800 in April, and permits for 38,800 units in structures with more than 5 units, down from 45,700 in April….for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.572 Million Annual Rate in May and Comments on May Housing Starts.
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