Retail Heats Up: August 14 – 18

Retail sales perked up in July. Here are the five things we learned from U.S. economic data released during the week ending August 18.

Retail sales were hot in July. Retail and food services sales grew 0.7 percent to a seasonally adjusted $696.4 billion. The Census Bureau measure was up 3.2 percent from a year earlier, with sales over the past three months 2.3 percent ahead of the comparable 2022 period. Gas station sales edged up 0.4 percent, but activity slumped 0.4 percent at auto dealers/parts stores. Net of both, core retail sales jumped 1.0 percent and were 5.3 percent ahead of their year-ago pace. Sales increased at retailers focused on sporting goods/hobbies (+1.5 percent), apparel (+1.0 percent), groceries (+0.8 percent), and building materials (+0.7 percent). Sales also rose at restaurants/bars (+1.4 percent) and department stores (+0.9 percent). Furniture stores (-1.8 percent) and electronics/appliance retailers (-1.3 percent) suffered sales declines. 

Manufacturing output grew for the first time in three months in July. The Federal Reserve estimates manufacturing production gained a seasonally adjusted 0.5 percent, following declines of 0.3 percent and 0.5 percent over the two previously months. Durable and nondurable output increased 0.8 percent and 0.1 percent, respectively, with the former boosted by a 5.2 percent surge for motor vehicles. Overall industrial production rose 1.0 percent as output jumped for mining and utilities by 0.5 percent and 5.4 percent, respectively. Relative to a year earlier, manufacturing output was off 0.7 percent and industrial production was down 0.2 percent. 

Forward-looking economic measures remained gloomy in July. The Conference Board’s Leading Economic Index (LEI) lost 0.4 percent to 105.8 (2016=100). The LEI has slumped 4.0 percent over the past six months. Only three of ten LEI components made positive contributions to the index: stock prices, jobless claims, and nonaircraft capital goods orders. The Coincident Economic Index (CEI) improved by 0.4 percent to 110.5, with all four components making positive contributions. The CEI has gained 0.7 percent over the past six months. The Lagging Economic Index was at 118.3, matching June’s reading and advanced a mere 0.1 percent over the past six months. The Conference Board expects a “short and shallow recession” later this year. 

Housing starts grew in July. The Census Bureau reports that privately-owned housing starts grew 3.9 percent to a seasonally adjusted annualized rate (SAAR) of 1.398 million units. Starts were 5.9 percent ahead of their year-ago rate. Single-family starts jumped 6.7 percent to an annualized 983,000, while multi-family starts held steady at 460,000. Looking towards the future, there were an annualized 1.442 million issued building permits, up 0.1 percent from July but 13.0 percent under year-ago levels. Single-family permits grew 0.6 percent, while multi-family permits slipped 0.2 percent. Completions fell 11.8 percent to an annualized 1.321 million homes. 

Homebuilders’ sentiment took a hit in August. The National Association of Homebuilders’ Housing Market Index (HMI) lost six points to a seasonally adjusted 50. This reading means an equal number of survey respondents see the housing market as being “good” as see them as “poor.” The HMI fell in all four Census regions, with the Midwest at a pessimistic 42. Declining were indices tracking present single-family home sales (down five points to 57), expected single-family home sales (down four points to 55), and traffic of prospective buyers (off six points to 34). The press release says “[r]ising mortgage rates and high construction costs cost” have “put a chill on builder sentiment.” 

Other U.S. economic data released over the past week:

• Jobless Claims (Week ending August 12, 2023, First-Time Claims, seasonally adjusted): 239,000, -11,000 vs. the previous week, +26,000 vs. the same week a year earlier). 4-week moving average: 234,250 (+9.5% vs. the same week a year earlier). 
• Import Prices (July 2023, All Imports, not seasonally adjusted): +0.4% vs. June 2023; -4.4% vs. July 2022. Nonfuel Imports: Unchanged vs. June 2023; -0.9% vs. July 2022.
• Export Prices (July 2023, All Exports, not seasonally adjusted): +0.9% vs. June 2023; -5.8% vs. July 2022. Nonagricultural Exports: +0.6% vs. June 2023; -8.2% vs. July 2022.
• Business Inventories (June 2023, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.541 trillion (Unchanged vs. May 2023; +2.0% vs. June 2022).
• Treasury International Capital Flows (June 2023, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$244.0 billion (vs. May 2023: +$56.7 billion; vs. June 2022: +$71.2 billion).
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