Automotive production sets seasonally adjusted record in April.
Economic indicators for the consumer and industrial sectors generally are trending up in May compared to April, but inventories are looking less lean. Housing indicators are mixed so far.
Industrial production and manufacturing
The most interesting takeaway from the Federal Reserve’s industrial production data release for April is that motor vehicle and parts production jumped 9.3% to a seasonally adjusted all-time high, surpassing December 2018 for the distinction.
The fact that a December – a month that normally includes significant holiday downtime – previously held the seasonally adjusted record should signal caution in interpreting the data. On a not seasonally adjusted basis, December 2018 ranks 95th in automotive output since the data series began in 1972.
While April was a record for seasonally adjusted output, it was only 13th on an unadjusted basis. March’s unadjusted output was stronger than April’s but was only 45th all time, seasonally adjusted.
Automotive output was mostly responsible for the 1% seasonally adjusted increase in manufacturing output. Excluding motor vehicles and parts, manufacturing production increased 0.4%.
Overall industrial production increased 0.5% in April after no change in February and March following revisions. Mining output increased 0.6% while utilities output fell 3.1%.
Retail and food service sales
Adjusted for inflation, retail and food service sales barely moved in April, ticking up just 0.1%. In current dollars, sales rose 0.4%. Gains followed both typical prior-month updates and an annual data revision.
In total, revisions were minor at about 1.2% lower for March than the initial estimate, although changes varied notably by sector. For example, the revisions lowered March sales by 5.9% for food services and drinking places and by 3.7% for non-store retail.
A few significant upward revisions offset most of those declines, however. Sales for general merchandise stores are now 2% higher for March than the prior estimate. Sales for motor vehicle and parts dealers were revised 0.5% higher – a small change but one that affects total retail sales significantly as it is the largest retail category.
Changes m/m in April were mixed. The largest was a 3.3% drop in sales for sporting goods, hobby, musical instruments & book stores. The largest gains were 2.4% for miscellaneous store retailers and 1.2% for non-store retailers. Aside from a 1.1% gain for department stores, all other sectors saw increases or decreases of less than 1%.
Inventories
March data on inventories shows a retail sector that has normalized but a wholesale sector that might have accumulated too much inventory.
The annual data revision for retail sales resulted in a significantly different picture for inventories relative to sales, especially excluding the automotive sector. Prior data showed not only that inventories excluding auto were still leaner than the pre-pandemic period but also that becoming leaner still. The revised data indicates that inventories relative to sales are essentially back to the pre-pandemic level and not clearly moving in either direction.
While inventories no longer look so lean in retail excluding motor vehicles and parts, they do not seem to pose a near-term threat for an inventory correction. The same might not be true for the wholesale sector.
The wholesale inventories-to-sales ratio of 1.4, seasonally adjusted, in March matches that in June 2020 and has been exceeded only three other times – during lockdowns in April and May 2020 and, just barely, in January 2009 during the Great Recession.
Residential construction
Housing starts rose 2.2% m/m, seasonally adjusted, in April but that followed a substantial downward revision of initial March estimates. The April figure is 1.3% below what the Census Bureau originally reported as the March rate of housing starts. The April data release also includes revisions of seasonally adjusted estimates back to January 2017, but those revisions are quite small.
Starts were up m/m for both single-family homes and units in multi-family buildings of five or more units. Multi-family starts in April were 6.9% above the February 2020 level. Single-family starts were 18.6% lower than February 2020.
Permits authorized for future home construction declined 1.5% m/m, but the Census Bureau had revised the initial March estimate higher. Single-family permits increased 3.1% while multi-family permits fell 9.7%. Even so, multi-family permits in April were 23.6% higher than in February 2020 while single-family permits were down 13.3%.
April saw a sharp drop in seasonally adjusted housing completions. The number of homes under construction ticked up 0.4%, but single-family homes under construction fell for the 11th straight month while multi-family units under construction have been rising steadily for two years.
Sales of existing homes
Sales of existing single-family homes fell 3.5%, seasonally adjusted, in April. The decrease was the second in a row following a 14.2% spike in February. Sales have now fallen in 14 of the past 15 months and are down 22.4% y/y and 24.7% from February 2020.
The inventory of homes on the market at current sales rates moved up to 2.8 months from 2.6 months in March, but that supply is still tight compared to the pre-pandemic norm. Tight supply is one factor that the National Association of Realtors cited for the recent volatility in sales activity. Other factors include job growth and fluctuating mortgage rates that “have created an environment of push-pull housing demand.”
The median price of an existing single-family home sold in April was $393,000, which is up 3.6% m/m but down 2.1% y/y. Home prices remain greatly inflated relative to the pre-pandemic era. In the latest month, the median sales price of a single-family home solid was 44.2% higher than a home sold in February 2020.
Next week brings data on sales of new homes.
Diesel and petroleum prices
The national average price of diesel declined 2.5 cents to $3.897 a gallon during the week ended May 15. Over the past 15 weeks, diesel prices have risen only once, and the total drop in prices during that period has been nearly 73 cents a gallon. In the 47 weeks since diesel hit a record of $5.81 a gallon, diesel has increased week over week only 9 times.
Diesel prices fell on average in all regions during the latest week with decreases ranging from only four-tenths of a cent in the Midwest to just over 13 cents in New England, where diesel prices are now nearly $2.19 cents lower than they were a year ago.
The underlying factors that typically drive diesel prices are mixed. Crude prices remain stable with West Texas Intermediate trading in the low $70s per barrel. However, the latest week continued to bring tighter distillate inventories. U.S. distillate stocks are at their lowest levels since October. The principal culprit is the Midwest, where inventories have been falling steadily for two months and are now at their lowest level since December 2020.
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