This week’s economic news was upbeat, as July numbers for consumer spending and industrial production showed improvement.
U.S. retail and food services sales for July were $403.9 billion, up 0.8 percent from June and 4.1 percent above July 2011. More importantly, the big movers for July were furniture sales, building supply sales and sporting goods stores which seems to indicate more discretionary spending. The excitement is mitigated by the fact that June sales were very weak, inviting an easy comparison.
Industrial production in July rose 0.5 percent in July and was up 5.0 percent year-over-year. Production of durable goods increased 0.8 percent with gains of more than 1 percent in computer products, motor vehicles, and aerospace and transportation equipment. Mining output rose 1.2 percent in July with gains in oil and gas extraction, coal mining and metal mining.
Philip Morris International
Sources: Federal Reserve, Census and company websites
Economic news is subdued this week. The consumer has retrenched, as reflected in a weak consumer confidence report and decreased consumption. New orders for goods also dropped reflecting the problems in Europe and Asia. ADP reported slower growth in employment.
According to the Institute for Supply Management, new orders for goods contracted for the second month as demand from Europe and Asia declined. The New Orders Index was 48 percent, an increase of 0.2 percentage point from June, but still below 50, the point at which there is expansion However, the Production Index and the Employment Index registered over 50 at 51.3 percent and 52 percent,
respectively. “Of the 18 manufacturing industries, seven are reporting growth in July in the following order: Plastics & Rubber Products; Electrical Equipment, Appliances & Components; Primary Metals; Petroleum & Coal Products; Fabricated Metal Products; Food, Beverage & Tobacco Products; and Furniture & Related Products. The 11 industries reporting contraction in July — listed in order — are: Nonmetallic Mineral Products; Apparel, Leather & Allied Products; Wood Products; Textile Mills; Miscellaneous Manufacturing; Chemical Products; Transportation Equipment; Printing & Related Support Activities; Paper Products; Machinery; and Computer & Electronic Products.”
ADP reported that employment increased by 163,000 between June and July, which exceeded expectations. However, it did not grow as much as it did last month, when employment was up by a revised 172,000. The service-providing sector added the most jobs (148,000), after adding 151,000 jobs in June. Construction also rose, but only by 5,000, for the second month. Carlos A. Rodriguez, president and chief executive officer of ADP, said: “According to this month’s ADP National Employment Report, the U.S. economy added 163,000 jobs in July. This increase marks two-and-half years of positive job growth. According to our data, businesses across the country have restored nearly 4 million jobs during this period.”
While personal income increased $61.8 billion, or 0.5 percent, personal consumption decreased $1.3 billion, or less than 0.1 percent. Private wage and salary disbursements increased $31.9 billion in June, compared with an increase of $9.7 billion in May. Services-producing industries’ payrolls increased $24.2 billion, compared with an increase of $16.1 billion. Rental income increased $2.5 billion in June, compared with an increase of $2.3 billion in May. Disposable personal income (DPI) — personal income less personal current taxes — increased $52.4 billion, while the personal saving rate — personal saving as a percentage of DPI — was 4.4 percent in June, compared with 4.0 percent in May.
The Consumer Confidence Survey, which had declined in June, showed some improvement in July, but stayed relatively subdued at 65.9, up from 62.7 in June. The Present Situation Index, decreased slightly to 46.2 from 46.6 a month ago.
Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Despite this month’s improvement in confidence, the overall Index remains at historically low levels. Consumers’ attitude regarding current conditions was little changed in July, but their short-term expectations, which had declined last month, bounced back. However, while consumers expressed greater optimism about short-term business and employment prospects, they have grown more pessimistic about their earnings. Given the current economic environment — in particular the weak labor market — consumer confidence is not likely to gain any significant momentum in the coming months.”
Sources: Conference Board, BEA, ADP, ISM and Company websites