Consumers Went Shopping in June: What We Learned During the Week of July 15 – 19

Retail sales accelerated, but overall economic activity slowed in June. Here are the five things we learned from U.S. economic data released during the week ending July 19.  

#1Retail sales shined in June. U.S. retail and food services sales grew 0.4 percent during the month to a seasonally adjusted $519.9 billion, per the Census Bureau. This matched May’s 0.4 percent sales gain and left the measure up 3.4 percent over the past 12 months. Sales at auto dealers & parts stores jumped 0.7 percent but fell 2.8 percent at gas stations (due to lower prices at the pump). Net of sales at auto dealers & parts stores and gas stations, core retail sales expanded 0.7 percent in June and 3.8 percent over the past year. Virtually every retail sector enjoyed sales gains during the month, led by restaurants/bars (+0.9 percent) and matching 0.5 percent jumps at furniture retailers, building materials/garden stores, grocery stores, apparel retailers, and health/personal care stores. Sales fell at department stores (-1.1 percent) and electronics/appliance retailers (-0.3 percent).

#2Forward-looking economic indicators suggest the U.S. economy may have hit the brakes in June. The Conference Board’s Leading Economic Index (LEI) shed 3/10ths of a point to a reading of 111.5 (up 1.6 percent from a year earlier), the measure’s first drop since last December. Even with the slide, six of ten LEI components improved during the month. The coincident index increased 1/10th of a point to 105.9 (+1.6 percent versus June 2018) as three of four index components made a positive contribution. The lagging index jumped 6/10ths of a point to 107.7 (+2.6 percent versus June 2018) with four of seven components making a positive contribution. The press release noted that the “LEI suggests [economic] growth is likely to remain slow in the second half of the year.”

#3Manufacturing output grew in June. The Federal Reserve reports that manufacturing output rose 0.4 percent on a seasonally adjusted basis, up from the 0.2 percent bump in May and April’s 0.7 percent drop. Durable goods production advanced 0.4 percent while that for nondurables increased 0.5 percent. Boosting the former were sizable output gains of motor vehicles, nonmetallic mineral products, and computers/electronics while the latter expanded thanks to a jump for petroleum and coal products. Overall industrial production was flat during June. Mining output eked out a 0.2 percent gain while utilities saw output fall 3.6 percent (thanks to moderate summer weather during June). Overall industrial production has grown a modest 1.3 percent over the past year while 12-month comparable for manufacturing output was a tepid +0.4 percent.

#4Housing starts slowed in June, thanks to multifamily units. The Census Bureau places its seasonally adjusted annualized estimate of housing starts at 1.253 million units, a 0.9 percent decline from May but up 6.2 percent from a year earlier. Even if the headline figure declined, starts of single-family homes grew 3.5 percent—those of multifamily units fell 9.4 percent. Looking towards the future, the annualized count of issued housing permits slumped 6.1 percent to 1.220 million (-6.6 percent versus June 2018). Issued permits for future single-family homes edged up 0.4 percent but plummeted 20.7 percent for properties of five or more units. Housing completions dropped 4.8 percent during June to an annualized 1.161 million units.

#5Homebuilder sentiment solidified in July. The National Association of Home Builders’ Housing Market Index (HMI) added one point during the month to a seasonally adjusted 65. This was a rebound from the two-point drop in June and the 61st straight month of the HMI staying above a reading of 50, indicative of more builders seeing the housing market as “good” versus being “poor.” The HMI grew in the West and South but lost ground in the Midwest and Northeast. Adding a point each were indices that track single-family home sales (72), expected home sales (71), and traffic of prospective buyers (48). The press release noted builders were reporting “solid demand for single-family homes.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending July 13, 2019, First-Time Claims, seasonally adjusted): 216,000 (+8,000 vs. previous week; +4,000 vs. the same week a year earlier). 4-week moving average: 218,750 (-0.1% vs. the same week a year earlier).
Import Prices (June 2019, All Imports, not seasonally adjusted): -0.9% vs. May 2019, -2.0% vs. June 2018. Nonfuel Imports: -0.3% vs. May 2019, -1.4% vs. June 2018.
Export Prices (June 2019, All Exports, not seasonally adjusted): -0.7% vs. May 2019, -1.6% vs. June 2018. Nonagricultural Exports: -1.1% vs. May 2019, -1.6% vs. June 2018.
University of Michigan Surveys of Consumers (July 2019-preliminary, Index of Consumer Sentiment, seasonally adjusted): 98.4 (June 2019: 98.2, July 2018: 97.9).
Treasury International Capital Flows (May 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$5.7 billion (vs. April 2019: +$36.4 billion, vs. May 2018: +$20.2 billion.
State Employment (June 2019, Nonfarm Payrolls, seasonally adjusted): Vs. May 2019: Increased in 4 states, essentially unchanged in 46 states and the District of Columbia.  Vs. June 2018: Increased in 28 states, essentially unchanged in 22 states and the District of Columbia.
Business Inventories (May 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.036 trillion (+0.3% vs. April 2019, +5.3% vs. May 2018.
Beige Book

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

Hiring Bounced Back: July 1 – 5

The labor market rebounded in June. Here are the five things we learned from U.S. economic data released during the week ending July 5.  

#1Job creation recovered in June. The Bureau of Labor Statistics tells us that nonfarm payrolls expanded by a seasonally adjusted 224,000 during the month, a sharp surge versus May’s 72,000 created jobs and just above April’s 216,000 payrolls jump. Private sector employers added 191,000 workers (up from an 83,000 gain in May), split between 154,000 in the service sector and 37,000 in the goods-producing sector. Industries adding the most jobs in June included professional/business services (+51,000), health care/social assistance (+50,500), transportation/warehousing (+23,900), and construction (+21,000). Average weekly private sector earnings of $959.76 represented a 2.8 percent increase over the past year.Yearly Wage Increases 070519

A separate survey of households has the unemployment rate inching up 1/10th of a percentage point to 3.7 percent (just above its multi-decade low) as 335,000 people entered the labor force during the month. The labor force participation rate grew by 1/10th of a percentage point to 62.9 percent—the same measure for adults aged 25 to 54 also added 1/10th of a percentage point to 82.2 percent. The median length of unemployment grew by a half week to 9.6 weeks while the number of part-time workers seeking a full-time opportunity essentially held steady at 4.347 million. The U-6 series, the broadest measure of labor underutilization published by BLS, eked out a 1/10th of a percentage point increase to 7.2 percent (just above its almost 19-year low achieved last month).

#2The U.S. trade deficit hit a 2019 high in May. The Census Bureau and the Bureau of Economic Analysis report that while exports grew by $4.2 billion to a seasonally adjusted $210.6 billion (-1.3 percent versus May 2018), imports surged by $8.5 billion to $266.2 billion (+3.3 percent versus May 2018). The resulting trade deficit of -$55.5 billion was up $4.3 billion from April and was a five-month high. The goods deficit blossomed by $4.4 billion to -$76.1 billion while the services surplus widened slightly (+$0.1 billion) to +$20.6 billion. The former resulted from imports of goods swelling $8.1 billion (including from imported automobiles, crude oil, capital goods, and semiconductors), overwhelming the $4.0 billion increase in exported goods (including capital goods, consumer goods, soybeans, and automobiles). The U.S. had its largest goods deficits with China, the European Union, Mexico, and Japan.

#3Factory orders dropped in May. New orders for manufactured goods decreased for the third time in four months with a 0.7 percent decline to a seasonally adjusted $493.6 billion, per the Census Bureau. Transportation goods orders shrank 4.6 percent, hurt by contracting orders for civilian (-28.2 percent) and defense (-15.5 percent) aircraft. Net of transportation orders inched up 0.1 percent, with increased orders for furniture (+3.3 percent), electrical equipment/appliances (+1.0 percent), machinery (+0.8 percent), computers/electronics (+0.7 percent), and primary metals (+0.1 percent). Declining were orders for fabricated metal products (-0.3 percent) and nondurables (-0.2 percent). Meanwhile, shipments grew 0.1 percent to $504.3 billion (its third gain in four months), with shipments unchanged for the month net of transportation goods. Unfilled orders declined 0.5 percent to $1.171 trillion (its third drop in four months) while inventories expanded for the eighth time in nine months with a 0.2 percent increase to $694.1 billion.

#4Purchasing managers suggest a slower pace of economic growth in June. The Institute for Supply Management’s PMI (the headline index from its Manufacturing Report on Business) slipped by 4/10ths of a point to 51.7. While this was the PMI’s lowest reading since October 2016, it also was the measure’s 34th straight month above a reading of 50.0 (the threshold between an expanding and contracting manufacturing sector). Three of five PMI components took a step back in June—new orders, inventories, and supplier deliveries—while the other two—production and employment— both advanced. Twelve of 18 tracked manufacturing industries reported growth, led by furniture, printing, and textiles. The press release noted that survey respondents “expressed concern about U.S.-China trade turbulence, potential Mexico trade actions and the global economy.”

The NMI, the headline index from ISM’s Nonmanufacturing Report on Business, declined by 1.8 points in June to a reading of 55.1. The NMI has been above the critical 50.0 threshold for an impressive 113 months, but this is the measure’s lowest reading since July 2017. Only one NMI component (supplier deliveries) grew during the month, while the other three declined (employment, business activity/production, and new orders). Sixteen of 18 tracked nonmanufacturing industries reported growth, led by real estate. The press release characterized survey respondents’ sentiment as “mixed,” as a “degree of uncertainty exists due to trade and tariffs.”

#5Construction spending decelerated in May. The Census Bureau places the seasonally adjusted annualized rate of construction put in place at $1.294 trillion, down 0.8 percent from April and 2.3 percent below the year-ago pace. Residential construction spending dropped 0.7 percent to an annualized $953.2 billion, 6.3 percent less than that of a year ago and its lowest reading since January 2017. Falling were spending on both private sector nonresidential (-0.9 percent) and residential (-0.6 percent) spending. Reversing recent trends, public sector construction spending also slowed, slumping 0.9 percent to an annualized $340.6 billion. Despite May’s decline, public construction spending remained 10.8 percent ahead of its year-ago pace.

Other U.S. economic data released over the past week:
Jobless Claims (week ending June 29, 2019, First-Time Claims, seasonally adjusted): 221,000 (-8,000 vs. previous week; -8,000 vs. the same week a year earlier). 4-week moving average: 222,250 (-0.1% vs. the same week a year earlier)

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

Employers Tap on the Brakes (Again): June 3 – 7

Hiring lost its momentum in May. Here are the five things we learned from U.S. economic data released during the week ending June 7.

#1

Hiring slows way down in May. Nonfarm employers added a seasonally adjusted 75,000 workers during the month, per the Bureau of Labor Statistics. While this was the 104th consecutive month of job gains, it fell short of the additions in March and April of 153,000 and 224,000, respectively. Private sector employers added 90,000 jobs, split between 82,000 in the service sector and 8,000 in the goods-producing sector. Industries adding the most workers during May were professional/business services (+33,000), leisure/hospitality (+26,000), and health care/social assistance (+24,000). Manufacturers added a mere 3,000 workers (perhaps reflecting the impact of rising trade tensions) while retailers shed 7,600 jobs. Average weekly earnings grew by $2.06 during the month (and has risen 2.8 percent over the past year) to $957.35.

A separate survey of households keeps the unemployment rate at a post-recession low of 3.6 percent. The labor force expanded by 176,000 people, keeping the labor force participation rate at 62.8 percent. The labor force participation rate for adults aged 25 to 54 slipped by 1/10th of a percentage point to 82.1 percent (its smallest since last September). The median length of unemployment declined by 3/10ths of a week to 9.1 weeks (May 2018: 9.3 weeks). The number of people with a part-time job but seeking a full-time opportunity contracted by 299,000 to 4.355 million (May 2018: 4.920 million). The broadest measure of labor force underutilization (the “U-6” series) dropped by 2/10ths of a week to a new post-recession low of 7.1 percent (April 2018: 7.7 percent).

#2The trade deficit shrank (but trade activity slowed) in April. The Census Bureau and Bureau of Economic Analysis report that exports fell by $4.6 billion during the month to $206.8 billion (-1.0 percent versus April 2018) while import activity declined by $5.7 billion to $257.6 billion (+0.2 percent April 2018). The resulting budget deficit of -$50.8 billion was $1.1 billion smaller than that of March. The goods deficit narrowed by $1.0 billion to -$71.7 billion while the services surplus expanded by $0.1 billion to +$20.9 billion. The former was the result of sizable declines in imports of non-automotive capital goods, gem diamonds, and motor vehicles while goods exports were pulled down by declines exported aircraft, motor vehicles, and pharmaceutical preparations. 

#3New factory orders declined for the second time in three months in April. The Census Bureau tells us that new orders for manufactured goods slowed 0.8 percent in April to a seasonally adjusted $499.3 billion. Transportation goods orders fell 5.9 percent, hurt by sharp decreases in orders for civilian aircraft (-25.2 percent), defense aircraft (-2.4 percent), and motor vehicles (-1.7 percent). Net of transportation goods, new factory orders grew 0.3 percent. A proxy for business investment—civilian capital goods net of aircraft—fell 1.0 percent. Shipments fell for the first time in three months with a 0.5 percent decline to $504.1 billion, although they gained 0.2 percent net of transportation goods. Unfilled orders shrank a modest 0.1 percent to $1.179 trillion while inventories expanded 0.3 percent to $692.9 billion.

#4Purchasing managers report growth in manufacturing decelerated in May. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, lost 7/10ths of a point to a reading of 52.1. This was the PMI’s lowest reading since October 2016 but the measure has remained above a reading above of 50.0 (the threshold between a growing and contracting manufacturing sector) for 33 straight months. Three of the PMI’s five components declined (production, supplier deliveries, and inventories) while the other two increased (new orders and employment). Eleven of 18 manufacturing industries expanded during May, led by printing, furniture, and plastic/rubber products. The press release noted survey respondents had “expressed concern with the escalation in the U.S.-China trade standoff.”

Meanwhile, ISM’s measure of service sector activity—the NMI—added 1.4 points to a reading of 56.9. This was the 112th consecutive month in which the NMI was above a reading of 50.0. Three of four index components rose from their April readings: business activity/production, new orders, and employment. Only the measure for supplier deliveries pulled back during the month. Sixteen of 18 nonmanufacturing industries expanded in May, led by accommodation/food services, education, and management of companies/support services. Survey respondents also here had noted “concerns” about tariffs.

#5Construction spending held steady in April. The Census Bureau estimates the value of construction put in place during the month was at a seasonally adjusted annualized rate (SAAR) of $1.299 billion, virtually unchanged from March and off 1.2 percent from the same month a year earlier. Private sector construction spending slumped 1.7 percent during April to a SAAR of $954.0 billion, 6.0 percent below its April 2018 mark. Private sector residential spending fell 0.6 percent while private sector nonresidential plummeted 2.9 percent. Public sector construction spending, on the other hand, jumped 4.8 percent to an annualized $338.0 billion. Public sector expenditures have risen 15.1 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending June 1, 2019, First-Time Claims, seasonally adjusted): 218,000 (Unchanged vs. previous week; -2,000 vs. the same week a year earlier). 4-week moving average: 215,000 (-3.3% vs. the same week a year earlier).
Productivity (2019 Q1-revision, Nonfarm Business Labor Productivity): +3.4% vs. 2018Q4, +2.4% vs. 2018Q1.
Beige Book

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