Factories and Consumers Were Active in April: May 14 – 18

Manufacturing rebounded while retail held firm in April. Here are the five things we learned from U.S. economic data released during the week ending May 18.

Manufacturing output picked up in April. The Federal Reserve estimates manufacturing production gained 0.5 percent on a seasonally adjusted basis during the month after being unchanged in March. Manufacturing output has increased 1.8 percent over the past year. Durable goods production grew 0.4 percent during the month while that for nondurables expanded 0.5 percent. Leading the former were substantial increases for machinery, aerospace equipment, electrical equipment/appliances, and computers/electronics. Boosting the latter were apparel and petroleum/coal. Overall industrial production increased 0.7 percent in April, matching March’s gain and having risen 3.5 percent over the past year. Production at utilities jumped 1.8 percent during April while mining output swelled 1.1 percent (with oil/gas extraction leading the latter).

Retail sales remained stout in April even as gas prices rise. The Census Bureau reports that retail and food services sales totaled a seasonally adjusted $497.6 billion, up 0.3 percent for the month and 4.7 percent from the April 2017 sales pace. Sales at auto dealers and parts stores inched up 0.1 percent while that as gas stations rose 0.8 percent (because of higher prices at the pump). Net of both, core retail sales increased 0.3 percent during April. Reporting higher sales during the months were retailers focused on apparel (+1.4 percent), furniture (+0.8 percent), groceries (+0.5 percent), and building materials (+0.4 percent). Sales slowed at health/personal care stores (-0.4 percent), restaurants/bars (-0.3 percent), electronics/appliance retailers (-0.1 percent), and sporting goods/hobby stores (-0.1 percent). Nonstore retailers (e.g., internet retailers) saw sales grow 0.6 percent during April and rise 9.6 percent over the past year.

Housing starts slowed in April, with less activity for multi-family units. The Census Bureau pegs the seasonally adjusted annualized rate (SAAR) of housing starts for April at 1.287 million units, off 3.7 percent for the month but still 10.5 percent ahead of the year-ago pace. Dragging down the measure was the 12.6 percent drop in starts of multifamily units (to an annualized 374,000 units). Single-family home starts edged up 0.1 percent to an annualized 894,000 units. Looking towards future activity, there were an annualized 1.352 million issued permits to build new homes. While this represented a 1.8 percent decrease from March, it was 7.7 percent above April 2017 levels. Single-family home permits were 0.9 percent higher than that of March. Home completions increased 2.8 percent during the month to an annualized 1.257 million units (+14.8 percent versus April 2017).

Homebuilders remained confident about the housing market during May. The National Association of Home Builders’ Housing Market Index (HMI) added two points during the month to a seasonally adjusted reading of 70. This was the 47^th consecutive month with an HMI above a reading of 50 (indicative of a greater percentage of builders viewing the housing market as “good” as opposed to “bad”) and places the sentiment measure ahead of its 12-month average of 68.6. While the HMI improved in the Midwest, it lost ground in the both in the South and West and was unchanged in the Northeast. The index measuring current sales of single-family homes added two points (to 76) while measures of expected sales over the next six months (77) and traffic of prospective buyers (51) matched their April readings. The press release notes that demand for homes should remain strong due to “[t]ight housing inventory, employment gains and demographic tailwinds.”

Forward-looking indicators suggest continued economic growth for the remainder of 2018. The Conference Board’s Leading Economic Index added 4/10^ths of a point in April to a reading of 109.4 (2016=100). The LEI has increased 6.4 percent over the past year. Eight of the ten components to the LEI made positive contributions, led by the interest rate spread and the average number of hours worked in manufacturing. The coincident index gained by 3/10^ths of a point to 103.5 (+2.2 percent versus April 2017), with all four components of the coincident index making positive contributions in April. Also adding 3/10^ths of a point was the lagging index, with the 104.7 reading being 2.5 percent ahead of that from a year earlier. The press release stated that the leading indicators data “suggest solid growth should continue in the second half of 2018.”

Other U.S. economic data released over the past week:
– Jobless Claims (week ending May 12, 2018, First-Time Claims, seasonally adjusted): 222,000 (+11,000 vs. previous week; -16,000 vs. the same week a year earlier). 4-week moving average: 213.250 (-12.0% vs. the same week a year earlier).
– State Employment (April 2018, Nonfarm Payrolls, seasonally adjusted): 3 states experienced significant increases in payrolls vs. March 2018. 28 states experienced significant payrolls increases vs. April 2017 while 1 experienced a significant decline.
– Business Inventories (March 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.930 trillion (Unchanged vs. February 2018, +3.8% vs. March 2017).
– Treasury International Capital Flows (March 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$18.6 billion (vs. February 2018: -$57.7 billion, vs. March 2017: -$35.5 billion).

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