Slowdown in Sales: June 17 – 21

Retail and home sales both were soft in May. Here are the five things we learned from U.S. economic data released during the week ending June 21.

Another weak retail sales report in May. Retail and food service sales edged up 0.1 percent to a seasonally adjusted $703.1 billion (+2.3 percent versus May 2023). This followed a 0.2 percent decline for the Census Bureau measure in April. Sales over the past three months were up a modest 0.5 percent over the prior three-month period (December 2023 – February 2024) and 2.9 percent from the same three months in 2023. Sales at gas stations fell 2.2 percent (thanks to moderating prices at the pump) but rose 0.8 percent at motor vehicle dealers/parts stores. Net of both, core retail sales were up 0.1 percent in May and 2.6 percent from a year earlier. Sales improved at retailers focused on sporting goods/hobbies (+2.8 percent), apparel (+0.9 percent), electronics/appliances (+0.4 percent), and health/personal care (+0.1 percent). Sales fell at furniture stores (-1.1 percent), building material retailers (-0.8 percent), grocery stores (-0.4 percent), and restaurants/bars (-0.4 percent). 

Sales of previously owned homes softened further in May. Existing home sales declined 0.7 percent to a seasonally adjusted annualized rate (SAAR) of 4.11 million units. The National Association of Realtors measure was 2.8 percent below year-ago levels and sharply down from 2022’s 6.12 million unit pace. Sales dropped 1.6 percent in the South but held steady in the other three Census regions. Inventories swelled 6.7 percent to 1.28 million homes, 18.5 percent above May 2023 levels and the equivalent of a 3.7 month supply. The median sales price of $419,300 was up 5.8 percent from a year earlier.

Housing starts fell in May. The Census Bureau reports housing starts declined 5.5 percent to a seasonally adjusted annualized rate (SAAR) of 1.277 million units. Starts were 19.3 percent below their year-ago pace. Starts fell for single-family (-5.2 percent) and multi-family (-10.3 percent) homes. Looking towards the future, the annualized count of issued building permits fell 3.8 percent to 1.386 million units. Permitting was down 9.5 percent from a year earlier. Housing completions slowed 8.4 percent to 1.514 million. Despite the decline, completions remained up 1.0 percent from a year earlier.

Manufacturing production rose in May. The Federal Reserve estimates manufacturing production grew a seasonally adjusted 0.9 percent, following declines during the two prior months. Rising were the production of both durable (+0.6 percent) and nondurable (+1.1 percent) goods. Overall industrial production jumped 0.9 percent, its first gain in three months. Mining output increased 0.3 percent while that at utilities surged 1.6 percent. Manufacturing output was up a paltry 0.1 percent from a year earlier, while overall industrial production’s 12-month comparable was +0.4 percent. Manufacturing sector capacity utilization of 77.1 percent was up a half percentage point from April but still below the 52-year average of 78.2 percent.

Forward-looking economic measures remained negative in May. The Conference Board’s Leading Economic Index (LEI) dropped by a half-point to a seasonally adjusted 101.2 (2016=100). The LEI has dropped 2.0 percent over the past six months. Five of ten LEI components made positive contributions to the index, led by average manufacturing hours worked, stock prices, and new civilian non-aircraft capital goods orders. The Coincident Economic Index (CEI) grew 0.4 percent for the month and 0.6 percent over the past six months to 112.4. All four CEI components made positive contributions, led by industrial production. The Lagging Economic Index (LAG) slipped 0.1 percent to 119.4 (-0.7 percent versus November 2023). The Conference Board indicates that the negative LEI “doesn’t currently signal a recession.”

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

• Jobless Claims (Week ending June 15, 2024, First-Time Claims, seasonally adjusted): 238,000, -5,000 vs. the previous week, -23,000 vs. the same week a year earlier). 4-week moving average: 232,750 (-7.5% vs. the same week a year earlier).
• Housing Market Index (June 2024, Index (>50 = A Majority of Homebuilders Feel Confident, seasonally adjusted):  43 (May 2024: 45; June 2023: 55).
• Business Inventories (April 2024, Manufacturers’ and Trade Inventories, seasonally adjusted: $2.545 trillion (+0.3% vs. March 2024; +1.0% vs. April 2023).
• Treasury International Capital Flows (April 2024, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$159.4 billion (March 2024: +$154.0 billion; April 2023: +$82.1 billion.

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