after the dearth of major reports last week, this week saw a number of them, including Retail Sales for May and Business Sales and Inventories for April, both released by the Census bureau, the May Consumer Price Index and the May Producer Price Index, both from the Bureau of Labor Statistics, the report on Industrial Production and Capacity Utilization for May from the Fed, and the May report on New Residential Construction from the Census Bureau...in addition, this week also saw the release of the Regional and State Employment and Unemployment for May from the BLS, and the release of the first two regional Fed manufacturing indexes for June: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -9.02 to + 6.01, its third positive reading in the past 4 months after 7 negatives, suggesting a return to expansion in First District manufacturing, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose from -1.8 in May to +4.7 in June, its second positive reading in 10 months, also suggesting an end to the contraction in that region's manufacturing...
May Retail Sales up 0.5%, Boosted by 2.1% Increase at Gas Stations
seasonally adjusted retail sales rose 0.5% in May after retail sales for March and April were revised slightly higher....the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $455.6 billion for the month, which was an increase of 0.5 percent (±0.5%)* from April's revised sales of $453.6 billion and 2.5 percent (±0.7%) above the adjusted sales of May of last year...April's seasonally adjusted sales were revised from the $453.4 billion originally reported to $453.6 billion, while March sales were also revised higher, from $447.8 billion, to $447.9 billion, with this report....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 4.5%, from $412,328 million in April to $471,421 million in May, while they were up 3.6% from the $462,615 million of sales in May a year ago...
included below is the table of the monthly and yearly percentage changes in sales by business type taken from the Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the March to April change under "Mar 2016 revised" and the revised April 2015 to April 2016 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance April estimates, before this month's revision, is here....
from the above table, we can see that a 2.1% increase to $39,999 million in seasonally adjusted sales at gas stations, largely due to higher prices, helped boost May sales...without those, May's retail sales would have just been up 0.3%...similarly, without sales at motor vehicle and parts dealers, which were up more than 0.5% to $96,973 million, other retail sales would have only been up a bit more than 0.4%...meanwhile, retailers showing well above average increases in May sales included non-store retailers, including catalog and online, which saw sales rise by 1.3% to $45,238 million, and specialty stores, such as sporting goods, book & music stores, where sales were also up 1.3% to $7,901 million...on the other hand, sales at building material and garden supply stores fell 1.8% to $28,365 million, sales at miscellaneous store retailers fell 1.2% to $10,515 million, and sales at department stores fell 0.9% to $12,349 million..
May Consumer Prices Up 0.2% on Higher Rents, Energy
the consumer price index rose 0.2% in May, as price increases for fuels and core services were partially offset by lower prices for food and core commodities...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.2% in May after rising 0.4% in April and 0.1% in March....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 240.236 in May from 239.261 in April, which left it statistically 1.02% higher than the 237.805 index reading of last May....regionally, prices for urban consumers have risen 1.5% in the West, 0.9% in the South, 0.8% in the Midwest, and 0.9% in the Northeast over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people...with lower food prices offsetting higher energy 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 246.992 to 247.554, which is now 2.24% ahead of its year ago reading of 242.119...
the volatile seasonally adjusted energy price index rose by 1.2% in May after rising by 3.4% in April and 0.9% in March, while falling by 6.0% in February and by 2.8% in both December and January, and thus the energy price index still remains 10.1% lower than it was in May a year ago....prices for energy commodities were 2.4% higher while the index for energy services rose by 0.2%, after falling 0.1% in April....the increase in the energy commodity index included a 2.3% increase in the price of gasoline, the largest component, and a 6.2% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 1.9% increase…within energy services, the index for utility gas service rose by 1.7% after rising by 0.6% in April, even as utility gas was still priced 4.7% lower than it was a year ago, while the electricity price index fell by 0.2%, after falling by 0.3% in April...energy commodities are still priced 16.9% below their year ago levels, with gasoline prices also averaging 16.9% lower than they were a year ago...meanwhile, the energy services price index is 2.0% lower than last May, as even electricity prices have fallen 1.3% over that period..
the seasonally adjusted food price index fell 0.2% in May, after it rose by 0.2% in April, as prices for food purchased for use at home fell 0.5% while prices for food away from home rose 0.2%, as average prices at fast food outlets rose 0.1% while average prices at full service restaurants rose 0.3%...for food at home, all six major grocery store food group price indexes declined...the price index for cereals and bakery products was 0.4% lower as prices for bakery products other than bread, biscuits, cakes and cookies fell 1.3%....the price index for the meats, poultry, fish, and eggs group fell by 0.5% as poultry prices fell 3.2%, prices for eggs were 2.8% lower and a 2.4% decrease in ham prices dragged the pork index down....the index for dairy products was 0.6% lower, as cheese prices fell 0.6%, prices for whole milk were 0.2% lower, while average prices for other dairy products fell 1.5%... the fruits and vegetables index fell 0.7% in May after falling by 0.5% in April and 1.9% in March as prices for fresh fruits were 0.6% lower on a 3.0% drop in orange prices and 2.5% cheaper apples, the index for fresh vegetables averaged a 0.4% decrease, led by a 7.0% drop in tomato prices, while prices for processed fruits and vegetables fell 1.4% on a 2.4% decrease in prices for frozen vegetables...in addition, the index for beverages and beverage materials was 0.1% lower as carbonated drinks prices fell 1.5% while coffee was priced 0.8% higher... lastly, prices in the other foods at home category averaged a 0.5% decrease as prices for butter fell 3.3% and olives, pickles and relishes were priced 3.8% lower....among food line items, only bacon, which is now priced 10.3% higher than a year ago, has 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 May after rising 0.2% in April, 0.1% in March and 0.3% in both February and January, the composite of all commodities less food and energy commodities fell by 0.2%, while the composite for all services less energy services was 0.3% higher....among the commodity components, which will be used by the Bureau of Economic Analysis to adjust May retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.4% on a 1.2% decrease in prices for laundry equipment, a 1.3% decrease in prices for cookware and tableware, and a 1.0% decrease in prices for living room, kitchen, and dining room furniture...meanwhile, the apparel price index was 0.8% higher on 2.9% increases for men's suits, sport coats, and outerwear and for men's furnishings, a 3.4% increase in prices for women's outerwear, and a 4.1% increase in prices for watches and jewelry...on the other hand, prices for transportation commodities other than fuel were down 0.5%, as prices for used cars and trucks were down 1.3% while tire prices were 0.8% lower....prices for medical care commodities were 0.2% lower on 0.4% lower prescription drug prices, while the recreational commodities index fell 0.3% as TV prices fell 1.9% and prices for toys, games, hobbies and playground equipment fell 1.5%.....in addition, the education and communication commodities index was 0.8% lower as prices for computer software and accessories fell 4.3%...lastly a separate index for alcoholic beverages fell 0.1% on a 2.7% decrease in prices for whiskey bought for use at home, while the index for ‘other goods’ was down 0.1% on a 0.7% decrease in prices for hair, dental, shaving, and miscellaneous personal care products...
within core services, the price index for shelter rose 0.4% on a 0.4% increase in rents and a 0.3% increase in owner's equivalent rent while costs for lodging away from home at hotels and motels rose 0.7%, and costs for water, sewers and trash collection were 0.6% higher....medical care services rose 0.5% as physicians' services rose 1.0% and and services by other medical professionals rose 1.1%...meanwhile, the transportation services index rose 0.3% on a 4.8% increase in car and truck rentals and the recreation services index rose 0.2% as video & audio rental services rose 1.9% and film processing rose 1.1%... on the other hand, the index for education and communication services was unchanged in May for the 2nd month in a row as a 0.6% decrease in wireless telephone services offset 0.3% higher college tuition......lastly, other personal services were up 0.6% on a 2.9% increase in checking account and other bank services and a 1.4% increase in legal fees...among core prices, a 13.9% increase in ship fares and a 10.3% year over year increase in moving and storage expenses were the only line items with annual increases greater than 10%, while only telephones, which were priced 10.0% lower, and televisions, which are now 17.5% cheaper, saw their prices drop by more than 10% over the past year...
Estimating May Real Retail Sales Using May CPI Data
with this May CPI release, we can now attempt to estimate the economic impact of the May retail sales figures we covered earlier, which saw nominal sales rise 0.5%...for the most accurate estimate, and the way the BEA will be figuring 2nd quarter GDP at the end of July, 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, May's clothing store sales, which rose by 0.8% in dollars, should be adjusted with the price index for apparel, which indicated prices for clothing were also up by 0.8%, which tells us that real retail sales of clothing were actually unchanged in May. Then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales for April and May with the similarly adjusted real clothing consumption for the 3 months of the first quarter, January, February and March, 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 real sales is to apply the composite price index of all commodities less food and energy commodities, which was down 0.2%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of aggregate retail sales. Those sales were up by just about 0.3% in April, while their composite price index was down 0.2%, meaning that real retail sales excluding food and energy sales were up by roughly 0.5%. Then, for the rest of the retail aggregate, we find sales at grocery stores were up 0.3% in May, while prices for food at home were down 0.5%, suggesting a real increase of around 0.8% in the quantity of food purchased for the month. Next, sales at bars and restaurants were up 0.8% in dollars, but those dollars bought 0.2% less, so real sales at bars and restaurants were only up by about 0.6%. And while gas station sales were up 2.2%, gasoline prices were up 2.3%, suggesting a real decrease in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have the detailed info on that. 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 May were up slightly more than 0.5% from those of April…
next, to get an approximation of the real adjusted changes for April and May to the 3 months of the first quarter, we use Table 7 in the pdf for the April personal income and outlays report, which shows real sales of goods were up 0.2% in February, up 0.4% in March, and up 1.2% in April. Normally, we'd have to adjust those figures for any revisions in the retail sales figures for those months, but since this months retail revisions are small fractions of 0.1%, we'll forgo that step today...thus, without compounding, that leaves real inflation adjusted May retail sales roughly 1.7% higher than those of March, 2.1% higher than those of February, and 2.3% higher than those of January, or, on average, more than 2.0% above the real retail sales of the first quarter....in national accounts terms, that's real growth in consumption of goods at an annual rate of over 8.1%, a pace that would add at least one-third of 1.92 percentage points to 2nd quarter GDP (ie, since May is one-third of the 2nd quarter)...that follows an April contribution to GDP from real goods consumption equivalent to one-third of 1.35 percentage points, which we incorporated into our calculation of the impact of the April incomes and outlays report of two weeks ago...thus, even if June retail sales are flat, personal consumption of goods would add 1.73 percentage points to 2nd quarter GDP...
Producer Prices Rise 0.4% in May on Higher Energy, Trade Margins
the seasonally adjusted Producer Price Index (PPI) for final demand increased by 0.4% in May as prices for finished wholesale goods rose by 0.7%, while margins of final services providers rose by 0.2%...this followed a April report that showed the overall PPI had increased 0.2%, with prices for finished goods up 0.2% while final demand for services rose 0.1%....producer prices are still down 0.1% from a year ago, and down 1.2% from two years ago, as most of the price reductions relating to lower oil and commodity prices were seen in early 2015...
as we noted, the index for final demand for goods, aka 'finished goods', was up 0.7% in May, after rising by 0.2% in both March and April, and falling by 1.8% over the December thru February period, as the index for wholesale energy prices rose 2.8% from April to May, the price index for wholesale foods was 0.3% higher, and the index for final demand for core wholesale goods (ex food and energy) also rose by 0.3% in May...major wholesale price changes included a 20% increase for diesel fuel, an 18.7% increase for home heating oil, a 14.8% increase for oilseeds, and a 10.2% increase in wholesale fresh and dry vegetables, which was partially offset by a 5.2% decrease in wholesale prices for beef and veal....a 1.3% increase in prices for metal forming machine tools and a 1.3% decrease in wholesale floor coverings were the largest price changes among core goods...
meanwhile, the index for final demand for services rose by 0.2% in May after rising 0.1% in April and falling 0.2% in March, as the index for final demand for trade services rose 1.2%, the index for final demand for transportation and warehousing services fell 0.6%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.2% lower....noteworthy among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers were 4.7% higher, while margins for RVs, trailers, and campers retailers were 4.4% lower...among transportation and warehousing services, margins for air transportation of freight rose 3.2% while margins for airline passenger services fell 2.6%...in the core final demand services index, margins for passenger car rentals rose 3.6% and margins for arrangement of vehicle rentals and lodging services were 2.9% lower..
this report also showed the price index for processed goods for intermediate demand increased by 0.8%, after rising 0.3% in April but falling in each of the prior nine months, as intermediate processed goods prices still remain 4.6% lower than in May a year ago.... the price index for processed foods and feeds rose 1.1%, while prices for intermediate energy goods rose by 2.7% and the price index for processed goods for intermediate demand less food and energy was 0.5% higher...meanwhile, the price index for intermediate unprocessed goods was up by 1.3% in May after rising by 2.6% in April and 2.5% in March, in the only increases in that index since June of last year...driving that May increase was a 4.2% increase in the index for core raw materials other than food and energy materials, while the index for unprocessed foodstuffs and feedstuffs rose 0.1%, and producer prices for crude energy goods were 0.9% higher.. this raw materials index remains 13.7% lower than it was a year ago, as almost half of the year over year decrease of 26.4% seen in November has now been retraced...
lastly, the price index for services for intermediate demand was 0.2% lower in May after rising 0.1% in April, on a 0.4% decrease in the core price index for services less trade, transportation, and warehousing for intermediate demand, while the index for trade services for intermediate demand rose 0.3% and the index for transportation and warehousing services for intermediate demand was unchanged...driving the drop in prices for services for intermediate demand was a 3.0% decrease in the index for business loans (partial)...over the 12 months ended in May, the year over year price index for services for intermediate demand, which has never turned negative, remains 0.9% higher than it was a year ago...
Industrial Production Down 0.4% in May on Drop in Auto Output
a large drop in the output of motor vehicles and parts led to a decline in manufacturing, which combined with lower utility output led industrial production lower in May...the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.4% in May after rising by a revised 0.6% in April...industrial production is now down 1.4% from a year ago, compared to last month's year over year decrease of 1.1%...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 103.6 in May from 104.0 in April, which was originally reported at 104.1...at the same time, the March reading for the index was revised down from 103.5 to 103.4.....the average of the April and May production indexes is now more than 0.3% below the average of the 1st quarter months, so to the extent that this report plays into GDP, this report suggests a net subtraction from GDP of that magnitude in the components that this report influences...
the manufacturing index, which accounts for more than 77% of the total IP index, decreased by 0.4, from 103.2 in April to 102.8 in May, after the manufacturing index for April was revised down from 103.4, the manufacturing index for March was revised down from 103.1 to 103.0, and the manufacturing index for January was revised up from 103.4 to 103.5...the May decrease was driven by a 4.2% drop in the production of motor vehicles and parts and left the manufacturing index 0.1% lower than a year earlier, which was the first year over year decrease in manufacturing since the January of 2014.... meanwhile, the mining index, which includes oil and gas well drilling, saw its first increase in 9 months, as it rose from 102.2 in April to 102.4 in May, although it remains 11.8% lower than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell1.0% in May after increasing a revised 6.1% in April, as the utility index fell from 102.5 in April to 104.1 in May...that dropped the utility index back to 0.8% below its year earlier reading, after rising above the level of a year earlier in April for the first time since September 2015...
this report also includes capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell to 74.9% in May from 75.3% in April, after April was revised from 75.4%....capacity utilization for all manufacturing industries rose from a downwardly revised 75.2% in April to 75.3 in May; utilization of NAICS durable goods production facilities fell from 76.0% in April to 75.4% in May, while capacity utilization for non-durables was unchanged at 75.0%....capacity utilization for the mining sector rose to 73.1% in May, from 72.7% in April, which was originally published as 72.5%, while utilities were operating at 77.5% of capacity during May, down from the revised 78.4% of capacity during April, which was originally reported as 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....
April Business Sales Up 0.9%, Business Inventories Up 0.1%
following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April (pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,290.2 billion in April, up 0.9 percent (±0.2%) from March revised sales, but down 1.3 percent (±0.5%) from April sales of a year earlier...note that total March sales were revised from the originally reported $1,289.2 billion as part of an annual benchmark revision....manufacturer's sales rose by 0.5% from March to $456,785 million in April, while retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 1.4% to $399,195 million, and wholesale sales rose 1.0% to $434,170 million...
meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,807.1 billion at the end of April, up 0.1 percent (±0.1%) from March, and 1.0 percent (±0.5%) higher than in April a year earlier...the value of end of March inventories was revised from the $1,818.6 billion reported last month to $1,804.5 billion in the annual revision...seasonally adjusted inventories of manufacturers were estimated to be valued at $620,782 million, 0.1% lower than in March, inventories of retailers were valued at $598,415 million, also 0.1% less than in March, while inventories of wholesalers were estimated to be valued at $587,901 million at the end of April, up 0.6% from March...all categories of business inventories are adjusted for price changes for national accounts data using item appropriate price indexes from the producer price index...since April producer prices averaged a 0.2% increase, real business inventories for April will thus be lower than the end of the 1st quarter by an average of 0.1%...if inventories should hold at that level through May and June, the change from the $69.6 billion real increase in the 1st quarter could subtract as much as 2.00 percentage points from second quarter GDP...
New Housing Construction Little Changed in May
the May report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started was at a seasonally adjusted annual rate of 1,164,000, which was 0.3 percent (±14.0%)* below the revised April estimated annual rate of 1,167,000 housing units started, but which was still 9.5 percent (±16.0%)* above last May's rate of 1,063,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, May housing starts could have been up by 13.7% or down by as much as 14.3% from those of April, with even larger revisions possible...in this report, the annual rate for April housing starts was revised from the 1,172,000 reported last month to 1,176,000, while March starts, which were first reported at a 1,089,000 annual rate, were revised up from last month's initial revised figure of 1,099,000 annually up to 1,113,000 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 Census field agents, which estimated that 109,200 housing units were started in May, up from the 107,300 units started in April...of those housing units started in May, an estimated 73,200 were single family homes and 35,600 were units in structures with more than 5 units, up from the revised 72,200 single family starts and 33,900 units started in structures with more than 5 units in April (there was an odd drop of units in buildings with 2 to 4 units, from 1,200 to 400)....
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 May, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,138,000 housing units, which was 0.7 percent (±1.3%)* above the revised April rate of 1,130,000 permits, but still 10.1 percent (±1.8%) below the rate of permit issuance in May a year earlier...the annual rate for housing permits issued in April was revised from 1,116,000 to 1,130,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by travelling census agents, which showed permits for 107,800 housing units were issued in May, up from the revised estimate of 99,700 new permits issued in April...those May permits included 69,600 permits for single family homes, up from 68,000 in April, and 35,400 permits for housing units in apartment buildings with 5 or more units, up from 29,100 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.164 Million Annual Rate in May and Comments on May 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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