Sunday, March 21, 2021

February’s retail sales, industrial production, & housing construction; January’s business inventories

Major monthly reports released over the past week included the Retail Sales report for February and Business Sales and Inventories for January from the Census Bureau, the February report on Industrial Production and Capacity Utilization from the Fed, and the February report on New Residential Construction, also from the Census Bureau ...in addition,  the week also saw the release of the Regional and State Employment and Unemployment Report for January from the Bureau of Labor Statistics, a report which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of that report provides a useful summary of this data, the serious statistical aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands...

This week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +12.1 in February to +17.4 in March, it's highest since last summer, suggesting a broader based expansion of 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 jumped to a 50+ year high of +51.8 in March from + 23.1 in February, indicating a substantial majority of that region's manufacturing firms are seeing increased activity this month...

Retail Sales Fell 3.0% in February After January Sales Revised 1.9% Higher

Seasonally adjusted retail sales decreased 3.0% in February after retail sales for January were revised 1.9% higher...the Advance Retail Sales Report for February (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $561.7 billion during the month, which was 3.0 percent (±0.5%) lower than January's revised sales of $579.1 billion, but still 6.3 percent (±0.7 percent) above the adjusted sales in February of last year...January's seasonally adjusted sales were revised up from $568.2 billion to $579.1 billion, while December's sales were revised from $539.7 billion down to $538,338 million; as a result, the December to January change was revised up from up 5.3 percent (±0.5 percent) to up 7.6% (±0.3%)...the downward revisions to December sales would indicate that 4th quarter personal consumption expenditures will be revised lower at about a $5.5 billion annual rate, which would thereby reduce 4th quarter GDP by about 0.11 percentage points...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down 5.4%, from $519,588 million in January to $491,356 million in February, while they were up 2.4% from the $479,868 million of sales in February 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 February 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 January revised figure to this month's February "advance" report in the first sub-column, and then the year over year percentage sales change since last February is in the 2nd column...the second double column pair below gives us the revision of the January advance estimates (now called "preliminary") as of this report, with the new December to January percentage change under "Dec 2020 (r)" (revised) and the January 2020 to January 2021 percentage change as revised in the last column shown...for your reference, our copy of the table of last month’s advance estimate of January sales, before this month's revisions, is here, should you be interested in more detail in how January sales were revised.….

February 2021 retail sales table

To compute February's real personal consumption of goods data for national accounts from this February retail sales report, the BEA will use the corresponding price changes from the February 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 February retail sales excluding the 3.6% price-related increase in sales at gas station were down by 3.5%....then, subtracting the figures representing the insignificant increase in grocery & beverage store sales and the 2.5% decrease in food services sales from that total, we find that core retail sales were down by roughly 4.25% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was 0.1% higher in February, we can thus approximate that real retail sales excluding food and energy will on average be down by roughly 4.35%.....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 motor vehicle and parts dealers were down 4.2%, the price index for transportation commodities other than fuel was 0.4% lower, which would suggest that real sales at vehicle and parts dealers fell by roughly 3.8%...similarly, while nominal sales at clothing stores were 2.8% lower in February, the apparel price index was 0.7% lower, which means that real sales of clothing fell around 2.1%...on the other hand, while nominal sales at sporting goods, hobby, music and book stores fell 7.5%, the price index for recreational commodities rose 0.5%, so we can figure real sales of recreational goods were down by roughly 8.0%....

In addition to figuring those core retail sales, we should also adjust food and energy retail sales for their price changes separately…the February CPI report showed that the food price index was 0.4% higher, with the index for food purchased for use at home 0.3% higher, while prices for food bought to eat away from home (other than at employee sites and schools) were 0.4% higher... thus, while nominal sales at food and beverage stores were unchanged, real sales of food and beverages would be roughly 0.3% lower in light of the 0.3% higher prices…meanwhile, the 2.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants fell about 2.9% during the month....on the other hand, while sales at gas stations were up 3.6%, there was a 6.4% increase in the retail price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 2.6%, 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, but leaving out real restaurant and bar sales, we can then estimate that the income and outlays report for February will show that real personal consumption of goods fell by more than 3.6% in February, after rising by a revised 7.4% in January, but after falling by a revised 2.1% in December...at the same time, the 2.9% decrease in real sales at bars and restaurants would reduce the growth rate of February’s real personal consumption of services by almost 0.3%...

Industrial Production Falls 2.2% in February After Prior Months Revised Lower

The Fed's February G17 release on Industrial production and Capacity Utilization reported that industrial production decreased by 2.2% in February after rising by a revised 1.1% in January, which left industrial output 4.2% lower than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 104.7 in February, after the January index was revised down from 107.2 to 107.1, the December index was revised down from 106.2 to 105.8, the November index was revised down from 104.9 to 104.8, and the October index was revised down from 103.9 to 103.8...

The manufacturing index, which accounts for more than 77% of the total IP index, fell 3.1% to 100.7 in February, mostly due to damage to petroleum refineries, petrochemical facilities, and plastic resin plants from the February deep freeze, without which manufacturing would have only been down about a half percent...that came after the manufacturing index for January was revised down from 103.9 to 103.8,  the manufacturing index for December index was revised down from 102.8 to 102.6, and the manufacturing index for November index was revised down from 101.9 to 101.8, leaving the manufacturing index 0.4% below its year ago level....meanwhile, the mining index, which includes oil and gas well drilling, fell 5.4%, from 119.0 in January to 112.6 in February, after the January index was revised down from 119.6, which left the mining index 15.3% below where it was a year earlier......finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 7.4% in our cold February, from 104.8 to 112.5, after our warmer January’s utility index was revised from 105.1 to 104.8, now down 0.6% from December...with this February's temperatures much below the already cooler levels seen across much of the US last February, the utility index is now 10.1% 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 fell to 73.8% in February from 75.5% in January, which was revised down from the 75.6% reported last month ...capacity utilization of NAICS durable goods production facilities fell from a revised 73.8% in January to 71.9% in February, while capacity utilization for non-durables producers fell from a downwardly revised 76.7% to 73.9%...capacity utilization for the mining sector fell to 77.5% in February from 81.8% in January, which was originally reported as 82.2%, while utilities were operating at 78.5% of capacity during February, up from their 73.3% of capacity during January, which was previously reported at 73.5%...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..

Housing Starts, Permits Reported Much Lower in February

The February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,421,000, which was 10.3 percent (±10.5 percent)* below the revised estimated January annual rate of 1,584,000, and was 9.3 percent (±9.4 percent)* below last February's rate of 1,567,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell 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, February housing starts could have been up by 0.2% or down by as much as 20.8% from those of January, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for January housing starts was revised from the 1,580,000 reported last month to 1,584,000, while December starts, which were first reported at a 1,669,000 annual rate, were revised from last month's initial revised figure of 1,680,000 annually back down to a 1,670,000 annual rate with this report....

The 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 100,700 housing units were started in February, down from the 111,000 units that were started in January and down from the 115,100 units that were started in December....of those housing units started in February, an estimated 72,200 were single family homes and 27,800 were units in structures with more than 5 units, down from the revised 77,100 single family starts in January. and down from the 33,000 units started in structures with more than 5 units...

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 February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,682,000, which was 10.8 percent (±1.0 percent) below the revised January rate of 1,886,000 permits, but was 17.0 percent (±1.4 percent) above the rate of building permit issuance in February a year earlier...the annual rate for housing permits issued in January was a 14 year high for building permits and was revised up from the originally reported 1,881,000....

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 117,200 housing units were issued in February, down from the revised estimate of 128,800 new permits issued in January....of those permits issued in February, 80,900 were permits for single family homes and 33,200 were permits for units in structures of more than 5 units, down from the 83,900 single family permits in January, and down from the 41,300 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 1.421 Million Annual Rate in February and Comments on February Housing Starts...

January Business Sales Up 4.7%, Business Inventories Up 0.3%

After the release of the February retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for January (pdf), which incorporates the revised January retail data from that February report and the earlier published January 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 $1,568.5 billion in January, up 4.7 percent (±0.3 percent) from December's revised sales, and 7.1 percent (±0.4 percent) higher than January sales of a year earlier...note that total December sales were concurrently revised up from the originally reported $1,494.2 billion to $1,497.953 billion, now a 1.0% increase from November, rather than the 0.8% increase previously reported....manufacturer's sales rose 1.9% to $513,268 million in January, and retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, rose 7.4% to $523,540 million, while wholesale sales rose 4.9% to $531,726 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,982.4 billion at the end of January, up 0.3% (±0.1%) from the end of December, but still 1.8 percent (±0.3 percent) lower than in January a year earlier...at the same time, the value of end of December inventories was revised from the $1,971.7 billion reported last month to $1,976.5 billion, now up 0.8% from November, rather than the 0.6% increase reported last month....seasonally adjusted inventories of manufacturers were estimated to be valued at $696,267 million, up 0.1% from December, while inventories of retailers were valued at $624,353 million, down 0.5% from in December, while inventories of wholesalers were estimated to be valued at $661,736 million at the end of January, 1.3% higher than in December...

For GDP purposes, all these inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for January, which indicated finished goods prices were 1.3% higher...two weeks ago, we looked at real factory inventories with producer price adjustments for goods at various stages of production, and judged those inventories would have a significant negative impact on 1st quarter GDP…then last week, we found that January's wholesale inventories decrease alone would have a modest negative impact on 1st quarter GDP….since the nominal value of retail inventories for January has now been shown to be 0.5% lower, real retail inventories for the month, after the 1.3% finished goods price adjustment, thus would have thus decreased by 1.8% from December, after a fourth quarter that saw real retail inventories increase substantially...therefore, what is shaping up to be a large real retail inventory decrease in the 1st quarter to date would have a much larger negative impact on 1st quarter GDP, first by subtracting the big decrease in first quarter real retail inventories, and then by subtracting the amount of their 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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