Factory Output Up, Consumer Prices Steady: What We Learned During the Week of August 15 – 19

July featured a 2nd straight month of increased manufacturing output while consumer prices held steady. Here are the 5 things we learned from U.S. economic data released during the week ending August 19.

#1Manufacturing output picked up in July. The Federal Reserve indicates manufacturing production expanded 0.5% during the month following a 0.3% gain in June. Output of durable goods increased 0.6%, led by gains of 1% or greater for automobiles and wood products. Nondurables production increased 0.5%, with gains of at least 0.8% for oil/coal, chemicals, plastics/rubber. Despite the recent increased activity, manufacturing output was only 0.2% above year ago levels. More broadly, overall industrial production increased 0.7% during July but was 0.5% below year ago levels. Mining output grew for only the 2nd time in 5 months (+0.7%) while hot summer weather led to a 2.1% increase in output at utilities. Factories were operating at their fastest pace of the year—capacity utilization was at 75.9%, up a half point from June. Capacity utilization in the manufacturing sector added 4/10ths of a point to 75.4%.081916

#2Consumer prices moderated in July. According to the Bureau of Labor Statistics, the Consumer Price Index (CPI) was unchanged on a seasonally adjusted basis during the month and was up only 0.9% from a year earlier. Energy CPI fell for the 1st time since February (-1.6%) as gasoline and fuel oil prices dropped 4.7% and 1.3%, respectively. Energy CPI was 10.9% below year ago levels. Food prices were unchanged for the month and were up a modest 0.8% from a year earlier. Net of both energy and food, core CPI grew 0.1% (its slowest pace since February) and was 2.2% above year ago levels. Increasing during the month were prices for medical care services (+0.5%), medical care commodities (+0.4%) new vehicles (+0.2%), and shelter (+0.2%). Meanwhile, prices for both used vehicles (-1.0%) and transportation services (-0.2%) fell.

#3Leading indicators grew for the 3rd time in 4 months. The Conference Board’s Leading Economic Index added a half point during July to a seasonally adjusted 124.3 (2010=100). This was up 1.2% from a year earlier. July’s gain came as 8 of 10 index components made positive contributions, led by average weekly manufacturing hours, the interest rate spread, stock prices, and jobless claims. The coincident index increased by 4/10ths of a point to 113.9 (+1.6% vs. July 2015), boosted by positive contributions for all 4 index components. The lagging index grew by 1/10th of a point to 121.8 (+3.0% vs. July 2015) with only 2 in 7 index components making a positive contribution. The press release indicates that “moderate economic growth should continue through the end of 2016.”

#4Housing starts grow but the count of issued housing permits flattens. The Census Bureau puts the seasonally adjusted annualized rate (SAAR) of housing starts for July at 1.211 million units, up 2.1% from the previous month and 5.6% from a year earlier. Starts of single-family homes inched up 0.5% while those for multifamily units jumped 5.0%. Starts were up in 3 of 4 Census region on both a month-to-month and year-to-year basis (the West being the exception for the former and the Northeast the negative outlier for the latter). Looking towards the future, the SAAR of issued housing permits slipped 0.1% during the month to 1.152 million units (+0.9% vs. July 2015). The rate of issued permits for single-family homes was off 3.7% from a year earlier while the 12-month comparable for multi-family unit permits was up 6.3%. Housing completions was at a SAAR of 1.026 million units, down 8.3% from the previous month but up 3.2% from a year earlier.

#5Homebuilder confidence rises to its highest point since January. The Housing Market Index from the National Association of Home Builders added 2 points in August to a seasonally adjusted reading of 60. This was the 26th consecutive month in which the measure of homebuilder sentiment was above a reading of 50, which means more builders saw the housing market as “good” versus being “poor.” The index improved in the Northeast and South but fell in the Midwest and West. Gaining were indices for present single-family home sales (up 2 points to 65) and expected sales over the next 6 months (up a point to 67) while the measure for the traffic of potential buyers shed a point to 44. In its press release, the NAHB noted continued confidence that new home sales would remain “on an upward path during the rest of the year.”

Other data released over the past week that you might find of interest:
Jobless Claims (week ending August 13, 2016, First-Time Claims, seasonally adjusted): 262,000 (-4,000 vs. previous week; -16,000 vs. the same week a year earlier). 4-week moving average: 265,250 (-3.0% vs. the same week a year earlier).
Regional/State Employment (July 2016, Nonfarm Payrolls): Vs. June 2016: Payrolls grew in 15 states, fell in 1 state. Vs. July 2015: Payrolls grew in 34 states, fell in 2 states.
Treasury International Capital Data (June 2016, Net Domestic Securities Purchased by Foreign Investors): +$7.6 billion (vs. May 2016: +$12.2 billion; +$89.3 billion).
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