U.S. Personal Income and Outlays – July 2018

Released Thursday, August 30, 2018

Download PDF version herePersonal Income: +0.3% month-over-month (Cons: +0.4%), +4.7% year-over-year
Personal Consumption Expenditures: +0.4% month-over-month (Cons: +0.4%), +5.2% year-over-year
Core PCE Price Index: +0.2% month-over-month (Cons: +0.2%), +2.0% year-over-year
Savings Rate: 6.7%, unchanged year-over-year

Quick Take:
Personal income rose +0.3% month-over-month in July, slightly below economists’ estimates. Year-over-year personal income growth was +4.7%, down from +4.8% growth in June. Wages and salaries, which make up ≈50% of personal income, grew +4.7% year-over-year in July, down from +4.9% growth in June.

Nominal personal consumption rose +0.4% month-over-month in July, in line with economists’ expectations. Nominal personal consumption growth in July was driven by services and nondurable goods spending, both of which rose +0.4% month-over-month, respectively.

July’s personal income and spending data suggests the U.S. consumption picture remains on solid footing. Year-over-year personal consumption growth reached the highest level in almost four years, and while the recent acceleration in growth has been driven primarily by food services and gasoline consumption, overall strength remains broad based, with both goods and services spending growing at over +5.0% year-over-year.

On the inflation side, month-over-month growth for the core PCE price index was +0.2% in July. Year-over-year growth was +2.0%, the highest pace of growth since April 2012. The housing category continues to be a large contributor to overall inflation, as housing and utilities prices were up +3.1% year-over-year as of July.

Notable Data:
Real disposable income, an indicator of purchasing power, was up +0.2% month-over-month in July and rose +2.9% year-over-year, down from +3.0% growth in June. On a 6-month annualized basis, real disposable income was up +2.6% in July.

Services spending, which makes up approximately two-thirds of personal spending, rose +5.2% year-over-year in July, the highest pace of growth since December 2016.

Real personal consumption rose +0.2% month-over-month in July after rising +0.3% for three consecutive months. On a year-over-year basis, real personal consumption rose +2.8%, up from +2.7% in June.

U.S. Durable Goods – July 2018

Released Friday, August 24, 2018

Download PDF version hereDurable Goods Orders: -1.7% month-over-month (Cons: -1.0%); +9.2% year-over-year
Durable Goods Shipments: -0.2% month-over-month; +7.5% year-over-year
NDCGXA Orders: +1.4% month-over-month (Cons: +0.5%); +8.5% year-over-year
NDCGXA Shipments: +0.9% month-over-month (Cons: +0.3%); +7.5% year-over-year

Quick Take:
Durable goods orders fell more than expected in July but NDCGXA orders were higher than economists’ expectations. NDCGXA orders rose +1.4% in July, while June’s rise was revised up to +0.6% from +0.2% originally.

NDCGXA orders, which are a good proxy for business CapEx, have risen consistently since the beginning of Q2. Over the last four months, NDCGXA orders have averaged a +1.2% monthly increase. On a year-over-year basis, growth in NDCGXA orders was +8.5% in July, up from +8.2% as of June and the highest pace of growth since January.

Business investment has been a consistent contributor to real GDP growth since the beginning of the year, over which time year-over-year growth in NDCGXA orders has averaged +7.1%, higher than the average growth of +6.7% in 2017. While we do not anticipate NDCGXA order growth to sustainably return to the 10%+ levels seen in the early part of the economic cycle, we do note that recent trends are worth monitoring.

Notable Data:
The strength in NDCGXA orders in July was driven by increases in computer and electronic products orders (+1.1% month-over-month) and machinery orders (+0.6%). Machinery orders, which make up approximately half of NDCGXA orders, were up +5.8% year-over-year.

NDCGXA shipments, which typically move in tandem with NDCGXA orders and flow into GDP readings, were also stronger than expected, rising +0.9% month-over-month in July. NDCGXA shipments were up +7.5% year-over-year, up from +7.3% growth in June.

U.S. Retail Sales – Jul 2018

Released Wednesday, August 15, 2018

Download PDF version hereRetail Sales: +0.5% month-over-month (Cons: +0.1%); +6.4% year-over-year
Core Retail Sales: +0.5% month-over-month (Cons: +0.4%); +4.8% year-over-year

Quick Take:
Retail sales came in above economists’ expectations in July, rising +0.5% month-over-month. However, June headline retail sales were revised to a +0.2% month-over-month increase, down from +0.5% originally.

Headline retail sales were up +6.4% year-over-year as of July, up from +6.1% growth in June. Year-over-year growth reached the highest level since February 2012.  Part of the strong headline year-over-year growth has been powered by gasoline station sales, which have benefitted from higher gasoline prices and are up +22% year-over-year.  That said, excluding gasoline sales, retail sales growth remains a very solid +5.1% year-over-year.

Core retail sales increased +0.5% in July, above the consensus estimate. Year-over-year core retail sales growth was +4.8% in July, up from June’s +4.7% year-over-year growth. June core retail sales month-over-month growth was revised to -0.1% from a flat reading in the original estimate.

July’s retail sales data indicates that consumer spending remains a bright spot of the U.S. economy, with year-over-year growth accelerating in both the headline and core sales measures. Growth in July was broad based as nine out of thirteen major spending categories showed increases in the month. On a year-over-year basis, spending on all major categories except sporting goods stores grew at rates above +3.0%. The current pace of +4.8% year-over-year growth in core retail sales remains at the high-end of the range for the current economic expansion.

Notable Data:
Significant July gains were made in clothing stores (+1.3% month-over-month), food services and drinking places (+1.3% month-over-month), gasoline stations (+0.8% month-over-month), and general merchandise stores (+0.7% month-over-month). Spending declined at sporting goods stores (-1.7% month-over-month), furniture stores (-0.5% month-over-month), health and personal care stores (-0.4% month-over-month), and miscellaneous store retailers (-0.3% month-over-month).

Spending at non-store retailers, which consists largely of e-commerce sales, rose +0.8% month-over-month in July and now makes up ~20% of core retail sales. Non-store retailer sales were up +8.7% year-over-year in July.

U.S. Industrial Production – Jul 2018

Released Wednesday, August 15, 2018

Download PDF version hereIndustrial Production: +0.1% month-over-month (Cons: +0.3%); +4.2% year-over-year
Manufacturing Production: +0.3% month-over-month (Cons: +0.3%); +2.8% year-over-year
Capacity Utilization: 78.1% (Cons: 78.2%); (78.1% prior month)

Quick Take:
Headline industrial production increased +0.1% month-over-month in July, which was below economists’ estimates of a +0.3% increase. Mining production declined for the first time since January, falling -0.3% month-over-month, while utilities production fell -0.5% in July. Manufacturing production rose 0.3%, which was in line with economists’ estimates. June industrial production was revised to a +1.0% increase from the initial reading of +0.6%, driven by upward revisions to mining and utilities production.

In July, year-over-year headline industrial production growth reached its highest level since February 2012, driven by mining production and durable goods manufacturing, which together accounted for over 80% of the year-over-year growth in headline industrial production. Taking a step back, while year-over-year manufacturing production growth has improved considerably since 2016, the current pace of +2.8% annual growth remains subdued relative to the early part of this economic cycle as well previous economic expansions. Nevertheless, the recent acceleration in manufacturing suggests demand remains healthy, which is consistent with the current levels of consumption growth and low levels of unemployment.

Notable Data:
Year-over-year growth in headline industrial production was +4.2% in July, up from +4.0% growth in June. Mining production grew +12.9% year-over-year, down slightly from +13.0% growth in the prior month. Utilities production was up +2.3% on a year-over-year basis, lower than June’s +3.7% pace of growth.  Manufacturing production was up +2.8% year-over-year as of July, the highest pace of growth since June 2012.

In July, durable manufacturing increased +0.4% month-over-month as motor vehicles and parts production rose +0.9% month-over-month and computer and electronic product manufacturing rose +1.3%. On a year-over-year basis, durable manufacturing increased +4.5% year-over-year. Non-durable manufacturing increased +0.2% month-over-month in July and was up +1.4% year-over-year.

Capacity utilization for headline industrial production was unchanged at 78.1% in July, while capacity utilization for manufacturing rose to 75.9% from 75.7%.