August’s retail sales, industrial production, new housing construction and existing home sales; July’s business inventories

Widely watched economic reports released ​l​ast week included the Retail Sales Report for August and the Business Sales and Inventories report for July, both from the Census bureau, the August Industrial Production and Capacity Utilization report from the Fed, the August report on New Residential Construction, also from the Census bureau, and the Existing Home Sales Report for August from the National Association of Realtors…in addition, on Friday the Bureau of Labor Statistics released the Regional and State Employment and Unemployment Report for August, a report which breaks down the two employment surveys from the monthly national jobs report by state and by region….while the text of that 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 regional Fed manufacturing surveys for September: the Empire State Manufacturing Survey from the New York Fed, which covers New York, northern New Jersey, a county in Connecticut, and Puerto Rico, reported their headline general business conditions index rose from rose from –6.6 in July and from –4.7 in August to +11.5 in September, meaning that a majority of Second District manufacturers reported improvement in business conditions in September for the first time since last November, while the Philadelphia Fed Manufacturing Survey for September, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions rose from -7.0 in August to +1.7 in September, the 7th positive reading in eight months, meaning that a small plurality of that region’s manufacturers now see improvement in various facets of their business this month….

Retail Sales Rose 0.1% in August after July’s Sales Were Revised 0.1% Higher

Seasonally adjusted retail sales rose 0.1% in August after retail sales for July were revised 0.1% higher…the Advance Retail Sales Report for August(pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $710.8 billion during the month, which was up less than 0.1 percent (±0.5%) from July’s revised sales of $710.4 billion, and 2.1 percent (± 0.5 percent) above the adjusted sales in August of last year…July’s seasonally adjusted sales were revised 0.1% higher, from the $709.7 billion reported last month to $710.4 billion, while June sales were revised nearly 0.1% lower, from $702.9 billion to $702,350 million, and hence the June to July increase was revised from up 1.0 percent (±0.5 percent) to up 1.1 percent (±0.2 percent) with this release…the downward revision to June’s sales means that the annual rate for ​nominal 2nd quarter sales was roughly $2.2 billion lower than was previously reported, which would be enough to subtract about 0.02 or 0.03 percentage points from the 2nd quarter GDP growth rate when the 3rd estimate is published at the end of the month…

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

To compute August’s real personal consumption of goods data for national accounts from this August retail sales report, the BEA will initially use the corresponding price changes from the August consumer price index, which we reviewed last week….to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals….from the third line on the above table, we can see that August retail sales excluding the price related 1.2% decrease in sales at gas stations were up by 0.1%….then, subtracting the figures representing the 0.7% decrease in grocery & beverage store sales and the unchanged food services sales from that total, we find that core retail sales were up by more than 0.3% month over month…since the August CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% lower in August, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show an increase of more than 0.5% for the month…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 clothing stores were 0.7% lower in August, the apparel price index was 0.3% higher, which means that real sales of clothing likely fell by about 1.0%…

In addition to figuring those core retail sales, to make a complete estimate of real August PCE, we should also adjust food and energy retail sales for their price changes separately, just as the BEA will do…the August CPI report showed that the food price index rose 0.1% in August, as the price index for food purchased for use at home was unchanged, while average restaurant prices were 0.3% higher…with no change in prices, the 0.7% nominal decrease in grocery & beverage store sales nominal sales would be a real decrease…on the other hand, the unchanged sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants were down about 0.3% for the month…meanwhile, while ​nominal sales at gas stations were down 1.2%, there was a 0.6% decrease in the retail price of gasoline, which would suggest real sales of gasoline were on the order of 0.6% lower, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the decrease in real sales at gas stations was likely a bit greater than our blunt estimate…by 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 August will show that real personal consumption of goods rose nearly 0.3% in August, after rising by a revised 0.8% in July and rising by a revised 0.2% in June, and after rising by 1.1% in May, but after falling by 0.5% in April…at the same time, 0.3% decrease in real sales at bars and restaurants would have a small negative impact on July’s real personal consumption of services…

Industrial Production Rose 0.8% in August on July Mis-Adjustment of Motor Vehicle Assemblies

The Fed’s August report on Industrial production and Capacity Utilization indicated that industrial production rose by 0.8% in August, after falling by a revised 0.9% in July and rising by a revised 0.1% in June, ​but is ​s​till unchanged from a year ago….the industrial production index, with the benchmark now set for average 2017 production to equal to 100.0, rose to 103.1 in August from 102.3 in July, which was revised up from the 102.9 that was reported for July a month ago…at the same time, the June reading for the IP index was revised down from 103.5 to 103.3, the May reading for the IP index was revised down from 103.3 to 103.2, the April reading for the index was revised down from 102.5 to 102.4, and the March reading for the index was unrevised at 102.5..

The manufacturing index, which accounts for more than 75% of the total IP index, rose by 0.9%, from 99.6 in July 99.7 in August, after July’s manufacturing index was revised down from 103.5 to 103.3, the June reading for the manufacturing index was revised down from 103.5 to 103.3, the May reading for the manufacturing index was revised down from 103.3 to 103.2, the April reading for the manufacturing index was revised down from 102.5 to 102.4…..the August manufacturing index increase was a reversal of the the July manufacturing decrease, which was largely due to a seasonally adjusted 9% drop in the index for motor vehicles and parts, which decreased because some vehicle manufacturers canceled their normal July retooling shutdowns in prior years, skewing the seasonal adjustment​.​..excluding the seasonally adjusted​ 10% ​"jump​" in the output of motor vehicles, other factory output was up 0.3%….meanwhile, the mining index, which includes oil and gas well drilling, rose 0.8% to 120.1 in August, after the July index was revised up from 118.6 to 119.1, leaving the mining index up by 0.1% from a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, was statistically unchanged while falling from  105.4 in July to 105.3 in August, after the July utility index was revised up from 105.8 to 105.4, and after the June utility index was revised from 109.7 to 108.6…with this August cooler than last year, the utility index is now 0.9% below its year ago reading of 106.3..

This report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose from 77.4% in July to 78.0% in August, after July’s utilization figure was revised down from the 77.8% reported a month ago…capacity utilization of NAICS durable goods production facilities rose from 74.1% in July to 75.6% in August, after July’s figure was revised down from 74.9%, while capacity utilization for non-durables producers fell from 79.0% to 78.7%, after July’s non-durables utilization was revised down from 79.4%…capacity utilization for the mining sector rose to 90.0% in August from 89.2% in July, which was originally reported as 88.8%, while utilities were operating at 70.5% of capacity during August, down from their 70.7% of capacity during July, which was revised down from 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….

NOTE: this industrial production report ​w​as screwed up by seasonal adjustments which reflect the impact of supply chain issues during the worst of the pandemic years….historically, auto manufacturers have shut down in July to retool ​their factories for the new models, and hence July’s auto manufacturing index had been boosted by an upward seasonal adjustment on the order of 30%….because a number  of auto manufacturers did not shut down in July during the pandemic years to take advantage of sparsely available parts supply, seasonally adjusted auto manufacturing artificially jumped in July during those years…the effect of those artificial production spikes was to cause the revision​ of the upward July seasonal adjustment for auto manufacturing from around 30% to around 20%, and to similarly reduce the downward August seasonal adjustment to auto manufacturing from around 30% to 20%…with the July auto shutdown for retooling back to normal for this year, the pandemic impacted seasonal adjustments resulted in what the Fed reports as “a recovery in the index of motor vehicles and parts, which jumped nearly 10 percent in August after dropping roughly 9 percent in July“, as if they have no idea as to why that happened….without that distortion, manufacturing rose 0.3% in August and industrial production over the two months in question would be close to unchanged…

Business Sales Rose 1.1% in July, Business Inventories Rose 0.4%

After the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July (pdf), which incorporates the revised July retail data from that August retail report and the earlier published July factory data and last week’s July wholesale trade report 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 $1,880.7 billion in July, up 1.1 percent (±0.2%) from June’s revised sales, and 2.9 percent (±0.3 percent) above July’s sales of a year earlier…note that June’s total sales were concurrently revised up from the originally reported $1,857.9 billion to $1,860.1 billion with this report, which is now virtually unchanged from May, revised from the 0.1% decrease reported last month….manufacturer’s sales were up 0.9% to $593,804 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 1.3% to $615,855 million, while wholesale sales rose 1.1% to $671,027 million..

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,574.9 billion at the end of July, up 0.4% (±0.1%) from June, and 2.5 percent (±0.3 percent) higher than in July a year earlier…the value of end of June inventories was revised from the $2,567.5 billion reported last month to $2,565.93 billion, which is still up 0.3% from June…seasonally adjusted inventories of manufacturers were estimated to be valued at $859,422 million, 0.1% higher than in June, inventories of retailers were valued at $811,981 million, 0.8% more than in June, while inventories of wholesalers were estimated to be valued at $903,520 million at the end of July, up 0.4% from June…

With the original release of the factory inventory data two weeks ago, we judged that the real change in July factory inventories would have a modest negative impact on the growth rate of 3rd quarter GDP, because they’d be negative while 2nd quarter real factory inventories were slightly positive; then, with the release of the wholesale inventory last week, we figured that real July wholesale inventories were also lower, after a large 2nd quarter increase, and hence also negative for 3rd quarter GDP…since the producer price index for July showed that prices for finished goods were on average 0.6% higher, that means that real retail inventories were roughly 0.2% higher for the month…however, since real retail inventories saw a substantial increase in the second quarter, that small increase in real July retail inventories suggests that most of that big 2nd quarter increase ​w​ill probably be given back in the 3rd quarter…

New Housing Starts and Building Permits Rose in August

The August report on New Residential Construction (pdf) from the Census Bureau indicated that their widely watched estimate of new housing units that were started during the month was at a seasonally adjusted annual rate of 1,283,000, which was 9.6 percent (±11.4 percent)* above July’s revised July estimated annual rate of 1,237,000 housing unit starts, and was 3.9 percent (±13.0 percent)* above last August’s pace of 1,305,000 housing starts a year…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell from July, or even from August of last year, while the figures in parenthesis indicate the most likely range of the changes indicated; in other words, August’s housing starts could have been down by 1.8% or up by as much as 21.0% from those of July, with a 10% chance that the actual change could have even been outside of that wide range…in this report, the annual rate for July housing starts was revised from the four year low of 1,238,000 reported last month to 1,23​7,000, while June’s housing starts, which were first reported at a 1,353,000 annual rate, were revised but unchanged from last month’s initial revised figure of a 1,329,000 annual rate with this report….

Those annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 119,700 housing units were started in August, up from the 112,700 units started in July, but down from 123,600 housing starts in June…of those housing units started in August, an estimated 88,500 were single family homes and 28,500 were units in structures with more than 5 units, up from the revised 80,400 single family starts in July, but down from the 30,400 units started in structures with more than 5 units in July…

The monthly data on new building permits, with a smaller margin of error, is probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in August, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,475,000 housing units, which was 4.9 percent above the revised July rate of 1,406,000 permits, but was 6.5 percent below the rate of building permit issuance in August a year earlier…the annual rate for housing permits issued in July was revised revised but unchanged from the annual rate of 1,406,000 reported last month…

Again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for roughly 132,400 housing units were issued in August, up from the revised estimate of 126,500 new permits issued in July…the August permits included 86,100 permits for single family homes, up from 85,800 in July, and 41,000 permits for housing units in apartment buildings with 5 or more units, up from 36,100 such multifamily permits a month earlier…

For graphs and commentary on this report, see the following posts by Bill McBride: Housing Starts Increased to 1.356 million Annual Rate in August at Calculated Risk, and Housing Starts Increased to 1.356 million Annual Rate in August in the Calculated Risk newsletter on Substack….

Existing Home Sales 2.5% Lower in August Despite Lower Prices

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell 2.5% from July to August, the 6th decrease in 7 months, projecting that 9.86 million homes would sell over an entire year if the August home sales pace were extrapolated over that year, a pace that was also 4.2% below the 4.77 million annual sales rate they projected in August of a year ago....July's home sales, now shown at a 3.96 million annual rate, were revised from the 3.5 million annual rate shown in last month’s report….the NAR also reported that the median sales price for all existing-home types was $416,700 in August, 3.1% higher than in August a year earlier, which they cite as "the 14th consecutive month of year-over-year price increases"​...the NAR press release, which is titled “Existing-Home Sales Dipped 2.5% in August“, is in easy to read plain English, so if you’re interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them 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 like to check the raw data overview (pdf), which gives us a close approximation of the actual number of homes that sold each month, and their prices….this unadjusted data indicates that roughly 378,000 homes sold in August, down by 3.1% from the 390,000 homes that sold in July, and down by 5.7% from the 401,000 homes that sold in August of last year, the thirty-sixth consecutive monthly year-over-year sales decrese…that same pdf indicates that the median home selling price for all housing types fell from a revised $421,400 in July and from a revised $426,900 in June to $416,700 in August, with the regional median home sales prices ranging from a low of $315,400 in the Midwest to a high of $622,500 in the West….for additional commentary and both seasonally adjusted and unadjusted graphs on this report, check out the following posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 3.86 million SAAR in August and in the CalculatedRisk Real Estate Newsletter: NAR: Existing-Home Sales Decreased to 3.86 million SAAR in August​..

 

 

(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…)