Business Cycle Indicators, Mid-May

With the release of industrial production (1.1% m/m vs. 0.5% Bloomberg consensus; mfg 0.8% vs. 0.4% consensus), we have the April reading for another key indicator followed by the NBER BCDC.

Figure 1: Nonfarm payroll employment (dark 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. NBER defined recession dates, peak-to-trough, shaded gray. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (5/2/2022 release), NBER, and author’s calculations.

We also had retail and food service sales figures for April released today (0.9% m/m at consensus). Retail and food service sales are not core series followed by the NBER BCDC (at least in previous years), but they can — and are — used to inform views about consumption. I use the relationship in log differences between consumption and CPI-all deflated retail and food services sales to predict April consumption. I also use log differences of retail sales (deflated by PPI finished goods) to predict March and April manufacturing and trade industry sales. This yields the following picture.

Figure 2: Nonfarm payroll employment (dark blue), industrial production (red), personal income excluding transfers in Ch.2012$ (green), manufacturing and trade sales in Ch.2012$ (black), estimated sales for March and April (light black), consumption in Ch.2012$ (sky blue), estimated consumption for April (light blue_ and monthly GDP in Ch.2012$ (pink), all log normalized to 2020M02=0. NBER defined recession dates, peak-to-trough, shaded gray. Source: BLS, Federal Reserve, BEA, via FRED, IHS Markit (nee Macroeconomic Advisers) (5/2/2022 release), NBER, and author’s calculations.

Bottom line: The US economy appears to continue to grow in April, despite negative q/q official GDP growth in Q1.

The m/m growth rates of the extrapolated series and the extrapolating series are shown in Figure 3.

Figure 3: Top panel, m/m growth rate of consumption and of total retail and food service sales (deflated using CPI). Bottom panel, m/m growth rate of manufacturing and trade sales and retail sales (deflated using PPI finished goods). Source: Census via FRED, BLS, and author’s calculations.