Economic Landscape July 2021
- The ISM manufacturing index registered 60.6% for June, slightly slower than the 61.2% for May but consistent with the accelerated expansion throughout the quarter. Demand remained strong in June, however supply chain constraints, slow delivery times, and lack of available labor curbed potential along with higher prices for raw materials, parts, packaging, and transportation.
- Industrial production increased 0.4% in June following a 0.7% gain in May. Factory output edged 0.1% lower, and the ongoing shortage of semiconductors contributed to the 6.6% drop in auto assemblies. Mining production rose by 1.4% on growing oil and gas extraction, while utilities output rose 2.7% as air conditioning units were turned up with much of the country affected by the June heat wave.
- U.S. payrolls grew by 850,000 in June with the largest employment gains in leisure and hospitality; local, state, and private education; professional and business services; and retail trade. The economy has recaptured 15.6 million jobs since April 2020, but remains down by 6.8 million from the February 2020 pre-pandemic level. The official unemployment rate was 5.9% in June.
- Consumer prices pushed higher again in June as the Consumer Price Index rose 0.9%. Consumer food prices increased 0.8%, with grocery prices up 0.8% and prices for eating out up 0.7%. Energy prices advanced 1.5% for the month led by a 2.5% increase in gasoline prices. Prices for used cars and trucks jumped 10.5% and accounted for over one-third of the overall monthly increase. Core CPI rose 0.9% in June, and in addition to used cars and trucks, prices also increased for new vehicles (+2.0%); apparel (+0.7%); and shelter (+0.5%) – particularly for lodging away from home (+7.0%). Since June 2020, the headline CPI rose 5.4% and core CPI gained 4.5%.
- The Producer Price Index rose 1.0% in June. Services prices increased 0.8% and account for nearly 60% of the total monthly gain; prices for goods rose 1.2%. PPI excluding food, energy, and trade services slowed a bit from 0.7% in May to 0.5% for June. The price index for U.S. imports increased 1.0 in June. Higher prices for imported petroleum (+4.6%) and natural gas (+8.1%) contributed to the 4.7% gain in fuel import prices. Nonfuel import prices rose 0.7% for the month with gains in prices for industrial supplies (+1.9%); finished goods (+0.4%); and foods, feeds, and beverages (+1.9%). June export prices advanced 1.2% as prices rose for agricultural (+1.5%) and nonagricultural (+1.1%) items.
- Retail sales advanced 0.6% in June following a 1.7% retreat in May. Motor vehicle sales declined 2.0% in June reflecting the ongoing supply chain challenges. Excluding the auto sector, retail sales gained 1.3% for the month. Restaurant and bar sales increased 2.3% in June suggesting further recovery in services spending, and consumer spending on goods remained healthy with sales rising at electronics & appliance stores (+3.3%); grocery stores (+0.4%); health & personal care stores (+1.6%); gas stations (+2.5%); clothing stores (+2.6%); department stores (+5.9%); and nonstore retailers (+1.2%). Over the past twelve months, retail sales have increased by 18.0%.
LAND OF DEMAND
Economic activity continued to broadly rebound in June, closing out a strong second quarter despite being constrained by supply chain bottlenecks. Robust demand paired with transient supply limits have pushed prices higher, but producers will eventually start to catch up with demand alleviating some of the price pressure over time. While the recent uptick in COVID variant cases bears watching, the U.S. entered the third quarter with good momentum and strong consumer demand that bodes well for upcoming back-to-school sales.