U.S. Retail Sales Fell in August U.S. retail sales declined in August, a cautious signal about consumers’ ability to remain the primary driver of economic growth this year.
Sales at retail stores, online and at restaurants fell 0.3% in August to a seasonally adjusted $456.32 billion last month, the Commerce Department said Thursday. It was the first decline in retail sales since March. Sales increased 0.1% in July, a small upward revisionfrom an initial flat reading.
Excluding autos, retail sales last month fell 0.1%. (…)
Retail sales were up 1.9% in August from a year earlier, outpacing weak growth in consumer prices over the past year. But sales growth slowed from July’s annual increase of 2.4%.
Excluding both autos and gasoline, sales were down 0.1% last month.
Because of food and gasoline deflation, analysis of retail sales data has become unusually complex. Doug Short has some good charts:
This is for total sales:
Core retail sales, which exclude autos, were down 0.1% in August after –0.4% in July. They had jumped 0.8% in June.
Control sales excludes Restaurant and Bars, everything autos-related and building materials (that series goes into GDP calculations). Control sales declined 0.1% in each of the last 2 months after +0.3% in June. Last 3 months: +0.1% (+1.2% annualized). Two months into Q3: –0.2% (-2.4% annualized).
On a YoY basis, we have done a 180 degrees. September will be important given that ‘’back-to-school’’ are often a good indicator for Christmas sales. Hopefully, things will turn upwards.
Doug also produces these two great charts to illustrate the permanent step down since the Financial Crisis:
Notice how the the gap between the blue and red lines has been widening in the last 12-18 months. Doug should send these charts to Mrs. Yellen.
The Liscio Report just published a report that showed that a mere 22% of states in their survey met or topped sales tax targets in August, down from 35% in July, and the mean YoY pace slowed to +0.8% from +1.3%. As I mentioned last week, the Beige Book used the word flat 56 times last week, surpassed only by the pre-Brexit angst and near-economic stagnation in the U.S. economy in March. (David Rosenberg)
On the more positive side, real Food services sales have bounced up a little in the past two months, although still within the downward channel. Not only has this sector been a big jobs producer, it also reflects trends in corporate budgets as explained in HARD HAT ZONE.
The NRA’s Restaurant Performance Index actually weakened in July but ticked up in August.
Business Inventories Unchanged in July as Sales Tick Down
Total business inventories decreased ever so slightly, -0.04% (+0.5% y/y), in July; June’s 0.2% rise was unrevised. Total business sales slipped -0.2% (-0.8% y/y), pausing after June’s 1.0% gain, which was revised from 1.2%.
Retail inventories went down 0.3% in July (+4.4% y/y), reversing a rise of 0.4% in June; that was revised from 0.5% reported before. Inventories excluding motor vehicles and parts dealers also fell 0.3% (2.9% y/y) following a 0.2% rise. Motor vehicle & parts inventories decreased -0.2% (+8.8% y/y), pausing after June’s 0.8% advance. (…)
The inventory-to-sales ratio was unchanged at 1.39 in July, its lowest level since November. The retail sector ratio moved down to 1.49 from June’s 1.50, while the I/S ratio excluding autos was flat at 1.27, still the lowest since August 2015. Stocks at motor vehicle & parts dealers were lower relative to sales, at 2.23 in July versus 2.28 in June.
U.S. Industrial Production Declines
Industrial output declined 0.4% during August (-1.1% y/y) following a 0.6% July increase, revised from 0.7%. It was the first production decline in three months and compared to a 0.2% shortfall expected in the Action Economics Forecast Survey.
U.S. PPI Pressures Stay at Bay
In August, the U.S. PPI for final demand was dead flat with the core (excluding food and energy) up in the month by a thin 0.1%. The PPI is coming off a volatile streak; it rose by 0.5% in June and then fell by 0.4% in July.
The PPI headline and core are no longer accelerating in terms of their sequential rates of growth. The headline PPI is flat over 12 months, up at a 1.1% pace over six months, and up at a slower 0.7% annual rate over three months.
The core PPI for final demand is up by 1% over 12 months and rising at a 0.7% annualized rate over periods of six months and three months. This is pretty much steady state expansion at a pace well below the Fed’s target.
From all of the above:
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GDPNow takes a dive
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2016 is 3.0 percent on September 15, down from 3.3 percent on September 9. The forecast of third-quarter real consumer spending growth declined from 3.4 percent to 3.1 percent after this morning’s retail sales report from the U.S. Census Bureau. The forecast of third-quarter real government spending growth declined from 1.3 percent to 0.8 percent after Tuesday’s Monthly Treasury Statement from the U.S. Bureau of the Fiscal Service.
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Optimism Fades for Economic Boost By Year-End Cautious consumers, retrenching manufacturers and scant signs of inflation are diminishing optimism about a breakout in economic growth in the final stretch of the year.
Recent economic gauges, including evidence of a slowdown in August hiring, suggest the economy could be constrained for the rest of the year to a growth rate only slightly above the expansion’s overall 2% pace—the weakest of any since World War II. (…)
“We have not seen much change in the general economy in North America,” Dave Farr,chief executive of Emerson Electric Co., told investors Wednesday. “On the consumer side of our businesses we’ve seen growth, but even the consumers are being cautious…On the industrial side, companies continue to cut.” (…)
U.S. Households Make Long-Awaited Gains in Housing Recovery Middle-class families are starting to see their biggest housing challenges ease, according to new Census data.
Housing affordability is finally improving after years during which the struggle to pay rent swelled to crisis levels for many poor and middle-class Americans, according to an analysis of American Community Survey data released Thursday.
Jed Kolko, chief economist at job-site Indeed and senior fellow at the Terner Center for Housing Innovation at the University of California, Berkeley, said just over 49% of renters were cost-burdened in 2015, meaning they spent more than 30% of their incomes in rent, compared with about 50% a year earlier—the lowest level since 2008.
Indeed, across the board, there are signs that affordability challenges are beginning to ease. Some 33.6% of households were cost-burdened in 2015, meaning they spent more than 30% of their incomes on housing costs, down from 34.6% a year earlier, the fifth straight year of declines.
Much of the reason for the improvement in affordability for homeowners was low mortgage rates. Renters also appear finally to be seeing income gains that are outpacing rent growth.
There was also a surprising decline in the popularity of single-family rentals, which until now have seen the strongest gains of all housing stock coming out of the recession, with a 34% jump between 2006 and 2015. That trend may finally be starting to reverse as 16.8% of single-family homes were rented in 2015, down from 17% a year earlier–the first decline since 2006, according to Mr. Kolko’s analysis.
This is likely due to the fact that families who lost their homes during the foreclosure crisis and were forced to rent instead are once again becoming eligible to get mortgages and returning to homeownership.
Single-family home ownership had the biggest increase since 2007, jumping to 65.7 million owner-occupied single-family homes in 2015, from 65.2 million a year earlier. (…)
Other indicators, however, suggest there is less reason for optimism. The number of occupied rental apartments saw the biggest jump of all housing types, with a 1.7% increase in 2015 compared with 2014.
Moreover, the homeownership rate overall continued declining, hitting 63% in 2015, down from 63.1% a year earlier. And just 949,000 new households were created in 2015, a slight decline from 2014 and below normal levels of 1.2 million, according to Mr. Kolko.
This set of charts from JP Morgan summarizes housing affordability in the U.S.. All clear but for the borrowing end. People have little cash for the down payment and lending standards are too tight.
Canadian household net worth rose to an all-time high in Q2/16 but the debt-to-income ratio jumped to a record 167.6%
The net financial position of households improved in Q2/16 as household asset valuations advanced by 5.5% from a year-ago to reach $11.8 trillion. Higher home prices nationally underpinned a jump in real estate values, which in turn, supported a 6.2% increase in non-financial assets (to $5.6 trillion). A rise in financial asset values provided additional support (4.9% to $6.2 trillion).
Strong debt growth outpaced the rise in net worth with the debt-to-net worth ratio deteriorating by 0.1ppt to 20.1% while the debt-to-asset ratio remained unchanged at 16.7%.
The sustainability of this asset appreciation is becoming increasingly suspect given the emergence of a cooling in housing activity over the past few months with home price gains likely to be more modest going forward. Softer housing demand could temper credit accumulation, although the uptrend in debt burdens relative
to incomes is unlikely to subside materially in the near-term against a backdrop of low borrowing rates and sluggish economic growth.The limited capacity of the BoC to offset a negative shock given the already-low rate environment has them pointing to the need for fiscal measures to bolster growth and macro-prudential policies to directly address imbalances. (RBC)
NBF is not worried seeing that debt servicing seems very manageable…as long as interest rates don’t rise much.
(…) The meetings come after a year-long investigation by The Globe and Mail into questionable practices that may have contributed to a growing affordability crisis in the overheated real estate markets of Vancouver and Toronto. The Canada Revenue Agency this week launched a review into the actions of B.C. real estate speculators in light of a Globe report that uncovered possible tax evasion and fraud. (…)
“The federal government does have some pretty big tools and levers to pull, except anything we do for Vancouver – and maybe for Toronto, which is facing it a little bit – would possibly have unintended consequences in housing markets across the country that aren’t facing the same pressures. … And that’s why, yes, it’s an urgent situation to deal with, but it’s all the more important that we deal with it right the first time.” (…)
“It is a serious issue. On the other hand, the question is, what can you do about it without causing real harm?” he said. “The last thing you want to do, of course, is have a major market correction which could have a fairly broad implication for the economy. You don’t increase affordability by throwing people out of work, so you have to be careful about what you do … I wouldn’t think something really draconian is called for.”
NYSE’s report on investor leverage shows an increase this summer. This rise in leverage probably contributed to the sharp sell-off we saw in recent days.
(The Daily Shot)