U.S. Retail Sales Increase Firmly

The Empire State Manufacturing Index of General Business Conditions increased to 25.6 in August, its highest level since October. The Action Economics Forecast Survey expected a reading of 20.0. These data, reported by the Federal Reserve Bank of New York, reflect business conditions in New York, northern New Jersey and southern Connecticut.

Haver Analytics calculates a seasonally adjusted index that is comparable to the ISM series. The calculated figure rose to 56.6, from 55.2 but that remained below the June high of 58.2. During the last ten years, the index had a 68% correlation with the q/q change in real GDP.

Most of the components of the Empire State Survey improved this month. The shipments, unfilled orders, inventories and the delivery times readings rose. The new orders fell modestly, however, for a second month.  

The number of employees series also fell for a second month, but remained up sharply from its January low. During the last ten years, there has been a 77% correlation between the employment index and the m/m change in factory sector payrolls. A lessened 20% of respondents reported increased employment while a stable 7% reported a decease. The employee workweek reading improved moderately but remained well below its April high.

The prices paid index nudged higher following sharp declines in the prior two months. Forty-six percent of respondents indicated increased prices, while just one percent reported a decline. Prices received fell to the lowest level since December.

The series measuring expectations of business conditions in six months improved following a sharp decline in July.

The Empire State figures are diffusion indexes, which are calculated by subtracting the percent of respondents reporting declines from those reporting gains. The data are available in Haver's SURVEYS database. The ISM-adjusted headline index dates back to 2001. The Action Economics Forecasts can be found in Haver's AS1REPNA database.

Total business inventories increased 0.4% (4.4% y/y) during May following a 0.3% April increase. Total business sales strengthened 1.4% (8.6% y/y), following a 0.6% gain. The inventory-to-sales ratio slipped to 1.34. It peaked early in 2016 at 1.43.

Retail inventories increased 0.4% (2.2% y/y) in May, the same as during April. Auto inventories grew 0.9% (1.9% y/y) after a 0.8% rise. Non-auto retail inventories edged 0.1% higher (2.4% y/y) following a 0.2% increase. General merchandise inventories rose 0.3% (0.9% y/y) after a 1.0% surge. In the department store sector, inventories edged 0.2% higher (-3.2% y/y) following a 0.7% rise. Building materials inventories gained 0.7% (6.1% y/y) after a 0.6% increase, while clothing store inventories fell 0.7% (-0.8% y/y), down for the third straight month. Inventories of furniture, electronics and appliances declined 0.9% (-0.7% y/y), the fourth decline this year. As reported last week, wholesale inventories increased 0.6% (5.9% y/y) following a 0.1% uptick. Factory sector inventories rose 0.2% (5.2% y/y) following a 0.4% gain.

Retail sales increased 1.1% in May (6.5% y/y) with non-auto sales up 1.2% (7.1% y/y) after a 0.5% rise. Wholesale sector sales increased 2.5% (11.8% y/y) after improving 1.4%. Shipments from the factory sector rose 0.6% (7.3% y/y) following a 0.1% uptick.

The inventory-to-sales (I/S) ratio in the retail sector slipped to 1.43 in May, down sharply from the levels averaged during the prior two years. The non-auto I/S ratio declined to 1.20, its lowest level since early-2012. The ratio peaked at 1.29 early in 2016. The wholesale sector I/S ratio fell sharply to 1.24, its lowest level since November 2014. The manufacturing sector I/S ratio held steady for the third month at 1.35, its lowest point in three years.

The manufacturing and trade data are in Haver's USECON database.