Tag: retail sales

Monday Economic Report – July 21, 2014

This is the summary for this week’s Monday Economic Report: 

With more and more data starting to trickle in for June, we are seeing some definite trends taking shape. One positive is that the manufacturing sector continues to expand, suggesting that the rebound from winter-related softness earlier in the year has mostly continued. Manufacturers also tend to be mostly upbeat about the second half of this year—a sign of optimism that is encouraging. Yet, there were also indicators suggesting that the pace of activity slowed somewhat in June, most notably in the industrial production, housing starts and retail sales numbers that were released last week.

Indeed, manufacturing output in June increased at its slowest rate since January, with relatively mixed news overall. Nondurable goods production edged higher, up 0.1 percent, but output from nondurable goods manufacturers declined by 0.3 percent. Monthly declines in production in such sectors as apparel, machinery and motor vehicles nearly offset output gains for aircraft, furniture, metals and plastics, and rubber products. Longer-term trends remain reassuring, even if they still leave room for improvement. Over the past 12 months, manufacturing production has increased 3.5 percent, a decent figure overall and progress from the much slower pace of just 1.5 percent in January. Durable goods output has risen by a healthy 5.5 percent year-over-year, whereas nondurable goods activity was a less robust 1.5 percent in the past year.

Housing starts in June were also weaker than expected, down from an annualized 985,000 in May to 893,000 in June. Starts were lower for both single-family and multifamily units. There have been suggestions that rain might have attributed to the weaker construction activity, with storms preventing some units from breaking ground. Yet, single-family starts have struggled for some time, down 4.3 percent over the past 12 months. On the positive side, single-family housing permits rose for the second straight month, up from 615,000 to 631,000 at the annual rate for the month. This could suggest stronger growth in the housing market in the coming months for single-family homes. Along those lines, homebuilder confidence increased to its highest point since January, with better expectations for sales over the next six months.

Meanwhile, surveys out last week reported multiyear highs in the pace of manufacturing activity. New orders and shipments were up sharply in surveys from the New York and Philadelphia Federal Reserve Banks. Hiring also picked up in both regions, and raw material costs remained elevated relative to prior months. More importantly, manufacturers in each survey said they were optimistic that sales, output, employment and capital spending would increase over the next six months. In fact, the Philadelphia Federal Reserve report found that 56.1 percent of its respondents anticipated higher new orders, with 60.4 percent predicting increased shipment levels. In addition, the Manufacturers Alliance for Productivity and Innovation (MAPI) reported that the business outlook rose for the sixth consecutive quarter on accelerated sales domestically and abroad. Shipments and capital spending were also anticipated to grow strongly moving forward.

On the consumer front, Americans continue to be cautious in their purchase decisions. Retail spending increased 0.2 percent in June. This was the slowest pace since January, and it was below expectations. Reduced auto sales contributed to this lower figure. Despite the slower activity levels in June, the year-over-year pace continues to grow at decent levels, up 4.3 percent over the past 12 months. Preliminary consumer confidence data also indicate some nagging anxieties in the economy, according to the University of Michigan and Thomson Reuters. The Consumer Sentiment Index unexpectedly decreased from 82.5 in June to 81.3 in July, and consumer attitudes have not changed much since December. Much of July’s decrease stemmed from weaker expectations about the future economy. However, higher gasoline prices might have also been a factor. Indeed, the producer price index increased in June largely on higher energy costs.

This week, we will get additional insights on the health of manufacturing worldwide. Markit will release preliminary purchasing managers’ index reports for China, Japan, the Eurozone and the United States for July. We will be looking for continued progress in Asia and the United States and we hope a reversing of the easing in activity in Europe. The Kansas City and Richmond Federal Reserve Banks will also report on their latest manufacturing surveys. Beyond these releases, the Bureau of Economic Analysis will publish real GDP data by industry for the first quarter; given the 2.9 percent drop in real GDP during the first quarter, we would anticipate minimal contributions to growth from the manufacturing sector. Other highlights include the latest data on consumer prices, durable goods orders and existing and new home sales.

Chad Moutray is the chief economist, National Association of Manufacturers. 

manufacturing production growth - jul2014

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Reduced Auto Sales Slowed Overall Retail Spending in June

The Census Bureau said that retail sales were up 0.2 percent in June, its slowest pace since January. The consensus expectation had been for retail spending levels closer to the 0.6 percent and 0.5 percent paces seen in April and May, respectively. Despite the slower levels of activity in July, the year-over-year pace continues to grow at decent levels, up 4.3 percent over the past 12 months. This was lower than the 4.6 percent pace observed the month before, but faster than the 1.8 percent year-over-year rate observed in January.

Spending on motor vehicles and parts declined 0.3 percent in June, its first decrease in six months. Still, the larger story for autos remains a positive one, with 6.4 percent growth year-over-year. If you were to exclude autos, retail spending would have grown by 0.4 percent for the month and 3.7 percent over the past 12 months. The year-over-year pace for retail spending excluding autos was up from 3.4 percent in May and was the fastest pace in 11 months.

Therefore, the news was perhaps more positive than the top-line figure might suggest. Areas with higher retail spending in the month of July included health and personal care stores (up 0.9 percent); nonstore retailers (up 0.9 percent); clothing and accessory stores (up 0.8 percent); sporting goods, hobby, book and music stores (up 0.6 percent); food and beverage stores (up 0.4 percent) and gasoline stations (up 0.3 percent). Beyond autos, building materials and garden supply stores (down 1.0 percent) and food services and drinking places (down 0.3 percent) also had decreased retail spending for the month.

Chad Moutray is the chief economist, National Association of Manufacturers. 

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Monday Economic Report – June 16, 2014

Here is the summary for this week’s Monday Economic Report:

Despite a very weak start to 2014, there is an expectation among manufacturers that the second half of the year will be better than the first. Indeed, average manufacturing sales forecasts in the latest NAM/IndustryWeek survey were the highest in two years, with capital investment and hiring plans also moving in the right direction. Indeed, these data points were consistent with 4.0 percent production growth in the sector between now and the fourth quarter of this year, and roughly 86 percent of respondents were either somewhat or very positive in their outlook. These findings mirrored similarly optimistic assessments from business economists, who predict real GDP growth of 3 percent or more in each of the remaining quarters of 2014, with industrial production up 3.7 percent for the year as a whole.

Despite more upbeat perceptions for the coming months, concerns continue to linger. Respondents to the NAM/IndustryWeek survey remain frustrated with political inaction and the slow pace of economic growth. The top business challenges continue to be rising health care costs (72.7 percent) and an unfavorable business climate (71.4 percent). When asked about policy priorities for the next few years, slowing entitlement spending (84.4 percent), finding a long-term budget deal (82.9 percent), reducing regulatory burdens (81.9 percent) and controlling health care costs (78.5 percent) were at the top of the list.

At the same time, consumers remain cautious. The University of Michigan and Thomson Reuters reported that consumer confidence edged lower for the second straight month, although sentiment has not changed much in the first six months of this year. There are persistent worries about labor and income growth, which appear to be preventing Americans from being more optimistic about the future.

These anxieties might also have been a factor in the weaker-than-expected retail spending numbers for May. While retail sales rose for the fourth consecutive month and purchases continue to reflect a rebound from winter-related softness, May’s increase of 0.3 percent was about half of what was predicted. In fact, excluding motor vehicles and gasoline station sales, spending was flat for the month. Nonetheless, one could also paint a more positive picture, with retail sales up 2.2 percent since November and 4.3 percent year-over-year. So perhaps May’s figures were just a pause in an otherwise decent upward trajectory for consumer spending. Small business owners were more upbeat about sales expectations in the latest National Federation of Independent Business (NFIB) survey. The NFIB’s Small Business Optimism Index reached its highest level in May since September 2007, or before the recession began.

Along those lines, the number of nonfarm job postings reached a pre-recessionary high in April. For manufacturers, job openings have increased in the past two months but remain below their recent peak in November. April’s increases in the manufacturing sector were primarily from durable goods firms. Net hiring (or hires minus separations) was also up for the month in manufacturing; however, it also suggests weaker employment growth in early 2014 versus the more robust hiring activity in the second half of 2013. This leaves room for improvement for the coming months.

This week, we will get several economic indicators on manufacturing and housing activity. For example, this morning, the Federal Reserve is expected to show a rebound in industrial production for May after the decline in April, and we will be looking for similar signs in surveys from the New York and Philadelphia Federal Reserve Banks. Tomorrow, we will get new data on housing starts and permits, with the consensus being around 1.04 million annualized units in May, down slightly from 1.07 million in April. On the monetary policy front, we have seen increased pricing pressures of late, even as core inflation for producers declined in May. Yet, the Federal Reserve is not expected to alter its course this week when the Federal Open Market Committee meets. Other highlights this week include new information on consumer prices, leading indicators and state employment.

Chad Moutray is the chief economist, National Association of Manufacturers. 

manufacturing job openings - jun2014

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Retail Spending Growth Slowed in May

The Census Bureau said that retail sales increased 0.3 percent in May. On the positive side, this was the fourth consecutive monthly increase in retail spending, rebounding from winter-related softness in both December and January. Since November (pre-dating the storms), retail sales have risen 2.2 percent, and year-over-year, they have grown 4.3 percent. Yet, the pace of growth was slower than anticipated, or half of the consensus expectation of 0.6 percent. May’s increase was down from the 1.5 percent and 0.5 percent gains experienced in March and April, respectively.

Moreover, when you exclude autos and gasoline purchases from the analysis, retail spending was unchanged for the month, suggesting broader weaknesses. Motor vehicle and parts sales were up 1.4 percent in May, extending sales increases since January and continuing a strong trend. Auto sales have grown 10.4 percent over the past 12 months. Meanwhile, gasoline station sales rose 0.9 percent and 0.4 percent in April and May, respectively. This was primarily due to higher petroleum costs, with West Texas intermediate crude costs up from $99.69 per barrel on April 1 to $103.40 a barrel on May 30.

Data from other sectors were mostly mixed. Americans spent more in May at miscellaneous store retailers (up 1.8 percent), building materials and garden supplies stores (up 1.1 percent), nonstore retailers (up 0.6 percent), and furniture and home furnishings stores(up 0.5 percent). In contrast, these increases were offset by declines for clothing and accessories (down 0.6 percent), general merchandise (down 0.6 percent), electronics and appliances (down 0.3 percent), food services and drinking places (down 0.2 percent), food and beverages (down 0.1 percent), and health and personal care (down 0.1 percent) stores.

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – May 19, 2014

Here is the summary for this week’s Monday Economic Report: 

There are numerous signs that global economic growth is lower than expected in 2014, with some disappointing data coming in last week. For instance, industrial production numbers were weaker in a number of countries, including slower industrial growth in China in April relative to just a few months ago and falling output in March in the Eurozone. Europe also learned that real GDP rose at the very slow pace of 0.2 percent in the first quarter, prompting new worries about sluggish income and labor market growth on the continent. Meanwhile, in the United States, the Federal Reserve reported that manufacturing production fell 0.4 percent in April. This followed relatively strong rebounds in February and March from winter-related softness in December and January. Still, output continues to reflect modest gains year-over-year, particularly for durable goods.

Despite April’s decline in industrial production, other data suggest that manufacturing activity in the United States appears to be recovering from earlier weaknesses. Manufacturing surveys from the New York and Philadelphia Federal Reserve Banks both show relatively strong expansions in their regions, even as the Philly Fed report eased a bit in May from April. New orders, shipments and employment reflected continuing expansion from the previous survey. More importantly, manufacturers in each district remained mostly upbeat about the next six months, with more than half of the respondents in both surveys anticipating new orders to increase moving forward. For their part, small business owners were also more optimistic, with the National Federation of Independent Business’s (NFIB) key index rising to its highest level since October 2007.

At first glance, the housing data released last week were also quite positive. Housing starts exceeded 1 million again for the first time this year, up from an annualized 947,000 units in March to 1,072,000 in April. New residential permitting was also higher. Yet, the bulk of April’s increases in both measures were primarily due to the more volatile multifamily housing segment. Single-family starts and permits were only marginally higher, but remain below the recent peaks last November. As such, there is perhaps more softness in the market than the headline figure indicated. (We will get existing and new home sales figures this week.) Indeed, homebuilder confidence fell to its lowest point in 12 months, with consumer anxieties cited as a concern. On the positive side, builders were somewhat more hopeful about future activity.

Consumer data were mixed. Retail sales increased 0.1 percent in April, extending the strong gains from February and March. Auto sales comprised much of April’s gains, with retail spending outside of motor vehicles unchanged from March. As such, consumers appeared to be somewhat cautious in April. This showed up in the latest consumer confidence data as well. The University of Michigan and Thomson Reuters reported that consumer sentiment edged slightly lower in May in its preliminary data, with Americans more concerned about current economic conditions. In terms of prices, consumer inflation has started to pick up slightly, led by higher food costs, but core pricing pressures remain below 2 percent at the annual rate, at least for now. A similar pattern was observed for producer prices.

This week, we will get more news on the health of the manufacturing sector worldwide, with flash Purchasing Managers’ Index (PMI) data from Markit for the United States, Europe, China and Japan. The Kansas City Federal Reserve will also release its latest sentiment survey. Finally, the Federal Open Market Committee (FOMC) minutes from its April 29–30 meeting will be released, providing some insights about current Federal Reserve debates. However, that meeting hardly produced any surprises, with the FOMC continuing to taper its asset purchases and the Federal Reserve’s forward guidance still pointing to short-term rate increases sometime next year.

Chad Moutray is the chief economist, National Association of Manufacturers. 

yoy industrial production growth - may2014

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Retail Spending Growth Was Positive, but Weak, in April

The Census Bureau said that retail sales increased a meager 0.1 percent in April. As such, it was much weaker than the 0.9 percent and 1.5 percent gains observed in February and March, respectively. The good news was that those increases – rebounds from winter-related softness in December and January – were essentially sustained. Since January, retail spending has increased 2.5 percent, with 4.0 percent growth year-over-year.

Still, much of the growth in April could be explained by the 0.6 percent increase in motor vehicle and parts sales, building on the 2.6 percent and 3.6 percent gains seen in February and March, respectively. When you exclude autos from the analysis, retail sales were unchanged in April, suggesting broader weakness outside of the motor vehicle segment. Nonetheless, retail spending excluding autos have risen 1.5 percent since January and 2.7 percent over the past 12 months.

Looking at other sectors, department stores had the strongest monthly retail sales growth, up 1.8 percent. Other segments with increased spending in April included clothing and accessories (up 1.2 percent), gasoline stations (up 0.8 percent), sporting goods and hobbies (up 0.7 percent), health and personal care (up 0.6 percent), building material and supplies (up 0.4 percent), and food and beverage (up 0.3 percent) stores.

In contrast, these increases were essentially offset by declines for electronics and appliances (down 2.3 percent), miscellaneous store retailers (down 2.3 percent), food services and drinking places (down 0.9 percent), nonstore retailers (down 0.9 percent), and furniture and home furnishings (down 0.6 percent).

Chad Moutray is the chief economist, National Association of Manufacturers.

 

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Monday Economic Report – March 17, 2014

Here is the summary for this week’s Monday Economic Report:

Recent events around the world remind us that the global economic and political environment remains uncertain. Manufacturers have had to cope with weather-related softness over the past few months, worries about the geopolitical situation and slowing growth rates in some of our largest trading partners, specifically China. Despite these challenges, they continue to be mostly upbeat about future activity.

The latest NAM/IndustryWeek Survey of Manufacturers found that 86.1 percent of respondents were positive about their company’s outlook, up from 78.1 percent three months ago, with increased expectations for sales, exports, employment and capital spending. Still, smaller manufacturers were less positive, particularly in their investment plans. The top challenges were the business climate and rising health care and insurance costs, with respondents noting the need for comprehensive tax reform and expressing concern about ever-increasing regulatory burdens.

Government regulations were also cited as the most important problem in the latest National Federation of Independent Business (NFIB) survey of small business owners. It was one of two sentiment surveys released last week showing reduced confidence. NFIB’s Small Business Optimism Index fell sharply, down from 94.1 in January to 91.4 in February. The percentage saying it was a good time to expand declined, with weak sales and earnings expectations. Likewise, preliminary March consumer confidence numbers from the University of Michigan and Thomson Reuters were also lower, perhaps reflecting concerns about job and income growth.

On the positive side, retail sales began to rebound in February, up 0.3 percent. While this was not enough to make up for the weather-induced declines of December and January, it did suggest there were possible “green shoots” on the consumer spending front, with Americans starting to return to the stores. For instance, the auto sector saw modest sales gains in February, a trend seen in other hard-hit sectors as well.

This week, much of the focus will be on the Federal Reserve Board, with a new monetary policy statement from the Federal Open Market Committee (FOMC) coming out on Wednesday. While hiring remains soft (as the latest job openings numbers show), the unemployment rate is likely to reach the 6.5 percent threshold in the next month or two. Therefore, the expectation is that the FOMC will change its forward guidance on short-term interest rates to omit mention of an unemployment rate target. Fortunately, pricing pressures remain minimal, allowing the Federal Reserve to continue to pursue highly accommodative policies, even as it continues to taper its long-term asset purchases. Look for the FOMC to reduce its purchases from $65 billion each month in long-term and mortgage-backed securities to $55 billion.

It will be a busy week for economic releases, including new data on industrial production and housing starts. Manufacturing output should rebound somewhat, even as bad weather dampened activity once again. Similar findings are expected in the New York and Philadelphia Federal Reserve Bank manufacturing surveys. Meanwhile, housing starts should also pick up slightly, but new residential activity will remain subpar relative to a few months ago. Still, we remain upbeat about the housing market for 2014 as a whole. Other highlights this week include new measures for consumer prices, homebuilder confidence and leading indicators.

Chad Moutray is the chief economist, National Association of Manufacturers.

nam industry week - mar2014

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Retail Spending Began to Rebound in February

The Census Bureau said that retail sales increased 0.3 percent in February. This was a partial rebound from the weather-induced declines of 0.3 percent and 0.6 percent in December and January, respectively. Retail sales peaked at an all-time high of $430.1 billion in November, but have fallen 0.7 percent since then. As a result, the year-over-year pace of retail spending has also decelerated in that time period, down from 4.0 percent in November to 1.5 percent in February.

The largest monthly gains in retail sales occurred in sporting goods, hobby, book and music stores (up 2.5 percent); nonstore retailers (up 1.2 percent); and health and personal care stores (up 1.2 percent) businesses. In the first two, these were bounce-backs from declines the month before.

The bigger story was the beginning of possible “green shoots” on the sales front in February for some retailers. For instance, motor vehicle sales were hard hit by poor weather conditions in both December and January (down 2.1 percent and 2.0 percent, respectively). In February, auto sales rose a very modest 0.3 percent, ending the downward streak. Similar shifts were seen for department stores (up 0.7 percent), clothing and accessories (up 0.4 percent), furniture and home furnishings (up 0.4 percent), and food service and drinking places (up 0.3 percent). This indicates that people have started to come back into these establishments – a positive development even if the increases have not fully offset the prior decreases.

Areas with continued weaknesses included miscellaneous store retailers (down 0.9 percent), general merchandise stores (down 0.3 percent), electronics and appliances (down 0.2 percent), and food and beverage stores (down 0.2 percent).

Chad Moutray is the chief economist, National Association of Manufacturers.

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Monday Economic Report – February 18, 2014

Here is the summary for this week’s Monday Economic Report:

A perfectly timed winter storm at the end of last week coincided with news that cold weather has had a negative impact on consumer spending and manufacturing output. Manufacturing production declined 0.8 percent in January, ending five straight months of expanding activity. Poor weather conditions closed some facilities and hampered shipments. Capacity utilization also decreased, down from 76.7 percent in December to 76.0 percent in January. That was the lowest utilization level since July. Yet, to the extent that weather contributed to the fall in manufacturing output, I would expect production to rebound in the coming months. After all, manufacturing production increased 3.0 percent in the second half of 2013, and manufacturers continue to be mostly upbeat about demand for 2014.

Nonetheless, we saw the effects of the weather in other indicators released last week as well. Retail sales fell 0.4 percent in January, extending December’s 0.1 percent decline. Reduced auto sales were a major factor in this decrease, with motor vehicle purchases down 1.8 percent in December and 2.1 percent in January. If you exclude autos from the analysis, retail spending was unchanged.

Although the University of Michigan and Thomson Reuters consumer sentiment measure was unchanged in February, respondents’ view of the current economy has slipped since December. One might surmise that weather impacted labor markets and incomes, lessening current confidence. However, Americans seem more optimistic about the future, with the expectations component rising from 71.2 in January to 73.0 in February.

There were signs that the U.S. economy’s recent improvements continue to bear fruit. Small business leaders have become more confident, with the National Federation of Independent Business’s Small Business Optimism Index edging higher for the third straight month, and January’s data also show an increased willingness to add workers. The net percentage planning to hire in the next three months rose to its highest level since September 2007. Along those lines, the number of manufacturing job postings increased from 283,000 in November to 297,000 in December. We have seen job openings in the sector recover from weaknesses midyear in 2013. Nonetheless, manufacturing net hires eased in December, and there was notable softness in the larger economy, both for new hires and job openings.

This week, we will get new numbers for the housing market and the latest data on manufacturing activity from a number of sources, including surveys from the New York and Philadelphia Federal Reserve Banks and Markit. The latter will report Flash Purchasing Managers’ Index (PMI) findings for the United States, China and the Eurozone. We will be looking for further evidence on the impact weather has had for manufacturers in the United States and for signs of improvement overseas. The Chinese PMI data had contracted in January’s report, but with output continuing to grow modestly. (For more information on worldwide trends, see the Global Manufacturing Economic Update, which was released on Friday.) Other highlights for the week include the latest data on consumer and producer prices, leading indicators and existing home sales.

Chad Moutray is the chief economist, National Association of Manufacturers.

retail sales - feb2014

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Retail Spending Fell for the Second Straight Month in January

The Census Bureau reported that retail sales fell 0.4 percent in January, extending the 0.1 percent decline observed in December. A significant drop in auto sales over the past two months was a major factor, with spending on motor vehicles and parts down 1.8 percent and 2.1 percent in December and January, respectively. Indeed, if you were to exclude autos from the analysis, retail spending would have been unchanged in January.

As with so many other indicators of late, weather was likely a contributing factor. If people are not able to get to the stores to make purchases, the overall spending numbers are bound to reflect that. As a result, we have seen the year-over-year retail sales numbers decelerate, down from 4.0 percent in November to 3.5 percent in December to 2.6 percent in January.

The sector-by-sector breakdown for January was largely mixed, as you might expect given that it was flat for the broader (non-auto) market. There were increases in spending for building materials (up 1.4 percent), gasoline stations (up 1.1 percent), electronics and appliances (up 0.4 percent), and food and beverages (up 0.2 percent). But, these were essentially offset by declines for department stores (down 1.5 percent), sporting goods and hobbies (down 1.4 percent), clothing and accessories (down 0.9 percent), furniture and home furnishings (down 0.6 percent), health and personal care (down 0.6 percent), nonstore retailers (down 0.6 percent), and food services and drinking places (down 0.6 percent).

Chad Moutray is the chief economist, National Association of Manufacturers.

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