among economic releases of this past week were those for March retail sales and consumer prices, which we’ll look at in detail, and the March Report on New Residential Construction (pdf) from the Census Bureau, which gives us somewhat sketchy data on new housing permits, housing starts, and housing completions, but which is nonetheless widely watched as if it's close to accurate...in March, permits issued for new housing were estimated at a seasonally adjusted annual rate of 990,000, 2.4% less than the February annualized rate, with a reasonable margin of error of ±1.0%, which was also 11.2 percent (±1.1%) above the estimate of Last March...an estimated 83,000 new housing units were started in March, which would work out to a seasonally adjusted annual rate of 946,000 housing starts, which is "2.8 percent (±14.7%)* above the revised February estimate and 6.0 percent (±15.5%)*" above the rate of a year earlier...the asterisks, of course, tell us that Census is uncertain whether there was an increase or decrease in new housing starts for the month or for the year because they've just got a small sampling of data, and that there's a 10% chance that housing starts in March either rose more than 17.5% or fell more than 11.9% for the month, and may be up more than 21.5% or down more than 9.5% for the year...there is similar uncertainty in their estimates on March housing completions, which were reportedly 0.2%(±13.2%)* below February and 7.7 percent (±14.3%)* above the home completion rate of a year ago..
other releases this week included Manufacturing & Trade Inventories & Sales for February from the Census, which is typically covered in the financial press as "business inventories"; this report estimated that total trade sales and manufacturers’ shipments for the month were at a seasonally adjusted $1,311.8 billion, up 0.8 percent (±0.2%) from January, which was 1.8 percent (±0.5%) more than a year earlier, while seasonally adjusted manufacturers’ and trade inventories were at $1,715.6 billion at the end of February, up 0.4 percent (±0.1%) over the month and 4.2 percent (±0.5%) higher than a year earlier...in the manufacturing sector, we saw the first two regional Fed surveys for April and industrial production for March; the April Empire State Manufacturing Survey from the New York Fed, covering New York and part of New Jersey, reported their general business conditions index fell from 5.6 to 1.3, with the new orders index at minus 2.8, on a scale where positive numbers indicate growth... the Philadelphia Fed's Business Outlook Survey for April (pdf), covering most of Pennsylvania, southern New Jersey, and Delaware, saw their most inclusive diffusion index rise from a reading of 9.0 in March to 16.6 in February, the highest reading in 7 months...
lastly, on Friday, the Bureau of Labor Statistics released the March Regional and State Employment and Unemployment Summary, 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...21 states were reported having a lower unemployment rate, 17 states and DC had higher unemployment rates, and the rates in 12 states were unchanged, with the usual caveat that there's a +/-0.2% margin of error on those rates...the Economic Policy Institute coverage on this report includes two interactive maps wherein you can easily view the unemployment rate and historical changes for each state by clicking on states within them; for a breakdown of payroll employment by job type for each state over the past 3 months and the change since last March, see these 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 ...
Retail Sales Rise 1.1% in March, Up Net 0.1% for First Quarter
retail sales appear to have rebounded from the winter slowdown as the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales for the month were at $433.9 billion, which was an increase of 1.1 percent (±0.5%) from revised February sales of $429.0 billion, and 3.8% (±0.7%) above sales in March of last year....February sales were originally reported at $427.2 billion, and the February increase from January was revised from 0.3% (±0.5%)* to an increase of 0.7% (±0.2%), while January sales were again revised down from $426.1 billion to $425.9 billion...before seasonal adjustments, the estimated sales for March were at $438,675 million, up from $386,277 million in February...even with stronger March sales and the revision to February, total retail sales for the first quarter were only 0.1% above the seasonally adjusted retail sales in the 4th quarter, and 2.5% ahead of the first quarter of 2013...while we'll review the March data as presented in this advance estimate, understand that it's from a fairly small sampling and subject to revision, just as February's sales were revised up 0.4% and January's were revised down 0.3%...
as usual, we'll begin by including below 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 February revised figure to this 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 set 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 2013 revised" and the February to February percentage change as revised in the 2nd column of the pair; and the third double column shows the percentage change of all 3 months of this year's sales (January, February and March) from the preceding three months (October thru December) and from the same three months of a year ago....with estimates for those 3 months now in place, we'll be able to use them to estimate the contribution of this report to 1st quarter GDP...
as should be obvious from the above table, the 1.1% gain in March sales was partially driven by a 3.4% increase to $76,933 million in sales at auto and other vehicle dealers, which contributed to the 3.1% increase in overall automotive sales to $84,131 million...without those motor vehicle and part sales, other retail sales were up 0.7% to $349,776 in March...business types seeing the largest percentage seasonally adjusted increases in March included general merchandise stores, where sales rose 1.9% to $55,845 million, building material and garden supply stores, where sales rose 1.8% to $26,609 million, non-store or online retailers, where March sales rose 1.7% to $39,549 million, restaurants and bars, where sales rose 1.1% to $47,330 million, furniture stores, where sales rose 1.0% to $8,457 million, and clothing stores, where sales rose 1.0% to $21,079 million...business types that saw seasonally adjusted sales decrease in March included electronics & appliance stores, where sales fell 1.6% to $8,226 million, gasoline stations, where sales fell 1.3% to $45,001 million, and miscellaneous store retailers, where sales also fell 1.3% to $39,549 million..
looking at the revisions to February in the table above and comparing them to the table from the advance report for February last month, we see a major driver of the revision from 0.3% growth in sales to 0.7% growth was the revision to sales at auto and other vehicle dealers, which were originally reported increasing by 0.3% and are now shown to be up 2.7%; indeed, without the revision to automotive sales, February sales would have been up 0.3% just as originally reported....however, within sales by business type, there were other major revisions as well....the sales gain at furniture stores was revised from a 0.4% increase in sales to a gain of 0.9%; sales at electronics and appliances, originally said to be down 0.2%, are now seen increasing by 0.4%; the sales increase by nonstore (online) retailers was revised from 1.2% to 1.6%, and the increase in sales at restaurants and bars has been revised from 0.3 to 0.8%…in major downward revisions, February sales at building material and garden supply stores, which had been seen growing 0.3% in the advance report, are now seen to have contracted by 0.6%, while the increase in sales at drug stores was lowered from 1.2 to 0.6%...
nonetheless, even with the significant upward revision to February sales, and March sales increases that were the largest monthly increase in retail sales since September of 2012, the total seasonally adjusted sales for the 1st quarter of this year were only 0.1% above the seasonally adjusted sales of the 4th quarter of last year, which is not looking good for the contributions from durable goods and nondurable goods to 1st quarter GDP...however, before we can estimate how retail sales might impact GDP, we need to adjust them for inflation, as all real GDP data is so adjusted...and this week we can easily do that, since the consumer price data was released the day after the retail sales report...
March Consumer Prices Up 0.2% on Higher Food, Shelter
the Consumer Price Index for March for All Urban Consumers (CPI-U) from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.2%, mostly due to increases in costs for food and shelter...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 1.5% above the 232.773 reading of a year ago…..since the energy index fell slightly, core prices, which exclude the more volatile food and energy prices changes, were also up 0.2%...the unadjusted core index rose from 236.075 in February to 236.913 in March and was 1.7% ahead of its year ago level of 233.052...
the seasonally adjusted food index rose 0.4% in March after rising 0.4% in February and was thus 1.7% higher than last March....prices for food away from home rose 0.3% as meals at full service restaurants were 0.2% higher, while prices at fast food restaurants rose 0.3% and prices for other food away from home rose 0.5%....meanwhile, the price index for food at home rose 0.5% with major food groups impacted by drought increasing notably...prices in the meats, poultry, fish, and eggs group rose 1.2% for the month as egg prices rose 4.4% and beef prices rose 1.9%, while prices for fish and seafood fell 0.7% from February; for the year, eggs were 9.9% higher, while beef prices were up 7.4% from a year earlier....prices for dairy products were up 1.0% in March as milk prices rose 1.8%, cheese prices rose 2.1%, while ice cream was 0.2% lower; milk is now up 4.8% year over year....prices for the fruits and vegetable group were 0.9% higher in March as citrus fruits jumped 7.5%, canned fruits and vegetables rose 1.6%, and apples were 1.2% higher while tomato prices fell 4.3%; for the year ending March, citrus prices were 17.0% higher while lettuce prices remained 16.9% below those of a year earlier....prices for cereal and bakery goods were 0.2% higher in March and just 0.4% above prices of a year earlier, as rice rose 1.2%, breakfast cereal prices rose 0.7%, while bread prices fell 0.9% and frozen pastry prices fell 1.8%; the largest one year price change in the group was a 2.1% increase in the price of rice...meanwhile, prices in the beverage group fell 0.2% as non-carbonated juices fell 1.0% while coffee prices rose 0.9%, while over the year beverage prices fell 1.8% with coffee prices 6.0% lower...lastly, prices for other foods at home fell 0.1% as snacks, spices, seasonings and sauces all fell 0.4% while soups and sugar both rose 0.7%...
the seasonally adjusted energy index fell 0.1% in March after falling 0.5% in February and is now unchanged year to date...the price drop was entirely due to seasonal adjustments, as unadjusted data showed energy prices up a normal 3.5% in March...a 2.0% drop in the energy commodity index was the major factor in the seasonally adjusted price drop, as gasoline prices fell 1.7% and are now 4.7% lower than the same time last year, while fuel oil prices fell 2.9% after rising 3.7% in January and 4.1% in February and are now 2.9% higher than a year ago...in addition, other fuels, which included propane, kerosene and firewood, were off 13.7% in March but are still 18.2% higher than a year ago...meanwhile, the energy services index rose 2.6% as electricity prices rose 1.1% and utility gas rose 7.5% and is now 16.4% more expensive than a year ago...
excluding food and energy, most of the seasonally adjusted price changes to core CPI components were modest in March, with an increase in shelter costs largely responsible for the rise in the core Index ....the index for shelter, which is almost 32% of the CPI, rose 0.3%, with rent of shelter rising 0.3%, as rent and owner's equivalent rent were both up 0.3%, while prices for lodging away from home rose 1.5%...prices for apparel, which had been down 0.3% in both January and February, rose 0.3% in March as footwear prices rose 0.6% while a 4.5% price increase in women's outerwear prices was partially offset by a 3.6% decrease in prices for dresses...in addition, the aggregate index for medical care was up 0.2% as medical commodities fell 0.3% on lower prescription drug prices, while medical services were up 0.3% on 0.8% higher hospital charges and the cost of health insurance fell 0.2%….in addition, the transportation commodity index excluding fuel rose 0.1% as used car prices rose 0.4% and new car prices were unchanged, while the transportation services index rose 0.2% on 4.0% higher car rentals and 0.5 higher airfares, partially offset by 0.3% lower vehicle repair charges...meanwhile, the recreation index was off 0.1% as recreation commodities fell 0.3% on a 1.8% decrease in TV prices and a 1.4% decrease in prices for audio equipment, which were partially offset by a 1.1% increase in prices for photographic equipment and supplies, while recreation services rose 0.1% on a 0.4% increase in prices for cable and satellite television and radio service which was partially offset by a 0.3% decrease in club dues and fees for participant sports and exercises...finally, the aggregate education and communication index rose 0.2% even though education and communication commodities fell 0.2% on 0.4% cheaper textbooks and a 0.3% decline in personal computers and peripheral equipment because education and communication services rose 0.2% on 0.7% higher child care and nursery school prices and 0.4% higher college tuition.... on a year over year basis, four line items among CPI components other than food and energy showed price changes greater than 10%; prices for women's outerwear has risen by 10.5%; video disc and similar media services have declined by 10.4% as have prices for photographic equipment, and televisions are 12.7% cheaper than they were a year earlier...
our new FRED graph below shows the overall change in each of the major component indexes of the CPI since January 2000, as we've reset all indexes to 100 as of that month for an apples to apples comparison of the price changes in each...in blue, we have the relative track of the price index for food and beverages; in bright green, we now have 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 in violet has obviously shown the most 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 included 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 has been changed to an interactive, wherein you can track the monthly changes in all of these relative indexes by dragging your cursor across the graph; due to a bug in FRED, March data will not display in some browsers unless you push the right bottom slider all the way to the right…
We Estimate 1st Quarter Real Goods Consumption are Down 0.1%, Subtract .03% from GDP
next, we'll look at how retail sales, in combination with adjustments from the detailed prices in the CPI, might impact the change in 1st quarter GDP....you'll recall that roughly 68% of GDP is personal consumption expenditures (PCE); even though most of that is spending for services, spending for durable and non-durable goods, such as would be included in the retail sales report, still amounts to a third of PCE, or roughly 23% of GDP...but retail sales as reported are not adjusted for price changes, whereas the change in real GDP is, as real GDP, despite its denomination in dollars, is really a measure of the growth rate of our national product in UNITS of goods and services produced...what the BEA does when computing GDP is adjust every dollar denominated component with an inflation gauge in order to arrive at the quarter over quarter change in units of production...in the case of goods sold at retail, the BEA computes a PCE price index for both durable and non-durable goods using many of the components of the CPI (here's a stub of their excel file showing how they do that)...what we'll do is a quick and dirty approximation of how price changes effect retail components, and since all of our data is already seasonally adjusted and to one just decimal place anyhow, we'll keep our estimate equally simple...
we'll start with the largest component of retail sales, which is motor vehicle and parts dealers, which according to the retail table above, fell 0.5% in the first quarter; we'll adjust that with the price index for "transportation commodities less motor fuel" which includes weighted prices for new and used vehicles, and tires and parts, and which was down 0.3% over the past three months; using our crude math, we adjust the 0.5% dollar value change in motor vehicle and parts sales with the cumulative 0.3% price decrease to find that real unit sales of motor vehicles and parts fell by just 0.2%...next we see that furniture store sales in dollars were down 2.4%; we adjust that with the 0.1% price increase for "household furnishings and supplies" over three months and find that unit sales of furniture were down 2.5%; next, we have sales at electronics and appliance stores down 1.7% for the quarter which we adjust with the weighted price indexes for appliances and for video and audio products, and find that real unit sales at electronics and appliance stores were down just 0.7%...next, dollar value sales at building material and garden supply stores were up 1.6% for the quarter; when we adjust that with the price index for "tools, hardware, outdoor equipment and supplies", which was up 0.5% over 3 months, we find that unit sales of building material and garden supplies were up 1.1% over that period...next on the table we see sales at food & beverage stores increased 1.1% for the quarter; since the food at home index was up 1.1% over three months, actual food store product sales are unchanged...next, sales at health & personal care stores, which are more commonly referred to as drug stores, were up 0.3% for the quarter; adjusting those sales with the price index for medical care commodities which was up 0.8 over the quarter indicates that unit sales at drug stores really fell 0.5%...next are sales at gas stations, which were up 0.8% in dollars in the 1st quarter, while the quarterly price changes for all types of gasoline were down 4.4% (without monthly compounding), vehicle parts and equipment were down 0.4% and vehicle maintenance and repair were up 0.4%, it would appear that real gas station sales were up approximately 1.2% in the quarter...next, clothing store sales were down 1.2%, and adjusting them with the apparel index which was down 0.3% leaves us real sales of clothing still down 0.9%...sales at sporting goods, hobby, book & music stores were down 4.7% in the 4th quarter; we'll adjust them with the recreational commodity price index and find that real sales of sporting goods, books & music were still down 4.3%, while sales at general merchandising stores were up 0.1% in the quarter, and adjusting them with the quarterly change in the price change for retail commodities less food, energy and used cars and trucks indicates real sales at general merchandising stores rose 0.3% for the quarter; we also adjust the nominal 2.2% decrease in sales at miscellaneous stores with the same index and call their real sales down 2.0% in the 1st quarter ...meanwhile, sales at non-store retailers were up 1.3% for the quarter; we've previously decided to adjust those mostly online sales with a weighted combination of software and book prices, consumer electronics prices, and the apparel price index which would result a 1.8% increase in real online sales ..lastly, sales at bars and restaurants were down 0.2% during the 1st quarter; adjusting that for 0.7% rise in prices for food away from home means real restaurant sales fell 0.9%...
it's pretty clear without even doing the math that sales in most retail sectors were down in real inflation adjusted terms in the 1st quarter, with automotive, the largest at 19% of retail, down 0.2%...so, multiplying each real change by the percentage of total retail for that sector (and eliminating gas stations because they have been the margin of error in each previous time we've calculated this), we have the following, starting with automotive: (-.038) - .050 - .014 + .066 + 0 - .030 - .045 - .086 + .039 -.040 + .162 - .099 equals -.135%, which assuming we've done our math right suggests that there was no real growth in personal consumption expenditures of goods in the first quarter, and that it may even be negative by a bit over 0.1%, and hence they’d subtract .031% from 1st quarter GDP....that would be in marked contrast to the 4th quarter, when durable goods consumption grew at a 2.8% annual rate and added .21% the the change in GDP and non-durable consumption grew at a 2.9% rate and added .45% to GDP...
March Industrial Production Up 0.7%; February Increase Revised to 1.2%
the monthly G17 from the Fed, on Industrial production and Capacity Utilization, reports industrial production by industry and by market group as index values and percentage changes from a month ago and quarterly at an annual rate, and capacity utilization as a percentage of plant and equipment in use during the month...in March, seasonally adjusted industrial production increased by 0.7% as the industrial production index, which is based on 2007 production equal to 100, rose to 103.2, while February's industrial production index was revised from 102.0 to 102.5, thus revised to 1.2% above the January level...the increase for the first quarter was thus 4.4% at an annual rate, as components of this report will show up in the end of month 1st quarter GDP release reported similarly...the output of manufacturing, which accounts for three-fourths of total industrial production, rose 0.5% as the manufacturing index rose from a revised 98.2 to 98.7, and February's increase was marked up to 1.4% from the originally reported 0.9%...however, due to the 0.9% retreat in January, 1st quarter manufacturing grew at just a 1.7% annual rate...one driver of the higher industrial production index in the quarter was the seasonally adjusted output of utilities, which rose at a 17.9% rate, as the March utility index rose another 1.0% to 108.0 on yet another colder than normal month in the populated East....since utility usage also grew at a 19.5% annual rate in the 4th quarter, expect that we'll give most of that growth back when the weather normalizes....but the mining index also rose again, from 123.5 in February to 125.3 in March, a 1.5% increase following the 0.8% increase in January and the 0.9% increase in February...on a quarterly basis mining, which includes gas and oil production, grew at a 9.5% annualized rate over the 1st quarter...
in addition to the breakdown of industrial production into those three industry groups, this G-17 release from Fed also reports on industrial production by market group...among final products and nonindustrial supplies, which grew by 0.6 in March, seasonally adjusted production of consumer goods rose 0.7% after rising 1.3% in February...of those, production of durable goods grew by 0.2% after a 2.9% February increase as production of automotive products fell 0.4% and production of home electronics fell 0.3% while output of appliances, furniture, carpeting mostly reversed the 2.7% February decline with March growth of 2.0%...on a quarterly basis, the production of durable goods fell at a 2.2% annual rate as automotive output fell at a 3.6% rate and output of appliances, furniture, carpeting fell at a 5.1% rate...meanwhile, production of non-durable goods rose 0.9% for the 2nd month in a row in March as output of consumer energy products rose 2.5% and non-energy non durables rose 0.3%...within the latter, clothing output rose 3.3%, output of chemical products rose 1.0%, paper products production rose 0.2%, while food and tobacco production fell 0.2%...for the quarter, consumer non-durable production grew at a 6.5% annual rate on a 14.5% growth rate of energy products and an 8.8% growth rate for chemical products...
seasonally adjusted production of business equipment rose 0.5% in March after rising a revised 2.0% in February as production of information processing equipment rose 1.2% and production of transit equipment rose 1.0% while production of industrial equipment was unchanged...for the 1st quarter, output of business equipment rose at a 4.2% annual rate, as production of industrial equipment rose at a 7.9% rate for the quarter while transit equipment fell at a 2.5% rate...also, production of defense and space equipment rose by 0.7% in March and grew at a 1.4 annual rate in the 1st quarter...in addition, production of supplies for use in construction rose by 0.2% in March and at a 1.2% annual rate in the first quarter, while production of business supplies rose by 0.6% in March and at a 5.3% rate for the quarter...meanwhile, production of raw and intermediate materials that would input into other production processes rose at a 0.9% rate In March led by a 4.5% one month jump in textiles output, while 1st quarter production of such materials to be processed further in the industrial sector grew at an annual rate of 4.7%...
with industrial production up, capacity utilization, which is the percentage of our plant and equipment that was in use during the month, likewise rose, from 78.8% in February to 79.2% in March...76.7% of our manufacturing capacity was in use during March, up from 76.5% in February but not much changed from the manufacturing utilization rate of 76.4% in March of last year...the operating rate for NAICS classified durable goods manufacturers was at 76.3%, up from 76.2%, let by an 83.3% rate for manufactures of electrical equipment, appliances, and components, while the March operating rate for NAICS classified manufacturers of non-durables was at 78.5%, up from 78.1% in February, with the oil and coal products industry operating at 85.2% of capacity...meanwhile, capacity utilization by the 'mining' industry rose from 88.2% to 89.1%, which given their higher production, suggests that oil and gas rig counts probably rose during the month; while the operating rate for utilities fell from 83.5% to 83.3%...over the last year, manufacturers added 2.0% to their plant capacity, the mining industry saw capacity grow by 4.7%, and utilities expanded their plant base by 0.6%....
our FRED graph for this report below shows the seasonally adjusted industrial production index 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… as an interactive graph, you can track the monthly changes in these indexes by dragging your cursor across the graph…also shown below is the track of capacity utilization for total industry since 2007 in pink; note that it’s a percentage, whereas the other metrics on the same graph are index values generated by the Fed...
(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…)
