United States
Core retail sales (ex auto’s, gasoline and building materials) in July rose .6% m/o/m, two tenths more than expected and also off a higher than expected base as June was revised up by 2 tenths. Auto sales/parts were up by 1.2% m/o/m, higher for a 4th straight month and up 5.5% y/o/y. As July auto sales were reported down 6% y/o/y a few weeks ago, I have no idea where the government number comes from because it squares with nothing. Building materials grew a solid 1.2% m/o/m and are up 8.5% y/o/y which Home Depot today can confirm. Online sales were remained very positive, up by 1.3% m/o/m and 11.4% y/o/y (thank you Amazon Prime Day). Restaurant/bar sales were up by .3% m/o/m but slowed to just 2.1% y/o/y, a big come down from the past few years and confirmed by the sales data from a variety of restaurant companies. Department store sales rebounded with a 1% m/o/m rise but are still down 1.3% y/o/y. Sporting goods sales rose m/o/m but are down by 5.7% y/o/y (see DKS today). Clothing sales fell a hair from June and are flat y/o/y. Sales of electronics were a particular drag, down for a 3rd straight month and lower by 1.4% y/o/y. Furniture sales grew by 4.3% y/o/y.
Bottom line, after the slowest y/o/y core sales gain since March 2016 in June of 2.5%, they rose by 3.6% y/o/y in July which is about in line with the 5 year average of 3.3%. This pace though still remains well below the 5%+ growth rates in the two prior recoveries. Here are some reasons why: many consumers have jobs but we know accelerating wage gains remain spotty, the savings rate is near the lowest level since 2008, and credit card debt, student loans and car loans each total $1T+. Lastly, we know healthcare spending (high deductibles) and rent have dominated the budgets of many.
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The NY manufacturing August index saw a large rebound to 25.2 from 9.8, was well above the forecast of 10 and is at the best level since 2014. New orders rose by 7.3 pts to 20.6 after falling by almost 5 last month. Backlogs though remained negative at -4.7 for a 2nd month. Inventories went negative too. Employment was higher by 2.3 pts to 6.2 but that is below the 6 month average of 8.7 while the Workweek was up by 11 pts to a 5 month high. Prices paid jumped 10 pts to a 4 month high coincident with the rebound in commodity prices but prices received fell almost 4 pts. There is growing business optimism for the next 6 months as this component rose 10 pts to the best since January. I’d guess the weaker dollar is helping with that. The big disappointment though was capital spending plans which fell almost 4 pts to the weakest level since September 2016 and planned spending on technology dropping to the lowest level in 5 months.
Bottom line, as this is the first August industrial number seen, let’s hope that its confirmed by the other regional survey’s because if so, US manufacturing started the middle month of the quarter on a good note. Maybe the softer US dollar has something to do with that. This said, the capital spending plans were punk and still remain the key missing link to this recovery.
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The weaker dollar did not have any noticeable impact on import prices in July as they grew by .1% m/o/m and 1.5% y/o/y as expected. The y/o/y gain is unchanged with June and are up just .6% y/o/y ex food and fuels. Either way, this number is never market moving.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.