A series of economic news points to activity heating up during the first days of summer. Here are the five things we learned from U.S. economic data released during the week ending July 20.
Manufacturing (and industrial production as a whole) rebounded in June. The Federal Reserve indicates manufacturing output gained 0.8 percent on a seasonally adjusted basis during the month, following a 1.0 percent pullback in May. Virtually all of June’s gain was on the durable goods side, where production swelled 1.6 percent. This included a 7.8 percent surge in automobile production (which had slumped 8.6 percent in May) and gains of at least one-percent for computers/electronics, wood products, and aerospace/transportation equipment. Nondurable output eked out a 0.1 percent increase during June. Overall industrial production grew 0.6 percent during the month following May’s 0.5 percent drop. Mining output increased 1.2 percent (with oil and gas extraction leading the way). Meanwhile, utility output slumped 1.5 percent. Over the past year, industrial production has grown 3.8 percent, with positive 12-month comparables for manufacturing (+1.9 percent), mining (+12.9 percent), and utilities (+5.0 percent).
Retail sales remained solid as we entered the summer. The Census Bureau estimates retail and food service sales grew 0.5 percent during the month to a seasonally adjusted $506.8 billion. This was 6.6 percent ahead of the year-ago sales pace. Net of sales at auto dealers/parts stores (+0.9 percent) and gas stations (+1.0 percent, thanks to higher prices at the pump), core retail sales increased by a still decent 0.3 percent during the month and has grown 5.6 percent over the past year. The report also featured significant upward revisions to May sales, showing the headline and core sales rising 1.3 percent and 1.2 percent, respectively. Sales improved during June at retailers focused on health/personal care (+2.2 percent), building materials (+0.8 percent), and furniture (+0.6 percent). Sales also jumped 1.5 percent at restaurants/bars. But the news was not positive everywhere, with sales slumping at sporting goods/hobby stores (-3.2 percent), apparel retailers (-2.5 percent), electronics/appliance retailers (-0.4 percent), and grocery stores (-0.2 percent).
Forward-looking economic indicators point to an accelerating U.S. economy in June. The Conference Board’s Leading Economic Index (LEI) added a half point to a seasonally adjusted reading of 109.8 (+5.8 percent versus June 2017). Seven of the ten components of the LEI made positive contributions during the month, led by new orders as measured by the Institute for Supply Management and the interest rate spread. The coincident index gained by 3/10ths of a point to 103.9 (+2.3 percent versus June 2017), aided by positive contributions for all four its components (including industrial production and nonfarm payrolls). The lagging index also increased by 3/10ths of a point (to a reading of 105.4, +2.7 percent versus June 2017). Four of the seven lagging index components made positive contributions, including those for the amount of outstanding commercial & industrial loans and the average length of unemployment. The press release said that the results do “not suggest any considerable growth slowdown in the short-term.”
Housing construction slowed in June. The Census Bureau reports that housing starts sank 12.3 percent during the month to a seasonally adjusted annualized rate (SAAR) of 1.173 million units. This represented a 4.2 percent decline from the June 2017 pace. Single-family home starts dropped 9.1 percent to 858,000 units (SAAR), just 0.2 percent under the year-ago pace while multifamily units started fell 20.2 percent to 304,000 units (-15.3 percent versus June 2017). Also declining was the annualized number of building permits, down 2.2 percent for the month to 1.301 million permits (-3.0 percent versus June 2017). The rate of housing completions held firm for the month at 1.261 million homes, which was nevertheless 2.3 percent ahead of that from a year earlier.
Homebuilders have remained confident this summer. The Housing Market Index (HMI) from the National Association of Home Builders held steady at a seasonally adjusted reading of 68. Not only was this the third time over the past four months in which the HMI was at 68, it also was the 49th consecutive month the index was above a reading of 50 (indicative of more homebuilders viewing the housing market as being “good” versus being “poor.” The HMI improved in the Midwest, was unchanged in the Midwest but lost ground in both the West and Northeast. The index measuring current sales of single-family homes remained at 74 while the expected sales index shed two points to 73. The index tracking the traffic of prospective buyers added two points to 52. The press release noted that even with the solid level of confidence, homebuilders are “burdened by rising construction material costs.”
Other U.S. economic data released over the past week:
– Jobless Claims (week ending July 14, 2018, First-Time Claims, seasonally adjusted): 207,000 (-8,000 vs. previous week; -32,000 vs. the same week a year earlier). 4-week moving average: 220,500 (-9.7% vs. the same week a year earlier).
– Business Inventories (May 2018, Manufacturers’ and Trade Inventories, seasonally adjusted): $1.937 trillion (+0.4% vs. April 2018, +4.4% vs. May 2017).
– Treasury International Capital Flows (May 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$20.3 billion (vs. April 2018: +$22.6 billion, vs. May 2017: +$95.5 billion).
– Beige Book
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What We Learned About the U.S. Economy Last Week 