A Better Retail Story, Manufacturing Still Uneven: What We Learned During the Week of August 10-14

July featured both a pick up in retail sales and continued uneven activity in the manufacturing sector. Here’s the U.S. economic data you missed during the week ending August 14.

  1. July was a solid month at 081415graphicthe cash register. The Census Bureau says retail sales totaled $446.5 billion (seasonally adjusted), up 0.6% from the previous month. Some of the rise reflected strong vehicle sales—sales at auto dealers and parts stores jumped 7.4%. Net of auto dealer/parts stores activity, retail sales grew for the 4th time in 5 months (+0.4%). Sales improved across most retail segments, including at stores focused on sporting goods/hobbies (+0.9%), furniture (+0.8%) and building materials (+0.7%), in addition to a 1.5% gain at non-store retailers (think the “Black Friday in summer” promotions offered by some online retailers during the month) and a 0.7% increase in sales at restaurants/bars. Yet even with July’s gains, the sector remains soft so far in 2015. Retail sales were only 2.4% above year ago levels, with the 12-month comparable jumping to a better but still not great +3.8% after removing both vehicle and gasoline sales.
  2. Manufacturing output grew in July at its fastest pace since last November, but most of the gains were confined to the auto sector. The Federal Reserve estimates manufacturing production grew 0.8% during the month, split between gains of +1.2% and +0.4% for durable and non-durable goods, respectively. The former benefited from a 10.6% surge in motor vehicle production—in fact, durable goods production net of vehicles slipped 0.2%. The non-durables figure was boosted by gains of at least 1.0% for apparel, paper and plastics/rubber products. Overall industrial production gained 0.6% during July (only its 2nd increase in 2015) as mining production eked out a 0.2% increase and output at utilities slowed 1.0%. Industrial production has only grown 1.3% over the past year, with the 12-month comparable for the manufacturing sector at a tepid +1.5%.
  3. The count of job openings remains at a near post-recession high. The Bureau of Labor Statistics’seasonally adjusted count of job openings was at 5.249 million, off 108,000 from May but up a robust 11.4% from a year earlier. Industries with the biggest year-to-year percentage gains were professional/business services (+29.6%), health care/social services (+23.6%) and retail (+16.2%). Hiring increased by 117,000 during the month to 5.177 million, which was up 9.0% from a year earlier (and with positive year-to-year percentage gains across every major industry grouping). Separations grew by 132,000 for the month to 4.931 million, up 9.0% from a year earlier. A positive sign is the 11.3% year-to-year gain in the number of people who voluntarily quit their jobs, although the count of layoffs was 4.2% above its year ago pace.
  4. Wholesale prices grew at a slower pace in July, thanks to a reversal in energy prices. Following gains of 0.5% and 0.4% during May and June, respectively, the BLS’s final demand Producer Price Index (PPI) grew by only 0.2% during July. PPI for final demand goods shed 1/10th of a percentage point, with the energy index dropping 0.6%. PPI for final demand food cooled 0.1%, which includes a 24.8% drop in the price for eggs that had been shooting up recently. Net of energy and food, core final demand goods PPI was unchanged for the month. Meanwhile PPI for final demand services grew at its fastest pace since last October with a 0.4% increase, with more than 40% of the gain tied to higher prices for guestroom rental. Over the past year, final demand PPI has contracted 0.8% with the final demand goods index having fallen 3.5% over the same 12 months. We will learn about July consumer prices on Wednesday.
  5. Small business owner sentiment regained in July some of what it had lost in June. The Small Business Optimism Index from the National Federation of Independent Business increased 1.3 points during the month to a reading of 95.4, following a 4.2 point drop in June. 7 of 10 index components improved during the month, with the biggest increases coming from indices tracking economic conditions expectations, plans to increase inventories, plans to increase employment and whether it is a good time to expand. The NFIB characterized the report as showing the “most grudging gains in the Index’s history,” noting that the measure remained below its 42-year average.

Other data released over the past week that you might find of interest:
Productivity (2nd Quarter 2015): +1.3% vs. Q1 2015; +0.3% vs. Q2 2014.
Jobless Claims (week ending August 8, 2015): 274,000 (+5,000 vs. week earlier); 4-week moving average: 266,250 (-1,750 vs. week earlier).
Import Prices (July 2015): -0.9% vs June; -10.4% vs. July 2014. Nonfuel imports: +0.5% vs. June; -2.6% vs. July 2014.
Business Inventories (June 2015): +0.8% vs. May 2015; +3.0% vs. June 2014.
University of Michigan Surveys of Consumers (August 2015–preliminary): 92.9 (1966 Q1 = 100) (-0.2 vs. final July 2015).
Mortgage Delinquencies (2nd Quarter 2015): 5.40% (-24-basis points vs. Q1 2015; -74-basis points vs. Q2 2014).

The opinions expressed here are not necessarily those of Kevin’s current and previous employers. No endorsements are implied.

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