in contrast to last week, when all of the releases covered June data, the most important releases this week were on July data, giving us our first look at the economy in the 3rd quarter…the major releases this week were the July advance report on retail sales from the Census Bureau, the July G17 on industrial production from the Fed, and the July producer price index from the BLS…in addition, we also saw the 2nd quarter report on household household debt and credit from the NY Fed, and the June Job Openings and Labor Turnover Survey, a report that’s gained a following after it was cited by Janet Yellen as including key employment indicators she follows….this week also saw the first regional survey on manufacturing from Fed District banks; on Tuesday, the August Empire State Manufacturing Survey from the New York Fed, polling manufacturers in New York and northern New Jersey, reported that their broadest diffusion index for general business conditions fell 11 points from the 4 year high of 25.6 in July to 14.7 in August, still indicating growth for the month, in an index where any positive number indicates expanding business for area manufacturers..

also, in the last major June report which will likely result in negative revisions to 2nd quarter GDP, the Census Bureau released the Manufacturing and Trade Inventories and Sales report for June, commonly covered as the business inventories report, which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers’ shipments increased by 0.3 percent (±0.2%) from May to $1,346.7 billion in June, which was 4.7 (±0.6%) above the total monthly sales level of June of last year; manufacturers sales were estimated at $499,828 million, retailer’s sales were estimated at $392,456 million, and merchant wholesalers accounted for $454,447 million of the overall total….meanwhile, total manufacturer’s and trade inventories were estimated to have increased 0.4 percent (±0.1%) from May to a seasonally adjusted $1,743.1 billion in June, which was up 5.8 percent (±0.4%) from June a year earlier…seasonally adjusted inventories of manufacturers were estimated to be valued at $653,775 million, inventories of retailers were estimated to be valued at $555,825 million, and inventories of wholesalers were estimated to be valued at $533,486 million at the end of June…the month end total business inventories to total sales ratio, a metric which is watched to determine if inventories are becoming excessive, was at 1.29, unchanged from May and up fractionally from 1.28 in June a year ago..

July Retail Sales Flat with 0.2% June Increase Unrevised

the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $439.8 billion for the month, virtually unchanged (±0.5%)* from June’s sales of $439.8 billion, which themselves were unrevised with a gain of of 0.2 percent (±0.2%)* over May sales; July’s sales were also estimated to be 3.7 percent (±0.9%) above those of July a year ago…before the seasonally adjustment, July estimated sales, extrapolated from surveys of a small sampling of retailers, were reportedly at $446,251 million, up from $438,735 million in June but down from $464,429 million in May, and up 4.2% from $428,090 million in July a year ago….

to break down the details of the July retail sales estimate, we’ll again start by including a picture of the table of monthly and yearly percentage changes in sales by business type from the Census pdf…..the first double column gives us the seasonally adjusted percentage change in sales for each type of retail business type from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance estimates (now called “preliminary”) as of this report, likewise for each business type, with the May to June change under “May 2014 revised” and the revised June 2013 to June 2014 percentage change in the last column shown…for reference, here is what those June percentage changes looked like before this month’s revision…  

July 2014 retail sales table

as you can see, the weakness in July sales is evident across most business types, with only the miscellaneous store retailers, who account for less than 2% of the total, managing a monthly gain as large as 0.9%… the seasonally adjusted 0.2% decline in motor vehicle and parts sales to $87,640 million was a drag on sales overall, but even without the decrease in sales from the automotive sector, retail sales still only managed a 0.1% increase….food and clothing sales provided some stability; clothing store sales were up 0.4% to $21,205 million, food and beverage store sales were up 0.3% to $49,558 million, and sales by restaurants and bars were up 0.2% to $47,281 million…meanwhile, general merchandise store sales were off 0.5% to $55,155 million, while non-store or online sales slipped 0.1% to $39,768 million, with electronic and appliance stores both showing sales down by the same margin…

while overall retail sales for June were little revised, several of the retail groups saw significant revisions in their reported sales for the month… building material and garden supply outlets, which were reported with 1.0% lower sales in June, have been revised to show a 1.0% gain for the month; June sales at bars and restaurants were also reversed, from a decrease of 0.3% to an increase of 0.2%…in addition, food and beverage stores were revised from an increase of 0.4% to an increase of 0.9%, while miscellaneous stores sales were revised from up 0.1% to up 0.9%…meanwhile, sales at general merchandise stores had been reported up 1.1% and they’ve been revised to a 0.4% increase, and clothing store sales were revised from an increase of 0.8% to an increase of 0.2%, while sales at gas stations, which were first reported 0.3% higher, have been revised to indicate they were 0.8% lower…

Industrial Production Increases 0.4% in July as Capacity Utilization Edges Up 0.1% to 79.2%

the Fed’s July release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.4% over a June reading which was revised from an increase of 0.2% to an increase of 0.4% as the May to June increase was revised from a 0.5% increase to a 0.3% increase…the industrial production index itself, which is benchmarked to 2007 production equal to 100.0, rose to a record high 104.4 from an unrevised June index level of 103.9, while May’s industrial production index was revised from 103.7 to 103.5…the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 1.0% in July to 100.7, the highest since November 2007 and first time that index has exceeded 100.0 since January 2008; in addition, the manufacturing index for June was revised up from 99.7 to 99.8 and the index is now 4.9% higher than the level of July 2013….. meanwhile the seasonally adjusted utility index, reflecting a milder than normal July in most of the country, fell another 3.4% in July after falling 0.7% in June and at 96.9 is now 9.7% below the levels of January, when it first spiked 4.1% due to the colder than normal weather…rounding out the industry groups, the mining index, which includes oil & gas production, increased by 0.3% to 130.5 in July, after increasing a revised 1.3% to 130.1 in June, and is now 8.6% higher than a year ago…

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group…among final products and nonindustrial supplies, which rose by 0.6% in July, seasonally adjusted production of consumer goods rose by 0.5% after rising a revised 0.2% in June; production of consumer durables rose 4.7% on an 8.5% increase in the output of automotive products, which are now up 19.8% year over year, while production of appliances, furniture and carpeting rose 1.8% in July and output of home electronics was 1.5% above June production…meanwhile, production of non-durable goods was down 0.7% for the month on a 1.5% drop in  energy output and a 0.4% drop in production of non-energy non-durables…of the later, clothing production was up 2.0%, while output of paper products fell 1.4%, production of food was 0.6% lower, and output of chemical products was unchanged….since last July, production of durable goods had increased by 12.0%, led by the increase in automotive production, and production of non-durable goods has risen 2.1% on a 5.0% increase in clothing output, while output of consumer energy products has increased 2.7%..

meanwhile, seasonally adjusted production of business equipment rose 1.3% in July after falling by a revised 0.3% in June as production of transit equipment rose 3.9% while production of information processing equipment rose 0.1% and production of industrial equipment rose 0.7%…for the year ending July, output of business equipment rose by 7.0% on the strength of an 11.7% increase in production of transit equipment, while output of industrial equipment rose 6.9% and production of information processing equipment rose 1.7%…in addition, production of defense and space equipment rose by 0.9% in July and grew by 4.3% over the year…in addition, production of supplies for use in construction rose 0.8% for the month and was 5.3% ahead of year ago output, while production of business supplies was unchanged for the month and up 2.2% for the year…meanwhile, production of raw and intermediate materials that would input into other production processes rose by 0.3% in July with output of consumer parts, equipment parts, and textiles all rising by more than 1.0%, with only output of energy materials falling by 0.6%…for the year, production of intermediate materials was up 5.5% with a 14.8% increase in parts for consumer goods leading production of intermediate durable goods to an 8.5% year over year increase..

with industrial production increasing 0.4% in July, capacity utilization, which is the percentage of our plant and equipment that was in use during the month, likewise rose, but by just 0.1%, from 79.1% in June to 79.2% in July, suggesting new capacity was added during the month…77.8% of our total manufacturing capacity was in use during July, up from 77.2% in June, and up from the manufacturing utilization rate of 75.8% in July of last year…the operating rate for NAICS classified durable goods manufacturers was at 78.5% in July, up from 77.9%, led by an 84.8% operating rate for manufactures of electrical equipment, appliances, and components, while the July operating rate for NAICS classified manufacturers of non-durables was at 78.4%, up from 78.3% in June, with the oil and coal products industry operating at 82.8% of capacity while textile and textile product mills were only operating at a 70.2% rate…. meanwhile, capacity utilization by the ‘mining’ industry fell from 89.9% to 89.4%, reflecting the increase in oil and gas rig counts during the month; while the operating rate for utilities obviously fell with lower production, from 78.7% to 75.9%…….our FRED graph for this report below shows the percentage of capacity in use for all industries monthly since 2007 in pink, while it shows the the seasonally adjusted industrial production index values for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0… 

July 2014 industrial production

July Producer Prices Inch Up 0.1% on Services

according to the Producer Price Index for July from the BLS, the seasonally adjusted producer price index for final demand rose 0.1% after rising 0.4% in June and falling 0.2% in May, and now indicates wholesale prices are 1.7% above year earlier levels…in July, the index for final demand for services rose by 0.1%, as the index for final demand of transportation and warehousing services, a measure of the margins received by such services, rose by 0.5%, while the margins for final demand trade rose 0.2%, while producer prices for services other than trade, transportation, and warehousing were unchanged, as a 1.9% decrease in prices for consumer loan services was offset by a 2.0% increase in portfolio management services….meanwhile, the price index for final demand for goods, aka ‘finished goods’, was unchanged after rising 0.5% in June, as a 0.6% decrease in the price index for final demand energy offset a 0.4% increase in the price index for final demand for food and a 0.2% increase in core wholesale goods…among wholesale finished food prices, oilseeds were priced 16.5% lower, fresh eggs were off 12.9%, grains were 12.2% lower, and producer prices for fish were 11.% higher inJune, while a 2.1% drop in wholesale gasoline prices was the major factor in the drop in energy prices…

this report also showed the price index for processed goods for intermediate demand rose 0.1%, as a 0.4% increase in intermediate processed foods and feeds and a 0.3% increase in intermediate core producer prices was offset by a 0.3% decrease in prices for intermediate processed energy goods….meanwhile, the price index for intermediate unprocessed goods fell 2.7% on a 0.4% drop in producer prices for for unprocessed foods and feeds and a 6.4% decline in the index for raw energy materials, while prices for unprocessed nonfood materials less energy were unchanged……finally, the price index for services for intermediate demand rose 0.3% in July, mostly on a 0.3% increase in the index for prices for services less trade, transportation, and warehousing for intermediate demand and a 0.5% increase in prices for transportation and warehousing services for intermediate demand…over the 12 months ended in July, the index for services for intermediate demand rose 1.7%…

2nd Quarter Household Debt Slips 0.2% with Delinquencies at a 7 Year Low

the New York Fed’s 2nd Quarter Report on Household Debt and Credit (pdf), indicated that total household debt, including real estate debt, slipped by $18 billion in the 2nd quarter to $11.63 trillion, a 0.2% decrease from the 1st quarter debt level…mortgages, the largest component of the aggregate, fell by 0.8% or $69 billion to $8.10 trillion, and home equity lines of credit fell by $5 billion to $521 billion, a 1.0% drop, while non-housing debt rose by 1.9%, with increases in all categories, as auto loan balances increased by $30 billion; student loan balances increased by $7 billion; credit card balances increased by $10 billion, and other non-housing credit balances increased by $9 billion….while up 4.3% from the $11.15 trillion debt level of the 2nd quarter last year, aggregate household debt still remains 8.2% below the peak of $12.68 trillion reached in the 3rd quarter of 2008…

the first bar chart below from this 31 page graphic presentation shows the components of total household debt nationally for each quarter since the beginning of 2003, with each bar on the graph representing a quarter of a year, and within each bar is a color coded representation of the amount in trillions of dollars of each type of debt that was outstanding at the end of that given quarter…in each bar, orange represents the amount of mortgage debt that was outstanding at the end of that quarter, violet indicates the amount of home equity loans outstanding, green is the amount of auto loans outstanding, blue is unpaid credit card debt, red are student loans outstanding, and grey is ‘other’ debt outstanding in the quarter….we can see that the aggregate total debt outstanding has been increasing over the past year, despite being flat this quarter, and that student loan debt has now expanded to 10% of the total, or one seventh of the amount of mortgage debt…note that although mortgage debt is considerably lower than at the peak, this report and its graphics does not distinguish between mortgage debt that has been paid off and mortgage debt that has been extinguished through a foreclosure or a short sale….

2nd quarter 2014 household debt components

>delinquency rates improved on all types of debt in the second quarter, with 6.2% of debt at some stage of delinquency, the lowest delinquency rate since the 3rd quarter of 2007, in contrast to an overall delinquency rate of 6.6% at the end of the first quarter…of the $724 billion of debt that was delinquent at the end of the quarter,  $521 billion was classified as seriously derogatory, meaning it was more than 90 days past due…new delinquencies also fell, with just 1.2% of current mortgage balances transitioning into delinquency during the quarter, the lowest new mortgage delinquency rate since 2000….the next bar graph below uses the same color coding for the type of loans represented as the graph above and covers the same time period; in this one, each bar has a color coded representation of the amount of newly delinquent loans by type as they first became delinquent in each quarter; here we can see a pretty clear peak with over $400 billion of household debt becoming delinquent for the first time in the last quarter of 2008; we can also see that newly delinquent student debt, or the red in each bar, has become larger as time goes on, and also clearly see how newly delinquent mortgage debt in orange dropped seasonally in the most recent quarter, just as was noted by the MBA 2nd quarter delinquency survey last week…  

2nd quarter 2014 household debt new delinquencies

June Job Openings at a 13 Year High

 

according to Job Openings and Labor Turnover Survey for June (JOLTS) from the Bureau of Labor Statistics, seasonally adjusted job openings rose by 92,000 to 4,671,000 in June, while jobs open at the end of May were revised down by 58,000 from the originally reported 4,635,000 openings to 4,577,000….job openings in professional and business services rose by 46,000 and job openings in retail sales rose by 22,000, while job openings in accommodation and food services fell by 56,000 in June after rising by 55,000 in May….job openings as a percentage of the employed labor force rose to 3.3% from 3.2% in May, up from 2.8% a year earlier and up from 2.7% in January…based on 9,474,000 officially unemployed in June, there would be 2.1 unemployed who were actually looking for work during June for every job opening; that, of course, does not count those who might have wanted a job but didn’t look for work during the month…

this JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and ‘other separations’, which include retirements and death…. in June, seasonally adjusted new hires totaled 4,830,000, up 92,000 from the 4,738,000 hired or rehired in May, as the hiring rate as a percentage of all employed rose from 3.4% to 3.5%, and up from 3.2% a year earlier…total hiring in the professional and business services category increased by 68,000 to 1,031,000 in June, while hiring in construction fell by 37,000 to 264,000….total separations also rose, from 4,530,000 in May to 4,547,000 in June, as the separations rate as a percentage of the employed remained unchanged at 3.3%, while it was up from 3.1% a year ago…subtracting the 4,547,000 total separations from the total hires of 4,718,000 would imply an increase of 283,000 jobs in June, slightly less than the revised payroll job increase of 298,000 for June reported by the BLS establishment survey two weeks ago, a difference not unexpected between these two surveys that both have wide confidence intervals…

further breaking down the seasonally adjusted job separations, we find 2,534,000 quit their jobs in June, 47,000 more than the revised 2,487,000 who quit their jobs in May, while the quits rate, an indicator of worker confidence which is being watched by the Fed, remained unchanged at 1.8% of total employment…..in addition to those who quit, another 1,622,000 were either laid off, fired or otherwise discharged in June, down 126,000 from 1,701,000 discharges in May, which left the discharges rate at 1.2% of all those who were employed during the month….meanwhile, other separations, which includes retirement and death, were at 391,000 in June, up a bit from 387,000 in May, for an ‘other separations’ rate of 0.3%, which was unchanged….our FRED graph for this report below shows job openings in blue in thousands monthly since January 2005, and monthly hires in orange and monthly separations in violet over the same span.note that when separations in purple were above  hires in orange we were losing jobs…the two major components of separations are also included, the count of layoffs and firings is tracked in red, while the number of those quitting their jobs monthly is shown in green…. 

June 2014 JOLTS

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)