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

Major monthly reports released last week included the Retail Sales report for February and the conjoined Business Sales and Inventories for January from the Census Bureau, the February report on Industrial Production and Capacity Utilization from the Fed, the February report on New Residential Construction, from the Census bureau, and the Existing Home Sales Report for February from the National Association of Realtors (NAR)….

in addition, the week also saw the release of the Regional and State Employment and Unemployment Report for January from the BLS, a report which breaks down the two employment surveys from the monthly national jobs report by state and region, released later than usual due to the annual revisions….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…

Last week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +5.7 in February to -20.0 in March, meaning that a solid majority of that region’s manufacturers saw deteriorating conditions in March, after a small plurality thought things were getting better a month earlier…meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell to +12.5 in March from +18.1 in February, indicating that a smaller majority of that region’s manufacturing firms are seeing increased activity this month than last…

Retail Sales rose 0.2% in February After January’s Sales were Revised 0.4% Lower

Seasonally adjusted retail sales increased 0.2% in February after retail sales for January were revised 0.4% lower…the Advance Retail Sales Report for February (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $722.7 billion during the month, which was 0.2 percent (±0.5%) higher than January’s revised sales of $721.3 billion, and 1.5 percent (±0.7 percent) above the adjusted sales in February of last year…January’s seasonally adjusted sales were revised down almost 0.4%, from $723.9 billion to $721.3 billion, while December’s sales were revised slightly lower, from $730.3 billion to $730.1 billion; as a result, the December 2024 to January 2025 percent change was revised from down 0.9 percent (±0.5 percent) to down 1.2 percent (±0.3 percent)…..the downward revision to December sales would indicate that nominal 4th quarter personal consumption expenditures will be revised lower at about a $0.9 billion annual rate, which would lower 4th quarter GDP by roughly 0.02 percentage points…estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were actually down 4.0%, from $665,578 million in January to $639,123 million in February, and that they were up just 0.3% from the $637,342 million of sales in February of 2024, a month that had 29 days..

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the February Census Marts pdf….the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the January revised figure to this month’s February “advance” report in the first sub-column, and then the year over year percentage sales change since last February is in the 2nd column…the second double column pair below gives us the revision of the January advance estimates (now called “preliminary”) as of this report, with the new December to January percentage change under “Dec 2024 (r)” (revised) and the January 2024 to January 2025 percentage change as revised in the last column shown…for your reference, our copy of the table of last month’s advance estimate of January sales, before this month’s revisions, is here…

To estimate February’s real personal consumption of goods data for national accounts from this February retail sales report, the BEA will initially use the corresponding price changes from the February consumer price index, which we reviewed last week….to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on the above table, we can see that February retail sales excluding the 1.0% decrease in sales at gas stations were up by 0.3%….then, subtracting the figures representing the 0.4% increase in grocery & beverage store sales and the 1.5% decrease in food services sales from that total, we find that nominal core retail sales were up by more than 0.6% for the month…since the CPI report showed that the composite price index for all goods less food and energy goods was 0.2% higher in February, we can thus figure that real retail sales excluding food and energy will on average be up by more than 0.4%…..however, the actual adjustment in national accounts data for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at auto and parts dealers were down 0.4%, the price index for transportation commodities other than fuel was was 0.2% higher, which would suggest that real sales at auto and parts dealers were down by 0.6%…similarly, while nominal sales at clothing stores were 0.6% lower in February, the apparel price index was 0.6% higher, which means that real sales of clothing actually fell around 1.2%, because the 0.6% fewer dollars spent bought 0.6% fewer clothes per dollar..

In addition to figuring the real change in those core retail sales, we should also adjust food and energy retail sales for their price changes separately, as the BEA will do…the February CPI report showed that the food price index was 0.2% higher, with the index for food purchased for use at home unchanged, while prices for food bought to eat away from home were 0.4% higher… hence, since nominal sales at food and beverage stores were up 0.4%, real sales of food and beverages would be also be 0.4% higher if prices didn’t change.…meanwhile, the 1.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants fell about 1.9% during the month….on the other hand, while sales at gas stations were down 1.0%, there was also a 1.0% decrease in the retail price of gasoline during the month, which would suggest that real sales of gasoline were unchanged, with a caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales, or their prices... averaging real sales that we have thus estimated back together, but leaving out real restaurant and bar sales, we can then estimate that the income and outlays report for February would show that real personal consumption of goods rose by roughly 0.35% in February, after falling by a revised 2.1% in January, after rising by a revised 1.1% in December, and rising 0.8% in November, unrevised…at the same time, the 1.9% decrease in real sales at bars and restaurants would reduce the growth rate of February’s real personal consumption of services by more than 0.1%..…

Industrial Production Rose 0.7% in February on Jump in Vehicle Output

The Fed’s February report on Industrial production and Capacity Utilization indicated that industrial production was 0.7% higher in February, after rising by a revised 0.3% in January, and by a revised 1.1% in December, which left our industrial output 1.4% higher than in February a year ago….the industrial production index, with the benchmark set for average 2017 production to equal to 100.0, came in at 104.1 in February, after the January index was revised from the 103.5 reported last month to 103.4, the December index was revised from 103.0 to 103.2, the November index was unchanged at the 102.0 level reported last month, the October index was revised from 102.1 to 102.3, and the September index was unchanged at 102.6...

The manufacturing index, which accounts for more than 77% of the total IP index, rose by 0.9%, from 99.1 in January to 100.0 in February, boosted by a jump of 8.5% in the index for motor vehicles and parts…that came after the manufacturing index for January was revised up from up from 99.0 to 99.1, the manufacturing index for December index was revised down from 99.1 to 99.0, the manufacturing index for November index was unrevised at 98.6, and the manufacturing index for October index was revised up from 98.4 to 98.9, leaving the manufacturing index 0.7% above its year ago level….meanwhile, the mining index, which includes oil and gas well drilling, rose 2.8% in a partial recovery from January’s well freeze-offs, from 117.1 in January to 120.3 in February, after the January index was revised down from 119.2, which left the mining index unchanged from where it was a year earlier… finally, the utility index, which often fluctuates due to above or below normal temperatures because it is seasonally adjusted to "normal", fell by 2.5% during our closer to normal February weather, from 115.5 to 112.6, after our colder than normal January’s utility index was revised from 114.9 to 115.5, now up 5.1% from December….with last February’s temperatures well above normal, the utility index is 8.7% higher than it was a year ago…

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose from 77.7% in January to 78.2% in February, after capacity utilization for January was revised down from the 77.8% reported last month …capacity utilization of NAICS durable goods production facilities rose from a downwardly revised 73.8% in January rate to 75.0 in February, while capacity utilization for non-durables producers rose to 79.0% from a revised 78.9% in January.…capacity utilization for the mining sector rose to 90.3% in February from 87.9% in January, which was originally reported as 89.5%, while utilities were operating at 73.9% of capacity during February, down from their revised 76.1% of capacity during January, which was previously reported at 75.7%…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..

January’s Business Sales Fell 0.8%, Business Inventories Rose 0.3%

After the release of the February retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for January (pdf), which incorporates the revised January retail data from that February report and the earlier published January wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted “$1,896.5 billion, down 0.8 percent (±0.2 percent) from December 2024, but was up 3.5 percent (±0.3 percent) from January 2024“…note that total December sales were concurrently revised up from the originally reported $1,908.8 billion to $1,912.1 billion, now up 1.0% from November, revised from the previously reported 0.8% increase….manufacturer’s sales rose 0.4% in January, while retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, fell 1.4%, and wholesale sales fell 1.3%…

meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted “$2,591.9 billion, up 0.3 percent (±0.1 percent) from December 2024 and … up 2.3 percent (±0.4 percent) from January 2024″....at the same time, the value of end of December inventories was revised from the $2,584.3 billion reported last month to $2,583.7 billion, still down 0.2% from November… seasonally adjusted inventories of manufacturers were estimated to be 0.1% higher than in December, while inventories of retailers were unchanged, and inventories of wholesalers were estimated to be valued 0.8% higher than in December…

For GDP purposes, all these inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for January, which indicated finished goods prices were 0.6% higher…two weeks ago, we looked at real factory inventories with producer price adjustments for goods at various stages of production, and judged the decrease in those inventories would first subtract the 4th quarter increase in real factory inventories, and then also subtract the first quarter decrease, from the growth rate of first quarter GDP…also two weeks ago, we found that January’s real wholesale inventories would be flat or down a bit, but not as much as the large 4th quarter decrease, and hence would add the difference between the quarterly decreases to 1st quarter GDP….since the nominal value of retail inventories for January has now been shown to be 0.1% higher, real retail inventories for the month, after the 0.6% finished goods price adjustment, thus would have thus decreased by 0.5% from December, after a fourth quarter that saw real retail inventories up slightly…therefore, what is so far a modest real retail inventory decrease in the 1st quarter would thus have a modest negative impact on 1st quarter GDP, first by subtracting the small 4th quarter increase, and then also by subtracting the first quarter decrease, from the growth rate of first quarter GDP…

Housing Starts Reported Higher in February, Building Permits Lower

The February 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 1,501,000 in February, which was 11.2 percent (±15.7 percent)* above the revised January estimated annual rate of 1,350,000 starts, but was 2.9 percent (±13.0 percent)* below the rate that housing units were being started in February of 2024…the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month, or even from those of a year ago, with the figures in parenthesis the most likely range of the change indicated; in other words, February’s housing starts could have been down by 4.5% or up by as much as 26.9% from those of January, with revisions of a greater magnitude in either direction also eventually possible…in this report, the annual rate for January housing starts was revised from the 1,366,000 reported last month to 1,350,000, while December starts, which were first reported at a 1,499,000 annual rate, were revised from last month’s initial revised figure of 1,515,000 annually up to a 1,526,000 annual rate with this report….

The annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 111,100 housing units were started in February, up from the 94,400 units that were started in January, and up from the 108,000 units that were started in December….of those housing units started in February, an estimated 80,400 were single family homes and 28,900 were units in structures with more than 5 units, up from the revised 68,100 single family starts in January. and up from the 24,500 units started in structures with more than 5 units in January…(NB: those figures don’t add up because there were 1,800 housing units started in structures with 2 to 4 units in February, same as in January, a figure typically small enough that it is usually ignored..

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data….for February, Census estimated that building permits for new housing units were being issued at a seasonally adjusted annual rate of 1,456,000, which was 1.2 percent below the revised January rate of 1,473,000 permits, and was 6.8 percent below the rate of building permit issuance in February a year earlier…the annual rate for housing permits issued in January was revised from the 1,483,000 reported last month to 1,473,000….

Again, these 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 106,000 housing units were issued in February, down from the revised estimate of 111,500 new permits issued in January….of those permits issued in February, 73,400 were permits for single family homes and 28,500 were permits for units in structures of more than 5 units, up from the 73,100 single family permits in January, but down from January’s 34,200 permits for units in structures of more than 5 units…

For graphs and commentary on this report, see the following posts by Bill McBride at Calculated Risk: Housing Starts Increased to 1.501 million Annual Rate in February and Newsletter: Housing Starts Increased to 1.501 million Annual Rate in February; Length of Time from Start to Completion Declined in 2024, which in turn links to his in-depth real estate newsletter post on this report…

Existing Home Sales Rose 4.2% in February; Prices 3.8% Higher than a Year Ago

The National Association of Realtors (NAR) reported that existing home sales increased by 4.2% from January to February on a seasonally adjusted basis, the largest jump in a year, projecting that 4.26 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was still 1.2% below the annual sales rate projected for February of last year….the January home sales pace was revised from the 4.08 million annual sales rate reported a month ago to a 4.09 million annual rate with this report….the NAR also reported that the median sales price for all existing-home types was $398,400 in February, which was 3.8% higher than in February a year earlier, and which they report is “the 20th consecutive month of year-over-year price increases.“, even though month over month prices have been falling since June…..the NAR press release, which is titled “Existing-Home Sales Accelerated 4.2% in February“, is in easy to read plain English, so if you’re interested in further details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release…since 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) to see what actually happened with home sales during the month…this unadjusted data indicates that roughly 257,000 homes sold in February, up 7.1% from the revised 240,000 homes that sold in January, but 5.2% fewer than the 271,000 homes that sold in February of last year….that same pdf indicates that the median home selling price for all housing types rose by 1.2%, from a revised $393,400 in January to $398,400 in February, and that it was up 3.8% from $383,800 in February of last year, while it was down 6.7% from $426,900 in June of 2024, with median prices ranging from a low of $295,500 in the Midwest to a high of $614,600 in the West….for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 4.26 million SAAR in February; Down 1.2% YoY and Newsletter: NAR: Existing-Home Sales Increased to 4.26 million SAAR in February, which links to his in depth newsletter article with more details on 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…)