Business Cycle Indicators and Retail Sales as of Mid-July 2021

Industrial production was released yesterday, and retail sales today.

Figure 1: Nonfarm payroll employment from June release (dark blue), Bloomberg consensus as of 7/16 for July nonfarm payroll employment (light blue +), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), consumption in Ch.2012$ (light blue), and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (7/1/2021 release), NBER, and author’s calculations.

Industrial production continued to rise in May, below Bloomberg consensus (0.4% vs. 0.6%), and at a slightly slower pace than recorded in the previous month. Manufacturing production declined slightly (-0.1% vs +0.2% consensus).

Nominal retail sales grew again, particularly so when excluding autos. Retail sales might provide some insights into the trajectory of two of the series included in Figure 1 — manufacturing and trade industry sales, and consumption — but the fit is not extremely tight.

Figure 2: Retail sales excluding food services, in mn 1982-84$ (teal), manufacturing and trade sales in bn. 2012$ SAAR (black). Retail sales ex-food deflated using CPI-all. Source: Census via FRED, BLS, St. Louis Fed via FRED, and author’s calculations.

Figure 3: Retail sales and food services, in mn 1982-84$ (teal), consumption, in bn 2012$ SAAR (purple). Retail sales using CPI-all. Source: Census via FRED, BEA, BLS, St. Louis Fed via FRED, and author’s calculations.

The latest observation for real manufacturing and trade sales is April, for consumption is May. Extrapolating with reference to retail sales, continued growth seems likely for the two series but hardly guaranteed.

Incorporating these retail sales data, Q2 NY Fed nowcast is 3.2%, Atlanta Fed GDPNow is 7.5%, and IHS-MarkIt is 8%.