Sunday, December 18, 2016

November retail sales, consumer and producer prices, industrial production, & new home construction; October business inventories

major reports released this week included Retail Sales for November and Business Sales and Inventories for October from the Census Bureau, the November Import-Export Price Index, the November Producer Price Index and the November Consumer Price Index from the Bureau of Labor Statistics, the November report on Industrial Production and Capacity Utilization from the Fed, and the November report on New Residential Construction, also from the Census Bureau...in addition, the BLS also released the Regional and State Employment and Unemployment for November on Friday, which breaks down the establishment survey and household survey data from the monthly jobs report released two weeks ago by region and by state..

the week also saw the release of the first two regional Fed manufacturing surveys for December: 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 rose from +1.5 in November to +9.0 in December, suggesting a broader based pickup in First District manufacturing expansion....meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions jumped from a reading of +7.6 in November to +21.5 in October, as nearly 34 percent of the region's manufacturing firms reported increases in their activity this month...

Retail Sales Up 0.1% in November after October Increase Revised 0.2% Lower

seasonally adjusted retail sales increased in November after retail sales for October were revised lower...the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $465.5 billion during the month, which was up 0.1 percent (±0.5%) from October's revised sales of $465.1 billion and 3.8 percent (±0.9%) above the adjusted sales in November of last year...October's seasonally adjusted sales were revised down from $465.9 billion to $456.1 billion, while September's sales were revised a bit higher, from $462.1 billion to $463.2 billion; as a result, the September to October change was revised down from up 0.8 percent (±0.5%) to up 0.6 percent (±0.2%).....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales rose 3.2%, from $453,692 million in October to $468,054 million in November, while they were up 5.3% from the $444,507 million of sales in November a year ago...the $0.2 billion upward revision to September sales should boost previous estimates of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.02 percentage points...

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the November Census Marts pdf....the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the October revised figure to this month's November "advance" report in the first sub-column, and then the year over year percentage sales change since last November in the 2nd column...the second double column pair below gives us the revision of the October advance estimates (now called "preliminary") as of this report, with the new September to October percentage change under "Sep 2016 r" (revised) and the October 2015 to October 2016 percentage change as revised in the last column shown...for your reference, the table of last month’s advance estimate of September sales, before this month's revisions, is here.….

November 2016 retail sales table

from the above table, we can see that a 0.5% decrease to $95,782 million in seasonally adjusted sales at motor vehicle and parts dealers was partially responsible for the November sales weakness, because without those automotive sales, retail sales were up 0.2%...automotive sales for October were also revised lower, from the originally reported 1.1% increase to an increase of just 0.5%, and hence were responsible for most of the downward revision to that month's sales...otherwise, not much stands out; the 1.0% decrease to $7,664 million in sales at specialty stores such as sporting goods and bookstores was just a small part of the aggregate, as was the 0.8% decrease to $10,773 million in sales at miscellaneous stores...we'll be able to ascertain the net economic impact of this apparent weakness in retail sales shortly, once we adjust them for the price data from the CPI..

November Consumer Price Index Up 0.2% on Higher Gasoline, Rents

the consumer price index increased by 0.2% in November, as higher prices for energy and housing were only partially offset by lower prices for groceries and other goods...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.2% in November after it had risen 0.4% in October, 0.3% in September, and 0.2% in August....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 241.729 in October to 241.353 in November, which left it statistically 1.69% higher than the 237.336 index reading of last November, which is reported as a 1.7% YoY increase....regionally, prices for urban consumers have risen by 2.3% in the West, by 1.6% in the Northeast and in the South, and by 1.2% in the Midwest over the past year, with greater price increases within regions in cities of more than 1,500,000 people everywhere except in the Northeast, where the largest cities averaged just a 1.5% price increase...with higher prices for gasoline partially offset by lower grocery prices, seasonally adjusted core prices, which exclude food and energy, also rose by 0.2% for the month, with the unadjusted core index rising from 249.218 to 249.227, which left it 2.11% ahead of its year ago reading of 244.075...

the volatile seasonally adjusted energy price index increased by 1.2% in November, after it had risen by 3.5% in October, 2.9% in September, was unchanged in August and fell by 1.6% in July...as a result, energy prices are now 1.2% higher than a year ago, after seeing negative comparisons through most of this year and 2015...prices for energy commodities were 2.5% higher while the index for energy services fell by 0.1%, after rising by 0.5% in October....the increase in the energy commodity index included a 2.7% increase in the price of gasoline, the largest component, while price of fuel oil fell 1.2% and prices for other fuels, including propane, kerosene and firewood, rose by an average of 0.2%…within energy services, the index for utility gas service fell by 0.4% after increasing by 0.9% in October, 0.8% in September, 2.1% in August and by 3.1% in July, and hence utility gas is still priced 6.2% higher than it was a year ago, while the electricity price index was unchanged, after increasing by 0.4% in October...energy commodities are now priced 0.8% above their year ago levels, with gasoline prices averaging 1.0% higher than they were a year ago.…meanwhile, the energy services price index is now 1.5% higher than last November, as even electricity prices have increased by 0.2% over that period..

the supposedly volatile seasonally adjusted food price index was unchanged in November, just as it was in July, in August, in September and in October, as 0.1% lower prices for food purchased for use at home offset 0.1% higher prices for food bought to eat away from home, where we saw average prices at fast food outlets remain unchanged while average prices at full service restaurants rose 0.2%...the food price index is still 0.4% lower than a year ago, as a 2.2% drop in the price of food at home has been mostly offset by a 2.3% increase in prices for food away from home, which included a 2.1% increase in prices of lunches at elementary and secondary schools...

in the food at home categories, the price index for cereals and bakery products increased by 0.1% as 1.8% higher prices for cakes and cupcakes and a 1.1% increase in prices for fresh and frozen pastries were offset by a 1.3% decrease in prices for rice, pasta, cornmeal and a 1.4% decrease in cookie prices...the price index for the meats, poultry, fish, and eggs group fell by 0.1% as beef prices fell 0.2% and other prices in the category were little changed, while the index for dairy products was 0.6% lower on a 1.2% decrease in prices for milk...the fruits and vegetables index was 0.2% lower despite increases of 2.3% for potatoes and 1.7% for apples as lettuce prices were 2.8% lower and canned vegetable prices fell 0.6%....the beverages index was 0.3% higher as prices for beverage materials such as tea rose 0.8%...lastly, prices in the other foods at home category were on average 0.3% lower, as peanut butter prices fell 4.4% and salad dressings were priced 3.1% lower.....among food at home line items, only eggs, which are now priced 33.3% lower than a year ago, and lettuce, which is 15.1% lower than last year, have seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.2% in November after rising by 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods fell by 0.3%, while the heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust November retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.4% as major appliances were priced 1.9% lower, as were window and floor coverings, while prices for living room, kitchen, and dining room furniture were down 1.4%...the apparel price index was 0.5% lower on a 3.3% decrease in prices for men's suits, sport coats, and outerwear and a 1.6% decrease in prices for men's footwear....prices for transportation commodities other than fuel were unchanged, as prices for new cars fell 0.1%, prices for tires fell 1.3%, while prices for used cars and trucks finally rose 0.3% after falling more than 4.5% in the 5 months since May...meanwhile, prices for medical care commodities were 0.5% lower on a 0.6% decrease in prescription drug prices...meanwhile, the recreational commodities index fell 0.3% on a 4.8% drop in TV prices, which more than offset price increases of 1.5% for audio equipment and 0.9% for recreational reading materials...on the other hand, the education and communication commodities index was 0.1% higher as a 2.1% cut in prices for computer software and accessories was more than offset by a 1.3% price increase for telephone hardware and a 1.1% increase in prices for college textbooks....lastly, a separate price index for alcoholic beverages was down 0.2% on 0.8% lower prices for wine and 1.2% lower prices for whiskey bought for drinking at home, while the price index for ‘other goods’ was up 0.1% on a 1.8% increase in prices for stationery, stationery supplies, and gift wrap...

within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.3% increase in owner's equivalent rent, and a 0.5% increase in costs for water, sewers and trash collection, while prices for lodging away from home at hotels and motels were 1.4% lower...at the same time, the index for medical care services was up 0.2% as prices for physicians services rose 0.6% and services by other medical professionals rose 0.5%...in addition, the transportation services index was 0.4% higher on a 9.9% increase in automobile service club fees and 1.0% increases for both motor vehicle body work and for motor vehicle insurance....the recreation services price index was up 0.3% as cable and satellite television services rose 1.1% and club dues and fees for participant sports and group exercises rose 0.6%, and the index for education and communication services rose 0.2% as internet services providers increased prices 1.3% and elementary and high school tuition and fees rose 0.3%, offsetting a 0.3% decrease for wireless telephone services...lastly, the index for other personal services was up 0.1% as prices for haircuts and other personal care services were 0.4% higher...among core prices, only televisions, which are now 24.8% cheaper than a year ago, and computer software and accessories, which are down by 10.9% since last November, have seen prices drop by more than 10% over the past year, while no line item showed an increase of that magnitude...

Estimating the Real Change in November Retail Sales Using Components of the November CPI

with this CPI release for November, we can now attempt to estimate the economic impact of the November retail sales figures which we reviewed earlier, which saw nominal sales rise 0.1%...for the most accurate estimate, and the way the BEA will be figuring 4th quarter GDP at the end of January, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, November's clothing store sales, which were unchanged in dollars, should be adjusted with the price index for apparel, which indicated prices for clothing were 0.5% lower for the month, which tells us that real unit sales of clothing were actually up by 0.5% in November...then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales for November with the similarly adjusted real clothing consumption for the 3 months of the third quarter (July, August and September), and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually.  The short cut we usually take to get a quick and dirty estimate of the change in real sales for the month is to apply the composite price index of all commodities less food and energy commodities, which was down by 0.3% in November, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of aggregate retail sales…in dollars, those non food and energy sales were down by $378 million, or nearly 0.1% in November, while as we noted earlier their composite price index was down 0.3%, meaning that real retail sales excluding food and energy sales were actually up by more than 0.2%.  then, for the rest of the retail aggregate, we find sales at food and beverage stores were up by 0.4% in November, while prices for food at home were down 0.1%, suggesting a real increase of around 0.5% in the quantity of food & beverages purchased during the month.  Next, sales at bars and restaurants were up 0.8% in dollars, but those dollars also bought 0.1% less “food away from home”, so real sales at bars and restaurants were really up by about 0.7%.  And while gas station sales were up 0.3%, gasoline prices were up 2.7%, suggesting a real decrease of 2.4% in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have a detailed breakout on those items, although we do know that tire prices were priced 1.3% lower and automotive fluids were down 0.2%...thus, weighing the food and energy components at roughly 30% of total retail sales, and core sales at 70%, we can estimate that the aggregate of real retail sales in November were up almost 0.3% from those of October…

Producer Prices Up 0.4% in November on 1.3% Higher Margins for Trade Services

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in November as prices for finished wholesale goods increased 0.2%, while margins of final services providers increased by 0.5%...this followed an October report that indicated the overall PPI was unchanged, with prices for finished goods up 0.4% while final demand for services fell 0.3%, and a September report that indicated the PPI was up 0.3%, with prices for finished goods up 0.3% while final demand for services rose 0.1%....producer prices are now up 1.3% from a year ago, since most of the price decreases relating to lower oil and commodity prices went by the boards in early 2015...

as noted, the price index for final demand for goods, aka 'finished goods', rose by 0.2% in November, after rising 0.4% in October, 0.7% in September but falling by 0.4% in both July and August, as the index for wholesale energy prices fell 0.3% from October to November while the price index for wholesale foods was 0.6% higher and the index for final demand for core wholesale goods (ex food and energy) rose 0.2%...major wholesale price changes for November included a 16.0% increase for fresh fruits and melons and a 9.9% increase for beef and veal, while wholesale prices for liquefied petroleum gas fell 8.7% and wholesale gasoline prices were 2.9% lower...

meanwhile, the index for final demand for services rose by 0.5% in November after falling by 0.3% in October but rising by 0.1% in both August and September, as the index for final demand for trade services rose 1.3%, the index for final demand for transportation and warehousing services rose 0.1% and the for final demand for services less trade, transportation, and warehousing services was also 0.1% higher....among trade services, seasonally adjusted margins for TV, video, and photographic equipment retailers were up 6.0%, margins for apparel, jewelry, footwear, and accessories retailers were up 4.2%, margins for fuels and lubricants retailers were up 9.9%, and margins for major household appliances retailers were up 9.0%.. among transportation and warehousing services, margins for air transport of freight fell 2.3% while all other transportation and warehousing services were higher.. in the core final demand services index, margins for passenger car rentals were 3.0% higher while margins for cruises and tours agencies were 3.1% lower...

this report also showed the price index for processed goods for intermediate demand was 0.3% higher, after rising 0.3% in October and 0.5% in September...prices for intermediate processed goods are now 0.2% higher than in November a year ago after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016.... in November, the price index for intermediate energy goods fell 0.8%, while prices for intermediate processed foods and feeds rose 0.8%, and the core price index for processed goods for intermediate demand less food and energy was 0.4% higher on a 9.5% increase in intermediate wholesale prices for primary basic organic chemicals...

at the same time, the price index for intermediate unprocessed goods was unchanged in November after a 0.6% decrease in October, a 1.3% increase in September, and a 2.8% drop in August...the price index for unprocessed foodstuffs and feedstuffs was up 3.5%, as the index for slaughter steers and heifers rose 10.7 percent, while the index for crude energy goods fell 5.0% as prices for crude oil fell 11.6%...at the same time, the index for core raw materials other than food and energy materials rose 2.4%, on an 11.4% increase in wholesale prices for iron and steel scrap... this raw materials index has now turned positive 0.2% from year ago, in contrast to its maximum year over year decrease of 26.4% that was seen in November of 2015...

lastly, the price index for services for intermediate demand was 0.2% higher in November, after being 0.6% lower in October, 0.4% higher in September, and being unchanged in August... the index for trade services for intermediate demand was 0.2% higher as margins for food wholesalers rose 2.0%, the index for transportation and warehousing services for intermediate demand was unchanged, as pricing for intermediate services related to air freight transportation fell 2.3%, while the core price index for services less trade, transportation, and warehousing for intermediate demand rose 0.3%, as a 3.2% increase in the index for for business loans (partial) accounted for 80% of the November increase in services for intermediate demand...over the 12 months ended in November, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.3% higher than it was a year ago... 

Industrial Production Falls 0.4% in November on Warmer than Normal Weather

the Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production fell 0.4% in November after rising by a revised 0.1% in October and falling by 0.2 percent in September, largely on a 4.4% drop in the utility index, as warmer than normal temperatures reduced the demand for heating....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 103.9 in November from 104.3 in October, which was statistically unrevised from last month, as were indexes of other prior months except for the July index, which was revised from 104.6 to 104.5....year over year industrial production is now down just 0.6%, an improvement from last month's 0.9% YoY decrease....

the manufacturing index, which accounts for more than 77% of the total IP index, was unchanged at 103.2 in November but was reported 0.1% lower, after the change from September to 103.0 to October was revised from a 0.2% increase to a 0.3% increase because the index for September was revised from 103.0 to 102.9; in addition, July's manufacturing index was revised down from 103.4 to 103.3....meanwhile, the mining index, which includes oil and gas well drilling, rose from 106.2 in October to 107.4 in November, after the October index was revised up from 106.1, which nonetheless still left the mining index 6.4% lower than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 4.4% in November, from 102.2 to 97.7, after the September utility index was revised up from 104.9 to 105.1...with the warmest Autumn in US weather history, the utility index has dropped 9.6% over the past 3 months, and is now 1.9% lower than it was a year earlier..

this report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell to 75.0% in November from 75.4% in October, which was revised from the 75.3% reported last month ...capacity utilization of NAICS durable goods production facilities fell from 76.2% in October to 75.9% in November, while capacity utilization for non-durables producers rose from an upwardly revised 74.5% to 74.7%...capacity utilization for the mining sector rose to 78.2% in November from 77.1% in October, which was originally reported as 77.0%, while utilities were operating at 74.4% of capacity during November, down from their 77.9% of capacity during October, which was revised up from the previously reported 77.8%...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.... 

October Business Sales Up 0.8% Business Inventories Down 0.2%

after the release of the November retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for October (pdf), which incorporates the revised October retail data from that November report and the earlier published October wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,326.8 billion in October, up 0.8 percent (±0.2%) from September's revised sales, and up 2.1 percent (±0.4%) from October sales of a year earlier...note that total September sales were concurrently revised up from the originally reported $1,314.6 billion to $1,316.0 billion....manufacturer's sales were up 0.4% to $464,722 million in October; retail trade sales, which exclude restaurant & bar sales from the revised October retail sales reported earlier, rose 0.7% to $409,881 million, and wholesale sales rose 1.4% to $452,169 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,813.0 billion at the end of October, down 0.2 percent (±0.1%)* from September, but still 0.4 percent (±0.5%)* higher than in October a year earlier...at the same time, the value of end of September inventories was revised from the $1,818.7 billion reported last month to $1817.0...seasonally adjusted inventories of manufacturers were estimated to be valued at $621,438 million, statistically unchanged from September, while inventories of retailers were valued at $603,797 million, 0.4% less than in September, and inventories of wholesalers were estimated to be valued at $587,730 million at the end of October, also 0.4% lower than in September...

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for October, which was up 0.4% for finished goods...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories would have a negligible impact on 4th quarter GDP…also last week, we found that real wholesale inventories would likely subtract about 0.07 or 0.08 percentage points from 4th quarter GDP growth….this week's real retail inventories for October, after a 0.4% price adjustment of the 0.4% nominal value decline, thus would have decreased by about 0.8% from September, in a third quarter that saw producer price index decreases of 0.2% in both July and August boost real inventories...thus it appears that retail inventories in October are also on track to subtract at least 0.08 percentage points from 4th quarter GDP growth, if not more..

November Housing Starts and Permits Fall from October Highs

the November report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in November was at a seasonally adjusted annual rate of 1,090,000, which was 18.7 percent (±6.7%) below the revised October estimated annual rate of 1,340,000 housing units started, and was 6.9 percent (±7.3%)* below last November's rate of 1,171,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, November housing starts could have been up by 0.4% or down by as much as 14.2% from those of last November, with even larger revisions possible...in this report, the annual rate for October housing starts was revised from the 1,323,000 reported last month to 1,340,000, while September starts, which were first reported at a 1,047,000 annual rate, were revised down from last month's initial revised figure of 1,154,000 annually back to 1,052,000 annually with this report....

those annual rates of 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 82,800 housing units were started in November, down from the 115,700 units that were started in October...of those housing units started in November, an estimated 60,700 were single family homes and 21,900 were units in structures with more than 5 units, down from the revised 72,700 single family starts and the 41,700 units started in structures with more than 5 units in October...

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in November, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,201,000 housing units, which was 4.7 percent (±1.1%) below the revised October rate of 1,260,000 permits, and was 6.6 percent (±2.6%) below the rate of building permit issuance in November a year earlier...the annual rate for housing permits issued in October was revised up from the originally reported 1,229,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 97,900 housing units were issued in November, down from the revised estimate of 100,700 new permits issued in October...the November permits included 55,800 permits for single family homes, down from 61,600 single family permits issued in October, and 31,300 permits for housing units in apartment buildings with 5 or more units, down from 36,600 such multifamily permits a month earlier... for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.090 Million Annual Rate in November and Comments on November Housing Starts... 

 

(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, most from the aforementioned GGO posts, contact me…)              

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