Cash Registers Rang Louder in July: August 13 – 17

Retail sales expanded while growth in manufacturing slowed. Here are the five things we learned from U.S. economic data released during the week ending August 17.

#1Retail sales heated up in July. The Census Bureau estimates retail and food services sales rose 0.5 percent to a seasonally adjusted $507.5 billion. This was an improvement from the downwardly revised 0.2 percent sales gain in June. Sales grew 0.2 percent at auto dealers/parts stores and 0.8 percent at gas stations (think higher gas prices). Net of auto dealers and gas stations, core retail sales jumped 0.6 percent in July following a 0.2 percent bump in June. Sales improved during the month at apparel retailers (+1.3 percent), restaurants/bars (+1.3 percent), department stores (+1.2 percent), grocery stores (+0.8 percent), and electronics/appliance retailers (+0.1 percent). Sales lost traction at retailers focused on sporting goods/hobbies (-1.7 percent), furniture (-0.5 percent), and health/personal care (-0.4 percent). Retail sales have risen 6.4 percent over the past year while the core retail sales measure has a 12-month comparable of +5.6 percent.Retail Sales June-July 2018 081718

#2Industrial production slowed in July. The Federal Reserve reports industrial production crept up a modest 0.1 percent on a seasonally adjusted basis during the month following a 1.0 percent jump in June. Growth in manufacturing slowed to a 0.3 percent increase in July after having surged 0.8 percent during the previous month. Production of durable goods gained 0.4 percent (including increases of around 1.0 percent for motor vehicles and computers/electronics) while the output of nondurables inched up 0.2 percent (with higher output of apparel, petroleum/coal products, chemicals, and plastics/rubber products). Mining output, which has surged 12.9 percent over the past year, slipped 0.3 percent during July (even as oil and gas extraction continued to rise). Utility output slowed for the third straight month with a 0.5 percent decline.

#3Forward-looking economic indicators further strengthened in July. The Conference Board’s Leading Economic Indicators (LEI) jumped by 7/10ths of a point to 110.7 (2016=100). This was an improvement from the 6/10ths of a point gain in June and leaves the LEI 5.1 percent ahead of its year-ago reading. July’s increase was broad-based as nine of the LEI’s ten components made positive contributions, led by the count of jobless claims staying near multi-decade lows. The coincident index grew by 2/10ths of a point to 104.2, a 2.4 percent increase from a year earlier as all four components made positive contributions. The lagging index slipped by 2/10ths of a point to 105.2 with only two of seven components growing during the month. The backward-looking measure was still 2.3 percent above its July 2017 mark. The press release noted that the LEI’s reading indicates economic growth will be “at a solid pace for the remainder of this year.”

#4Housing starts sputtered during July. Housing starts edged up 0.9 percent to a seasonally adjusted annualized rate of 1.168 million units, per the Census Bureau. This was a weak rebound to June’s 12.9 percent drop and left housing starts 1.4 percent below the July 2017 pace. Starts of single-family home gained 1.9 percent while those of construction with more five or more units increased 3.1 percent. Starts weakened in the West (-19.6 percent) and Northeast (-4.0 percent) but improved in both the Midwest (+11.6 percent) and South (+10.4 percent). Looking towards the future, the annualized rate of issued building permits grew 1.5 percent during the month to 1.311 million permits (+4.2 percent versus July 2017). Issued permits increased for both single-family (+1.9 percent) and multi-family (+1.7 percent). Fewer homes were completed during the month—the annualized count of homes completed slumped 1.7 percent to 1.188 million units (-0.8 percent versus July 2017). Single-family home completions plummeted 5.2 percent during the month while multi-family completions gained 8.2 percent.

#5Small business owner optimism inches ever so close to a 35-year high. The Small Business Optimism Index added 7/10ths of a point in July to a seasonally adjusted reading of 107.9 (1986=100). This was not only a 2.7 point gain from a year earlier, it was the measure’s best reading since July 1983 (which itself was the best reading for the National Federation of Independent Business index in its 45-year history). Six of the ten index components improved from their June readings, including three-point gains for indices tracking expected real sales, plans to increase employment, and whether it is a good time to expand. Only two measures—current inventories and plans to increase inventories—declined from their June readings. The press release notes that business owners “anticipate more sales and better business conditions.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending August 11, 2018, First-Time Claims, seasonally adjusted): 212,000 (-2,000 vs. previous week; -24,000 vs. the same week a year earlier). 4-week moving average: 215,500 (-10.5% vs. the same week a year earlier).
Import Prices (July 2018, All Imports, not seasonally adjusted): Unchanged vs. June 2018, +4.8% vs. July 2017. Nonfuel imports:  -0.3% vs. June 2018, +1.3% vs. July 2017.
Export Prices (July 2018, All Exports, not seasonally adjusted): -0.5% vs. June 2018, +4.3% vs. July 2017. Nonagricultural imports: Unchanged vs. June 2018, +5.0% vs. July2017.
Housing Market Index (August 2018, Index (>50=”Good” housing market, seasonally adjusted): 67 (vs. July 2018: 68, vs. August 2017: 67).
Productivity (2018 Q2-preliminary, Nonfarm Business Labor Productivity, seasonally adjusted annualized rate): +2.9% vs. 2018Q1 +1.3% vs. 2017Q2.
State Employment (July 2018, Change in Nonfarm Payrolls, seasonally adjusted): Vs. June 2018: Increased in 6 states, decreased in 1, and essentially unchanged 43 states and the District of Columbia. Vs. July 2017: Increased in 34 states and essentially unchanged in 16 states and the District of Columbia
University of Michigan Surveys of Consumers (August 2018-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 95.3 (July 2018: 97.9 August 2017: 96.8).
Treasury International Capital Flows (June 2018, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$45.5 billion (vs. May 2018: +$20.3 billion, vs. June 2017: +$35.5 billion).

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

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