March retail sales, industrial production, and new home construction; February’s business inventories

Major monthly reports released this past week included the Retail Sales report for March and the associated Business Sales and Inventories report for February, both from the Census Bureau, the March report on Industrial Production and Capacity Utilization from the Fed, and the March report on New Residential Construction from the Census Bureau….In addition, the week also saw the release of the Regional and State Employment and Unemployment Report for March from the Bureau of Labor Statistics, a report which breaks down the two employment surveys from the monthly national jobs report by state and region …while the text of that report provides a useful summary of the state and regional data, the serious statistical aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands..

This week also saw the release of the first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from -20.0 in March to –8.1 in April, which would indicate that the ongoing contraction of First District manufacturing was less widespread than 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 from +3.2 in March to -26.4 in April, its lowest reading since April 2023, which they report was as “almost 39 percent of the firms reported decreases in general activity this month, while 13 percent reported increases; 41 percent reported no change”….notice that -26.4 is the percentage difference between those reporting increases and those reporting decreases, which is how these diffusion indices are calculated...

Retail Sales Rose 1.4% in March After Prior Two Months’ Sales Revised Higher

Seasonally adjusted retail sales increased by 1.4% in March, after retail sales for January and February were revised higher…the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $734.9 billion during the month, which was up by 1.4 percent (±0.5%) from February’s revised sales of $724.5 billion, and 4.0 percent (±0.5 percent) above the adjusted sales in March of last year… February’s seasonally adjusted sales were revised from $722.7 billion to $724.5 billion, while January’s sales were revised from $721.3 billion to $722.944 billion; as a result, the percent change from January to February remained at up 0.2 percent (±0.5 percent)….estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 14.9%, from $641,915 million in February to $737,329 million in March, while they were up almost 5.0% from the $702,520 million of sales in March of a year ago…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf….the first double column of this table shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month’s March “advance” report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called “preliminary”) as of this report, with the new January to February percentage change under “Jan 2025 r” (revised) and the February 2024 to February 2025 percentage change as revised in the 2nd column of that pair…(for your reference, our copy of this same table from the advance February estimate, before this month’s revisions, is here)…. lastly, the third pair of columns shows the percentage change of the first 3 months of this year’s sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter of a year ago….as you can see from that fifth column, overall retail sales for the 1st quarter of 2023 were just 0.3% higher than the 4th quarter of 2024, which implies that nominal personal consumption of goods for the 1st quarter will only be up by roughly the same amount, before any inflation adjustments…

To compute March’s real personal consumption of goods data for national accounts from this March retail sales report, the BEA will initially use the corresponding price changes from the March consumer price index, which we just reviewed… to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals…from the third line on the above table, we can see that March retail sales excluding the 2.5% price-related decrease in sales at gas stations were up by 1.7%….then, by subtracting the dollar values representing the 0.2% increase in grocery & beverage sales and the 1.8% increase in food services sales out from that total, we find that core retail sales were up by almost 2.0% for the month…since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.1% lower in March, we can thus estimate that real retail sales excluding food and energy will have increased around 2.1%…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 0.4% higher in March, the apparel price index was also 0.4% higher, which means that real sales of clothing were actually unchanged, since higher prices accounted for the nominal sales increase… similarly, while sales at health and personal care stores were 0.7% higher, the price index for medical care commodities was 1.1% higher, which suggests real sales of drugs and health products were actually down by around 0.4%….

In addition to figuring those core retail sales, we should also adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.4% higher in March, as the price index for food purchased for use at home was 0.5% higher, while the index for food bought away from home was 0.4% higher, as prices at fast food outlets rose 0.2% while prices at full service restaurants rose 0.6%…hence, with the 0.5% increase in average prices at food and beverage stores, the change in real sales of food and beverages would be 0.5% lower than their nominal sales change, or down by around 0.3%…meanwhile, the 1.8% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants rose by around 1.4% during the month…and while sales at gas stations were down 2.5%, there was a 6.3% decrease in the price of gasoline during the month, which would suggest that real sales of gasoline were up by almost 4.1%, 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 March will show that real personal consumption of goods rose by nearly 2.0% in March, after rising by a revised 0.9% in February but after falling by a revised 1.9% in January…at the same time, the 1.4% increase in real sales at bars and restaurants would boost March real personal consumption of services by almost 0.1%…(note that’s a low confidence estimate because of the gasoline adjustment aberration; ​without gasoline, real PCE goods would be up 1.6%..

Industrial Production Fell 0.3% in March on Milder Weather

The Fed’s G17 release on Industrial production and Capacity Utilization for March indicated that industrial production fell by 0.3% in March, after rising by a revised 0.8% in February, and after rising by a revised 0.2% in January, which left production 1.3% higher than a year ago… the industrial production index, with the benchmark set for average 2017 production to be equal to 100.0, fell to 103.9 in March from 104.2 in February, which was revised but essentially unchanged.…however, the January index was revised down from 103.4 to 103.3, the December index was revised down from 103.2 to 103.1, the November index was revised but unchanged at 102.0. and the October index was revised down from 102.3 to 102.2…after those revisions and despite the March decrease, US industrial production was up at a 5.5% annual rate for the first quarter as a whole…

The manufacturing index, which accounts for around 77% of the total IP index, rose 0.3% to 100.5 in March from 100.1 in February, which had previously been reported at 100.0…at the same time, the January manufacturing index was unrevised at 99.1, the December manufacturing index was unrevised at 99.0, the November manufacturing index was unrevised at 98.6, but the October manufacturing index was revised down from 98.5 to 98.4….after those revisions, the manufacturing index now sits 1.0% above its year ago level, while first quarter manufacturing rose at a 5.1% annual rate from that of the 4th quarter of 2024….meanwhile, the mining index, which includes oil and gas well drilling, rose 0.6%, from 120.0 in February to 120.8 in March, after the February mining index was revised down from last month’s reported 120.3, which left the mining index 1.0% above where it was a year earlier…finally, the utility index, which typically fluctuates due to deviations from normal temperatures, fell by 5.8%, from 112.0 in our colder than normal February to 105.5 in our warmer than normal March, after February’s utility index had fallen 1.5% from our even colder January…including this month’s revisions, the utility index is now 4.4% above that of a year ago, mostly because last March’s temperatures averaged even warmer than normal…

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…seasonally adjusted capacity utilization for total industry fell to 77.8% in March from 78.2% in February, which was unrevised from the utilization reported a month ago…capacity utilization of NAICS durable goods production facilities rose from an unrevised 75.0% in February to 75.4% in March, while capacity utilization for non-durables producers was unchanged at 79.1%…capacity utilization for the mining sector rose to 90.5% in March from 90.1% in February, which had been reported as 90.3% last month, while utilities were operating at 69.1% of capacity during March, down from 73.5% in February, after February’s utility utilization was revised down from the previously reported 73.9%….for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories..

February Business Sales Rose 1.2%, Business Inventories Rose 0.2%

After the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February wholesale and factory data to give us a complete picture of the business contribution to the economy for that month….note that wholesale sales and inventories were revised on March 25th, which thus significantly revised the figures that were reported a month ago, even before the usual revisions to the prior month’s data that accompany this report….

According to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,921.1 billion, up 1.2% (±0.2 percent)* from January, and up 3.6 percent (±0.3 percent) from sales of February last year…January’s sales were revised from the originally reported $1,896.5 billion to $1,898.3 billion, now a 0.6% decrease from December, vs the 0.8% decrease previously reported….the seasonally adjusted value of manufacturer’s sales rose 0.7% to $596,774 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, were 0.40% higher at $627,898 million, while wholesale sales rose 2.4% to $696,400 million…

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,590.0 billion at the end of February, up 0.2 percent (±0.1%) from the end of January, and 2.1 percent (±0.4 percent) higher than in February a year earlier…at the same time, the value of end of January inventories was revised from the $2,591.9 billion reported last month to $2,585.2 billion, still shown as 0.3% higher than December….seasonally adjusted inventories of manufacturers were estimated to be valued at $864,864 million, up 0.1% from January, while inventories of retailers were valued at $822,765 million, also 0.1% higher than January, and inventories of wholesalers were estimated to be valued at $902,328 million at the end of February, 0.3% higher than in January…

For GDP purposes, all those inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, which was up by 0.3% for finished goods…two weeks ago, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged that the inflation adjusted decrease in real factory inventories would first subtract the factory inventories’ modest 4th quarter increase, and then also the first quarter decrease, from the growth rate of first quarter GDP….then last week, we judged that January’s and February’s real decreases in wholesale inventories was not at large as the 4th quarter decrease, and thus would add the difference between the two decreases to 1st quarter GDP…Since the nominal value of retail inventories for February has now been shown to be 0.1% higher, real retail inventories for the month, after the 0.3% finished goods price adjustment, thus would have thus decreased by 0.2% from January, after a 0.5% increase in that month…therefore, what is thus far a small real retail inventory decrease in the 1st quarter would have a negative impact on 1st quarter GDP, first by reversing the relatively small 4th quarter increase, then by also subtracting the small real decrease in real retail inventories we have so far in the first quarter…

Housing Starts Reported Lower in March; Building Permits 1.5% Higher

The March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,324,000 in March, which was 11.4 percent (±13.5 percent)* below the revised estimated annual rate of 1,494,000 starts in February, but 1.9 percent (±10.6 percent)* above last March’s annual rate of 1,299,000 starts….the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell from February, or even from a year ago, with the figures in parenthesis representing the most likely range of the change indicated. In other words, March housing starts could have been up by 2.1% from those of February, or down by a much as 24.9%, with revisions of a greater magnitude in either direction still possible…in this report, the annual rate for February housing starts was revised from the 1,501,000 reported last month to 1,494,000, while January starts, which were first reported at a 1,366,000 annual rate, were revised from last month’s initial revised figure of 1,350,000 to a 1,361,000 annual rate with this report….

These annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 110,700 housing units were started in March, unchanged from the 110,700 units that were started in February, but up from the 95,000 units that were started in January….of those housing units started in March, an estimated 79,600 were single family homes and 30,000 were units in structures with more than 5 units, down from the revised 79,700 single family starts in February but up from the 28,900 units started in structures with more than 5 units in February…

The monthly data on new building permits, with a smaller margin of error, are usually a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data…in March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,482,000, which was 1.6 percent above the revised February rate of 1,459,000 permits, but was 0.2 percent below the rate of building permit issuance in March a year earlier…the annual rate for housing permits issued in February was revised up from the originally reported 1,456,000...

Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 125,500 housing units were issued in March, up from the revised estimate of 106,400 new permits issued in February…of those permits issued in March, 84,800 were permits for single family homes and 35,700 were permits for units in structures of more than 5 units, up from the 73,900 single family permits issued in February, and up from the February’s 28,500 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 Decreased to 1.324 million Annual Rate in March and M Newsletter: Housing Starts Decreased to 1.324 million Annual Rate in March, which in turn links to his Real Estate Newsletter post 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…)