Two Recent, and Troubling, Pieces of the Economic Puzzle: Retail Sales and Industrial Production

By at 15 May, 2019, 1:56 pm

by Raymond J. Keating-

Figuring out what’s going on with the economy often is like piecing together a puzzle. When each piece is put in place, one hopefully gains an improved look at the overall picture. At the same time, though, the picture itself can be unclear. For good measure, since we are talking about an economy involving nearly 330 million people, more than 30 million businesses, and integrated into the global economy, things are constantly changing.

Two puzzle pieces were published on May 15.

Retails Sales Down

First, the U.S. Census Bureau released its latest take on retail sales. In April, retail and food services sales declined by 0.2 percent. That decline contrasted with market expectations for a small gain. Even after excluding autos and gas, sales still fell by 0.2 percent.

What’s striking about the recent trend is how volatile the numbers have been. Consider that March saw a big jump of 1.7 percent, which followed a small decline in February (-0.2 percent), a gain in January (+0.7 percent), a big decline in December (-1.6 percent), and a tiny gain in November (+0.1 percent).

Compared to a year earlier, retail sales were up by 3.1 percent in April.

These retail sales numbers mark a poor start to the second quarter. It should be noted that while real GDP growth increased by 3.2 percent in the first quarter (hitting exactly on the post-World-War-II average rate), personal consumption expenditures grew by only 1.2 percent, which was a marked slowdown from the previous three quarters.

Manufacturing Output Down

Meanwhile, the April industrial production numbers from the Federal Reserve also released on May 15 offered an even more troubling warning regarding the industrial sectors of our economy, in particular, manufacturing.

Industrial production (that is, the real output of the manufacturing, mining, and electric and gas utilities) in April declined by 0.5 percent. In fact, industrial production has declined in three of the first four months in 2019, after experiencing no growth in December of last year. That’s a troubling five-month stretch in which industrial production has declined by 1.2 percent.

As for manufacturing output – the largest chunk of industrial production – it also declined by 0.5 percent in April. Through the first four months of 2019, manufacturing production has declined in three months, and was flat in one month. Over that period, manufacturing production declined by 1.6 percent.

Source: Federal Reserve Bank of St. Louis, FRED

Compared to a year earlier, the growth in industrial production slowed to 2.0 percent, and manufacturing output growth decelerated to only 1.0 percent. For all of 2018, industrial production had grown by 3.9 percent, and manufacturing output by 2.3 percent.

These numbers point to a poor start to the second-quarter economy, and raises more questions about the direction of the 2019 economy along with current trade policies that are raising costs and reducing opportunities for U.S. small businesses.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

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