May’s retail sales, industrial production, new home construction and existing home sales; April’s business inventories

Widely watched reports released during the past week included the Retail Sales report for May and its companion the Business Sales and Inventories report for April, both from the Census Bureau; the May report on Industrial Production and Capacity Utilization from the Fed, the May report on New Residential Construction from the Census Bureau and the May report on existing home sales from the National Association of Realtors (NAR)…

This week also saw the release of the first two Fed regional manufacturing reports for June: 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 to –6.0 June, from –15.6 in May, indicating that a smaller plurality of that district’s manufacturers are experiencing a slowdown than were a month ago..…meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions fell from +4.5 in May to +1.3 in June, indicating that a smaller plurality of that district’s manufacturers are experiencing improvement than were a month ago, or, as they specify: “more than 29 percent of the firms reported increases in general activity this month (down from 38 percent last month), while 25 percent reported decreases (up from 22 percent); 46 percent reported no change (up from 40 percent)”

Retail Sales Rose 0.1% in May After March and April Sales Were Revised Lower

Seasonally adjusted retail sales rose 0.1% in May after retail sales for March and April were revised  lower….the Advance Retail Sales Report for May​ (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $703.1 billion for the month, which was an increase of 0.1 percent (±0.4%) from April’s revised sales of $702.5 billion, and 2.3 percent (±0.5 percent) above the adjusted sales of May of last year….April’s seasonally adjusted sales were revised from the $705.2 billion reported last month to $702.5 billion, while March sales were revised from $705.1 billion to $703,738 million, which combined meant that March to April percent change was revised from the virtually unchanged (±0.4 percent)* change that was reported a month ago to a decrease of 0.2 percent (±0.2 percent)*….the $1.36 billion downward revision to March sales should reduce nominal first quarter PCE at around a $4.4 billion annual rate and subtract about 0.0​5 percentage points, give or take, from 1st quarter GDP when the 3rd estimate is released on May 27th….estimated sales before seasonal adjustments, which were extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 6.1% before the adjustment, from $700,151 million in April to $742,945 million in May, while they were up 2.9% from the $722,019 million in actual sales of May a year ago…

Included below is the table of the monthly and yearly percentage changes in sales by business type taken from the Census pdf….the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly estimates (now called “preliminary”) as revised with this report, likewise for each business type, with the March to April change under “Mar 2024 r” (revised) and the revised April 2023 to April 2024 percentage change in the last column shown…for your reference, our copy of the table of last month’s advance April estimates, before this month’s revision, is here….

To compute May’s real personal consumption of goods data for national accounts from this May retail sales report, the BEA will initially use the corresponding price changes from the May 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 May retail sales, excluding the 2.2% decrease in sales at gas stations, were up by 0.3%…then, by subtracting the actual dollar amounts representing the 0.2% decrease in grocery & beverage sales and the 0.4% decrease in food services sales from the dollar amounts behind that change, we find that core retail sales were up by 0.5% for the month….since the May CPI report showed that the composite price index of all goods less food and energy goods was unchanged in May, we can thus figure that the change in real retail sales excluding food and energy sales would be an increase of 0.5% from April…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 furniture stores were down 1.1% in May, the May price index for furniture and bedding was 0,6% lower, which would suggest that real unit sales of furniture were 0,5% lower​, once price decreases are taken into account… similarly, while nominal sales at clothing stores were 0.9% higher in May, the apparel price index was 0.3% lower, which suggests that real sales of clothing actually rose around 1.2%…

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 May CPI report showed that the food price index was 0.1% higher, as the price index for food purchased for use at home was unchanged, while the index for food bought away from home was 0.4% higher…thus, with nominal sales at food and beverage stores 0.2% lower, real sales of food and beverages would have been around 0.2% lower without a change in prices…meanwhile, the 0.4% decrease in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants were roughly 0.8% lower during the month…on the other hand, while sales at gas stations were down 2.2%, there was also a 3.6% decrease in the price of gasoline during the month, which would suggest that real sales of gasoline were on the order of 1.5% higher, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices…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 May will show that real personal consumption of goods rose by roughly 0.5% in May (with a caveat on that gasoline increase), after falling by a revised 0.5% in April, but after rising by a revised 0.2% in March, after rising by 0.3% in February and falling by 0.3% in January…at the same time, the 0.8% decrease in real sales at bars and restaurants would subtract about 5 basis points from the growth rate of May’s real personal consumption of services….

Industrial Production Rose 0.9% in May After March and April were Revised Lower

Industrial production increased in May after production for March and April was revised lower…the Fed’s G17 release on Industrial production and Capacity Utilization for May reported that industrial production increased 0.9% in May after being unchanged in April and falling by a revised 0.1% in March, which left total output 0.4% higher than a year ago, reversing the 0.4% year over year decrease reported for April a month ago…the industrial production index, which is benchmarked for average 2017 production to be equal to 100.0, rose from a revised 102.5 in April to 103.3 in May, after the April reading for the index was revised down from 102.8 to 102.5, the March index was revised down from 102.8 to 102.4, the February index was revised but remained at 102.6, and the January index was was revised down from 101.8 to 101.7….

The manufacturing index, which accounts for about 77% of the total IP index, also rose 0.9%, from a revised 99.0 in April to to 99.8 in May, after the April manufacturing index was revised from 99.4 to 99.0, the March manufacturing index was revised from 99.7 to 99.4, the February manufacturing index was revised but remained at 99.5, the January manufacturing index was revised from 98.2 to 98.1, and the December manufacturing index was revised from 99.3 to 99.4, leaving manufacturing output 0.1% higher than it was a year ago… meanwhile, the mining index, which includes oil and gas well drilling, rose 0.3% from 117.6 in April to 117.9 in May, after the April index was revised up from the originally reported 117.1, still leaving the mining index 0.4% lower than it was a year earlier….finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 1.6% to 107.8 in May, after the April index was revised from a 2.8% increase to 106.7 to an increase of 4.1% to 106.0, which came after the March utility index was revised from a 1.6% increase to 103.7 to a 0.3% decrease to 101.9, leaving the utility index 3.9% above its year earlier level…

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 78.7% in May from 78.2% in April, after capacity utilization for April was revised up from the 78.4% reported a month ago….capacity utilization for all manufacturing industries was up from 76.% in April to 77.1% in May, as utilization of NAICS durable goods production facilities rose from a downwardly revised 74.6% in April to 75.0% in May, while capacity utilization for non-durables manufacturers rose from 78.4% to 79.1%…at the same time, capacity utilization for the mining sector rose to 92.7% in May, from 92.5% in April, which was originally reported as 92.1%, while utilities were operating at 71.5% of capacity during May, up from 70.5% of capacity during April, which was was originally reported at 71.0%….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….

Business Sales and Business Inventories Both Rose 0.3% in April

Following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April(pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….According to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,862.4 billion in April, up 0.3 percent (±0.2 percent) from March revised sales, and up 2.2 percent (±0.3 percent) from April sales of a year earlier…March sales were revised from the originally reported $1,858.0 billion to 1,857.1 million, and the March decrease from February was revised from -0.1% to –0.2%….manufacturer’s sales were up 1.0% from March at $590,190 million in April, but retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, were down 0.3% to $596,523 million, while wholesale sales rose 0.1% to $663,752 million..

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,545.2 billion at the end of April, up 0.3 percent (±0.1%) from March, and 5.2 percent (±0.4 percent) higher than in April a year earlier…the value of end of March inventories was revised from the $2,539.0 billion reported last month to $2,537.5 billion with this release, and is now a 0.1% decrease from February…seasonally adjusted inventories of manufacturers were estimated to be valued at $858,330 million, 0.1% higher than in March, inventories of retailers were valued at $791,079 million, 0.7% more than in March, and inventories of wholesalers were estimated to be valued at $895,776 million at the end of April, up 0.1% from March.

With the release of the factory inventory data two weeks ago, we judged that the real change in April’s factory inventories, after adjusting for inflation, would have a modest negative impact on the growth rate of 2nd quarter GDP, by falling slightly after an small first quarter increase; meanwhile, with the release of the wholesale inventory data, we felt the change in 2nd quarter real wholesale inventories from the first quarter was negligible, and thus would have little impact on the growth rate of 2nd quarter GDP…..since the April producer price index reported that prices for finished goods were on average 0.4% higher, that means that there was likely a real increase in retail inventories of around 0.3% for the month….however, since the key source data and assumptions (xls) for the second estimate of 1st quarter GDP indicated that 1st quarter real retail inventories had accounted for most of the 1st quarter inventory increase, any increase in the 2nd quarter’s real retail inventories that is smaller than that would subtract from 2nd quarter GDP by the difference between the increases of the two quarters…

New Housing Starts Reported at a 4 Year Low in May; Permits also Lower

The May 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 1,277,000 in May, which was a 47 month low, 5.5 percent (±9.4 percent)* below the revised April estimated annual rate of 1,352,000 housing unit starts, and was 19.3 percent (±10.0 percent) below last May’s rate of 1,583,000 housing starts a year…the asterisk indicates that Census does not have sufficient data to determine whether housing starts actually rose or fell from April, with the figure in parenthesis the most likely range of the change indicated; in other words, May’s housing starts could have just as easily been up by 3.9% or down by as much as 14.9% from those of April, with even larger revisions to this month’s data possible over time…in this report, the annual rate for April’s housing starts was revised from the 1,360,000 estimated last month to 1,352,000, while March housing starts, which were first reported at a 1,321,000 annual rate, were revised from last month’s initial revised annual figure of 1,287,000 up to 1,299,000 annually 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 116,900 housing units were started in May, down from the 123,300 units started in April but up from the 109,800 units started in March… of those housing units started in May, an estimated 90,000 were single family homes and 25,400 were units in structures with more than 5 units, down from the revised 85,900 single family starts in April, and down from the 25,400 units started in structures with more than 5 units at the same time…

The monthly data on new building permits, with a smaller margin of error and hence usually smaller revisions, is probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in May, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,386,000 housing units, which was 3.8 percent below the revised April permit rate of 1,440,000 units, and 9.5 percent below the rate of permit issuance in May a year earlier….the annual rate for housing permits issued in April was unrevised from the 1,440,000 reported a month ago…

Again, the annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed that permits for roughly 131,300 housing units were issued in May, down from the revised estimate of 132,300 new permits issued in April, but up from the 124,300 housing units permitted in March….the May figure included permits for an estimated 93,400 single family units, down from 93,600 in April, and permits for 32,700 units in structures with more than 5 units, down from 33,700 in April….

For graphs and commentary on this report, see the following posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.277 million Annual Rate in May and Single Family Starts Down Slightly Year-over-year in May; Multi-Family Starts Down 50%, which links to his in depth free newsletter article on the same subject…

Existing Home Sales Fell 0.7% in May; Median Sale Price at a Record High

The National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose 0.2% from April to May, projecting that 4.11 million homes would sell over an entire year if the May home sales pace were extrapolated over that year, a pace that was also 2.8% lower than the annual sales rate projected in May of a year ago….that came after homes sold at an annual sales rate of 4.14 million in April, which was revised but unchanged from last month’s report.…the NAR also reported that the median sales price for all existing-home types was at $419,300 in May, which was 5.8% higher than in May a year earlier, which was “the highest price ever recorded and the eleventh consecutive month of year-over-year price gains”….the NAR press release, which is titled Existing-Home Sales Edged Lower by 0.7% in May as Median Sales Price Reached Record High of $419,300, is in easy to read plain English, so if you’re interested in a regional breakdown, or the details on housing inventories, cash sales, distressed sales, first time home buyers, etc, you can easily find that information 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 entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month…this data indicates that roughly 404,000 homes sold in May, up by 12.2% from the 360,000 homes that sold in April, but down by 1.0% from the the 408,000 homes that sold in May of last year, so we can see the effect of the seasonal adjustment to reduce the springtime increase typical for May home sales…that same pdf indicates that the median home selling price for all housing types rose 3.1%, from a revised $406,600 in April to $419,300 in May, with the regional median home sales prices ranging from a low of $317,100 in the Midwest to a median high nearly double that at $632,900 in the West…for additional details, analysis, and long term graphs on this report, see “NAR: Existing-Home Sales Decreased to 4.11 million SAAR in May” and “NAR: Existing-Home Sales Decreased to 4.11 million SAAR in May; Median House Prices Increased 5.8% Year-over-Year” from Bill McBride at Calculated Risk, which in turn links to his Real Estate Newsletter coverage of this report…

 

 

(the above is the synopsis that accompanied my regular sunday morning news 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…)