Retail and Manufacturing Fail to Impress: May 13 – 17

Retail and manufacturing each stumbled in April.  Here are the five things we learned from U.S. economic data released during the week ending May 17. 

#1Retail sales wobbled in April. The Census Bureau values retail and food services sales at a seasonally adjusted $513.4 billion, down 0.2 percent from March. Sales at auto dealers/parts stores slowed 1.1 percent but grew 1.8 percent at gas stations (thanks to higher prices at the pump). Net of both of these categories, core retail sales declined 0.2 percent in April and have risen a not particularly vigorous 3.2 percent over the past 12 months. During April, sales gained at department stores (+0.7 percent), restaurants/bars (+0.2 percent), sporting goods/hobby retailers (+0.2 percent), and grocery stores (+0.2 percent), but fell at retailers focused on building materials (-1.9 percent), electronics/appliances (-1.3 percent), apparel (-0.2 percent), and health/personal care (-0.2 percent).

#2Both manufacturing and overall industrial production faltered in April. The Federal Reserve estimates industrial production dropped for the third time in four months with a seasonally adjusted 0.5 percent decline in April that left the measure up a paltry 0.9 percent over the past year. Manufacturing output also contracted by 0.5 percent during the month (also its third decrease in four months) and off 0.2 percent from a year earlier. Durable goods production slumped 0.9 percent, with drops of at least two percent for motor vehicles, machinery, and electrical equipment/appliances. The output of nondurables slowed 0.1 percent. Warmer than average April weather led to a 3.5 percent reduction in utilities’ output while mining output rose 1.6 percent, thanks to increased oil and natural gas extraction and more coal mining. 

#3Housing starts had their best month in April since last summer. The Census Bureau places housing starts at a seasonally adjusted annualized rate of 1.205 million units, up 5.7 percent from March but still 2.5 percent under from the pace of April 2018. Starts of single-family homes rose 6.2 percent to an annualized 854,000 units (its best month since January) while multi-family unit home starts edged up 2.3 percent to 359,000 (its best since last November). Permit data suggest modest growth over the near-term, as the rate of issued housing permits eked out a 0.6 percent gain to 1.96 million permits (which was 5.0 percent below the year-ago pace). Housing completions slowed 1.4 percent during the month to an annualized 1.312 million homes (+5.5 percent versus April 2018).

#4Homebuilders grew more optimistic about the housing market in May. The National Association of Home Builders’ Housing Market Index (HMI) increased by three points to a seasonally adjusted 66. This was the 59th consecutive month in which the HMI was above a reading of 50, indicating that a higher percentage of homebuilders saw the housing market as being “good” rather than being “poor.” The index improved in three of four Census regions while holding steady in the Midwest. Also moving forward during the month were indices tracking single-family home sales (up three points to 72), expected sales of single-family homes (up a point to 72), and traffic of prospective buyers (up two points to 49). The press release noted that survey respondents had “characterize[d] sales as solid, driven by improved demand and ongoing low overall supply.”

#5Small business owner sentiment firmed in April. The National Federation of Independent Business’s Small Business Optimism Index grew for the third consecutive month with a 1.7 point gain to a seasonally adjusted 103.5 (1986=100). While off from the 104.8 reading a year earlier, the index has been above 100.0 for 29 straight months. Eight of the ten index components improved from their March readings, led by earnings trends, expected credit conditions, and plans to increase inventories. The press release noted that “[t]he ‘real’ economy is doing very well versus what we see in financial market volatility.”

Other U.S. economic data released over the past week:
Jobless Claims (week ending May 11, 2019, First-Time Claims, seasonally adjusted): 212,000 -16,000 vs. previous week; -9,000 vs. the same week a year earlier). 4-week moving average: 225,000 (+5.2% vs. the same week a year earlier).
Import Prices (April 2019, All Imports, not seasonally adjusted): +0.2% vs. March 2019, -0.2% vs. April 2018. Nonfuel Imports: -0.1% vs. March 2019, -0.9% vs. April 2018.
Export Prices (April 2019, All Exports, not seasonally adjusted): +0.2% vs. March 2019, +0.3% vs. April 2018.  Nonagricultural Exports: +0.4% vs. March 2019, +0.7% vs. April 2018.
Leading Indicators (April 2019, Index (2016=100)):  112.1 (vs. March 2019: 111.9, vs. April 2018: 109.1).
University of Michigan Consumer Sentiment (May 2019-preliminary, Index of Consumer Sentiment (1966Q1=100), seasonally adjusted): 102.4 (vs. April 2019: 97.2, May 2018: 98.0).
State Employment (April 2019, Nonfarm Payrolls, seasonally adjusted): Vs. March 2019: Up in 10 states, down in 1 state, and essentially unchanged in 39 states and the District of Columbia. Vs. April 2018: Up in 29 states and essentially unchanged in 21 states and the District of Columbia.
Business Inventories (March 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.018 trillion (Unchanged vs. February 2019, +5.0% vs. March 2018).
Treasury International Capital Flows (March 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): -$20.6 billion (vs. February 2019: +$52.8 billion, vs. March 2018: -$14.8 billion).

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

Spring Had Sprung for Retailers in March: April 15 – 19

Retail sales rebounded while manufacturing sputtered in March. Here are the five things we learned from U.S. economic data released during the week ending April 19.  

#1Retail sales surged in March. The Census Bureau places total U.S. retail and food services sales at a seasonally adjusted $514.1 billion. The 1.6 percent increase from February was the largest single-month percentage gain in retail sales since the fall of 2017 and left sales up 3.6 percent from a year earlier. A part of the increase was thanks to improved sales at both auto dealers/parts stores (+3.1 percent) and gas stations (+3.5 percent), the latter the product of higher gasoline prices. Core retail sales rose a still robust 0.9 percent for the month, reversing February’s 0.7 percent sales decline and placing the measure 3.6 percent ahead of that from a year earlier. Sales activity rose at retailers focused on apparel (+2.0 percent), furniture (+1.7 percent), groceries (+1.2 percent), electronics/appliances (+0.5 percent), building materials (+0.3 percent), and health/personal care (+0.2 percent), along with a 0.8 percent bounce at restaurants and bars. The only major retailer category to suffer a sales decline during the month was sporting goods/hobby stores with a 0.3 percent drop while department store sales were flat.

#2Manufacturing output was flat in March. The Federal Reserve estimates manufacturing production was unchanged during the month after having increased 0.3 percent in February, leaving output up a soft 1.0 percent over the past year. Durable goods output slipped 0.1 percent, with output falling sharply for wood products and automobiles but growing for primary metals and electronics/computers. Nondurable goods production eked out a 0.1 percent increase, boosted by gains for textiles, petroleum/coal products, and chemicals. Overall, industrial production declined 0.1 percent in March, reversing February’s 0.1 percent gain. Mining output dropped 0.8 percent while that at utilities inched up 0.2 percent. The former has risen 10.5 percent over the past year while the latter’s 12-month comparable was +3.8 percent.

#3The trade deficit narrowed in February. The Census Bureau and the Bureau of Economic Analysis report that exports grew by $2.3 billion to $209.7 billion (+2.3 percent versus February 2018) while imports inched up by $0.6 billion to $259.7 billion (-0.5 percent versus February 2018). As a result, the trade deficit contracted by $1.8 billion to -$49.4 billion, its smallest reading since last June. The goods deficit shrank by $1.2 billion to -$72.0 billion while the services surplus grew by $0.5 billion to +$22.6 billion. The former was the result of higher exports of civilian aircraft and automobiles/parts and a decline in imports of industrial supplies/materials. The U.S. had its biggest goods trade deficits with China, the European Union, and Mexico.

#4Forward-looking economic indicators improved in March. The Conference Board’s Leading Economic Indicators (LEI) added 4/10ths of a point in March to a reading of 111.9 (+3.1 percent versus March 2018). Eight of ten LEI components made positive contributions, led by first-time unemployment insurance claims and consumers’ expectations for the economy. The coincident index grew by 1/10th of a point to 105.8 (+2.1 percent versus March 2018), with three of four components making positive contributions (industrial production was the exception). The lagging index also added 1/10th of a point as it grew to 107.0 (+2.9 percent versus March 2018), with four of seven components improving from their February readings. The press release notes that even with March’s gain, the LEI “continues to moderate, suggesting that growth in the US economy is likely to decelerate toward its long-term potential of about 2 percent by year end.”

#5Housing starts and building permits declined in March. The Census Bureau estimates housing starts slipped 0.3 percent during the month to a seasonally adjusted annualized rate of 1.139 million units. This was 14.2 percent below the March 2018 rate and the measure’s lowest mark since May 2017. Starts of single-family homes slowed 0.4 percent to an annualized 785,000 while multi-family unit starts slumped 3.4 percent. Looking towards the future, the number of issued building permits declined 1.3 percent to an annualized 1.269 million permits (-7.8 percent versus March 2018), with declines for single-family and multi-family homes of 1.1 percent and 2.7 percent, respectively. The annualized count of completed homes also fell, with a 1.9 percent drop to 1.338 million homes, which was nevertheless up 6.8 percent from a year ago.

Other U.S. economic data released over the past week:
Jobless Claims (week ending April 13, 2019, First-Time Claims, seasonally adjusted): 192,000 (-5,000 vs. previous week; -35,000 vs. the same week a year earlier; fewest since September 6, 1969). 4-week moving average: 201,250 (-10.8% vs. the same week a year earlier).
Housing Market Index (April 2019, Index (>50=greater percentage of homebuilders viewing housing market as “good” versus being “poor,” seasonally adjusted): 63 (vs. March 2019: 62, April 2018: 68).
State Employment (March 2019, Nonfarm Payrolls, seasonally adjusted) Vs. February 2019: Grew in 1 state, essentially unchanged in 49 states and the District of Columbia. Vs. March 2018: Grew in 22 states, essentially unchanged in 28 states and the District of Columbia.
Business Inventories (February 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.017 trillion (+0.3 percent versus January 2019, +4.9% vs. February 2018).
Treasury International Capital Flows (February 2019, Net Foreign Purchases of U.S. Securities, not seasonally adjusted): +$42.4 billion (vs. January 2019: -$19.6 billion, vs. February 2018: +$57.6 billion.
Beige Book

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

Hiring Rebounded in March: April 1 – 5

Employers resumed hiring in March while consumers stayed away from stores in February. Here are the five things we learned from U.S. economic data released during the week ending April 5.  

#1Job creation picked back up in March. Nonfarm payrolls grew a seasonally adjusted 196,000 during the month, per the Bureau of Labor Statistics. This was a big improvement from the upwardly revised, but still weak 33,000 jobs added in February. Private sector employers’ payrolls expanded a net 182,000 workers in March, with 170,000 new jobs in the service sector. Industries adding the most workers were health care/social assistance (+61.200), professional/business services (+37,000), leisure/hospitality (+33,000), and construction (+16,000). The same report places average hourly earnings at $27.70 and average weekly earnings at $955.65, both up 3.2 percent from a year earlier.Nonfarm Payrolls 2010-19 040519

Based on a separate household survey, the unemployment rate held steady at 3.8 percent. The labor force shrank by 224,000 people during the month while the labor force participation rate slipped 2/10ths of a percentage point to 63.0 percent. Holding steady, however, was the labor force participation rate for adults aged 25 to 54 at 82.5 percent. The median length of unemployment edged up by 3/10ths of a week to 9.6 weeks while the number of part-time workers seeking a full-time opportunity expanded by 189,000 to 4.499 million. Still at its post-recession low was the broadest measure of labor underutilization (the “U-6” series) at 7.3 percent.

#2Retail sales disappointed in February. The Census Bureau estimates U.S. retail and food services sales declined 0.2 percent to a seasonally adjusted $506.0 billion. The same report upwardly revised January’s sales increase from +0.2 percent to +0.7 percent and left retail sales 2.2 percent ahead of that of February 2018. Sales at both auto dealers/parts stores (+0.7 percent) and gas stations (+1.0 percent) both surged during the month. Net of both, core retail sales sank 0.6 percent for the month but have grown 2.9 percent from a year earlier. In February, sales weakened at retailers focused on building materials (-4.4 percent), electronics/appliances (-1.3 percent), furniture (-0.5 percent), and apparel (-0.4 percent). Also losing track were sales at department stores, which decreased 0.5 percent. Retailers focused on health/personal care (+0.6 percent), hobbies/sporting goods (+0.5 percent), and restaurants/bars (+0.1 percent) each enjoyed sales increases. The shift to online stores continued as nonstore retailers’ sales grew 0.9 percent in February and were up 10.0 percent from a year earlier. 

#3Durable orders slumped in February. The Census Bureau reports that new orders for manufactured durable goods fell 1.6 percent during the month to a seasonally adjusted $250.6 billion. Transportation goods orders declined 4.8 percent, hurt by a sharp 31.1 percent decrease in orders for civilian aircraft and a much smaller 0.1 percent drop in auto orders. Net of transportation goods, core durable goods orders inched up 0.1 percent. Growing were new orders for electrical equipment/appliances (+1.0 percent), primary metals (+0.7 percent), and fabricated metal products (+0.3 percent) while orders slowed 0.3 percent for both machinery and computers/electronics. Durable goods shipments grew for the third time in four months (+0.2 percent). Inventories expanded 0.3 percent while the value of unfilled orders shrank 0.3 percent.

#4Purchasing managers continued to report economic growth in March. The PMI, the headline index from the Institute for Supply Management’s Manufacturing Report on Business, added 1.1 points during the month to a reading of 55.3. This was the 31st consecutive month in which the measure has been above a reading of 50.0, the threshold between a growing and contracting manufacturing sector. Three of the five PMI components improved from the February readings: employment (up 5.2 points to 57.5), new orders (up 1.9 points to 57.4), and production (up a full point to 55.8). Slipping, however, were measures tracking inventories (off 1.6 points to 51.8) and supplier deliveries (down 7/10ths of a point to 54.2). Sixteen of 18 tracked manufacturing industries expanded during the month, led by printing, textiles, and food/beverages.

Meanwhile, the ISM’s measure of service sector activity lost 3.6 points in March to a reading of 56.1. Despite the decline, this was the 110th straight month in which the NMI was above a reading of 50.0. Three of four NMI components pulled back during the month: business activity (down 7.3 points to 57.4), new orders (down 6.2 points to 59.0), and supplier deliveries (down a full point to 50.0). Sixteen of 18 tracked nonmanufacturing industries expanded in March, led by construction and professional/scientific/technical services. The press release characterized survey respondents’ comments as “mostly optimistic,” but noted that purchasing managers expressed “concerns about employment resources and capacity constraints.”

#5Construction spending rose again in February. The Census Bureau reports that the value of construction put in place jumped 1.0 percent during the month to a seasonally adjusted annualized rate (SAAR) of $1.320 trillion (+1.1 percent versus February 2018). Private-sector construction spending inched up 0.2 percent to an annualized $994.5 billion, which was nevertheless 1.9 percent below its February 2018 annualized pace. Private residential spending grew 0.7 percent in February while nonresidential expenditures declined 0.5 percent. Public sector construction spending soared 3.7 percent and has risen 12.1 percent over the past year.

Other U.S. economic data released over the past week:
Jobless Claims (week ending March 30, 2019, First-Time Claims, seasonally adjusted): 202,000 (-10,000 vs. previous week; -29,000 vs. the same week a year earlier; fewest since December 6, 1969). 4-week moving average: 213,500 (-4.2% vs. the same week a year earlier).
Business Inventories (January 2019, Manufacturers’ and Trade Inventories, seasonally adjusted): $2.014 trillion (+0.8% vs. December 2018, +5.3% vs. January 2018).
Consumer Credit (February 2019, Outstanding Consumer Credit (non-real estate) Balances, seasonally adjusted): $4.046 trillion (+$15.2 billion vs. January 2019, +5.0% vs  February 2018).

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