Sunday, July 18, 2021

June's consumer and producer prices, retail sales, and industrial production; May’s business inventories

Major reports that were released this week included the June Consumer Price Index, the June Producer Price Index, and the June Import-Export Price Index from the Bureau of Labor Statistics, the Retail Sales Report for June, and the Business Sales and Inventories Report for May from the Census Bureau, and the June report on Industrial Production and Capacity Utilization from the Fed...in addition, we also had the release of the Regional and State Employment and Unemployment Report for June, a report which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of this report provides a useful summary of this data, the serious statistics 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 Fed regional manufacturing reports for July: the Empire State Manufacturing Survey from the New York Fed, which covers New York state, southwestern Connecticut, and northern New Jersey, reported their headline general business conditions index rose from + 17.4 in June to a record +43.0 in July, suggesting widespread robust growth among First District manufacturers, while the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from +30.7 in June to +21.9 in July, meaning that a somewhat smaller majority of that region's manufactures reported growth in various facets of their operations this month as compared to the last..

CPI Rose 0.9% in June on Higher Prices for New and Used Vehicles, Lodging, and Airfares; Now Up 5.4% Year over Year

The consumer price index rose 0.9% in June, the largest one month price jump in 13 years, as higher prices for new and used vehicles, lodging at hotels and motels, airfares, car and truck rentals, clothing, food and fuel were only slightly offset by lower prices for toys and health insurance...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.9% higher in June, after rising by 0.6% in May, by 0.8% in April. by 0.6% in March, 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% last June....the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 269.195 in May to 271.696 in June, which left it statistically 5.3915% higher than the 257.797 index reading of June of last year, which is reported as a 5.4% year over year increase, up from the 5.0% year over year increase reported a month ago, and the largest annual increase since August 2008...with food and energy prices rising at roughly the same pace as the overall index increase, seasonally adjusted core prices, which exclude food and energy, were also up by 0.9% for the month, as the unadjusted core price index rose from 275.893 to 278.218, which left the core index 4.4746% ahead of its year ago reading of 265.799, which is reported as a 4.5% year over year increase, up from the 3.8% year over year core price increase that was reported for May, and the largest year over year core price index increase since November 1991...

The volatile seasonally adjusted energy price index rose 1.5% in June, after being unchanged in May, falling by 0.1% in April, rising by 5.0% in March, by 3.9% in February, by 3.5% in January, by 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% last June, and hence is now 24.5% higher than in June a year ago....the price index for energy commodities was 2.6% higher in June, while the index for energy services was 0.2% higher, after rising 0.7% in May....the energy commodity index was up 2.6% on a 2.5% increase in the price of gasoline and a 2.9% increase in the price index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 2.8% higher...within energy services, the price index for utility gas service rose 1.7% after rising 1.7% in May and is now 15.6% higher than it was a year ago, while the electricity price index fell 0.3% in June after rising 0.3% in May....energy commodities are now averaging 44.2% higher than their year ago levels, with gasoline prices averaging 45.1% higher than they were a year ago, while the energy services price index is now up 6.3% from last June, as electricity prices are still 3.8% higher than a year ago…

The seasonally adjusted food price index rose 0.8% in June, after rising by 0.4% in May, by 0.4% in April, by 0.1% in March, by 0.2% in February, by 0.1% in January and by 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, after rising 0.5% last June, by 0.7% last May and by 1.4% last April, as the price index for food purchased for use at home was 0.8% higher in June, after rising 0.6% in May, while the index for food bought to eat away from home was 0.7% higher, as average prices at fast food outlets rose 0.6% and prices at full service restaurants rose 0.8%, while food prices from vending machines and mobile vendors averaged 2.3% higher...

In the food at home categories, the price index for cereals and bakery products was 0.3% lower, as average bread prices fell 0.4%, the price index for rice, pasta, and cornmeal fell 0.7%, the price index for cookies fell 0.6% and the price index for fresh sweetrolls, coffeecakes, doughnuts fell 1.9%....on the other hand, the price index for the meats, poultry, fish, and eggs food group was 2.5% higher, as the price index for beef and veal rose 4.5%, the price index for pork rose 3.1%, the price index for eggs rose 3.0%, and the price index for fish and seafood rose 1.8%....at the same time, the seasonally adjusted price index for dairy products was 0.2% higher, as milk prices rose 0.5% and the price index for ice cream was 1.6% higher...meanwhile, the fruits and vegetables price index was 0.7% higher, as the price index for fresh vegetables rose 1.1%, the price index for fresh vegetables rose 0.9% and the price index for canned fruit rose 0.9% and the price index for dried beans, peas, and lentils fell 0.6%....in addition, the beverages price index was 0.9% higher, as the price index for carbonated drinks rose 1.8% and the price index for beverage materials including tea but not coffee rose 1.8%, while coffee prices were unchanged....lastly, the price index for the ‘other foods at home’ category rose 0.2%, as the price index for salad dressing rose 0.8%, the price index for fats and oils other than butter and margarine but including peanut butter rose 0.5%, the price index for frozen and freeze dried prepared foods rose 0.5%, and the price index for snack foods was 1.1% higher...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 June, there are no food line items showing a price change greater than 10% over the past year, while the price index for food at employee sites and schools is 29.9% lower on what was reported as a 43.5% year over year drop in the price index for food at elementary and secondary schools in March, but has not been itemized separately since...

Among the seasonally adjusted core components of the CPI, which rose 0.9% in June after rising by 0.7% in May, 0.9% in April, 0.3% in March, 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 of last year, the composite price index of all goods less food and energy goods was 2.2% higher in June, 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 June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was was 0.1% higher, as the price index for bedroom furniture rose 1.6%, the price index for major appliances rose 2.7%, the price index for floor coverings rose 2.9%, and the price index for household tools, hardware and supplies rose 0.9%....meanwhile, the apparel price index was 0.7% higher on a 5.0% increase in the price index for women's dresses, a 2.1% increase in the price index for women's outerwear, a 1.6% increase in the price index for women's suits and separates, and a 2.1% increase in the price index for infants' and toddlers' apparel...at the same time, the price index for transportation commodities other than fuel rose another 5.6%, after rising 4.0% in May and 4.3% in April, as prices for new cars were 1.9% higher, prices for new trucks were 2.0% higher, prices for used cars and trucks rose by 10.5%, the price index for motor oil, coolant, and fluids rose 1.2%, and the price index for tires was 0.9% higher... on the other hand, the price index for medical care commodities was 0.4% lower, as prescription drug prices fell 0.2%, nonprescription drug prices fell 0.3%, and the price index for medical equipment and supplies fell 0.6%...at the same time, the recreational commodities index was 0.3% lower despite a 1.3% increase in TV prices, as the price index for pets, pet supplies, accessories rose 1.1%, the price index for newspapers and magazines fell 1.6%, and the price index for toys, games, hobbies and playground equipment fell 2.3%...in addition, the education and communication commodities index was 0.2% lower on a 1.8% decrease in the price index for computer software and accessories and a 1.5% decrease in the price index for telephone hardware, calculators, and other consumer information items….lastly, a separate price index for alcoholic beverages was 0.5% higher, while the price index for ‘other goods’ was 0.1% higher on a 0.7% increase in the price of cigarettes and a 0.7% increase in the price index for stationery, stationery supplies, and gift wrap...

Within core services, the price index for shelter was 0.5% higher as rents rose 0.5%, homeowner's equivalent rent was 0.3% higher, and prices for lodging away from home at hotels and motels rose 7.9%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.4%, and other household operation costs were on average 0.9% lower on a 2.8% decrease in the price index for domestic services...on the other hand, the price index for medical care services was unchanged as physicians' services rose 0.3% and the price index for outpatient hospital services rose 0.4% while the price index for health insurance fell 1.0%....but the transportation services price index was 1.5% higher for a second month as car and truck rentals rose 5.2%, the price index for vehicle body work rose 1.3%, airline fares rose 2.7%, the price index for intracity transportation rose 1.5% and the price index for vehicle insurance rose 1.2%...in addition, the recreation services price index rose 0.5% as the price index for cable and satellite television service rose 1.2%, the price index for admission to movies, theaters, and concerts rose 0.9%, and the price index for fees for lessons or instructions rose 2.8%.... at the same time, the index for education and communication services was 0.1% higher as the price index for land-line telephone services rose 0.9%, the price index for elementary and high school tuition and fees rose 0.4%, and the price index for delivery services rose 1.3%...lastly, the index for other personal services was 0.2% higher as the price index for laundry and dry cleaning services was 0.7% higher and the price index for checking account and other bank services rose 0.2%...

Among core line items, the price index for car and truck rental, which has now risen 87.7% from a year ago, the price index for used car and trucks, which is now up 45.2% from a year ago, the price index for vehicle insurance, which is up 11.3% year over year, the price index for airline fares, which is up 24.6% since last June, the price index for other intercity transportation, which is up 13.3% over the same span, the price index for men's pants and shorts, which is still up 11.1% from a year ago, the price index for women's dresses, which has risen by 15.5% over the past year, the price index for jewelry, which is now up 12.3% from a year ago, the price index for lodging away from home including at hotels and motels, which has now risen 16.9% in the past year, the price index for domestic services, which has risen 10.6% year over year, the price index for moving, storage, freight expense, which is up by 17.3% over the last 12 months, the price index for sewing machines, fabric and supplies, which has risen 13.3% year over year, the price index for laundry equipment, which is up 29.4% from last June, and the price index for living room, kitchen, and dining room furniture, which is up 10.8% year over year, have all seen prices rise by more than 10% over the past year, while the price index for telephone hardware, calculators, and other consumer information items, which is now down by 17.8% since last June, is the only core line item to have decreased in price by a double digit magnitude over that one year span....

June Retail Sales Up 0.6% After May Sales Revised 0.4% Lower

Seasonally adjusted retail sales rose 0.6% in June after retail sales for May were revised lower....the Advance Retail Sales Report for June (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $621.3 billion during the month, which was an increase of 0.6 percent (±0.5%) from May's revised sales of $617.9 billion, and 18.0 percent (±0.7 percent) above the adjusted sales in June of last year...May's seasonally adjusted sales were revised 0.4% lower, from the $620.2 billion reported last month to $617.9 billion, while April's adjusted sales were revised a bit higher, from $628.7 billion to $628.751 billion, and as a result the change from April to May was revised to a decrease of 1.7%, from the 1.3% decrease reported a month ago....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 1.6% in June, from $641,450 million in May to $631,110 million in June, while they were up 18.5% from the $532,678 million of sales in June a year ago...

Included below is the table of the monthly and yearly percentage changes in sales by business type that we’ve taken from the Census retail sales pdf....the first pair of columns below gives us the seasonally adjusted percentage change in sales for each type of retail business from May to June and the year over year percentage change for those businesses since last June; the second pair of columns gives us the revised figures for May's report, with April to May and the May 2020 to May 2021 change shown; for your reference, our copy of this table as it appeared in the May advance report, before this month's revisions, is here....lastly, the third pair of columns shows the percentage change of the recent 3 months of sales (April, May and June) from the preceding three months (January, February and March) and from the same three months of a year ago....

June 2021 retail sales table

The figures shown in that fifth column above, ie, comparing sales of April, May and June to those of January, February and March, give us a quick sense of how the change in retail sales will impact the change in 2nd quarter GDP....as you can see, even though May's sales were 1.7% lower than those of April, nominal retail sales for the three months of the second quarter were up 6.2% from the first three months of this year...that's an increase at a 27.2% annual rate, which as you know, will be reduced by the price changes of the corresponding months before inclusion in the growth of GDP..

To compute June's real personal consumption of goods data for national accounts from this June retail sales report, the BEA will use the corresponding price changes from the June consumer price index, which we reviewed earlier…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 June retail sales excluding the 2.5% price-related increase in sales at gas stations were up by 0.4%....then, by subtracting the dollar amounts representing the 0.6% increase in grocery & beverage sales and the 2.3% increase in food services sales from that total, we find that core retail sales were statistically unchanged over the month...since the June CPI report showed that the composite price index of all goods less food and energy goods was 2.2% higher in June, we can thus figure that real retail sales excluding food and energy will show an decrease of around 2.2%...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were down 2.0% in June, the June price index for transportation commodities other than fuel was 5.6% higher, which would suggest that real unit sales at auto & parts dealers were probably on the order of 7.2% lower once price increases are taken into account... similarly, while sales at furniture and home furnishing stores were 3.6% lower, the price index for household furnishings and supplies was was 0.1% higher, which means real sales of furniture and home furnishings actually fell by around 3.7%….meanwhile, while nominal sales at sporting goods and other recreational commodity stores were down by 1.7%, the recreational commodities index was 0.3% lower in June, which would mean that real unit sales at sporting goods and other recreational commodity stores were probably on the order of 1.4% lower, once the price decrease is taken into account... on the other hand, while nominal sales at clothing stores were 2.6% higher in June, the apparel price index was 0.7% higher, which means that real sales of clothing likely rose around 1.9%...

In addition to figuring those core retail sales, to make an estimate of the month's change in real sales, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the June CPI report showed that the food price index was 0.8% higher, as the price index for food purchased for use at home rose 0.8% while the index for food bought away from home was 0.7% higher...thus, while nominal sales at food and beverage stores were 0.6% higher, real sales of food and beverages would have been around 0.2% lower in light of the 0.8% higher prices…meanwhile, the 2.3% increase in nominal sales at bars and restaurants, once adjusted for 0.7% higher prices, suggests that real sales at bars and restaurants only rose around 1.6% during the month...similarly, while sales at gas stations were up 2.5%, there was also a 2.5% increase in the price of gasoline during the month, which would suggest that real sales of gasoline were virtually unchanged, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so there was likely a small increase in real sales at gas stations…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 June will show that real personal consumption of goods fell by around 1.8% in June, after falling by a revised 2.4% in May, and a revised 0.4% in April but after rising by a 9.6% in March, falling by 3.5% in February and rising by 7.3% in January...at the same time, the 1.6% increase in real sales at bars and restaurants will add more than 0.1% to the growth rate of June's real personal consumption of services....note that despite decrease in real personal consumption of goods in April, May and June, the 9.6% increase in March PCE goods means that real 2nd quarter sales were still significantly higher than those of January and February, and thus will have a similarly significant positive impact on the quarter over quarter growth of 2nd quarter GDP...

Industrial Production Rose 0.4% in June Despite 6.6% Drop in Automobile Output

The Fed's G17 release on Industrial production and Capacity Utilization for June reported that seasonally adjusted industrial production rose 0.4% in June after rising by 0.7% in May but after being statistically unchanged in April, and is now up by 9.8% from a year ago, rising at a 5.5% annual rate in the 2nd quarter...the industrial production index, with the benchmark now set for average 2017 production to equal to 100.0, rose from 99.7 in May to 100.1 in June, after the May reading for the IP index was revised down from 99.9 to 99.7, and the January index was revised up from 99.3 to 99.4, while the Indices for February, March and April were unrevised at 96.4, 98.9, and 99.0 respectively....

The manufacturing index, which accounts for around 77% of the total IP index, decreased by 0.1% in June, even as the manufacturing index was unchanged at 97.9, as a 6.6% decrease in the output of motor vehicles and parts due to the ongoing shortage of semiconductors dragged manufacturing lower; excluding the drop in motor vehicles and parts, factory output increased by 0.4%, and is still up 9.8% from a year ago...the May manufacturing index was revised from the 98.2 published last month to 97.9, the April manufacturing index was revised from 97.4 to 97.1, the March index remained unrevised at 97.5, the February manufacturing index was revised from 94.6 to 94.5, and the January manufacturing index was revised from 99.3 to 99.4....meanwhile, the mining index, which includes oil and gas well drilling, increased for the 4th consecutive month, rising 1.4%, from 106.7 in May to 108.2 in June, after the May index was revised up from the originally reported 106.3, which thus lifts the mining index to 17.8% above what it was a year ago....finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 2.7% to 103.6 June, after the May index was revised down from 101.1 to 100.9, which leaves the utility index 2.1% above its year earlier reading...

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…seasonally adjusted capacity utilization for total industry rose to 75.4% in June from 75.1% in May, after capacity utilization for May was revised down from the 75.2% reported a month ago....capacity utilization for all manufacturing industries fell from 75.6% in May to 75.5% in June, as capacity utilization by NAICS durable goods production facilities fell from 74.2% in May to 74.0% in June, while capacity utilization for NAICS non-durable producers rose from 77.1% to 77.2%...capacity utilization for the mining sector rose to 76.7% in June, from a revised 75.6% in May, which was originally reported as 75.2%, while utilities were operating at 74.5% of capacity during June, up from a revised 72.7% May, which was originally published as 72.8%...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....

June Producer Price Index Sets YoY Records for Final Demand and Intermediate Services; 46 year High for Prices of Intermediate Goods

The seasonally adjusted Producer Price Index (PPI) for final demand rose 1.0% in June, as prices for finished wholesale goods rose 1.2% while margins of final services providers rose 0.8%...that increase followed a May report that the PPI had risen 0.8%, as prices for finished wholesale goods rose 1.5% while margins of final services providers rose 0.6%, an April report that the PPI was 0.6% higher, as prices for both finished wholesale goods and margins of final services providers rose by 0.6%, a now revised March report that has the PPI 0.9% higher, as prices for finished wholesale goods rose 1.5% while margins of final services providers rose 0.5%, and a re-revised February report that now has the PPI 0.7% higher, with prices for finished wholesale goods on average 1.6% higher, while margins of final services providers increased by 0.3%....on an unadjusted basis, producer prices are now a record 7.3% higher than a year ago, up from the recomputed 6.6% year over year increase now indicated for May's producer prices, while the core producer price index, which excludes food, energy and trade services, rose by 0.5% for the month, and is now 5.5% higher than in June a year ago, up from the 5.3% year over year increase that was shown in May...

As noted, the price index for final demand for goods, aka 'finished goods', was 1.2% higher in June, after being 1.5% higher in May, 0.6% higher in April, 1.5% higher in March, 1.6% higher in February, 1.6% higher in January, 0.9% higher in December, 0.4% higher in November, 0.5% higher in October, 0.4% higher in September, 0.4% higher in August, 0.5% higher in July, and 0.4% higher in June of last year, and hence is now up by a record 11.7% from a year ago....the finished goods price index rose 1.2% in June as the price index for wholesale foods rose 0.8%, after rising by 2.6% in May, by 2.1% in April, by 0.5% in March, by 1.4% in February, and by 1.6% in January, and as the price index for wholesale energy goods was 2.1% higher, after it had risen 2.2% in May, fallen by 2.4% in April, risen by 5.9% in March, by 5.8% in February, and by 5.1% in January....meanwhile, the index for final demand for core wholesale goods (excluding food and energy) was 1.0% higher, after it had risen by 1.1% in May, by 1.0% in April, by 0.9% in March, by 0.3% in February and by 0.8% in January....wholesale energy prices averaged 2.1% higher due to a 2.8% increase in wholesale prices for gasoline, a 5.6% increase in wholesale prices for home heating oil, and a 12.1% increase in wholesale prices for LP gas, while the wholesale food price index rose 0.8% on a 5.6% increase in the wholesale price index for beef and veal, a 4.8% increase in the wholesale price index for pork, and a 7.6% increase in wholesale price index for processed turkeys...among core wholesale goods, the wholesale price index for industrial chemicals rose 4.5%, the wholesale price index for iron and steel scrap rose 9.9%, the wholesale price index for truck trailers rose 2.6%, the wholesale price index for transformers and power regulators rose 7.5%, the wholesale price index for sporting and athletic goods rose 3.0%, and the wholesale price index for mobile homes rose 3.6%...

At the same time, the index for final demand for services rose 0.6% in June, after rising 0.6% in May, 0.6% in April, a revised 0.5% in March, a revised 0.3% in February and 1.0% in January, as the index for final demand for trade services rose 2.1%, the index for final demand for transportation and warehousing services rose 0.9%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.3% higher...among trade services, seasonally adjusted margins for automobile retailers rose 17.4%, margins for hardware, building materials, and supplies retailers rose 10.6%, margins for TV, video, and photographic equipment and supplies retailers rose 8.4%, margins for fuels and lubricants retailers rose 4.3%, and margins for RVs, trailers, and campers retailers rose 5.8%, while margins for apparel wholesalers fell 6.0%...among transportation and warehousing services, average margins for air transportation of freight rose 4.3% and margins for airline passenger services rose 2.5%...among the components of the core final demand for services index, the index for application software publishing rose 4.7%, margins for passenger car rental rose 4.4%, the price index for arrangement of cruises and tours rose 4.6%, and the price index for traveler accommodation services rose 3.9%, while margins for gaming receipts (partial) fell 4.2% …

This report also showed the price index for intermediate processed goods rose 1.9% in June, after rising 2.8% in May, 1.6% in April, a revised 3.5% in March, a revised 2.9% in February, and 1.8% in January, 1.4% in December, 0.9% in November, 0.9% in October, 0.6% in September, 0.9% in August, 1.4% in July, and 1.2% in June of last year... the price index for intermediate energy goods rose 0.2% in June, as refinery prices for jet fuel rose 3.7%, refinery prices for gasoline rose 2.8%, producer prices for LP gas rose 12.1%, and producer prices for industrial natural gas rose 4.5%, while producer prices for natural gas to electric utilities fell 18.9%... meanwhile, the price index for intermediate processed foods and feeds rose 1.7%, as the producer price index for meats rose 4.7%, the producer price index for processed poultry rose 6.4%, and the producer price index for refined sugar and byproducts rose 1.8%...at the same time, the core price index for intermediate processed goods less food and energy rose 2.3% as the producer price index for steel mill products rose 6.2%, the producer price index for plywood rose 15.2%, the producer price index for copper and brass mill shapes rose 4.3%, the producer price index for fabricated structural metal products rose 5.9%, the producer price index for nitrogenates rose 9.1%, the producer price index for phosphates rose 8.0%, and the producer price index for building paper and board rose 11.2%...prices for intermediate processed goods are now 22.6% higher than in June a year ago, the largest year over year price increase since the year ended February 1975, but just the seventh increase after 19 consecutive year over year decreases, which had 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 2.6% in June, after rising 8.4% in May, falling 3.8% in April, rising a revised 0.7% in March and a revised 11.9% in February, after rising 5.3% in January, and rising by 2.1% in December, by 6.3% in November, 1.3% in October, 5.2% in September, 4.0% in August, 0.6% in July, and by 5.4% last June....that was as the June price index for crude energy goods rose 5.8% as crude oil prices rose 9.9%, unprocessed natural gas prices rose 1.7%, and coal prices rose 0.7%, while the price index for unprocessed foodstuffs and feedstuffs rose 0.7% on a 7.0% increase in producer prices for slaughter cattle, a 5.6% increase in producer prices for slaughter chickens, a 15.0% increase in producer prices for alfalfa hay, and a 5.5% increase in producer prices for raw milk....at the same time, the index for core raw materials other than food and energy materials rose 0.9%, as the price index for aluminum base scrap rose 10.4%, the price index for recyclable paper rose 13.2%, and the price index for iron and steel scrap rose 9.9%... this raw materials index is now 54.1% higher than a year ago, which is down from the 57.9% year over year increase in May, but just the eighth year over year increase after the annual 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 1.1% in May, after rising 0.8% in May, 0.8% in April, a revised 0.5% in March, a revised 0.3% in February, and rising 1.1% in January, and 0.7% in December 2020, after being unchanged in November, rising 0.7% in October, rising 1.1% in September, 0.8% in August, 0.5% in July, and 0.3% last June….the price index for intermediate trade services was 2.5% higher, as margins for intermediate metals, minerals, and ores wholesalers rose 13.9%, margins for intermediate hardware, building material, and supplies retailers rose 10.6%, and margins for intermediate building materials, paint, and hardware wholesalers rose 1.4%...meanwhile, the index for transportation and warehousing services for intermediate demand was 2.1% higher, as the intermediate price index for air transportation of freight rose 4.7%, the intermediate price index for water transportation of freight rose 3.5%, and the intermediate price index for arrangement of freight and cargo rose 20.5%....at the same time, the core price index for intermediate services other than trade, transportation, and warehousing services rose 0.4%, as the intermediate price index for passenger car rental rose 4.4%, the intermediate price index for residential property management fees rose 5.0%, the intermediate price index for television advertising time sales rose 3.6%, and the intermediate price index for traveler accommodation services rose 3.9%, while the intermediate price index for truck, utility trailer, and RV rental and leasing fell 1.5%...over the 12 months ended in June, the year over year price index for services for intermediate demand is now 8.7% higher than it was a year ago, the tenth consecutive positive annual change since it briefly turned negative year over year from April to August of last year, and the largest 12-month advance in the eleven year history of this index..

Business Sales Down 0.3% in May, Business Inventories Up 0.5%

Following the release of the June retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for May(pdf), which incorporates the revised May retail data from that June report and the previously published wholesale and factory data for May to give us a broad 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 $1,615.9 billion in May, down 0.3 percent (±0.2 percent) from April’s revised sales, but 28.7 percent (±0.6 percent) higher than May's sales of a year earlier...note that total April sales were revised from the originally reported $1,621.1 billion to $1,621.4 billion but the increase from March remained unrevised at +0.6%... manufacturer's sales were up 0.7% from April at $490,436 million during May, but retail trade sales, which exclude restaurant & bar sales from the revised May retail sales reported earlier, fell 2.4% to $548,987 million, while wholesale sales rose 0.8% to $576,450 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,039.3 billion at the end of May, up 0.5 percent (±0.1%) from April, and 4.5 percent (±0.5 percent) higher than in May a year earlier...the value of end of April inventories were revised to $2,028.4 billion from the $2,024.0 billion reported here last month, now a 0.1% increase from March, rather than a 0.2% decrease...seasonally adjusted inventories of manufacturers were estimated to be valued at $731,635 million, 0.9% more than in April, while inventories of retailers were valued at $597,834 million, 0.8% less than in April, and inventories of wholesalers were estimated to be valued at $709,814 million at the end of May, up 1.3% from April...

In national accounts reports, the various categories of business inventories will be adjusted for price changes using item appropriate price indexes from the producer price index....with the release of wholesale inventories data last week, we figured there would be a real decrease wholesale inventory on the order of 0.2% in May’s wholesale inventories, following the real wholesale inventory increase on the order of 0.2% we had figured for April, and as there was a small increase (~0.1%) in real wholesale inventories in the first quarter, any neutral 2nd quarter real inventories would have a small negative impact on the growth rate of 2nd quarter GDP....likewise, the inflation adjusted factory inventory data from the prior week indicated a real decrease in May, but while first quarter factory inventories were also negative, we felt the decrease in real 2nd quarter factory inventories would be greater and still have a negative impact on the growth rate of 2nd quarter GDP....with prices for finished goods on average 1.2% higher in May on top of the nominal 0.8% decrease in May’s retail inventories, this report suggests that real retail inventories have decreased at a rate near 2.0% in May, following a real decrease of around 2.4% in April....since real retail inventories were only modestly negative in the 1st quarter, the large drop in the 2nd quarter's real retail inventories so far would thus have a substantial negative impact on 2nd quarter GDP...

 

(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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