July’s retail sales exceeded estimates with an increase of +0.6%, bringing year over year sales up to +4.2%. Monthly sales for June were revised upwards from -0.2% to +0.3%, with sales for May 2017 through July 2017 up +3.9% compared to the same period a year ago. There were significant sales increases, both M/M and Y/Y, for nonstore (e.g. online) retailers (+1.3% M/M, +11.5% Y/Y), motor vehicles (+1.2% M/M, +5.7% Y/Y), and building materials (+1.2% M/M, +8.3% Y/Y). Yearly sales declined for electronics and appliances stores (-0.9%), sporting goods stores (-4.2%), and department stores (-1.3%).

The Philadelphia Federal Reserve Bank’s manufacturing outlook index dropped to 18.9 in August from 19.5 in July, indicating slightly slower but still positive growth that was stronger than the 17.0 that had been expected by most economists. An increase in demand for manufactured goods was reflected by notable increases in new orders (+18.3) and in shipments (+12.4), with a modest increase in the number of businesses paying more for input prices (+2) and a larger number reporting increases in prices received (+4.5). Over the next six months, more businesses expected to see continued growth (+5.4), with more predicting new orders (+9.7) and hiring new employees (+4.1), accompanied by small declines in expectations for input prices (-7.8) and projected capital expenditures (-2.8).

Industrial production expanded at a yearly rate of 2.2%, with a more moderate pace of growth for July at +0.2% after June’s +0.4% increase. The manufacturing component declined -0.1%, dragged down by a -0.5% drop in durable products manufacturing that was itself influenced by drops in auto production (-3.6%), furniture (-1.3%), and primary metals (-1.2%). Production was up for both mining (+0.5%) and utilities (+1.6%), with a +1.9% production increase in electric utilities offset by a -1.1% decrease for natural gas. Capacity utilization was unchanged from June to July at 76.7%, with a drop in manufacturing utilization (down -0.1% to 75.4%) balanced by increases in mining capacity (up +0.2% to 84.6%) and utility capacity (up +1.2% to 78.1%).