Sunday, April 18, 2021

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

Major monthly reports released this past week included the March Consumer Price Index from the Bureau of Labor Statistics, the March report on Industrial Production and Capacity Utilization from the Fed, and the Retail Sales report for March, the Business Sales and Inventories report for February, and the March report on New Residential Construction, all from the Census Bureau…the week also saw the release of the March Import-Export Price Index and the Regional and State Employment and Unemployment Summary for March, both from the Bureau of Labor Statistics; the latter report 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 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 +26.3, up from +17.4 in March, suggesting a broader 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 rose to +50.2 in April from +44.5 in March, the index’s highest reading in nearly 50 years, indicating that the great majority of the region's manufacturing firms reported increases in their activity this month...

CPI Rose 0.6% in March on Higher Prices for Energy and Transportation Services

The consumer price index rose 0.6% in March, the largest monthly increase since August 2012, as higher prices for fuel, utilities, transportation services, financial services, and used vehicles were only slightly offset by lower prices for clothing and for communication commodities...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.6% higher in March, after rising by 0.4% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, 0.4% in August, by 0.5% in July and by 0.5% in June, but after falling by 0.1% last May, by 0.7% last April and by 0.3% in March of last year....the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 263.014 in February to 264.877 in March, which left it statistically 2.6198% higher than the 258.678 reading of March of last year, which is reported as a 2.6% year over year increase, up from the 1.7% year over year increase reported a month ago....with higher prices for energy a major factor in the overall index increase, seasonally adjusted core prices, which exclude food and energy, were only up by 0.3% for the month, as the unadjusted core price index rose from 270.696 to 271.713, which left the core index 1.6464% ahead of its year ago reading of 267.268, which is reported as a 1.6% year over year increase, up from the 1.3% year over year core price increase that was reported for February, but still little changed from the 1.6% the year over year core price increase that was reported for December of 2020...

The volatile seasonally adjusted energy price index rose 5.0% in March, after rising by 3.9% in February, 3.5% in January, 2.6% in December, 0.7% in November, 0.6% in October, 1.4% in September, 0.9% in August, 2.1% in July, and by 4.4% in June, but after falling by 2.3% in May, by 9.5% in April, and by 5.8% last March, and hence is now 13.2% higher than in March a year ago...the price index for energy commodities was 8.9% higher in March, while the index for energy services was 0.6% higher, after rising 0.9% in February....the energy commodity index was up 8.9% on a 9.1% increase in the price of gasoline and a 3.2% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.5% lower...within energy services, the price index for utility gas service rose 2.5% after rising 1.6% in February and is now 9.8% higher than it was a year ago, while the electricity price index was unchanged in March after rising 0.7% in February....energy commodities are now averaging 22.0% higher than their year ago levels, with gasoline price averaging 22.5% higher than they were a year ago, while the energy services price index is now up 4.1% from last March, as electricity prices are also 2.5% higher than a year ago…

The seasonally adjusted food price index rose 0.1% in March, after rising by 0.2% in February, 0.1% in January and 0.3% in December, after being unchanged in November, rising 0.2% in October, rising 0.1% in August and in September, after falling 0.3% last July, rising 0.5% last June, rising 0.7% last May and 1.4% last April, and by 0.3% last March, as the price index for food purchased for use at home was 0.1% higher in March, after rising 0.3% in February, while the index for food bought to eat away from home was also 0.1% higher, as average prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%, while food prices at employee sites and schools averaged 13.3% lower...notably, the price index for food at elementary and secondary schools was down 16.3% and is now down 43.5% from a year ago...

In the food at home categories, the price index for cereals and bakery products was 0.1% lower even as average bread prices rose 0.2%, as the price index for fresh biscuits, rolls, muffins fell 1.2%, the price index for crackers and bread and cracker products fell 1.2% and the price index for fresh sweetrolls, coffeecakes, doughnuts fell 1.0%....on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.1% higher, as the price index for poultry rose 0.9%, the price index for pork rose 1.0%, the price index for fresh fish and seafood rose 1.3%, and egg prices rose 2.0%...meanwhile, the seasonally adjusted price index for dairy products was 0.5% lower, as milk prices fell 0.5% and the price index for dairy products other than cheese and ice cream was 0.9% lower....however, the fruits and vegetables price index was 1.0% higher as the price index for fresh fruits rose 0.9%, the price index for fresh vegetables rose 1.4%, and the price index for dried beans, peas, and lentils rose 2.8%....meanwhile, the beverages price index was 0.2% lower as the price index for nonfrozen noncarbonated juices and drinks fell 1.8% and the price index for coffee fell 0.7%....lastly, the price index for the ‘other foods at home’ category was unchanged, as the price index for sugar and sweets rose 0.4% and the price index for snacks rose 0.6%, while the price index for fats and oils fell 0.4% and the price index for prepared salads fell 1.7%...the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last March, the only food line items showing a price change greater than 10% over the past year are beef roasts, which are 11.2% higher, and the index for pork roasts, steaks, and ribs, which has risen 10.5%...

Among the seasonally adjusted core components of the CPI, which rose 0.3% in March after rising 0.1% in February, being unchanged in January and December, after rising by 0.2% in November, by 0.1% in October, by 0.2% in September, by 0.3% in August, by 0.5% in July and by 0.2% in June, after falling by 0.1% in May, by 0.4% in April and being unchanged in March of last year, the composite price index of all goods less food and energy goods was 0.1% higher in March, while the more heavily weighted composite for all services less energy services was 0.4% higher....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the price index for household furnishings and supplies was was 0.4% higher,  as the price index for major appliances rose 1.9%, the price index for living room, kitchen, and dining room furniture rose 2.4%, and the price index for tools, hardware and supplies rose 1.6%....however, the apparel price index was 0.3% lower on a 1.7% decrease in the price index for men's suits, sport coats, and outerwear, a 4.1% decrease in the price index for women's suits and separates, a 5.6% decrease in the price index for girls' apparel, and a 3.1% decrease in the price index for boys' and girls' footwear....meanwhile, the price index for transportation commodities other than fuel was 0.2% higher, as prices for new cars and trucks were unchanged, prices for used cars and trucks rose 0.5%, and the price index for vehicle parts and equipment other than tires was 2.4% higher... at the same time, the price index for medical care commodities 0.1% higher, as prescription drug prices were unchanged while nonprescription drug prices rose 0.2%...on the other hand, the recreational commodities index was 0.2% lower on a 0.6% decrease in TV prices, a 1.3% decrease in the price index for sporting goods, a 1.8% decrease in the price index for photographic equipment and supplies, and a 1.6% decrease in the price index for recreational books...in addition, the education and communication commodities index was 1.8% lower on a 2.3% decrease in the price index for educational books and supplies, a 2.0% decrease in the price index for computers, peripherals, and smart home assistants, and a 0.9% decrease in the price index for telephone hardware, calculators, and other consumer information items….lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ was up 0.2% on a 0.4% increase in the price index for miscellaneous personal goods and a 0.6% increase in cigarette prices...

Within core services, the price index for shelter was 0.3% higher as rents rose 0.2% and homeowner's equivalent rent was 0.2% higher, and as prices for lodging away from home at hotels and motels rose 4.4%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.2% and other household operation costs were on average 0.1% higher....meanwhile, the price index for medical care services was 0.1% higher, as the price index for outpatient hospital services rose 0.7% and the price index for inpatient hospital services rose 0.5%....at the same time, the transportation services price index was 1.8% higher as car and truck rentals rose 11.7%, the price index for intracity mass transit rose 2.7%, and the price index for vehicle insurance rose 3.3%...in addition, the recreation services price index rose 0.8% as the index for admission to movies, theaters, and concerts rose 1.1% and the price index for admissions to sporting events rose 4.7%.... on the other hand, the index for education and communication services was unchaged as the price index for delivery services rose 1.0% while the price index for day care and preschool services fell 0.8% and the price index for wireless telephone services fell 0.3%...lastly, the index for other personal services was up 0.9% as the price index for checking accounts and other bank services rose 13.0% while the price index for haircuts was 0.4% higher...

Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is now down by 18.0% since last March, the price index for men's suits, sport coats, and outerwear, which is also down 18.0% from a year ago, the price index for women's dresses, which has fallen by 11.4% in the past year, the price index for admission to sporting events, which is still down by 11.9% from a year ago, and airline fares, which are still down by 15.1% since last March, have all seen prices drop by more than 10% over the past year, while the price index for car and truck rental, which has now risen 31.2% from a year ago, and the price index for laundry equipment, which is up 24.2% from last March, are the only core line items to have increased by a double digit magnitude over that span....

Retail Sales Rose 9.8% in March as Consumers Spent Stimulus Checks

Seasonally adjusted retail sales increased by 9.8% in March, the second largest jump on record, after retail sales for January and February were both revised higher...the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled a record high $619.1 billion during the month, which was up by 9.8 percent (±0.5%) from February's revised sales of $529.3 billion and 27.7 percent (±0.7 percent) above the adjusted sales in March of last year... February's seasonally adjusted sales were revised from $561.7 billion to $563.7 billion, while January's sales were revised from $579.1 billion to $579.552 billion; as a result, the percent change from January to February was revised from down 3.0 percent (±0.5 percent) to down 2.7 percent (±0.2 percent)....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were actually up 27.3%, from $493,085 million in February to $627,885 million in March, while they were up 30.4% from the $481,513 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....the first double column of this table 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 2021 r" (revised) and the February 2020 to February 2021 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....as you can see from that fifth column, overall retail sales for the 1st quarter of 2021 were roughly 7.7% higher than the 4th quarter of 2019, which implies that nominal personal consumption of goods for the 1st quarter will be up by roughly the same amount, before any inflation adjustments…

March 2021 retail sales table

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 just reviewed...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 10.9% price-related increase in sales at gas stations were up by 9.7%....then, removing the 0.7% increase in grocery & beverage sales and the 13.4% increase in food services sales out from that total, we find that core retail sales were up by almost 10.9% for the month...since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.1% higher in March, we can thus figure that real retail sales excluding food and energy will show an increase of around 10.8%...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 sporting goods and other recreational commodity stores were up 23.5%, the March price index for transportation commodities other than fuel was 0.2% lower, which would mean that real unit sales at sporting goods and other recreational commodity stores were probably on the order of 26.4% higher, once the price increase is taken into account... similarly, while nominal sales at clothing stores were 18.3% higher in March, the apparel price index was 0.3% lower, which means that real sales of clothing likely rose around 18.6%...on the other hand, while sales at furniture and home furnishing stores were 5.9% higher, the price index for household furnishings and supplies was was 0.4% higher, which means real sales of furniture and home furnishings only rose by around 5.5%..

In addition to figuring those core retail sales, we should 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 0.1% higher, as the price index for food purchased for use at home rose 0.1% while the index for food bought away from home was also 0.1% higher, as prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.2%...hence while nominal sales at food and beverage stores were 0.7% higher, real sales of food and beverages would be around 0.6% higher in light of the 0.1% higher prices…on the other hand, the 13.4% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants rose around 13.0% during the month...and while sales at gas stations were up 10.9%, there was a 9.1% increase in price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 1.6% or 1.7%, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the actual increase in real sales at gas stations was likely greater...reweighing and averaging the real sales changes that we have thus estimated back 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 around 8.9% in March, after falling by a revised 2.9% in February and rising by a revised 7.8% in January...at the same time, the 13.0% increase in real sales at bars and restaurants would boost March real personal consumption of services by more than 1%...

Now that we have estimates of the percentage change in PCE goods for all three months of the first quarter, we can also estimate the contribution that PCE goods will make to 1st quarter GDP.... the February income and outlays report gives the change in real PCE goods for the 4th quarter months as unchanged in October, down 1.2% in November, and down 2.2% in December…based on the revisions to retail sales in the March retail report, we now have PCE goods for January at +7.8%, PCE goods for February at -2.9%, and PCE goods for March at +8.9%…to simplify our calculations, we’ll now convert perfcentage changes in PCE goods into an index, and set October with an index value of 100.00…thus Nov = 98.80, Dec = 96.63, Jan = 104.17, Feb = 101.15, and March = 110.15…hence, to figure out the growth rate of 1st quarter PCE goods, we have this calculation ( ((104.17 + 101.15 + 110.15) / 3)/ ((100 + 98.8 + 96.63)/ 3)) ^ 4  = 1.30021  …that means that PCE goods rose at about a 30.0% annual rate in the 1st quarter…since PCE goods has usually been around 23% of GDP, that means the contribution of PCE goods alone to first quarter GDP will be around 6.90 percentage points…

Industrial Production Rose 1.4% in March After February Output Revised 0.6% Lower

The Fed's G17 release on Industrial production and Capacity Utilization for March reported that industrial production rose 1.4% in March after falling by a revised 2.6% in February, which left production 1.0% higher than a year ago... the industrial production index, with the benchmark set for average 2012 production to be equal to 100.0, ended at 105.6 in March, up from an February index reading that was revised down from 104.7 to 104.1, after the January index was revised down from 107.1 to 106.9, which caused the February decrease to be revised from 2.2% down to 2.6%...meanwhile December index was revised up from 105.8 to 105.9, the November index was unrevised at 104.8, and the October was revised from 103.8 to 103.9...as a result of those revisions and the March increase, US industrial production was up at a 2.5% annual rate for the first quarter as a whole...

The manufacturing index, which accounts for around 77% of the total IP index, rose to 102.8 in March from a revised 100.0 in February, which had previously been reported at 100.7... that came after the January manufacturing index was revised from 103.8 to 103.9, the December manufacturing index was left unrevised at 102.6, and the November manufacturing index was revised from 101.8 to 101.9....after revisions, the manufacturing index now sits 3.1% above its year ago level, while first quarter manufacturing has grown at a 2.7% annual rate from that of the 4th quarter of 2019....meanwhile, the mining index, which includes oil and gas well drilling, rose 5.7%, from 112.8 in February to 119.2 in March, after the February mining index was revised up from last month's reported 112.6, which still left the mining index 8.8% below where it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, fell by 11.4% in March, from 111.5 to 98.8, after the February utility index was revised from 112.5 to 111.5, now up 9.2% from January...including this month's revisions, the utility index is still only 0.2% below that of a year ago, as last March was also much warmer than normal...

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 rose to 74.4% in March from 73.4% in February, which was revised down from the 73.8% utilization reported a month ago...capacity utilization of NAICS durable goods production facilities rose from a revised 71.3% in February to 73.5% in March, while capacity utilization for non-durables producers was up from 73.5% to 75.4%...capacity utilization for the mining sector rose to 82.2% in March from 77.7% in February, which had been reported as 77.5% last month, while utilities were operating at 68.8% of capacity during March, down from 77.8% in February, while the February utility index was revised down from the previously reported 78.5%...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..  

February Business Sales Down 1.9%, Business Inventories Up 0.5%

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....note that wholesale sales and inventories were revised on March 24th, which thus revised the figures that were reported a month ago, even before the usual revisions to the prior month’s data that accompany this report...

According to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,549.6 billion in February, down 1.9 percent (±0.3 percent) from January's revised sales, but still up 5.7 percent (±0.4 percent) from February sales of a year earlier...January's sales were revised from the originally reported $1,568.5 billion to $1,579,238 million, now a 4.5% increase from December....the seasonally adjusted value of manufacturer's sales fell 2.0% to $502,400 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 2.8% to $508,904 million, while wholesale sales fell 0.8% to $538,303 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,010.8 billion at the end of February, up 0.5 percent (±0.1%) from the end of January, but 0.7 percent (±0.4 percent) lower than in February a year earlier...at the same time, the value of end of January inventories was revised from the $1,982.4 billion reported last month to $2,000.7 billion, now 0.4% higher than December....seasonally adjusted inventories of manufacturers were estimated to be valued at $702,441 million, up 0.8% from January, and inventories of retailers were valued at $625,903 million, statistically unchanged January, while inventories of wholesalers were estimated to be valued at $682,470 million at the end of February, 0.6% higher than in January...

For GDP purposes, all those inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, which was up by 1.4% for finished goods...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those declining real inventories would have a significant negative impact on 1st quarter GDP...also last week, we found that February's wholesale inventories decrease would have a negative impact on 1st quarter GDP....with a 1.4% increase in prices, real retail inventories will fall by around 0.6% in February, after falling around 1.8% in January, following a large increase in real retail inventories in the fourth quarter...hence the real retail inventory decrease in the 1st quarter will not only reverse that 4th quarter increase, but also subtract from the growth of GDP by the size of the 1st quarter real inventory decrease...

March Housing Starts at a 14 Year High; Building Permits Also Higher

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 1,739,000 in March, which was the highest rate since June 2006, 19.4 percent (±13.7 percent) above the revised estimated annual rate of 1,457,000 starts in February, and was also 37.0 percent (±15.2 percent)* above last March's pandemic hit annual rate of 1,269,000 starts....the figures in parenthesis represent the most likely range of the change indicated; in other words, March housing starts could have been up by as much as 33.1% from those of last March, or up just by 5.7%, 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 1,421,000 reported last month to 1,457,000, while January starts, which were first reported at a 1,580,000 annual rate, were revised from last month's initial revised figure of 1,584,000 annually to a 1,642,000 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 144,400 housing units were started in March, up from the 103,100 units that were started in February and the 115,200 units that were started in January...of those housing units started in March, an estimated 103,700 were single family homes and 38,800 were units in structures with more than 5 units, up from the revised 74,800 single family starts in February and down from the 27,000 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 usually 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 1,766,000, which was 2.7 percent (±1.7 percent) above the revised February rate of 1,720,000 permits, and was 30.2 percent (±1.8 percent) above rate of building permit issuance in March a year earlier...the annual rate for housing permits issued in February was revised up from the originally reported 1,682,000, as apparently last month's data collection was hampered by the deep freeze....

Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 158,300 housing units were issued in March, up from the revised estimate of 120,100 new permits issued in February...of those permits issued in March, 110,800 were permits for single family homes and 42,100 were permits for units in structures of more than 5 units, up from the 81,100 single family permits in February, and up from the 35,600 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 increased to 1.739 Million Annual Rate in March and Comments on March 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 of which are picked from the aforementioned GGO posts, contact me…)  

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