Manufacturing, Retail Gains: What We Learned During the Week of July 11 – 15

June was a good month for both manufacturing and retail sales. Meanwhile, prices firmed a bit. Here are the 5 things we learned from U.S. economic data released during the week ending July 15.

#1A jump in motor vehicle production led to the 2nd increase in manufacturing activity in 3 months during June. The Federal Reserve estimates manufacturing output gained 0.4% during the month with production up a matching 0.4% from a year earlier. Production of durable goods gained 0.9%, boosted by a 5.9% surge in motor vehicle output, along with sizable gains in the production of machinery, electrical equipment, and appliances. Production of nondurables slipped 0.1%, hurt by lower output of apparel, paper, chemicals, and plastics/rubber. More broadly, overall industrial production gained 0.6% during the month but remained 0.7% below year ago levels. Mining output enjoyed a 2nd straight monthly gain but remained 10.5% below June 2015 levels. Utility output increased 2.4% and was 0.5% above year ago levels. Factory utilization recovered from a drop in May—overall capacity utilization gained a half point in June to 75.4%, with manufacturing capacity utilization adding 3/10ths of a point to 75.1%.071516

 #2Retail sales heated up in June. The Census Bureau puts the seasonally adjusted value of retail sales at $457.0 billion, a 0.6% increase from May and 2.7% above year ago levels. An often clearer view of retail sales involves eliminating sales at gas stations (+1.2%) and auto dealers/parts stores (+0.1%) from the analysis. This measure of “core” retail sales grew 0.7% during June and was 4.7% above the year ago pace. Virtually every major retail segment saw sales improve during the month, led by building materials (+3.9%), sporting goods/hobby retailers (+0.8%), department stores (+0.7%), health/personal care stores (+0.7%), furniture retailers (+0.5%), and grocery stores (+0.3%). Sales also gained 1.1% at nonstore retailers (e.g., internet retailers) and were 14.2% above year ago levels. The laggards during June were apparel stores (-1.0%) and restaurants/bars (-0.3%)

#3Consumer prices grew at a moderate pace in June. The Consumer Price Index (CPI) increased 0.2% on a seasonally adjusted pace during the month and was 1.1% above year levels, according to the Bureau of Labor Statistics. Energy PPI grew for a 4th straight month with a 1.3% gain, led by 3.3% bump in both gasoline and fuel oil prices. Food CPI decreased for the 3rd time in 4 months (-0.1%), pulled down by lower prices for meats/poultry/fish/eggs, nonalcoholic beverages, dairy goods, and fruits/vegetables. Net of energy and food, core PPI gained 0.2% and was 2.3% above year ago levels (the 8th straight month in which the 12-month comparable was at/above 2.0%). Rising were prices for services (including, shelter, transportation, and medical care) while declining were prices for new & used vehicles and apparel.

#4Led by gains in energy goods and select services, wholesale prices grew at their fastest pace in more than a year. The Bureau of Labor Statistics estimates final demand Producer Price Index (PPI) grew 0.5% on a seasonally adjusted basis during June and was 0.3% above year ago levels. Core final demand PPI gained 0.3% and was 0.9% above year ago levels. Wholesale prices for final demand goods gained 0.8%, led by increases of 4.1% and 0.9% for energy and food, respectively. The former was pulled up by a 9.9% gain in gasoline prices. Net of energy and food, final demand PPI was unchanged for the month. PPI for final demand services increased 0.4% during the month, thanks to higher prices for trade services (i.e., margins for wholesalers and retailers, +0.7%) and transportation/warehousing (+0.5%).

#5The count of job openings and the pace of hiring both declined in May…but then we already knew that. Following the path of weak employment report from May (which has since been followed by a strong June), the Bureau of Labor Statistics reports that the seasonally adjusted count of job openings fell by 345,000 during the month to a seasonally adjusted 5.500 million. This was nevertheless 2.1% above May 2015 levels. Private sector industries with the largest percentage year-to-year gains in job openings include health care/social assistance (+10.4%), retail (+10.2%), manufacturing (+7.0%), construction (+6.2%), and accommodation/food services (+5.7%). 5.036 million people were hired during the month, down 49,000 jobs from April and 1.5% from a year earlier. Sizable month-to-month declines in hiring occurred in construction, trade/transportation/utilities, and professional/business services. The count of people leaving the jobs declined by 63,000 during May to 4.952 million workers (+1.7% vs. May 2015). A positive sign remains the count of people voluntarily leaving their jobs (because it is a sign of optimism)—quits totaled 2.895 million, up 5.0% from a year earlier. Meanwhile, layoffs were 2.1% below May 2015 levels at 1.667 million workers.

Other data released over the past week that you might find of interest:
Jobless Claims (week ending July 9, 2016, First-Time Claims, seasonally adjusted): 254,000 (unchanged vs. previous week; -24,000 vs. the same week a year earlier). 4-week moving average: 264,750 (-7.6% vs. the same week a year earlier).
Import Prices (June 2016, not seasonally adjusted): +0.2% vs. May 2016, -4.8% vs. June 2015. Net of fuel: -0.3% vs. May 2016, -1.8% vs. June 2015.
Export Prices (June 2016, not seasonally adjusted): +0.8% vs. May 2016, -4.8% vs. June 2015. Net of agricultural exports: +0.5% vs. May 2016, -3.8% vs. June 2016.
University of Michigan Index of Consumer Sentiment (July 2016-preliminary, Index (1966Q1 = 100), seasonally adjusted): 89.5 (-4.0 points vs. June 2016, -3.6 points vs. July 2015).
NFIB Small Business Optimism Index (June 2016, Index (1986 = 100), seasonally adjusted): 94.5 (+7/10ths of a point from May 2016, -1/10th of a point from June 2015).
Federal Budget (June 2016, Surplus/Deficit): +$6.3 billion (vs. May 2016: -$52.5 billion, vs. +$50.5 billion). Deficit 1st 9 months of FY16: -$400.8 billion (+26.7% vs. 1st 9 months of FY15).
Beige Book

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

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