Sunday, October 19, 2014

September’s retail sales, industrial production, producer prices, & new housing data, and August’s business inventories..

it's been a pretty busy week, with major reports on September retail sales and industrial production, as well as the release of the September producer price index by the BLS, & the September new home construction and August business inventories reports from the Census ...we also saw the first two regional manufacturing surveys for October from Fed district banks, as the New York Fed reported their Empire State Manufacturing general business conditions index fell twenty-one points to 6.2, indicating significantly slower growth reported vis a vis September in the district that includes New York and northern New Jersey, and the October Manufacturing Business Outlook Survey from the Philadelphia Fed, which saw a slight decrease, from 22.5 to 20.7, in their broadest diffusion index, but which nonetheless indicated a significant plurality of firms in Pennsylvania and southern New Jersey reported an increase in manufacturing activity in October...

Retail Sales Fall 0.3% in September; Could Boost 3rd Quarter GDP Anyway

the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $442.7 billion for the month, which was a decrease of 0.3 percent (±0.5%)* from the revised August sales of $444.1 billion, but still 4.3 percent (±0.9%) above sales in September of last year...August's seasonally adjusted sales were originally reported at $444.4 billion, and despite the statically significant downward revision, the July to August percentage change in sales was unrevised from the previously reported 0.6% (±0.2%) increase because July's sales were also revised down, from $441.8 billion to $441.5 billion...recall that the asterisk on September's sales indicates that from their small sampling of retail outlets, Census cannot yet determine whether sales rose or fell for the month...estimated unadjusted sales in September, extrapolated from that small survey, indicated sales fell to $424,608 million in September from $455,566 million in August, while they were up from the $401,379 million in September a year ago, so we can see there was a modestly large upward seasonal adjustment to sales data for September...  

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 pairs of columns in the table below; the first double column shows us the percentage change in sales for each kind of business from the August revised figure to this September "advance" report in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column set below gives us the revision of the August advance estimates (now called "preliminary") as of this report, with the new July to August percentage change under "Jul 2014 r" (revised) and the August 2013 to August 2014 percentage change as revised in the 2nd column of the pair....then, the third pair of columns shows the percentage change of the last 3 months of this year's sales (July, August and September) from the preceding three months (April thru June) and from the same three months of a year ago....with estimates for those 3 months of the 3rd quarter now in place, we'll be able to speculate about the contribution of retail sales to 3rd quarter GDP... 

September 2014 retail sales

although the last pair of columns appears to show that the 3rd quarter increase is overall sales was a comparatively weak 1.0%, especially when contrasted to the 2.3% growth in retail sales that we saw in the 2nd quarter, we have to remember that before retail sales are included in the personal consumption expenditures (PCE) component of GDP, they must first be adjusted for inflation...the BEA uses equivalent components of the consumer price index to do that, and CPI inflation ran more than 1.1% over the second quarter, reducing 2nd quarter PCE by a similar percentage ...so far in the 3rd quarter, the CPI was up 0.1% in July but down 0.2% in August...if the negative results from the producer price index are any indication, consumer inflation, which will be reported next week, should also be flat in September, possibly resulting in a negative deflator for PCE in the third quarter...if that is the case, the goods components of PCE may well contribute more to GDP in the third quarter than they did in the second...

looking at the details for September in the first two columns above we can see that the seasonally adjusted 0.8% decline in motor vehicle and parts sales to $89,689 million was one major reason for the larger than expected headline decrease in September; nonetheless, even excluding motor vehicles and parts, retail sales still fell 0.2% to $394,619 million....other businesses that saw significant sales declines in September included clothing stores, where sales fell 1.2% to $21,174 million, building material and garden supply outlets, where sales fell 1.1% to $27,268 million, nonstore or online retailers, where sales also fell 1.1% to $39,604 million, furniture stores, where sales fell 0.8% to $8,312 million, and gasoline stations, where sales also fell 0.8% to $44,680 million...meanwhile, sales at electronics and appliance stores rose 3.4% to $9,228 million, likely reflecting initial sales of the iphone6, while sales also rose 0.6% to $48,070 million at restaurants and bars, 0.3% to $25,261 million at drug stores, and 0.2% to $55,980 million at general department stores...

although the overall 0.6% increase in August retail sales went essentially unrevised, there were revisions in sales for some of the component business types worth noting...the table of component changes from last month's advance release is here and the middle two columns in the table above shows the revised data...we'd first note that August sales at auto dealers, the largest component of retail sales, were revised from the originally reported 1.5% increase to an increase of 2.0%, although the entire automotive sales increase was a bit less at 1.9%...clothing store sales were also revised higher, from the originally reported 0.3% rise to an increase of 0.8%, and sales at general merchandise stores, which were originally reported as down 0.1%, have been revised to show a 0.3% increase...on the other hand, sales at building materials and garden supply stores, which were originally reported as up 1.4% in August, have now been revised to an increase of just 0.5%...similarly, sales at miscellaneous store retailers, which were first reported as 2.5% higher in August, have been revised down to a 1.5% increase...other notable downward revisions include furinture store sales, reported as a 0.7% increase in the advance report, are now revised to a 0.3% rise; specialty store sales, as sporting goods, book and music stores, were also revised down 0.4%, from an increase of 0.9% to an increase of 0.5%, while the decrease in gasoline station sales is now shown at 1.1%, rather than the 0.8% decrease shown in the advance report, and the increase in drug stores sales was marked down from 0.6% to 0.3%...

September Industrial Production Increases 1.0%

Industrial production and Capacity Utilization for September indicated that industrial production rose 1.0% from a August reading which was revised down to a decrease of 0.2% from the previously reported 0.1% decline from July...the industrial production index, which is benchmarked to 2007 production equal to 100.0, rose to a record high 105.1 from the previously issued reading of 104.1 for August, which was revised to 104.0, while the industrial production index for earlier months was unrevised...the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 0.5% in September to 100.5, after the manufacturing index for August was revised down from 100.2 to 100.0, while the September manufacturing index is now 3.7% higher than the level of September 2013..... meanwhile the seasonally adjusted utility index, rebounding from the effects of a mild summer on normal electricity consumption, rose 3.9% to 101.2 in September as overall temperatures and A/C use were slightly above normal... in addition, the mining index, which includes oil & gas production, increased by 1.8% to 133.7 in September, after increasing by 0.3% in August, and is now 9.1% higher than a year ago...

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group...among final products and nonindustrial supplies, which rose by 0.7% in September, seasonally adjusted production of consumer goods rose 0.5% after falling a revised 0.7% in August...production of durable goods fell by 0.3% as production of consumer electronics fell 1.3% and the heavily weighted automotive products sector fell 1.1%...meanwhile, production of non-durable goods rose 0.8% as output of consumer energy products rose 2.2% while output of non-energy non-durables rose 0.3%, as a 1.6% increase in clothing production and a 0.7% increase in the output of chemical products was offset by a 0.4% decrease in paper products production and unchanged food and tobacco output...for the third quarter, production of durable goods increased at a 11.0% annual rate, led by annualized growth rates of 19.1% in automotive production and 12.7% in appliances, furniture, carpeting, while 3rd quarter production of non-durable goods fell at a 3.9% annual rate on a decrease in output of consumer energy products at a 10.8% annual rate, while non energy non durable goods production fell at a 1.4% annualized rate, despite growth of chemical products output at a 7.3% annual rate..

seasonally adjusted production of business equipment rose 0.3% in September after falling by a revised 0.2% in August as production of transit equipment rose 0.8% and production of information processing equipment rose 0.5%, while production of industrial equipment was unchanged...for the third quarter, output of business equipment rose at a 4.9% annual rate, as production of transit equipment rose at a 9.0% rate, production of information processing equipment rose at a 5.8% rate and output of industrial production equipment rose at a 2.8% rate....meanwhile, production of defense and space equipment rose by 1.4% in September and grew at a 3.2% annual rate over the 3rd quarter...in addition, production of supplies for use in construction were up by 0.4% for the month and at a 10.2% rate for the quarter, while production of business supplies rose by 1.4% in September, turning their growth rate in the third quarter positive at a 1.8% annual rate...meanwhile, production of raw and intermediate materials that would input into other production processes rose by 1.4% in September and at an 4.6% rate for the quarter, boosted by a 7.0% growth rate in durable goods parts, while the quarterly output of non-durable intermediates grew at a 1.1 annual rate and the annualized output of energy materials grew at a 4.4% rate for the quarter...

in the associated report on capacity utilization, 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 rose in September to 79.3%, from 78.7% in August.....77.3% of our total manufacturing capacity was in use during September, up from 77.1% in August and up 1.0% from the factory operating rate of 76.1% in September of last year...the operating rate for NAICS classified durable goods manufacturers was at 78.1%, up from 77.0% in August, with capacity utilization ranging from 84.7% for manufacturers of electrical equipment, appliances, and components to 64.7% for manufacturers of non-metallic mineral products, while the September operating rate for NAICS classified manufacturers of non-durables was at 78.6%, up from 78.3% in August, with the oil and coal products industry operating at 84.7% of capacity while textile mills were operating at a 72.5% rate.... meanwhile, capacity utilization by the 'mining' industry rose from a revised 89.2% to 90.1%, an increase half the size of the production increase, reflecting new capacity added by the oil and gas industry, while the operating rate for utilities rose from 76.3% to 79.2%....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… 
September 2014 industrial production

Producer Prices Fall 0.1% in September on Lower Food, Energy & Demand for Services

the September Producer Price Index from the Bureau of Labor Statistics indicated that the seasonally adjusted producer price index for final demand fell for the first time in 13 months as the index was down 0.1% from August, after producer prices were up 0.1% in July and unchanged in August, reducing the year over year increase in the index to 1.6%...the index for final demand for services fell by 0.1% for the first time since December as none of its subcomponents rose; the index for final demand for transportation and warehousing services, a measure of margins received by wholesalers, was 0.2% lower, the index for final demand for trade services was unchanged, while prices for final demand for services less trade, transportation, and warehousing services fell 0.1%...meanwhile, the price index for final demand for goods, aka 'finished goods', fell 0.2% after falling 0.3% in August and hence is down 0.5% for the third quarter...the price index for final demand for foods was down 0.7% as wholesale pork prices fell 10.1% and wholesale oilseeds were 8.7% lower priced than in August...the price index for final demand for energy was also down 0.7% as a 2.6% drop in wholesale gasoline prices offset 2.9% prices increases for both LP gas and heating oil...with both food and energy prices down, the index for final demand for core goods was up 0.2%, as wholesale prices for cosmetics and other toiletries rose 1.4%...

this report also showed the price index for processed goods for intermediate demand rose 0.1%, as prices for intermediate processed foods and feeds rose 0.6% while prices for intermediate processed energy goods fell 0.5%, and  intermediate core producer prices were 0.2% higher....meanwhile, the price index for intermediate unprocessed goods rose 0.6% after falling 3.3% in August and 2.7% in July on a 2.2% jump in producer prices for for unprocessed foods and feeds while there was a 1.1% decline in the index for raw energy materials and prices for unprocessed nonfood materials less energy rose 0.5%......finally, the price index for services for intermediate demand was unchanged in September, as a 0.2% increase in the index for intermediate trade services and a 0.1% increase in prices for transportation and warehousing services for intermediate demand offset a 0.2% decrease in prices for intermediate services less trade, transportation, and warehousing....over the 12 months ended in September, the price index for services for intermediate demand rose 1.5%...

New Home Construction Continues at a Million a Year Pace in September

according to the Census report on New Residential Construction for September (pdf) starts on new housing units were estimated to be at a seasonally adjusted annual rate of 1,018,000 in September, which was 6.3 percent (±9.3%)*  above the revised estimated pace of 1,017,000 homes hypothetically started annually in August, and 17.8 percent (±14.4%) above the annual rate of 863,000 housing starts estimated in September a year ago...the asterisk on the September range indicates that the Census, based on their survey of a small percentage of permit offices visited by Census field agents, does have sufficient data to determine whether housing starts rose or fell for the month, while the numbers in parenthesis is the 90% confidence range, ie housing units started in September were likely at a seasonally adjusted annual rate between 3.0% less and 15.6% greater than those in August.....the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 93,200 total units were started in September, up from 86,000 in August, with 56,900 of those single family dwellings, while construction was started on 34.500 apartment units in buildings with 5 or more units...

the monthly data on new building permits have a much narrower margin of error than new housing starts and hence are probably a better monthly indicator of new construction trends than the volatile and often revised starts data... in September, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,018,000, which was 1.5 percent (±1.1%) above the revised August annual rate of 1,003,000 and 2.5 percent (±1.2%) above the 993,000 annual rate estimated for new permit issuance in September of last year...those estimates were extrapolated from the unadjusted estimate of 89,700 new permits issued in September, which was up from the estimated 87,200 new permits issued in August...of those units permitted in September, 53,700 (±0.9%) were for single family homes, and 33,400 (±5.6%) 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…note that the number in thousands shown monthly for both metrics is an estimate of how many units would be permitted or started over an entire year if that month’s pace were continued over 12 months…  

September 2014 new home construction

August Sales Up 0.4% While Business Inventories Rise 0.2%

the Census Bureau also released the Manufacturing and Trade Inventories and Sales report for August this week, which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers' shipments fell by 0.4 percent (±0.1%) from July to $1,353.4 billion in August, which was still 4.5% (±0.6%) above the total monthly sales level of August of last year...manufacturers sales were estimated at $503,106 million, down from $508,108 million, retailer's sales were estimated at $396,328 million, up from $394,005 million, while merchant wholesalers accounted for $453,938 million of the overall total, down from $457,008 million in July....

meanwhile, total manufacturer's and trade inventories were estimated to have increased 0.2 percent (±0.1%) from July to a seasonally adjusted $1,752.3 billion in August, which was up 5.4 percent (±0.4%) from August a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $653,917 million, up from $653,068 million; inventories of retailers were estimated to be valued at $560,366 million, down from $561,824 million, and inventories of wholesalers were estimated to be valued at $538,005 million at the end of August, up from July's $534,437......the month end total business inventories to total sales ratio, the metric which is watched to determine if inventories are becoming excessive, was at 1.29, unchanged from July but up a tad from the 1.28 ratio of August a year ago...so far, inventory growth in July and August has been off the pace of the second quarter and their slower growth rate will likely be a negative for third quarter GDP...

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

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