Retail sales downshifted but manufacturing accelerated in July. Here are the five things we learned from U.S. economic data released during the week ending August 21.
Retail slowed in July…but stayed well ahead of the pace. Retail and food sales dropped 1.1 percent during the month to a seasonally adjusted $617.7 billion. Even with the decline (presumably caused by the rise in COVID-19 cases), the Census Bureau data series remained 15.8 percent ahead of its year-ago pace. A lack of inventory hurt auto dealer/parts sales (-3.9 percent), while higher prices pushed up sales at gas stations (+2.4 percent). Net of transactions at both, core retail sales declined 0.7 percent for the month and were up 13.8 percent from a year earlier. Sales gained electronics/appliances retailers (+0.3 percent) and health/personal care stores (+0.1 percent). Restaurants and bars also enjoyed a 1.7 percent increase. Sales slumped at retailers focused on apparel (-2.6 percent), sporting goods/hobbies (-1.9 percent), building materials (-1.2 percent), furniture (-0.6 percent), and grocery stores (-0.4 percent).
Manufacturing output rebounded in July. The Federal Reserve estimates manufacturing production rose a seasonally adjusted 1.4 percent during the month. This followed a 0.3 percent decline in June. Motor vehicle manufacturing surged 10.8 percent—net of that, manufacturing output gained 0.7 percent. (Even with the increase, auto production remained 3.5 percent under its recent peak in January.) Durable goods production jumped 2.4 percent, while that for nondurables grew 0.3 percent. Overall industrial production advanced 0.9 percent during the month, following gains of 0.8 percent and 0.2 percent in May and June, respectively. Mining output rose 1.2 percent in July, while output at utilities fell 2.1 percent. Over the past year, manufacturing output has risen 7.4 percent while overall industrial production was up 6.6 percent.
Forward-looking economic measures remained sturdy in July. The Conference Board’s Leading Economic Indicator (LEI) added a whole point during the month to a reading of 116.0 (2016=100). The LEI was up a robust 10.6 percent from a year earlier, with all ten indicators supporting July’s increase. The coincident index grew by 6/10ths of a point to 105.6 (up 4.8 percent from July 2020), with all for components making positive components. The lagging index increased by 6/10ths of a point to 106.5 (1.3 percent behind its year-ago reading), with five in seven components making positive contributions. With potential “headwinds” coming from the Delta variant and inflation, the Conference Board anticipates the U.S. economy will expand 6.0 percent in 2021 and “a still robust” 4.0 percent in 2022.
4. Housing starts slowed in July. The Census Bureau reports that housing starts fell 7.0 percent during the month to a seasonally adjusted annualized rate of 1.534 million. Starts were at their lowest rate since April but remained 2.5 percent ahead of their year-ago pace. Single-family home starts declined 4.5 percent in July, while those of multi-family homes slumped 13.6 percent. Looking towards the future, the annualized count of issued building permits grew 2.6 percent to 1.635 million permits (+6.0 percent versus July 2020). Single-family home permits slipped 1.7 percent, while those for multi-family units grew 11.1 percent. Completions jumped 5.6 percent during the month to an annualized 1.317 million units.
Rising costs temper homebuilder sentiment. The National Association of Homebuilders’ Housing Market Index (HMI) shed five points in August to a seasonally adjusted reading of 75. While this was the 15th straight month in which the HMI was above a reading of 50 (indicative of more homebuilders seeing the housing market as being “good” versus being “bad), this was its lowest reading since last July. The index fell sharply in the South and Midwest but edged up in the West and Northeast. Also falling were indices tied to current sales of single-family homes and the traffic of prospective buyers while that of expected sales held steady. Per its press release, the NAHB anticipates “production bottlenecks should ease over the coming months.”
Other U.S. economic data released over the past week:
- Jobless Claims (Week ending August 14, 2021, First-Time Claims, seasonally adjusted): 348,000, -29,000 vs. the previous week, -572,000 vs. the same week a year earlier). 4-week moving average: 377,750 (-63.2% vs. the same week a year earlier).
- Business Inventories (June 2021, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.057 trillion (+0.8% vs. May 2021, +6.6% vs. June 2020).
- Treasury International Capital Flows (June 2021, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$80.9 billion (May 2021: -$41.9 billion; June 2020: +78.8 billion).
- Mortgage Delinquencies (2021Q1, One-to-Four Unit Residential Delinquency Rate, seasonally adjusted): 5.47% (-91 basis points vs. 2021Q1; -275 basis points vs. 2020Q2).
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What We Learned About the U.S. Economy Last Week 