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

Widely watched economic reports released last 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, and the August report on New Residential Construction, also from the Census bureau.…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 fell from +5.5 in July and from +11.9 in August to –8.7 in September, its first negative reading since June, meaning that a modest plurality of Second District manufacturers reported deterioration in business conditions in September for the first time since June, 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 –0.3 in August to +23.2 in September, its highest reading since January, meaning that a substantial majority of that region’s manufacturers saw improvement in various facets of their business this month….

Retail Sales Rose 0.6% in August after July’s Sales Were Revised 0.2% Higher

Seasonally adjusted retail sales rose 0.6% in August after retail sales for July were revised 0.2% higher…the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $732.0 billion during the month, which was up 0.6 percent (±0.4%) from July’s revised sales of $727.4 billion, and 5.0 percent (±0.5 percent) higher than the adjusted sales in August of last year…July’s seasonally adjusted sales were revised nearly 0.2% higher, from the $726.3 billion reported last month to $727.4 billion, while June sales were revised nearly 0.1% higher, from $722.6 billion to $723,033 million, and hence the June to July increase was revised from up 0.5 percent (±0.4 percent) to up 0.6 percent (±0.2 percent) with this release…the upward revision to June’s sales means that the annualized rate for nominal 2nd quarter sales was roughly $1.7 billion higher than was previously reported, which would probably add about 0.02 percentage points to the 2nd quarter GDP growth rate when the 3rd GDP estimate is published next week…

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 2025 (r)revised”, and the revised July 2024 to July 2025 percentage change for each business type 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 adjust nominal dollar sales for inflation….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 0.5% increase in sales at gas stations were up by 0.5%….then, subtracting the figures representing the 0.3% increase in grocery & beverage store sales and the 0.7% increase in food services sales from the figures behind that total, we find that core retail sales were up by almost 0.7% month over month…since the August CPI report showed that the the composite price index of all goods less food and energy goods was 0.3% higher in August, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show an increase of about 0.4% 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 1.0% higher in August, the apparel price index was 0.5% higher, which means that real sales of clothing only rose by about 0.5%…

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 rose 0.6%, while average restaurant prices were 0.3% higher…after a 0.6% increase in prices, the 0.3% nominal increase in grocery & beverage store sales nominal sales would be a real 0.3% decrease…on the other hand, 0.7% increase in sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants were up by about 0.4% for the month…meanwhile, while nominal sales at gas stations were up 0.5%, there was a 1.9% increase in the price index for gasoline, which would suggest real sales of gasoline were on the order of 1.4% 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 less than our blunt estimate….by appropriately weighing 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 by more than 0.1% in August, after rising by a revised 1.0% in July and being revised to unchanged in June, but after falling by 0.7% in May, and after falling by 0.1% in April…at the same time, 0.4% increase in real sales at bars and restaurants would have a small positive impact on July’s real personal consumption of services…

Industrial Production Rose 0.1% in August after July’s IP was Revised 0.2% Lower

The Fed’s August report on Industrial production and Capacity Utilization indicated that industrial production rose by 0.1% in August, after falling by a revised 0.4% in July and rising by a revised 0.5% in June, and is now up 0.9% from a year ago….the industrial production index, with the benchmark now set for average 2017 production to equal to 100.0, rose to 103.9 in August from 103.8 in July, after July’s index was revised down from the 104.0 that was reported for July a month ago…at the same time, the June reading for the IP index was revised up from 104.1 to 104.2, the May reading for the IP index was revised but remained at 103.7, the April reading for the index was revised down from 103.7 to 103.6, and the March reading for the index was revised down from 103.6 to 103.5. ..

The manufacturing index, which accounts for more than 75% of the total IP index, rose by 0.2%, from 100.0 in July to 100.3 in August, after July’s manufacturing index was revised down from 100.2 to 100.0, the June reading for the manufacturing index was revised down from 100.2 to 100.1, the May reading for the manufacturing index was revised down from 100.0 to 99.9, the April reading for the manufacturing index was revised down from 99.8 to 99.7, and the March manufacturing index was revised down from 100.3 to 100.2…..the August manufacturing index increase was largely due to a seasonally adjusted 2.6% jump in the index for motor vehicles and parts, which increased because some vehicle manufacturers canceled their normal July retooling shutdowns in prior years, skewing the seasonal adjustment for July downward and hence upward August.…excluding the seasonally adjusted 2.6% increase in the output of motor vehicles, other factory output was up 0.1%….meanwhile, the mining index, which includes oil and gas well drilling, rose 0.9% to 121.4 in August, after the July mining index was revised up from 120.9 to 120.3, leaving the mining index up by 1.0% from a year ago….finally, the utility index, which often fluctuates due to above or below normal temperatures, was 2.0% lower while falling from 108.6 in July to 106.4 in August, after the July utility index was revised up from 108.6 to 108.3, and after the June utility index was revised from 108.5 to 109.4…with this August’s air conditioning demand similar to that of last year, the utility index is just 0.1% above 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 was unchanged at 77.4% in August, after July’s utilization figure was revised down from the 77.5% reported a month ago…capacity utilization of NAICS durable goods production facilities was unchanged at 75.1% in August, after July’s figure was revised down from 75.2%, while capacity utilization for non-durables producers rose from 78.2% in July to 78.4% in August, after July’s non-durables utilization was revised down from 78.4%…meanwhile, capacity utilization for the mining sector rose to 90.6% in August from 89.9% in July, which was originally reported as 90.3%, while utilities were operating at 68.6% of capacity during August, down from their 70.2% of capacity during July, which was revised up from 70.0%…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 Rose 1.0% in July, Business Inventories Rose 0.2%

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 $1,948.2 billion in July, up 1.0 percent (±0.2%) from June’s revised sales, and 4.0 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 $1,924.7 billion to $1,928.4 billion with this report, which is now up 0.7% from May, revised from the 0.5% increase reported last month….manufacturer’s sales were up 0.9% to $608,271 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 0.7% to $628,620 million, while wholesale sales rose 1.4% to $711,349 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 0.2% (±0.1%) from June, and 1.5 percent (±0.3 percent) higher than in July a year earlier…the value of end of June inventories was revised from the $2,660.3 billion reported last month to $2,660.98 billion, which is still up 0.2% from June…seasonally adjusted inventories of manufacturers were estimated to be valued at $948,846 million, 0.3% higher than in June, inventories of retailers were valued at $809,789 million, 0.2% more than in June, while inventories of wholesalers were valued at $908,055 million at the end of July, up 0.1% 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 result in a modest positive boost to the growth rate of 3rd quarter GDP, because they’d be less negative than the sharply negative real factory inventories were in the second quarter; then, with the release of the wholesale inventory last week, we figured that while real July wholesale inventories were also lower, that came after a large 2nd quarter decrease, and hence they’d also be positive for 3rd quarter GDP….meanwhile, 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 0.4% lower for the month….since real retail inventories saw a small increase in the second quarter, both that 2nd quarter increase and the small decrease in real July retail inventories would be subtracted from GDP in the 3rd quarter…

New Housing Starts and Building Permits Fell 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 1,307,000, which was 8.5 percent (±10.7 percent)* below July’s revised July estimated annual rate of 1,429,000 housing unit starts, and was 6.0 percent (±9.7 percent)* below last August’s pace of 1,391,000 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 up by 2.2% or down by as much as 19.2% 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 1,428,000 reported last month to 1,429,000, while June’s housing starts, which were first reported at a 1,321,000 annual rate, were revised from last month’s initial revised figure of a 1,358,000 annual rate to an annual rate of 1,382,000 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 113,300 housing units were started in August, down from the 129,600 units started in July, and down from 129,100 housing starts in June…of those housing units started in August, an estimated 78,400 were single family homes and 33,700 were units in structures with more than 5 units, down from the revised 80,400 single family starts in July, and down from the 40,300 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 1,312,000 housing units, which was 3.7 percent below the revised July rate of 1,362,000 permits, and was 11.7 percent below the rate of building permit issuance in August a year earlier…the annual rate for housing permits issued in July was revised to 1,362,000 units from the annual rate of 1,354,000 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 112,200 housing units were issued in August, down from the revised estimate of 121,500 new permits issued in July…the August permits included 72,200 permits for single family homes, down from 79,000 in July, and 35,300 permits for housing units in apartment buildings with 5 or more units, down from 37,700 such multifamily permits a month earlier…

For graphs and commentary on this report, see the following posts by Bill McBride: Housing Starts Decreased to 1.307 million Annual Rate in August at Calculated Risk, and the identically titled but more detailed Housing Starts Decreased to 1.307 million Annual Rate in August in the Calculated Risk newsletter on Substack….

 

 

(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 chosen from the aforementioned GGO posts, contact me…)