September's retail sales, producer prices, and durable goods; August's business inventories, et al

Shutdown delayed reports that were released this past week included the Retail Sales report for September and the corresponding Business Sales and Inventories report for August, both from the Census Bureau and originally scheduled for release on October 16th, the September Producer Price Index from the Bureau of Labor Statistics, also originally scheduled for October 16th, and the Advance report on durable goods for September from the Census Bureau and originally scheduled for October 27th…the week also saw the widely watched and regularly scheduled Case-Shiller Home Price Index for September, an index generated by averaging relative home sales prices from July, August and September against prices for the same homes that sold during prior three month periods and against a January 2000 baseline, and which reported that their national home price index for those 3 months averaged 1.3% higher than their price index generated by repeat home sales prices during the same 3 month period a year earlier….

The week also saw the regular release of the last two regional Fed manufacturing surveys for November; the Dallas Fed Texas Manufacturing Outlook Survey, which covers Texas and adjacent western Louisiana and southeastern New Mexico, reported its general business activity index fell to -10.4 in November, down from -5.0 in October, indicating that a larger plurality of Texas area manufacturers continued to see deteriorating business conditions in November…meanwhile, the Richmond Fed Survey of Manufacturing Activity for November, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index dropped to −15 in November from −4 in October, likewise indicating that a significant plurality of that region’s manufacturers reported deteriorating conditions this month…

September Retail Sales Up 0.2% on Gasoline Prices; Would Reduce 3rd Quarter Growth

Seasonally adjusted retail sales rose 0.2% in September, after  July and August sales were both revised slightly higher, leaving the change in August sales statistically unchanged from the last report…the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $733.3 billion, which was an increase of 0.2 percent (±0.4%)* from August’s revised sales of $732.1 billion, and 4.3 percent (±0.5 percent) above the sales of September of last year…August’s seasonally adjusted sales were revised from the $732.0 billion first reported two months ago to $732.1 billion, while July’s sales, which were revised up to $727.4 billion from the originally reported $726.3 billion two months ago, were revised up again, to $727.7 billion with this report…estimated unadjusted sales in September, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 4.9%, from $745,372 million in August to $708,950 million in September, while they were up 5.7% from the $670,818 million of sales in September a year ago, before a modest seasonal and holiday weekend adjustment in this month’s report…

Since this month’s report marks the end of the 3rd quarter for retail sales, we’ll include the entire table from this report showing retail sales by business type, including the quarter over quarter data…to again explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month’s September “advance” figure in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called “preliminary”) as of this report, with the new July to August percentage change under “July 2025 r” (revised) and the August 2024 to August 2025 percentage change as revised in the 2nd column of the pair….then, the third pair of columns shows the percentage change of the most recent 3 months of this year’s sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and from the same three months (July, August and September) of a year ago….that pair of columns gives us a snapshot comparison of 2nd quarter sales to third quarter sales, which is useful in estimating the impact of this report on 3rd quarter GDP….for your reference, the table of last month’s advance estimate of August sales, before this month’s revisions is here….

To compute September’s real personal consumption of goods data for national accounts from this September retail sales report, the BEA will initially use the corresponding price changes from the September consumer price index, which was released four weeks ago.…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 September retail sales excluding the 2.0% price related increase in sales at gas stations, were unchanged….then, subtracting the figures representing the 0.2% increase in grocery & beverage sales and the 0.7% increase in food services sales from that total, we find that core retail sales were down by almost 0.2% for the month….since the CPI report showed that the composite price index of all goods less food and energy goods was 0.3% higher in September, we can thus figure that real retail sales excluding food and energy were down by almost 0.5% month over month…however, the adjustment 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 health and personal care stores stores were up 1.1%, the price index for medical care commodities was 0.1% lower, which would mean that real unit sales drug stores would have been around 1.2% higher…on the other hand, while sales at clothing stores were 0.7% lower in September, the apparel price index was 0.7% higher at the same time, which would suggest that real sales of clothing were roughly 1.4% lower…

In addition to figuring those core retail sales, to make a complete estimate of real September PCE, we would need to adjust food and energy retail sales for their price changes separately, just as the BEA will do….the September CPI report showed that the food price index was 0.2% higher in September, with the price index for food purchased for use at home 0.3% higher, while prices for food bought at restaurants averaged 0.1% higher… hence, while nominal sales at food and beverage stores were up 0.2%, real sales of food and beverages would be roughly 0.1% lower in light of 0.3% higher prices.…meanwhile, the 0.7% increase in nominal sales at bars and restaurants, once adjusted for 0.1% higher prices, suggests that real sales at bars and restaurants were 0.6% higher….on the other hand, while sales at gas stations were up 2.0%, there was a 4.1% increase in the price index for gasoline, which would suggest real sales of gasoline were roughly 2.0% lower, with the 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 somewhat less than our imputed 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 September will show that real personal consumption of goods fell by more than 0.5% in September, after rising by a revised 0.7% in August and by a revised 0.8% in July, and after rising by 0.4% in June, and after falling by 0.8% in May, and falling by 0.2% in April…..at the same time, the 0.6% increase in real sales at bars and restaurants would have a modest positive impact on September’s real personal consumption of services…

Producer Price Index Rose 0.3% in September on Higher Fuels, Foods, and Transportation Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in September, as the final demand price index for wholesale goods was 0.9% higher, while the price index for final demand for services was unchanged….that September PPI increase followed a revised 0.1% decrease in August, when the final demand price index for wholesale goods rose 0.2%, but the more heavily weighted price index for final demand for services was 0.3% lower, and also followed an upwardly revised 0.8% increase in July, when the final demand price index for wholesale goods rose 0.6% and the price index for final demand for services was was 0.9% higher, and followed a revised 0.1% PPI increase in June, when the final demand price index for wholesale goods rose 0.3%, while the price index for final demand for services was unchanged, and a 0.4% increase in May, when the final demand price index for wholesale goods was 0.1% higher, and the price index for final demand for services 0.5% higher, and a an unrevised 0.3% decrease in the April PPI, with the final demand price index for wholesale goods unchanged, and the price index for final demand for services 0.3% lower, and also followed a 0.2% decrease in March, when the final demand price index for wholesale goods fell 0.9% while the price index for final demand for services was 0.3% higher, and a unrevised 0.1% increase in February, when the price index for wholesale goods rose 0.3% while the price index for final demand for services was 0.1% higher, and an unrevised 0.7% increase in January, when the final demand price index for wholesale goods rose 0.7% and the price index for final demand for services was also 0.7% higher, and also followed a 0.5% PPI increase in December, when the final demand price index for wholesale goods rose 0.5% and the price index for final demand for services was also 0.5% higher, a 0.1% increase last November, when final demand prices for wholesale goods rose 0.6% and the price index for final demand for services was 0.1% lower, an upwardly revised 0.3% PPI increase last October, when the final demand price index for wholesale goods rose 0.1% and the price index for final demand for services was 0.5% higher, and a 0.3% increase last September, when the price index for finished wholesale goods was 0.2% lower, but the price index for final demand for services was 0.5% higher….on an unadjusted basis, producer prices are now 2.7% higher than a year ago, while the core producer price index, which excludes food, energy and trade services, was 0.1% higher for the month, and is 2.9% higher than it was a year ago…

As noted, the producer price index for final demand for goods was 0.9% higher in September, after being 0.2% higher in August, 0.6% higher in July, 0.3% higher in June, 0.1% higher in May, unchanged in April, 0.9% lower in March, 0.3% higher in February, 0.7% higher in January, 0.5% higher last December, 0.6% higher last November, 0.1% higher last October, and 0.2% lower last September, and is now 3.3% higher than a year ago….the final demand goods price index was 0.9% higher in September because the price index for wholesale energy goods was 3.5% higher, after it had been 0.4% lower in August, 0.7% higher in July, 1.1% higher in June, 0.4% lower in May, 0.3% lower in April, 3.9% lower in March, 1.4% lower in February, and 2.0% higher in January, and as the price index for wholesale foods was 1.1% higher, after it had been 0.1% higher in August, 1.5% higher in July, 0.1% higher in June, unchanged in May, 0.9% lower in April, 2.2% lower in March, up 1.6% in February, and up 1.0% in January, and as the index for final demand for core wholesale goods (excluding food and energy) was 0.3% higher in August, after it had been 0.3% higher in August, 0.3% higher in July, 0.2% higher in June, 0.3% higher May, 0.3% higher April, 0.3% higher March, 0.3% higher February, and 0.2% higher in January….

Wholesale energy prices were 3.5% higher in September on a 11.8% increase in wholesale prices for gasoline, a 5.9% increase in wholesale prices for home heating oil and distillates, and a 9.8% increase in wholesale prices for natural gas liquids, while the final demand for food price index was 1.1% higher on a 15.8% increase in the wholesale price index for beef and veal, a 6.7% increase in the wholesale price index for processed turkeys, a 7.1% increase in the wholesale price index for fresh fruits and melons, and a 6.9% increase in the wholesale price index for grains… among core wholesale goods, the wholesale price index for agricultural machinery and equipment rose 1.0%, the wholesale price index for tools, dies, jigs, fixtures, and industrial molds rose 0.8%, the wholesale price index for floor coverings rose 1.3%, the wholesale price index for jewelry, platinum and karat gold rose 2.2%, and the wholesale price index for iron and steel scrap was 0.7% higher…

Meanwhile, the price index for final demand for services was unchanged in September, after being 0.3% lower in August, 0.9% higher in July, unchanged in June, 0.5% higher in May, 0.3% lower in April, 0.2% higher in March. 0.1% higher in February, 0.7% higher in January, 0.5% higher last December, 0.1% lower last November, 0.4% higher last October, and 0.5% higher last September, and is now 2.5% higher than a year ago…the price index for final demand for trade services fell 0.2%, but the price index for final demand for transportation and warehousing services rose 0.8%, and the core index for final demand for services other than trade, transportation, and warehousing services was 0.1% higher….

Among trade services, seasonally adjusted margins for automobile retailers fell 10.6%, margins for sporting goods and boat retailers were 3.5% lower, margins for RVs, trailers, and campers retailers were 2.4% lower, margins for machinery and vehicle wholesalers were 4.8% lower and margins for machinery and equipment parts and supplies wholesalers were 3.0% lower, but margins for TV, video, and photographic equipment and supplies retailers were 12.9% higher….among transportation and warehousing services, average margins for airline passenger services were 4.0% higher, margins for air transportation of freight were 0.4% higher, and margins for rail transportation of freight and mail were 0.1% higher….among the components of the core final demand for services index, the price index for management, scientific, and technical consulting services rose 3.0%, the price index for tax preparation and planning rose 1.7%, the price index for deposit services rose 3.4%, and the price index for home health and hospice care was 1.2% higher…

This report also showed the price index for intermediate processed goods was 0.4% higher in September, after being 0.4% higher in August, 0.8% higher in July, 0.1% lower in June, 0.1% higher in May, 0.3% higher in April, 0.1% lower in March, 0.4% higher in February, 1.0% higher in January, 0.2% higher last December, 0.1% higher last November, and 0.3% higher last October, but 0.8% lower last September….the price index for intermediate energy goods rose 0.9% in September as refinery prices for gasoline rose 11.8% and producer prices for natural gas liquids rose 9.8% ….at the same time, the price index for intermediate processed foods and feeds rose 1.1%, as the producer price index for meats rose 7.1% and the producer price index for prepared animal feeds was 0.9% higher….meanwhile, the core price index for intermediate processed goods less food and energy goods was 0.2% higher, as the producer price index for fluid power equipment rose 9.3%, the producer price index for asphalt rose 5.2%, the producer price index for primary nonferrous metals rose 3.9%, the producer price index for secondary nonferrous metals rose 3.2%, the producer price index for motors, generators, motor generator sets rose 2.3%, and the producer price index for nitrogenates was 2.5% higher….average prices for intermediate processed goods were 3.8% higher than in September 2024, the 11th year over year increase in 31 months, but are still no where near their 26.6% year over year increase of November 2021, which had been a 46 year high…

Meanwhile, the price index for intermediate unprocessed goods rose 0.1% in September, after falling 1.8% in August, rising 1.6% in July and 2.2% in June, after falling 1.6% in May, 3.7% in April, and 3.9% in March, but after rising 0.2% in February, 5.8% in January and 2.9% last December, after being unchanged last November, after rising 2.3% last October, and falling 1.9% last September….that was as the September price index for crude energy goods fell 3.0%, as crude oil prices fell 1.7%, unprocessed natural gas prices fell 8.7% and coal prices were 0.5% lower, while the price index for unprocessed foodstuffs and feedstuffs was 1.9% higher, as the producer price index for corn rose 8.3%, the producer price index for slaughter hogs rose 8.4%, the producer price index for slaughter cattle rose 2.9%, and the producer price index for hay and hayseeds was 5.4% higher….meanwhile, the index for core raw materials other than food and energy materials was 1.5% higher, on a 1.8% increase in the price index for copper base scrap, a 0.7% increase in the price index for iron and steel scrap, and a 0.6% increase in the price index for construction sand, gravel, and crushed stone….because last September’s 1.9% decrease dropped out of the YoY comparison, this raw materials price index is now 3.5% higher than a year ago, the 11th year over year increase in the past 32 months, which followed a run of twenty-seven consecutive year over year increases, which came after the annual change on this index had been negative from the beginning of 2019 through October of 2020…

Lastly, the price index for services for intermediate demand was was 0.1% higher in September, after being unchanged in August, 0.7% higher in July, 0.1% higher in June, 0.1% higher in May, 0.3% lower in April, 0.3% higher in March, unchanged in February, 0.1% higher in January, 0.6% higher last December, 0.2% lower last November, 0.1% higher last October, and 0.2% higher last September.…the price index for intermediate trade services was 0.8% higher, as margins for food wholesalers rose 3.8%, margins for chemicals and allied products wholesalers rose 2.6%, and margins for intermediate hardware, building material, and supplies retailers were 2.3% higher….at the same time, the price index for transportation and warehousing services for intermediate demand was 0.4% higher, as the intermediate price index for transportation of passengers rose 4.0%, the intermediate index for water transportation of freight rose 1.0%, and the intermediate index for warehousing, storage, and related services was 0.7% higher….on the other hand, the core price index for intermediate services other than trade, transportation, and warehousing services was 0.1% lower, as the intermediate price index for television advertising time sales fell 1.0%, intermediate price index for business loans fell 3.9%, the intermediate price index for portfolio management fell 1.2%, the intermediate price index for nonresidential real estate rents fell 2.3%, and the intermediate price index for passenger car rental was 2.2% lower….over the 12 months ended in August, price index for services for intermediate demand was 1.7% higher than it was a year earlier, the fifty-ninth consecutive annual increase in this index, after it had briefly turned negative year over year at the onset of the pandemic, from April to August of 2020, even as the current annual increase is still much lower than the record 9.5% year over year increase that was indicated for July 2021…

September Durable Goods: New Orders Rose 0.5%, Shipments Rose 0.1%, Inventories Fell 0.1%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $1.5 billion or 0.5 percent to $313.7 billion in September, the second increase after two decreases, after Augusts' new orders were revised but statistically unchanged from the $312.1 billion reported last month, now a 3.0% increase from July’s orders, rather than the 2.9% increase that was previously reported …after big jumps in the value of March and May orders, which were only partly reversed in April and June, year to date new orders are now running 7.3% above those of 2024, up from the 7.1% year to date increase we saw in this report two months ago.…

The volatile monthly change in new orders for transportation equipment led the September new orders increase, as the value of new transportation equipment orders rose $3.1 billion or 3.1 percent to $95.4 billion, led by a 30.9% increase to $8,776 million in the value of new orders for defense aircraft….excluding orders for transportation equipment, other new orders still rose 0.6%, but excluding the 6.1% increase in new orders for defense equipment, new orders only increased 0.1%…meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment intentions, rose $663 million or 0.9% to $77,485 million, after rising by an upwardly revised 0.9% in August…

The seasonally adjusted value of September’s shipments of durable goods, which will be included as inputs into various components of 3rd quarter GDP after adjusting for changes in prices, rose for the ninth time in ten months, increasing by $0.2 billion or by 0.1 percent to $307.7 billion, after the value of August shipments was revised but statistically unchanged from the $307.5 billion reported last month, but is now shown as down 0.1% from July….an increase in the value of shipments of machinery, up three of the last four months, drove the September shipments increase, rising $0.6 billion or 1.4 percent to $39.4 billion, but a decrease in the value of shipments of transportation equipment was a major limiting factor, as they fell $0.9 billion or 0.9 percent to $101.1 billion, on a 9.3% decrease in the value of shipments of commercial aircraft, while the value of shipments excluding transportation equipment rose 0.6% to $192,911 million….at the same time, shipments of nondefense capital goods less aircraft were up 0.9% at $77,041 million, after falling 0.1% in August…

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for a second consecutive month, decreasing by $0.6 billion or 0.1 percent to $589.8 billion, after the value of August inventories was revised from $590.8 billion to $590.4 billion, still a 0.1% decrease from July…a decrease in the value of inventories of transportation equipment was responsible for the September inventory decrease, falling $1.5 billion or 0.8 percent to $186.4 billion, on a 2.6% decrease in the value of inventories of commercial aircraft, while the value of inventories of other than transportation equipment was 0.2% higher…

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose in September for the fourteenth time in fifteen months, increasing $10.9 billion or 0.7 percent to $1,489.7 billion, after August’s unfilled orders were revised from $1,479.0 billion to $1,478.9 billion, still a 0.7% increase from July….an increase of $9.6 billion or 1.0 percent to $928.8 billion in unfilled orders for transportation equipment was responsible for most of the increase, while unfilled orders excluding transportation equipment orders rose by $1,287 million or by 0.2% to $560,963 million at the same time….compared to a year earlier, the unfilled order book for durable goods is now 8.3% above the level of last September, as unfilled orders for transportation equipment are 13.3% above their year ago level, largely due to a 16.6% increase in the backlog of orders for commercial aircraft…

Business Sales Rose 0.2% in August; Business Inventories were Flat

After the release of the September retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data from that September report and the earlier published August wholesale and factory data to give us a complete picture of the business contribution to the economy for the month….according to the Census Bureau, total manufacturer’s and trade sales were estimated to be valued at a seasonally adjusted $1,950.9 billion in August, up 0.2 (±0.1) from July’s revised sales, and up 4.4 percent (±0.3 percent) from August sales of a year earlier….note that total July sales were concurrently revised from the originally reported $1,948.2 billion to $1,947.8 billion, but were still a 1.0% increase from June….

Meanwhile, total manufacturer’s and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,663.7 billion at the end of August, virtually unchanged (±0.1 percent)* from July, but 1.1 percent (±0.3 percent) higher than in August a year earlier…the value of end of July inventories were revised from $2,666.7 billion to $2,664.7 billion, and they are now shown as a 0.1% increase from June, vs the 0.2% increase previously reported…seasonally adjusted inventories of manufacturers were estimated to be valued at $948,430 million, virtually unchanged from July, while inventories of retailers were valued at $807,330 million, 0.1% less than in July, while inventories of wholesalers were estimated to be valued at $907,943 million at the end of August, virtually unchanged from July…

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index…when we reviewed the September index earlier, the producer price index for August indicated that aggregate prices for finished goods were on average 0.2% higher, that prices for intermediate processed goods were 0.4% higher, but that prices for unprocessed goods were 1.8% lower….retail inventories are all finished goods, as are about 70% of wholesale inventories, while factory inventories are roughly evenly split between the three stages of production… when we looked at factory inventories last week, we judged the real July and August inventory decrease to be smaller than the 2nd quarter decrease, and hence a positive for 3rd quarter GDP… also, with the wholesale inventory report last week, we figured that real wholesale inventories were a bit higher in the 3rd quarter, after a large 2nd quarter decrease, and hence strongly positive for 3rd quarter GDP…since the producer price index for August showed that prices for finished goods were on average 0.2% higher, that means that real retail inventories were roughly 0.2% lower for the month…however, since real retail inventories saw a small increase in the second quarter, both that 2nd quarter increase and the small decreases in real July and August retail inventories would be subtracted from GDP in the 3rd quarter…

 

 

(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…)