Sunday, February 21, 2021

January’s retail sales, industrial production, producer prices, new home construction, and existing home sales; December's business inventories..

Major reports that were released this past week included the Retail Sales Report for January and the Business Sales and Inventories Report for December from the Census Bureau, the January report on Industrial Production and Capacity Utilization from the Fed, the January Producer Price Index from the Bureau of Labor Statistics, the January report on New Residential Construction from the Census Bureau, and the Existing Home Sales Report for January from the National Association of Realtors (NAR)…The week also saw the release of the first two regional Fed manufacturing surveys for February: 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 +4.7 in December and from +3.5 in January to +12.1 in February, its highest level in several months, suggesting a pickup in the pace of First District manufacturing growth.. meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions slipped from +26.5 in January to + 23.1 in February, still indicating fairly widespread growth among that region's manufacturing firms this month...

Retail Sales Rose 5.3% in January after December Sales were Revised Lower

Seasonally adjusted retail sales increased 5.3% in January after retail sales for December were revised lower...the Advance Retail Sales Report for January (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $568.2 billion during the month, which was up 5.3 percent (±0.5%) from December's revised sales of $539.7 billion and 7.4 percent (±0.7 percent) above the adjusted sales in January of last year....December's seasonally adjusted sales were revised 0.2% lower, from $540.9 billion to $539.7 billion, while November's sales were revised higher, from $544.6 billion to $545,248 million; as a result, the November to December change was revised from down 0.7 percent (±0.5%) to down 1.0 percent (±0.2 percent)*.....the revisions to November and December sales partly offset each other but indicate that the 4th quarter's personal consumption expenditures would be revised lower at a rate of around $2.2 billion annually, which would reduce 4th quarter GDP by around 0.03 percentage points....estimated unadjusted retail sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 17.3%, from $616,649 million in December to $509,802 million in January, while they were 5.8% higher than the $481,862 million of sales in January a year ago, so we can see how a large seasonal adjustment to holiday and post holiday sales altered the headline sales results, compared to the big sales decrease that would normally be expected in January...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the January 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 revised December figure to this month's January "advance" report in the first sub-column, and then the year over year percentage sales change since last January in the 2nd column...the second double column pair below gives us the revision of the December advance estimates (now called "preliminary") as of this report, with the new November to December percentage change under "Nov 2020 r" (revised) and the December 2019 to December 2020 percentage change as revised in the last column shown...for your reference, the table of last month’s advance estimate of December sales, before this month's revisions, is here...

January 2021 retail sales table

To compute January's real personal consumption of goods data for national accounts from this January retail sales report, the BEA will use the corresponding price changes from the January consumer price index, which we reviewed 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 January retail sales excluding the 4.0% price-related increase in sales at gas station were up by 5.4%.....then, subtracting the figures representing the 2.4% increase in grocery & beverage store sales and the 6.9% increase in food services sales from that total, we find that core retail sales were up by almost 6.5% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was unchanged in January, we can thus approximate that real retail sales excluding food and energy will on average be close to our nominal core retail sales, or show an increase of 6.5%....however, the actual adjustment in national accounts data 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 furniture stores were up 12.0%, the price index for household furnishings and supplies was 0.5% lower, which would suggest that real sales at furniture stores rose by roughly 12.5%…..on the other hand, while nominal sales at clothing stores were 5.0% higher in January, the apparel price index was 2.2% higher, which means that real sales of clothing were only around 2.7% higher...

In addition to figuring those core retail sales, we should also adjust food and energy retail sales for their price changes separately…the January CPI report showed that the food price index was 0.1% higher, with the index for food purchased for use at home 0.1% lower, while prices for food bought to eat away from home were 0.4% higher... thus, while nominal sales at food and beverage stores were 2.4% higher, real sales of food and beverages would be roughly 2.5% higher in light of the 0.1% lower prices…meanwhile, the 6.9% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants rose about 6.5% during the month....in addition, while sales at gas stations were up 4.0%, there was a 7.4% increase in the retail price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 3.4%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales...averaging real sales that we have thus estimated together, we can then estimate that the income and outlays report for January will show that real personal consumption of goods rose by about 5.2% in January, after falling by a revised 1.4% in December, and by a revised 1.3% in November...at the same time, the 6.5% increase in real sales at bars and restaurants would boost January’s real personal consumption of services by almost 0.5%....note that in estimating December's revised real goods consumption, we have incorporated both the revision to December's real sales and last week's downward revision to December's consumer prices, which would precipitate a similar downward revision to the December PCE price index for goods and a corresponding upward increase in December's real goods consumption...

Industrial Production Rose 0.9% in January After Prior Five Months Revised Higher

The Fed's G17 release on Industrial production and Capacity Utilization indicated that seasonally adjusted industrial production rose by 0.9% in January after rising by a revised 1.3% in December and by a revised 0.9% in November, but it still remained 1.8% lower than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 107.2 in January from 106.2 in December, after the December index was revised from 105.7 to 106.2, the November index was revised from the 104.1 reported last month to 104.9, the October index was revised from 103.6 to 103.9, the September index was revised from 102.6 to 102.8, and the August index was revised from 102.7 to 102.9....as a result of this month's revisions, industrial production grew 1.0% in August, rather than 0.7% as previously reported, shrunk 0.1% in September, same as was previously reported, rose 1.1% in October, revised from up 1.0%, and grew 0.9% in November, revised from the 0.5% growth previously reported, and grew 1.3% in December rather than the 1.6% growth that was previously reported...

The manufacturing index, which accounts for around 77% of the total IP index, rose 1.0% in January, from 102.8 to 103.9, after the December manufacturing index was revised from 102.2 to 102.8, the the November index was revised from 101.3 to 101.9, October index was revised from 100.5 to 100.9, the September index was revised from 99.2 to 99.4, and the August manufacturing index was revised from 99.1 to 99.1....meanwhile, the mining index, which includes oil and gas well drilling, rose from 116.9 in December to 119.6 in January after the December index was revised down from 117.4, which left the mining index to 11.5% below where it was a year earlier...finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, fell 1.2% in January, from 106.4 to 105.1, after the December utility index was revised from 106.3 to 106.4 and the November utility index was revised from 100.0 to 101.5....since last year's heating requirements for December and January were below normal and drove the utility index lower at that time, this year's utility index is now 6.6% higher than it was a year ago...

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 rose to 75.6% in January from 74.9% in December, which was revised from the 74.5% that was reported last month ...capacity utilization of NAICS durable goods production facilities rose from an upwardly revised 73.9% in December to 74.6% in January, while capacity utilization for non-durables producers rose from an upwardly revised 75.6% to 76.8%...capacity utilization for the mining sector rose to 82.2% in January from 80.2% in December, which was originally reported as 80.5%, while utilities were operating at 73.5% of capacity during January, down from their 74.6% of capacity during December, which was previously reported at 74.5%...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....

Producer Prices rose 1.3% in January After Rising 0.8% over All of 2020

The seasonally adjusted Producer Price Index (PPI) for final demand rose 1.3% in January, as prices for finished wholesale goods were on average 1.4% higher, while margins of final services providers increased by 1.3%...that followed a revised December report that now shows the PPI was up 0.3%, with prices for finished wholesale goods up 1.0% while margins of final services providers were 0.1% lower, a revised November report that shows the PPI was 0.1% higher, with prices for finished wholesale goods rising 0.3% while margins of final services providers decreased 0.2%, a revised October report that indicates the PPI was 0.5% higher, with prices for finished wholesale goods rising 0.6% and margins of final services providers rising 0.5%, and a revised September report that indicates the PPI was 0.3% higher, with prices for finished wholesale goods 0.4% higher and margins of final services providers 0.2% higher....revisions to prior reports with this release reflect the routine annual recalculation of seasonal adjustment factors and affect previously published seasonally adjusted indexes and percent changes for January 2016 through December 2020; it appears that at least part of the reason for the large jump in January producer prices was due a recalibration of weight allocations used to calculate the overall indexes to more accurately reflect recent sales patterns, which would have thus increased the weighting of commodities and services in greatest demand.....on an unadjusted basis, producer prices are now 1.7% higher than a year ago, up from the 0.8% year over year increase indicated by last month's report, while, the core producer price index, which excludes food, energy and trade services, rose by 1.2% for the month, and is now 2.0% higher than in January a year ago, up from the 1.1% year over year increase as was shown in December...

As noted, the price index for final demand for goods, aka 'finished goods', was 1.4% higher in January, after being a revised 1.0% higher in December, 0.3% higher in November, 0.6% higher in October, 0.4% higher in September, 0.4% higher in August, 0.5% higher in July, 0.4% higher in June, 1.4% higher in May, 2.8% lower in April, 1.7% lower in March, 0.7% lower in February, and 0.3% higher in January of last year, with all of those monthly figures revised...the finished goods price index rose 1.4% in January because the price index for wholesale energy goods was 5.1% higher, after it had risen by 4.9% in December, 1.3% in November, and by 0.8% in October, while the price index for wholesale foods rose 0.2%, after falling 0.2% in December, rising by 0.6% in November, by 1.9% in October, and by a revised 1.7% in September, while the index for final demand for core wholesale goods (excluding food and energy) was 0.8% higher, after rising by 0.5% in November....wholesale energy prices averaged 5.1% higher due to a 13.6% increase in wholesale prices for gasoline, a 7.6% increase in wholesale prices for No.2 diesel fuel, and a 21.8% increase in wholesale prices for liquefied petroleum gas...meanwhile, the wholesale food price index rose 0.2% on a 19.0% increase in the wholesale price index for oilseeds, an 18.2% increase in the wholesale price index for grains, and a 11.3% increase in wholesale price index for fresh fruits and melons....among core wholesale goods, the wholesale price index for industrial chemicals rose 7.0%, the wholesale price index for light motor trucks rose 1.5%, and the wholesale price index for iron and steel scrap rose 20.6% while the wholesale price index for communication equipment fell 1.7% ..

At the same time, the index for final demand for services rose 1.3% in January, after falling by 0.1% in December, falling by 0.2% in November, rising by 0.5% in October, and rising by 0.2% in September, as the index for final demand for trade services rose 1.0%, the index for final demand for transportation and warehousing services rose 1.3%, and the core index for final demand for services less trade, transportation, and warehousing services was 1.4% higher.....among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers rose 5.3%, margins for TV, video, and photographic equipment and supplies retailers rose 11.1%, and margins for machinery and vehicle wholesalers rose 4.2%, while margins for automobile retailers fell 7.7%.. among transportation and warehousing services, average margins for rail transportation of passengers rose 1.7% while average margins for truck transportation of freight rose 2.2%...among the components of the core final demand for services index, the index for portfolio management rose 9.4%, the index for management, scientific, and technical consulting services rose 16.1%, and margins for traveler accommodation services rose 13.3%, while margins for property and casualty insurance fell 1.7%…

This report also showed the price index for intermediate processed goods rose 1.7% in January, after rising a revised 1.4% in December, 1.3% in November, 0.3% in October, 0.6% in September, 0.9% in August, 1.4% in July, and 1.4% in June, but after being unchanged in May and falling the prior 5 months....the price index for intermediate energy goods rose 2.0%, as refinery prices for gasoline rose 13.6%, refinery prices for residual fuels rose 18.6%, and producer prices for liquefied petroleum gas rose 21.8%, while producer prices for natural gas to electric utilities fell 21.1%... meanwhile, the price index for intermediate processed foods and feeds rose 0.1%, as the producer price index for fats and oil rose 3.3% and the producer price index for prepared animal feeds rose 1.2%...at the same time, the core price index for intermediate processed goods less food and energy rose 1.8% as the producer price index for industrial chemicals rose 7.0%, the producer price index for steel mill products rose 5.2%, the producer price index for paving mixtures and blocks rose 4.1%, and the producer price index for softwood lumber rose 13.9%...prices for intermediate processed goods are now 3.1% higher than in January a year ago, the second increase after 19 consecutive year over year decreases, which followed 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods rose 3.8% in January, after rising a revised 2.2% in December, 7.4% in November, 0.3% in October, 4.2% in September, a revised 4.0% in August 0.6% in July, 5.4% in June and 8.4% in May, but after falling a revised 13.7% in April and 8.1% in March....that was as the January price index for crude energy goods rose 5.3% as crude oil prices rose 12.0% while unprocessed natural gas prices fell 0.9%, while the price index for unprocessed foodstuffs and feedstuffs fell 1.2% on an 20.4% drop in the price of raw milk, a 13.0% decrease in the price of slaughter chickens, and a 4.9% decrease in the price of slaughter hogs...at the same time, the index for core raw materials other than food and energy materials rose 8.9%, as producer prices for recyclable paper rose 7.9%, the price index for iron and steel scrap rose 20.6%, the price for aluminum base scrap rose 9.3%, and raw cotton prices rose 7.9%... this raw materials index is now 6.6% higher than a year ago, the third annual increase in 2 years, as the year over year change on this index had been negative from the beginning of 2019 through October of last year...

Lastly, the price index for services for intermediate demand rose 1.3% in January, after rising 0.4% in December, falling 0.1% in November, rising 0.6% in October, rising 1.1% in September, 0.8% in August, 0.5% in July, and 0.3% in June….the price index for intermediate trade services was 1.1% higher, as margins for metals, minerals, and ores wholesalers rose 11.4% and margins for intermediate paper and plastics products wholesalers rose 1.4%...meanwhile, the index for transportation and warehousing services for intermediate demand was 0.4% higher, as the intermediate price index for truck transportation of freight rose 2.2% and the intermediate price index for air mail and package delivery services, not including by USPS, rose 1.3%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing rose 1.5%, as the intermediate price index for administrative and general management consulting services jumped 22.9%, the intermediate price index for traveler accommodation services rose 13.3% and the intermediate price index for portfolio management rose 9.4%...over the 12 months ended in January, the year over year price index for services for intermediate demand is 2.8% higher than it was a year ago, the fifth consecutive positive annual change since it turned negative year over year in April for the first time in the history of this index...

December Business Sales Up 0.8%, Business Inventories Up 0.6%

After the release of the January retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for December (pdf), which incorporates the revised December retail data from that January report and the earlier published December 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 $1,494.2 billion in December, up 0.8 percent (±0.2 percent) from November's revised sales, and up 2.5 percent (±0.4 percent) from December’s sales of a year earlier...note that total November sales were concurrently revised up from the originally reported $1,480.8 billion to $1,482.771 million, now statistically unchanged from October, rather than down 0.1%...manufacturer's sales rose 1.7% to $501,815 million in December; retail trade sales, which exclude restaurant & bar sales from the revised December retail sales reported earlier, fell 0.6% to $488,579 million, while wholesale sales rose 1.2% to $503,778 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,971.7 billion at the end of December, up 0.6 percent (±0.1 percent) from November, but 2.6 percent (±0.4 percent) lower than in December a year earlier...at the same time, the value of end of November inventories was revised from the $1,959.9 billion reported last month to $1,960.5 billion, still up 0.5% from October....seasonally adjusted inventories of manufacturers were estimated to be valued at $679,707 million at the end of December, 0.3% more than at the end of November, inventories of retailers were valued at $617,066 million, up 1.2% from November,  and inventories of wholesalers were estimated to be valued at $658,047 million at the end of December, 0.3% higher than in November...

Last week we estimated that 4th quarter GDP was underestimated by around 0.09 percentage points based on what the wholesale inventory report showed, and a week earlier we estimated 4th quarter GDP was underestimated by around by about 0.08 or 0.09 more percentage points based on what the factory inventories report showed....in the advance report on 4th quarter GDP of two weeks ago, retail inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted retail inventories were valued at $624,149 billion at the end of December, up 0.8% from a revised $617,734 billion in November....that's $0.294 billion less than the $624,443 billion for the end of the quarter that this report shows, which would mean that the quarterly change in 4th quarter retail inventories were underestimated at roughly a $1.2 billion annual rate, or by an amount that would add about 0.02 or 0.03 percentage points to GDP...combined with our previous figures on factory and wholesale inventories, then, this report would suggest that the growth rate of 4th quarter GDP should be revised upwards by around 0.20 percentage points when the 2nd estimate is released next week....

January Housing Starts Reported Lower; Building Permits at 14 Year High

The January report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in January was at a seasonally adjusted annual rate of 1,580,000, which was  6.0 percent (±16.4 percent)* below the revised December estimated annual rate of 1,680,000, and was 2.3 percent (±13.9 percent)* below last January's rate of 1,617,000 housing starts annually....the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month, or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, January housing starts could have been up by 10.4% or down by as much as 22.4% from those of December, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for December housing starts was revised from the 1,669,000 reported a month ago to a 14 year high of 1,680,000, while November starts, which were first reported at a 1,547,000 annual rate, were revised from last week's initial revised figure of 1,578,000 back to a 1,553,000 annual rate....

The 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 109,500 housing units were started in January, down from the revised 115,400 units that were started in December, and down from the 117,800 units that were started in November...of those housing units started in January, an estimated 77,900 were single family homes and 30,300 were units in structures with more than 5 units, down from the revised 89,400 single family starts in December but up from the 25,200 units started in structures with more than 5 units in December...

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 January, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,881,000, which was a 14 year high for permits, 10.4 percent (±1.2 percent) above the revised December rate of 1,704,000 permits, and 22.5 percent (±1.8 percent) above the 1,536,000 a year rate of building permit issuance in January a year earlier...the annual rate for housing permits issued in December was revised from the 1,709,000 reported last month to 1,704,000....

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 128,300 housing units were issued in January, down from the revised estimate of 133,600 new permits issued in December....of those, 83,900 were permits for single family homes and 40,900 were permits for units in structures of more than 5 units, down from the 88,500 single family permits in December, and down from the 41,500 permits for units in structures of more than 5 units....for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk:  Housing Starts decreased to 1.580 Million Annual Rate in January and Comments on January Housing Starts...

Existing Home Sales Rose 0.6% in January

The National Association of Realtors (NAR) reported that existing home sales rose by 0.6%% from December to January on a seasonally adjusted basis, projecting that 6.69 million existing homes would sell over an entire year if the January home sales pace were extrapolated over that year, a pace that was also 23.7% above the annual sales rate projected in January of a year ago...December home sales are now shown to have been running at a 6.65 million annual rate, revised down from the 6.76 million annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $303,900 in January, 14.1% higher than in January a year earlier, which they report "marks 107 straight months of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Tick Up 0.6% in January", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily read about those things in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is seasonally adjusted and at a not very informative annual rate, we usually take look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data indicates that roughly 367,000 homes sold in January, down by 31.8% from the 538,000 homes that sold in December, but up 15.8% from the 317,000 homes that sold in January of last year, so we can see how that large mid-winter seasonal adjustment turned the headline sales figure positive...that same pdf indicates that the median home selling price for all housing types fell 1.7%, from a revised $309,200 in December to $303,900 in January, while the average home sales price was $337,700 in January, down 1.3% from the $342,000 average sales price in December, but up 11.5% from the $302,900 average home sales price of January a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 6.69 million in January and Comments on January Existing Home Sales...

 

(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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