Sunday, April 21, 2019

March retail sales, industrial production, & new home construction; February's trade deficit & business inventories

Major monthly reports released this week included the Commerce Dept report on our International Trade for February, the Retail Sales report for March and the Business Sales and Inventories report for February from the Census Bureau, the March report on Industrial Production and Capacity Utilization from the Fed, and the March report on New Residential Construction from the Census Bureau…the week also saw the release of the Regional and State Employment and Unemployment Summary for March from the BLS, while the Census Bureau also released the February report on Wholesale Trade, Sales and Inventories, the summary of which was later included in the aforementioned Business Sales and Inventories report...

This week also saw first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an NYC suburban county in Connecticut, northern New Jersey, and Puerto Rico, reported their headline general business conditions index rose to +10.1, up from +3.7 in March, suggesting a return to modest growth for First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell to +8.5 in April from +13.7 in March, indicating that a smaller plurality of the region's manufacturing firms reported increases in their activity this month...

Retail Sales Rose 1.6% in March after February and January Sales Revised Higher

Seasonally adjusted retail sales increased by 1.6% in March after retail sales for January and February were both revised a bit higher...the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $514.1 billion during the month, which was up by 1.6 percent (±0.5%) from February's revised sales of $491.8 billion and 3.6 percent (±0.7%) above the adjusted sales in March of last year...February's seasonally adjusted sales were revised from $506.0 billion to $506.1 billion, while January's sales were revised from $507.0 billion to $507.2 billion; as a result, the change from January to February remained at -0.2 percent (±0.2%)*.....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were up 16.2%, from $446,692 million in February to $519,066 million in March, while they were up 1.5% from the $511,626 million of sales in March of a year ago...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf...to again explain what this table shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's 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 pair 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 2019 r" (revised) and the February 2018 to February 2019 percentage change as revised in the 2nd column of that pair...(for your reference, our copy of this same table from the advance February estimate, before this month's revisions, is here).... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter a year ago....

March 2019 retail sales table

As you can see from that fifth column, retail sales for the 1st quarter of 2019 were only 0.1% higher than the 4th quarter of 2018, despite the 1.6% jump in March sales; that's because retail sales fell 1.6% in December, which meant that January sales, despite being up 0.7%, were still lower than those of November, and the 0.2% decrease in February sales didn't improve on that...that weakness in 1st quarter consumption will be evident when the first quarter GDP report is released next week..

Meanwhile, to compute March's real personal consumption of goods data for national accounts from this March retail sales report, the BEA will use the corresponding price changes from the March consumer price index, which we reviewed when it was released 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 March retail sales excluding the 3.5% price-related increase in sales at gas station were up by 1.4%....then, pulling the 1.0% increase in grocery & beverage sales and the 0.8% increase in food services sales out from that total, we find that core retail sales were up by a bit more than 1.5% for the month...since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% lower in March, we can thus figure that real retail sales excluding food and energy will show an increase of around 1.7%...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 up 3.1%, the March price index for transportation commodities other than fuel was 0.1% higher, as as prices for new cars and trucks rose 0.5%, prices for used cars and trucks fell 0.4%, which would mean that real unit sales at auto & parts dealers were probably on the order of 3.0% higher, with real new car sales, up 3.3% in dollars, around 2.8% higher once the price increase is taken into account... on the other hand, while nominal sales at clothing stores were 2.0% higher in March, the apparel price index was 1.9% lower, which means that real sales of clothing likely rose around 3.9%...

In addition to figuring those core retail sales, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.3% 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 0.2% higher...thus, while nominal sales at food and beverage stores were 1.0% higher, real sales of food and beverages would only be around 0.6% higher in light of the 0.4% higher prices…meanwhile, the 0.8% increase in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants also rose around 0.6% during the month...but while sales at gas stations were up 3.5%, there was a 6.4% increase in price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 2.9%, with a caveat that gasoline stations do sell more than gasoline, so the actual decrease in real gas station sales was likely smaller...averaging real sales that we have thus estimated together, and excluding food services, we can then estimate that the income and outlays report for March will show that real personal consumption of goods rose by more than 1.3% in March, after falling by 0.1% in February and rising by a revised 0.3% in January, but after falling by 2.0% December...at the same time, the 0.6% increase in real sales at bars and restaurants would boost March real personal consumption of services by less than 0.1%...

Trade Deficit Fell 3.4% February on Greater Exports of Civilian Aircraft

Our trade deficit fell by 3.4% February, as both our exports and imports increased, but the value of our exports increased more than the value of our imports did....the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit fell $1.8 billion to $49.4 billion in February, from a January deficit that was revised but statistically unchanged from the $51.1 billion deficit reported a month ago...in rounded figures, the value of our February exports rose by $2.3 billion to $209.7 billion on a $2.1 billion increase to $139.5 billion in our exports of goods and an increase of $0.2 billion to $70.1 billion in our exports of services, while our imports rose $0.6 billion to $259.1 billion on a $0.9 billion increase to $211.6 billion in our imports of goods, which was partially offset by a $0.3 billion decrease to $47.5 billion in our imports of services....export prices averaged 0.7% higher in February, so real exports were smaller than their nominal value by that percentage, while import prices were 1.0% higher, meaning that the 0.2% growth in the value of our imports was actually a contraction in real terms....

The increase in our February exports of goods came about as a result of higher exports of capital goods and of automotive products, which was partially offset by a decrease in our exports of industrial supplies...referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of capital goods rose by $2,125 million to $48,093 million on a $2,586 million increase in our exports of civilian aircraft and a $386 million increase in our exports of semiconductors, and that our exports of automotive vehicles, parts, and engines rose by $585 million to $14,115 million on a $654 million increase in our exports of passenger cars...in addition, our exports of consumer goods rose by $38 million to $17,808 million as a $573 million increase in our exports of pharmaceuticals was offset by a $288 decrease in our exports of gem diamonds and a $249 decrease in our exports of jewelry...partially offsetting the increases in those end use categories, our exports of industrial supplies and materials fell by $383 million to $43,016 million as a $281 million decrease in our exports of fuel oil, a $209 million decrease in our exports of natural gas liquids, and a $206 million decrease in our exports of natural gas were offset by a $492 million increase in our exports of crude oil and a $437 million increase in our exports of other petroleum products, while our exports of foods, feeds and beverages fell by $249 million to $10,746 million on a $207 million decrease in our exports of corn, and our exports of other goods not categorized by end use fell by $173 million to $5,216 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that higher imports of consumer goods were responsible for the increase in our February imports, while their impact was limited by lower imports of industrial supplies and materials...our imports of consumer goods rose by $1,567 million to $56,730 million as a $2,088 million increase in our imports of cellphones and a $380 million increase in our imports of artwork and collectibles were partially offset by a $394 million decrease in our imports of pharmaceuticals and a $204 million decrease in our imports of toys, games, and sporting goods...in addition, our imports of capital goods rose by $191 million to $57,208 million as a $862 million increase in our imports of civilian aircraft engines, a $646 million increase in our imports of civilian aircraft, and a $292 million increase in our imports of semiconductors was partially offset by a $572 million decrease in our imports of computers, a $340 million decrease in our imports of drilling & oilfield equipment, a $229 million decrease in our imports of civilian aircraft parts and a $227 million decrease in our imports of excavating equipment, while our imports of other goods not categorized by end use rose by $453 million to $9,305 million….partially offsetting the increases in those end use categories, our imports of industrial supplies and materials fell by $1611 million to $42,568 million, as our imports of organic chemicals fell by $391 million, our imports of our imports of fuel oil fell by $223 million and our imports of iron and steel mill products fell by $211 million, and our imports of foods, feeds, and beverages fell by $199 million to $12,062 million on a $418 million decrease in imports of foods other than those itemized separately, and our imports of automotive vehicles, parts and engines fell by $15 million to $31,919 million as a $601 million increase in our imports of passenger cars was offset by a $434 million decrease in our imports of parts and accessories of vehicles other than bodies and chassis, engines and tires...

The Full Release pdf also gives us surplus and deficit details on our goods trade with selected countries:

The February figures show surpluses, in billions of dollars, with South and Central America ($3.7), Hong Kong ($2.8), United Kingdom ($0.9), Brazil ($0.6), Singapore ($0.4), Canada ($0.4), and OPEC ($0.3). Deficits were recorded, in billions of dollars, with China ($30.1), European Union ($12.4), Mexico ($7.7), Japan ($6.7), Germany ($5.5), Italy ($2.8), South Korea ($2.4), India ($2.2), France ($2.2), Taiwan ($1.7), and Saudi Arabia ($0.3).

  • The deficit with China decreased $3.1 billion to $30.1 billion in February. Exports increased $1.6 billion to $9.2 billion and imports decreased $1.5 billion to $39.3 billion.
  • The surplus with Hong Kong increased $1.0 billion to $2.8 billion in February. Exports increased $0.9 billion to $3.2 billion and imports decreased $0.1 billion to $0.3 billion.
  • The deficit with Japan increased $1.3 billion to $6.7 billion in February. Exports decreased $1.1 billion to $5.7 billion and imports increased $0.2 billion to $12.4 billion.

To gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012  dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here...from that table, we can figure that 4th quarter real exports of goods averaged 148,107.7 million monthly in chained 2012 dollars, while inflation adjusted 1st quarter goods exports were at 149,892 million and 150,733 million for January and February respectively in that same 2012 dollar quantity index representation...averaging January and February goods exports and then computing the annualized change between that average and the average of the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 6.09% annual rate above those of the 4th quarter, or at a pace that would add 0.51  percentage points to 1st quarter GDP.....in a similar manner, we find that our 4th quarter real imports of goods averaged 235,498 million monthly in chained 2012 dollars, while inflation adjusted January and February imports were at 233,413 million and 232,490 million respectively, after that same 2012 chained dollars inflation adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have decreased at a 4.26% annual rate from those of the 4th quarter...since an increase in imports would subtract from GDP because it would represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 4.26% rate would thus conversely add 0.51 more percentage points to 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to add 1.02 percentage points to 1st quarter GDP...

Note that we have not computed the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, but that the increase in exports of services combined with the decrease in imports of services suggests that February’s trade in services would also make a positive contribution to 1st quarter GDP...

Industrial Production Down 0.1% in March After Annual Revisions

The Fed's G17 release on Industrial production and Capacity Utilization for March reported that industrial production fell 0.1%% in March after rising by a revised 0.1% in February, which left production 2.8% higher than a year ago...however, this month’s data now reflects the results of an annual revision on March 27th which left the IP indexes for 2016 and 2017 a bit higher than the previously published numbers, and the estimates for 2015 and 2018 slightly lower....hence, the industrial production index, with the benchmark set for average 2012 production to equal to 100.0, ended at 110.2 in March, down 0.1% from February, after the February index, which had been published at 109.7 a month ago, was revised down from the revised 110.5 to 110.3, the revised January index was revised down from 110.4 to 110.2, the revised December index was revised from 110.6 to 110.5, the revised November index was revised from 110.5 to 110.6, and the revised October index was revised from 109.8 to 109.9...as a result of those revisions, US industrial production was down at a 0.3% annual rate for the first quarter as a whole...

The manufacturing index, which accounts for around 77% of the total IP index, slipped to 105.5 in March, after the February index was revised from 104.8 to 105.7 in the annual revision and then revised to 105.6 with this report....meanwhile, the January manufacturing index was revised from the revised 106.1 to 105.9, the revised December manufacturing index was unrevised at 106.5, the revised November manufacturing index was revised from 105.9 to 105.8, and the revised October manufacturing index was revised from 105.4 to 105.6...taking into account all revisions, the manufacturing index now stands 1.0% above its year ago level, while first quarter manufacturing has shrunk at a 1.1% annual rate from that of the 4th quarter of 2018....meanwhile, the mining index, which includes oil and gas well drilling, fell 0.8%, from 132.2 in February to 131.2 in March, after the February mining index was revised up from last month's reported 131.8, which meant the mining index was 10.5% higher than it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, rose by 0.2% in March, from 108.2 to 108.4, after the February utility index was revised from 107.3 to 108.2, up 3.7% from January...after both the annual and this month's revisions, the utility index is now 3.8% above that of a year ago, largely on a colder March this year than last..

This report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry fell to 78.8% in March from 79.0% in February, which was revised from the 78.2% reported before the annual revision ...capacity utilization of NAICS durable goods production facilities slipped from a revised 76.7% in February to 76.6% in March, while capacity utilization for non-durables producers was unchanged at 77.2%...capacity utilization for the mining sector fell to 90.9% in March from 92.1% in February, which had been reported as 94.6% last month, while utilities were operating at 79.9% of capacity during March, unchanged from February, even as that February utility index was previously reported at 78.6%...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.. 

March Housing Starts and Building Permits Significantly Lower than a Year Ago

The March 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 1,139,000 in March, which was 0.3 percent (±14.6 percent)* below the revised estimated annual rate of 1,142,000 starts in February, and 14.2 percent (±8.8 percent) below last March's rate of 1,327,000 housing starts a year....the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during March, with the figures in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been up by 14.3% or down by as much as 14.9% from those of February, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for February housing starts was revised from the 1,162,000 reported last month to 1,142,000, while January starts, which were first reported at a 1,230,000 annual rate, were revised from last month's initial revised figure of 1,273,000 annually to a 1,298,000 annual rate with this report....

These 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 93,300 housing units were started in March, up from the 80,200 units that were started in February and the 87,000 units that were started in January...of those housing units started in March, an estimated 65,500 were single family homes and 26,500 were units in structures with more than 5 units, up from the revised 54,900 single family starts in February and up from the 24,900 units started in structures with more than 5 units in February...

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 March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,269,000, which was 1.7 percent (±1.4 percent) below the revised February rate of 1,291,000 permits, and was 7.8 percent (±1.9 percent) below the rate of building permit issuance in March a year earlier...the annual rate for housing permits issued in February was revised down from the originally reported  1,296,000....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 roughly 103,900 housing units were issued in March, up from the revised estimate of 89,700 new permits issued in February.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.139 Million Annual Rate in March and Comments on February Housing Starts... 

February Business Sales Up 0.1%, Business Inventories Up 0.3%

After the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February 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 $1,446.8 billion in February, up 0.1 percent (±0.1 percent)* from January's revised sales, and up 2.4 percent (±0.3 percent) from February sales of a year earlier...note that total January sales were concurrently revised down from the originally reported $1,449.6 billion to $1,444,834 million, still a 0.3% increase from December....the value of manufacturer's sales rose 0.4% to $505,471 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 0.3% to $445,518 million, while wholesale sales rose 0.3% to $495,852 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,017.4 billion at the end of February, up 0.3 percent (±0.1%) from the end of January, and 4.9 percent (±0.5 percent) higher than in February a year earlier...at the same time, the value of end of January inventories was revised from the $2,013.9 billion reported last month to $2,011.7 billion, now 0.9% higher than January....seasonally adjusted inventories of manufacturers were estimated to be valued at $687,785 million, up 0.3% from January, and inventories of retailers were valued at $660,720 million, also 0.3% more than in January, while inventories of wholesalers were estimated to be valued at $668,892 million at the end of February, 0.2% higher than in January... 

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, 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 could still have a positive impact on 1st quarter GDP, mostly because of the low bar set by 4th quarter real factory inventories…however, all of retail inventories and most of wholesale inventories are finished goods, meaning they will show a small real decrease in February once adjusted with the producer price index...since the 4th fourth quarter saw real retail inventories increase by $8.6 billion, or at a 5.1% annual rate, and real wholesale inventories increase by $14.6 billion, or at a 8.3% rate, any first quarter real decreases in those inventories will subtract from 1st quarter GDP by at least the magnitude of the 4th quarter increase...

 

(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 of which are picked from the aforementioned GGO posts, contact me…)      

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