Sunday, November 12, 2017

September job openings, wholesale sales & inventories

the only agency reports released this week were the Job Openings and Labor Turnover Survey (JOLTS) for September from the Bureau of Labor Statistics, the September report on Wholesale Trade, Sales and Inventories from the Census Bureau, and the Consumer Credit Report for September from the Fed...the later showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $20.8 billion, or at a 6.6% annual rate, as non-revolving credit expanded at a 6.3% rate to $2,782.3 billion and revolving credit outstanding rose at a 7.7% rate to $1,005.6 billion...this week also saw the release of the Mortgage Monitor for September (pdf) from Black Knight Financial Services, which indicated that 4.40% of all mortgages were delinquent in September, up from 3.93% in August and up from 4.27% in September of 2016, and that 0.70% of all mortgages were in the foreclosure process, down from from 0.76% in August and down from 1.00% a year ago....mortgage delinquencies have been elevated in regions of the country where properties have experienced hurricane damage...

Job Openings Little Changed in September; Hiring Down, Job Quitting Up

the Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 3,000, from 6,090,000 in August to 6,093,000 in September, after August job openings were revised 8,000 higher, from 6,082,000 to 6,090,000...September's jobs openings were still 7.5% higher than the 5,666,000 job openings reported in September a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 4.0% in September, while it was up from 3.8% a year ago...there were wide differences in job openings between industries, from the 156,000 job opening increase to 1,055,000 openings in the broad professional and business services sector, to the 111,000 job opening decrease to 757,000 openings in the leisure and hospitality sector (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in September, seasonally adjusted new hires totaled 5,273,000, down by 147,000 from the revised 5,420,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed fell to 3.6% from 3.7% in August, while it was unchanged from September a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 33,000, from 5,273,000 in August to 5,240,000 in September, while the separations rate as a percentage of the employed remained unchanged at 3.6%, the same as in September a year ago (see table 3)...subtracting the 5,240,000 total separations from the total hires of 5,273,000 would imply an increase of 33,000 jobs in September, a bit more than the revised payroll job increase of 18,000 for September reported in the October establishment survey last week, but well within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,192,000 of us voluntarily quit our jobs in September, up from the revised 3,093,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.1% to 2.2% of total employment, which was also up from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,703,000 were either laid off, fired or otherwise discharged in September, down by 78,000 from the revised 1,781,000 who were discharged in August, as the discharges rate remained at 1.2% of all those who were employed during the month, which was still up from the discharges rate of 1.0% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 355,000 in September, down from 398,000 in August, for an 'other separations rate’ of 0.2%, which was down from 0.3% in August, but the same as the 'other separations rate' of 0.2% in September of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

September Wholesale Sales Up 1.5%, Wholesale Inventories Up 0.3%

the September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $480.5 billion, up 1.3 percent (±0.4 percent) from the revised August level, and up 8.5 percent (±1.2 percent) from the wholesale sales of September 2016... the August preliminary estimate was revised up to $474.5 billion from the $473.4 billion in wholesale sales reported last month, which revised the July to August change to +1.9%.... September wholesale sales of durable goods were up 0.7 percent from August and were up 9.8 percent from a year earlier, with a 3.4% increase in wholesale sales of metals and minerals leading the durables increase for the month, while wholesale sales of nondurable goods were up 1.8 percent from August and were up 7.4 percent from last September, with a 12.6% increase in wholesale sales of petroleum and petroleum products offsetting decreases in wholesales sales of most other non-durables...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $609.5 billion at month end, up 0.3 percent (±0.4 percent)* from the revised August level and 8.5 percent (±1.2 percent) higher than in September a year ago....August's inventory value was revised from $608.1 billion to $607.47 billion, which meant that the July to August percent change was revised from the advance estimate of +0.9 percent to +0.8 percent...wholesale inventories of durable goods were up 0.3 percent from August, and were up 5.7 percent from a year ago, with 0.7% higher wholesale inventories of  electrical and electronic goods leading the September durables increase...at the same time, the value of wholesale inventories of nondurable goods were up 0.4 percent from August and were up 3.0 percent from last September, as the value of wholesale inventories of petroleum and petroleum products was up 3.0%, largely on higher prices, as the Energy department has been reporting falling inventories all summer…

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)  

 

Sunday, November 5, 2017

October's jobs report; September's income and outlays, trade deficit, construction spending, and factory inventories

in addition to the Employment Situation Summary for October from the Bureau of Labor Statistics, this week also saw the release of four September reports that included metrics which were either estimated or included in last week's advance estimate of 3rd quarter GDP: the September report on Personal Income and Spending from the Bureau of Economic Analysis, the Census report on our International Trade for September, the September report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for September...in addition, we also saw the last of the Fed manufacturing surveys for October: the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity index rose from +21.3 in September to +27.6 in October, its highest reading since 2006, indicative of an ongoing robust expansion of the Texas economy...

there were also a slew of privately issued reports released this week, including the Case-Shiller Home Price Index for August, an index generated by averaging relative home sales prices from June, July and August against a January 2000 baseline, and which reported that home prices nationally for those 3 months averaged 6.1% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 5.9% year over year increase shown in the prior report...other privately issued reports included the ADP Employment Report for October, the light vehicle sales report for October from Wards Automotive, which estimated that vehicles sold at a 17.98 million annual rate in October, down 2.7% from the recovery high of a 18.47 million annual rate in September, and up fractionally from the same month a year ago, and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the October Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 58.7% in October, down from 60.8% in September, which still suggests a strong expansion in manufacturing firms nationally, and the October Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 60.1%, from 59.8% in September, indicating a slightly larger plurality of service industry purchasing managers reported expansion in various facets of their business in October...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...

Employers Add 261,000 Jobs in October; Labor Force Participation Falls 0.4%

the Employment Situation Summary for October was essentially a reversal of the hurricane impacted September report, with payroll jobs increasing while average pay fell, while the unemployment rate, the employment to population ratio and the labor force participation rate all fell…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 261,000 jobs in October, the largest increase since July 2016, after the previously estimated payroll job change for September was revised from a loss of 33,000 jobs to a gain of 18,000, and the payroll jobs increase for August was revised up from 169,000 to 208,000…that means that this report represents a total of 351,000 more seasonally adjusted payroll jobs than were reported last month, as this week's establishment survey data includes a reversal of the temporary paycheck losses after the September hurricanes...meanwhile, the unadjusted data shows that there were actually 1,042,000 more payroll jobs extent than in September, as significant seasonal job increases in the education sector were washed out by the seasonal adjustment...

seasonally adjusted job increases in October were spread throughout the private service sector and in government, with the 8,300 jobs lost in retail sales the only notable decrease...the largest job increase was in the leisure and hospitality sector, which gained 106,000 jobs, as a net of 88,500 workers in bars and restaurants who missed at least one paycheck in September returned to work after their places of employment reopened in the post-hurricane recovery...the broad professional and business services sector added 50,000 jobs, with 23,000 of those finding work with employment services...the health care and social assistance sector saw the addition of 33,500 jobs with the addition of 16,100 jobs in individual and family services and 6,700 jobs in home health care services....another 24,000 jobs were added in manufacturing, with 19,000 of those spread throughout several categories of durables goods manufacturers...meanwhile, other major industries, including mining, construction, wholesale trade, transportation and warehousing, financial activities, and government saw smaller job gains in October, while employment in the resource exploitation industries and the information sector was slightly lower..

with the post-hurricane return of low paid food service workers to payrolls, the establishment survey also showed that average hourly pay for all employees fell by 1 cent an hour to $26.53 an hour in October, after it had increased by 12 cents an hour in September with the loss of those food service jobs; meanwhile, the average hourly earnings of production and non-supervisory employees decreased by one cent an hour to $22.22 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in October, while hours for production and non-supervisory personnel rose a tenth of an hour to 33.7 hours...at the same time, the manufacturing workweek increased by 0.2 hour to 40.8 hours, while average factory overtime increased by 0.1 hour to 3.5 hours...

meanwhile, the October household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 484,000 to 153,861,000, while the estimated number of those unemployed and looking for work fell by 281,000 to 6,520,000; and hence the total labor force decreased by a total of 765,000....since the working age population had grown by 204,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 968,000 (rounded) to a record high of 95,385,000, which was enough to reduce the labor force participation rate 0.4%, from 63.1% in September to 62.7% in October...in addition, the drop in number employed combined with the increase in the population was also enough to cut the employment to population ratio, which we could think of as an employment rate, from 60.4% to 60.2%...but at the same time, with the relatively large drop in the number unemployed was also enough to cut the unemployment rate from 4.2% to 4.1%...meanwhile, the number of those who reported they were forced to accept just part time work fell by 369,000, from 5,122,000 in September to 4,753,000 in October, which combined with the lower unemployment rate, cut the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", down 0.4% to 7.9% of the labor force in October, its lowest level since December 2006....

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..

September Personal Income Rose 0.4%, Personal Spending Rose 1.0%

the release of the September Income and Outlays report on this past Monday was actually concurrent with the GDP release on the prior Friday, since all the PCE data in that GDP report comes from this report...and like that 3rd quarter GDP report, which we reviewed last week, all the dollar values reported here are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if September's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from August to September....thus, when the opening line of the press release for this report tell us "Personal income increased $66.9 billion (0.4 percent) in September...", they mean that the annualized figure for all types of personal income in September, $16,532.5 billion, was $66.9 billion, or roughly 0.4% greater than the annualized personal income figure for August; the actual increase in personal income in September over August is not given....similarly, disposable personal income, which is income after taxes, also rose by less than 0.4%, from an annual rate of $14,412.3 billion in August to an annual rate of $14,465.3 billion in September...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for September, which were included in the change in real PCE in the 3rd quarter GDP report, rose at a $136.0 billion annual rate to a pace of $13,531.2 billion in consumer spending annually, more than 1.0% higher than in August, which itself was revised from the previously reported annual rate of $13,390.6 billion up to $13,395.2 billion...the current dollar increase in September spending included a $46.6 billion annualized increase to an annualized $9,173.5 billion in spending for services, a $46.5 billion increase to $1,499.9 billion in annualized spending for durable goods, and a $42.9 billion increase to $2,857.8 billion in annualized spending for non durable goods, with the goods spending reflecting the surge we saw in September retail sales...total personal outlays for September, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $132.5 billion to $14,023.3 billion, which left personal savings, which is disposable personal income less total outlays, at a $441.9 billion annual rate in September, down from the revised $521.4 billion in annualized personal savings in August...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 3.1%, down from 3.6% in August, and the lowest savings rate since December of 2007..

while our personal consumption expenditures accounted for 69.5% of our third quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption.....that's done with the price index for personal consumption expenditures, also included in this report, which is a chained price index based on 2009 prices = 100....from Table 9 in the pdf for this report, we find that that index rose from 112.629 in August to 113.051 in September, giving us a month over month inflation rate of 0.3747%, which BEA reports as an increase of +0.4%....at the same time, Table 11 gives us a year over year PCE price index increase of 1.6%, and a core price increase, excluding food and energy, of 1.3% for the year, both still below the Fed's inflation target...applying the September inflation adjustment to the change in September PCE shows that real PCE was up 0.638%, which BEA reports as a 0.6% increase in their summary table...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2009 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....those results are shown in tables 7 and 8 of the PDF, where the quarterly figures given are identical to those shown in table 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...

September Trade Deficit Up 1.7% on Higher Imports of Capital Goods and Industrial Materials

our trade deficit rose by 1.7% in September as the value of both our exports and our imports increased, but our imports increased by more....the Census report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit rose by $0.7 billion to $43.5 billion in September from a revised August deficit of $42.8 billion...the value of our September exports rose by $2.1 billion to $196.8 billion on a $1.8 billion increase to $130.6 billion in our exports of goods and a $0.3 billion increase to $66.2 billion in our exports of services, while our imports rose by $2.8 billion to $240.3 billion on a $2.4 billion increase to $196.0 billion in our imports of goods while our imports of services rose $0.4 billion to $44.3 billion...export prices were on average 0.8% higher in September, so the relative real increase in September exports would be lower than the nominal amount by that percentage, while import prices were 0.7% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage....

the increase in our September exports of goods resulted from higher exports of industrial supplies and materials as the value of our crude oil exports doubled...referencing the Full Release and Tables for September (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1857 million to $38,407 million on a $1,144 million increase in our exports of crude oil, a $288 million increase in our exports of nonmonetary gold, a $221 million increase in our exports of organic chemicals, and a $254 million increase in our exports of natural gas liquids...in addition, our exports of foods, feeds and beverages rose by $78 million to $11,873 million, and our exports of other goods not categorized by end use rose by $752 million to $5,579 million...partially offsetting the increases in those export categories, our exports of consumer goods fell by $225 million to $16,536 million on a $969 million decrease in our exports of pharmaceuticals, which was partially offset by a $782 million increase in our exports of artwork and antiques, our exports of capital goods fell by $205 million to $45,090 million on a $320 million decrease in our exports of telecommunications equipment, and our exports of automotive vehicles, parts, and engines fell by $182 million to $12,850 million on a $328 million decrease in our exports of new and used passenger cars...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of capital goods and industrial supplies and materials were responsible for the $2.8 billion increase in our goods imports, even as our imports of passenger cars decreased....our imports of capital goods rose by $1,468 million to $55,126 million on a $522 million increase in our imports of semiconductors and a $348 million increase in our imports of civilian aircraft...at the same time, our imports of industrial supplies and materials rose by $1092 million to $41,108 million on a $693 million increase in our imports of petroleum products other than fuel oil and on a $214 million increase in our imports of copper...in addition, our imports of consumer goods rose by $357 million to $49,214 million on a $296 million increase in our imports of TVs and video equipment, and a $281 million increase in our imports of pharmaceuticals, and our imports of foods, feeds, and beverages rose by $208 million to $11,778 million on small increases in several food items...partially offsetting those increases, our imports of automotive vehicles, parts and engines fell by $553 million to $29,483 million on a $487 million decrease in our imports of of new and used passenger cars, and our imports of other goods not categorized by end use fell by $111 million to $7,736 million...

in last week's advance report on 3rd quarter GDP, our September trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released last week, just before the GDP release...that report estimated that our September goods trade deficit was at $64,138 million on a Census basis, up from the $63,319 million goods deficit in August, on goods exports of $129,582 million and goods imports of $193,720 million...this report revises that and shows that our actual goods trade deficit in September was $65,386 billion on a balance of payments basis, and $64,112 billion on a Census basis, on Census adjusted goods imports of $194,447 billion and Census adjusted goods exports of $130,334 billion...in addition, the August trade deficit was revised more than $0.4 billion higher to $63,732 million...together, those revisions from the previously published data mean that the 3rd quarter trade deficit in goods was roughly $0.4 billion more than was included in last week's GDP report, or roughly $1.6 billion on an annualized basis, which would subtract about 0.04 percentage points from 3rd quarter GDP when the 2nd estimate is released at the end of November...

Construction Spending Rose 0.3% in September, Less Than Estimated by the BEA

the Census Bureau's report on construction spending for September (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,219.5 billion annually if extrapolated over an entire year, which was 0.3 percent (±1.3%)* above the revised annualized August estimate of $1,216.0 billion and also 2.0 percent (±1.6%)* above the estimated annualized level of construction spending in September of last year...the annualized August construction spending estimate was revised less than 0.2% lower, from $1,218.3 billion to $1,216.0 billion, while the annual rate of construction spending for July was revised less than 0.3% higher, from 1,212.3 billion to $1,215,351 million...

quoting further details from the Census release: Spending on private construction was at a seasonally adjusted annual rate of $942.7 billion, 0.4 percent (±1.0 percent)* below the revised August estimate of $946.2 billion. Residential construction was at a seasonally adjusted annual rate of $515.4 billion in September, nearly the same as (±1.3 percent)* the revised August estimate of $515.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $427.3 billion in September, 0.8 percent (± 1.0 percent)* below the revised August estimate of $430.6 billion.  In September, the estimated seasonally adjusted annual rate of public construction spending was $276.8 billion, 2.6 percent (±2.3 percent) above the revised August estimate of $269.8 billion. Educational construction was at a seasonally adjusted annual rate of $71.9 billion, 5.2 percent (±2.8 percent) above the revised August estimate of $68.3 billion. Highway construction was at a seasonally adjusted annual rate of $84.3 billion, 1.1 percent (±5.6 percent)* above the revised August estimate of $83.4 billion.

the BEA's key source data and assumptions (xls) for 3rd quarter GDP indicates that they had estimated an annualized $3.7 billion or 1.1% increase in residential construction, and an annualized $1.0 billion or 0.3% decrease in nonresidential construction...this report indicates that residential construction increased by just $0.2 billion, while nonresidential construction fell by an annualized $3.3 billion...that would mean that this report suggests that construction spending was overestimated by $5.8 billion (at an annual rate) in the 3rd quarter GDP report, or at a rate that would mean a subtraction of about 0.13 percentage points from 3rd quarter GDP when the 2nd estimate is released at the end of November...

Factory Shipments Up 0.8% in September, Factory Inventories Up 0.7%

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for September, which includes revisions to last week's advance durable goods report, is quite complete, so we'll just quote directly from it here:

New orders for manufactured goods in September, up three of the last four months, increased $6.5 billion or 1.4 percent to $478.5 billion, the U.S. Census Bureau reported today. This followed a 1.2 percent August increase. Shipments, up nine of the last ten months, increased $3.9 billion or 0.8 percent to $480.4 billion. This followed a 0.6 percent August increase. Unfilled orders, up following two consecutive monthly decreases, increased $2.7 billion or 0.2 percent to $1,135.0 billion. This followed a virtually unchanged August decrease. The unfilled orders-to-shipments ratio was 6.70, down from 6.76 in August. Inventories, up ten of the last eleven months, increased $4.4 billion or 0.7 percent to $660.8 billion. This followed a 0.6 percent August increase. The inventories-to-shipments ratio was 1.38, unchanged from August.

New orders for manufactured durable goods in September, up three of the last four months, increased $4.7 billion or 2.0 percent to $238.4 billion, down from the previously published 2.2 percent increase. This followed a 2.1 percent August increase. Transportation equipment, also up three of the last four months, led the increase, $3.6 billion or 4.7 percent to $80.9 billion. New orders for manufactured nondurable goods increased $1.8 billion or 0.8 percent to $240.1 billion.

Shipments of manufactured durable goods in September, up four of the last five months, increased $2.1 billion or 0.9 percent to $240.3 billion, down from the previously published 1.0 percent increase. This followed a 0.7 percent August increase. Transportation equipment, up two of the last three months, led the increase, $0.8 billion or 1.1 percent to $79.5 billion. Shipments of manufactured nondurable goods, up five of the last six months, increased $1.8 billion or 0.8 percent to $240.1 billion. This followed a 0.4 percent August increase. Petroleum and coal products, up three consecutive months, drove the increase, $2.1 billion or 5.0 percent to $44.9 billion.

Unfilled orders for manufactured durable goods in September, up following two consecutive monthly decreases, increased $2.7 billion or 0.2 percent to $1,135.0 billion, unchanged from the previously published increase. This followed a virtually unchanged August decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $1.4 billion or 0.2 percent to $771.9 billion.

Inventories of manufactured durable goods in September, up fourteen of the last fifteen months, increased $2.6 billion or 0.6 percent to $403.9 billion, unchanged from the previously published increase. This followed a 0.5 percent August increase. Transportation equipment, up three consecutive months, led the increase, $1.0 billion or 0.7 percent to $131.0 billion.

Inventories of manufactured nondurable goods, up four consecutive months, increased $1.8 billion or 0.7 percent to $256.8 billion. This followed a 0.7 percent August increase. Petroleum and coal products, up three consecutive months, led the increase, $1.8 billion or 5.0 percent to $38.6 billion. By stage of fabrication, September materials and supplies increased 0.8 percent in durable goods and increased 1.9 percent in nondurable goods. Work in process increased 0.8 percent in durable goods and increased 1.0 percent in nondurable goods. Finished goods increased 0.2 percent in durable goods and decreased 0.4 percent in nondurable goods.

the BEA's key source data and assumptions (xls) for 3rd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would decrease by $0.7 billion, so the $1.8 billion increase would indicate a that they underestimated the 3rd quarter GDP inventory component by about $2.5 billion, which would imply that 3rd quarter GDP will have to be adjusted upwards by around 0.06 percentage points to account for what this report shows..

 

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)  

Sunday, October 29, 2017

3rd quarter GDP, September’s durable goods and new home sales

the key economic release of the past week was the 1st estimate of 3rd quarter GDP from the Bureau of Economic Analysis; other widely watched releases included the advance report on durable goods for September and the September report on new home sales, both from the Census bureau...we also saw the release of the Chicago Fed National Activity Index (CFNAI) for September, a weighted composite index of 85 different economic metrics, which rose to +0.17 in September from –0.37 in August, which was revised from the -0.31 reported last month....that left the 3 month average of the index unchanged at -0.16 in September, which indicates that national economic activity has been somewhat below the historical trend over the summer months...

   in addition, this week also saw the release of two more regional Fed manufacturing surveys for October: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index fell to +14 in October from +19 in September, still suggesting ongoing growth in that region's manufacturing, and the Kansas City Fed manufacturing survey for October, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to 23 in October, up from 17 in September and 16 in August, and their strongest expansionary reading since March 2011...

3rd Quarter Growth at 3.0% Rate on Inventories Build, Improving Trade Balance

our economy grew at a 3.0% rate in the 3rd quarter,  just a bit lower than the growth rate of the second quarter, as growth in private inventories offset slower personal consumption growth...the Advance Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 3.0% annual rate over the output of the 2nd quarter of 2016, when our real output grew at a 3.1% real rate...in current dollars, our third quarter GDP grew at a 5.2% annual rate, increasing from what would work out to be a $19,250.0 billion a year output rate in the 2nd quarter to a $19,495.5 billion annual rate in the 3rd quarter, with the headline 3.0% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.2%, aka the GDP deflator, was applied to the current dollar change... as is usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate for the quarter is released, which will be two months from now...also note that September construction and preliminary inventory data have yet to be reported, and that the BEA assumed a 1.1% increase in residential construction, an 0.3% decrease in nonresidential construction, and an increase in nondurable manufacturing inventories for September before they estimated 3rd quarter output (see Key source data and assumptions (xls)

while we cover the details on the 3rd quarter below, remember that the press release for GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 1st estimate of 3rd quarter GDP, which is linked to on the sidebar of the BEA’s press release, which also offer links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2013, table 2, which shows the contribution of each of the components to the GDP growth figures for those quarters and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...

personal consumption expenditures (PCE), which accounts for roughly 69% of GDP, grew at a 3.9% rate in current dollars in the 3rd quarter, which turned out to be a 2.4% real growth rate of consumed goods and services after the 3rd quarter PCE price index increase of 1.5% at an annual rate was used to adjust that spending for inflation....consumer outlays for durable goods rose at a 5.7% rate while average prices of those durable goods fell at a 2.6% rate, and thus the BEA found real growth in output of consumer durables rose at a 8.3% rate, as consumption of automobiles grew at a 14.7% rate and accounted for half the increase...the BEA also found that real output of consumer non-durable goods rose at a 2.1% rate, after growth in consumer spending for non-durables at a 4.5% rate was adjusted for prices that rose at a 2.4% rate, as growth in real consumption of food and other non-durables more than offset lower growth in consumption of gasoline and clothing...meanwhile, the 3.4% nominal growth in consumer outlays for services was deflated by a 1.9% increase in prices for personal services to show real output of consumer services grew at a 1.5% annual rate, as weakness in the real growth rate for outlays for housing and utilities was more than offset by modest growth in all other services...as a result of these changes in growth from the 2nd to the 3rd quarter, the increase in outlays for durable goods added 0.61 percentage points to the GDP growth rate, increased consumption of non-durable goods added 0.31 percentage points, and increased consumption of services added 0.70 percentage points to the growth rate of GDP in the 3rd quarter…

the change in other components of the change in GDP are computed by the BEA in the same manner as we have just illustrated for computing PCE; ie, the annualized increase in current dollar spending for the quarter is adjusted with the annualized inflation factor for that component, yielding the change in real units of goods or services produced in the quarter at an annual rate....thus, real gross private domestic investment, which had grown at a 3.9% annual rate in the 2nd quarter, grew at a 6.0% annual rate from those levels in the 3rd quarter, mostly on increased inventory accumulation...real growth in fixed investments grew at a 1.5% annual rate in the 3rd quarter, after growing at a 3.2% rate in the 2nd quarter...among fixed investments, real non-residential fixed investment grew at a 3.9% rate, even as real investment in non-residential structures shrunk at a 5.4% rate and subtracted 0.15 percentage points from 3rd quarter GDP, because real investment in equipment grew at a 8.6% rate and added 0.47 percentage points to GDP while real investment in intellectual property grew at 4.3% rate and added 0.17 percentage points to GDP....meanwhile, real residential investment shrunk at a 6.0% rate in the 3rd quarter, after shrinking at a 7.3% rate in the 2nd quarter, and subtracted 0.24 percentage points from 3rd quarter GDP...for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

meanwhile, real private inventories grew by an inflation adjusted $35.8 billion in the quarter, up from the inflation adjusted inventory growth at a $5.5 billion rate we saw in the 2nd quarter, and as a result the $30.3 billion increase in real inventory growth added 0.73 percentage points to the 3rd quarter's growth rate, after modest real inventory growth at a $4.3 billion rate in the 2nd quarter had added 0.12% to that quarter's GDP growth....however, since greater growth in inventories indicates that more of the goods produced during the quarter were left in storage or "sitting on the shelf”, their increase by $30.3 billion in turn means real final sales of GDP were actually smaller by that amount, and hence real final sales of GDP only rose at a 2.3% rate in the 3rd quarter, down from the real final sales growth rate of 2.9% in the 2nd quarter, when the smaller increase in inventory growth meant that growth in real final sales was fairly close to real growth in GDP...

real exports increased in the 3rd quarter while real imports decreased, thus increasing the portion of our investment and consumption that was domestically sourced...our real exports of goods and services grew at a 2.3% rate in the third quarter, after our exports had increased at a 3.5% rate in the 2nd quarter, while our real imports shrunk at a 0.8% rate in the 3rd quarter after growing at a 1.5% rate in the 2nd quarter...as you'll recall, increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted elsewhere in this GDP calculation), while increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been because it was not produced here....thus the 3rd quarter increase in real exports added 0.28 percentage points to 3rd quarter GDP, while lower 3rd quarter imports added 0.12 percentage points to 3rd quarter GDP, and hence our improving trade balance added a net of 0.41 (rounded) percentage points to 3rd quarter GDP, after our improved trade deficit had added 0.21 percentage points in the second quarter…

finally, real consumption and investment by government decreased at a 0.1% annual rate in the 3rd quarter, after shrinking at a 0.2% rate in the 2nd quarter, as federal government consumption and investment rose at a 1.1% rate, while state and local consumption and investment contracted at a 0.9% rate....inflation adjusted federal spending for defense grew at a 2.3% rate and added 0.09 percentage points to 3rd quarter GDP growth, while real non-defense federal consumption and investment shrunk at a 0.5% rate and subtracted 0.01 percentage points from GDP....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of goods or services....meanwhile, state and local government investment and consumption expenditures fell at a 0.9% annual rate and subtracted 0.09 percentage points from the growth of 3rd quarter GDP, as real growth in state and local consumption expenditures added 0.08 percentage points while real growth in state and local investment shrunk at a 9.5% rate and subtracted 0.17 percentage points...

September Durable Goods: New Orders Up 2.2%, Shipments Up 1.0%, Inventories Up 0.6%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $5.1 billion or 2.2 percent to $238.7 billion in September, after August's new orders were revised from the $232.8 billion reported last month to $233.6 billion, now 2.0% greater than July's orders, which had originally been reported as a 1.7% increase...year to date new orders are now 5.2% above those of 2016, vs the 5.0% year to date change we saw in this report last month....the volatile monthly change in new orders for transportation equipment led the September increase, as new transportation equipment orders rose $4.0 billion or 5.1 percent to $81.2 billion, on a 31.5% increase to $12,752 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders still rose 0.7%, and excluding just new orders for defense equipment, new orders increased 2.0%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose $852 million or 1.3 percent to $65,935 million...

meanwhile, the seasonally adjusted value of September shipments of durable goods, which were included as inputs into various components of 3rd quarter GDP after adjusting for changes in prices, increased by $2.4 billion or 1.0 percent to $240.5, after August shipments were revised from from $237.2 billion to $238.14 billion, now up 0.7% from July....a $1.1 billion or 1.4 percent increase to $79.7 billion in shipments of transportation equipment led the increase, without which all other shipments rose 0.8%...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 14th time in 15 months, increasing by $2.4 billion or 0.6 percent to $403.6 billion, after August inventories were revised from $$400.5 billion to $401,176 million, now 0.5% higher than the prior month...an increase in inventories of transportation equipment were also a factor in the September inventory increase, as they rose $0.8 billion or 0.7 percent to $130.8 billion...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, were up for the first time in 3 months, rising by $2.8 billion or 0.2 percent to $1,135.1 billion, after the small August decrease was revised from $1,132.3 billion to $1,132.6 billion, now statistically unchanged...a $1.5 billion or 0.2 percent to $772.1 billion increase in unfilled orders for transportation equipment was responsible half the increase, as unfilled orders excluding transportation equipment orders rose 0.3% to $362,958 million....compared to a year earlier, the unfilled order book for durable goods is now 1.4% above the level of last September, with unfilled orders for transportation equipment just 0.1% above their year ago level, largely due to a 0.6% decrease in the backlog of orders for commercial aircraft...  

New Home Sales Reported Much Higher on Buying in the South

the Census report on New Residential Sales for September (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 677,000 annually, which was 18.9 percent (±19.0 percent)* above the revised annual pace of 561,000 that new single family homes were selling at in August and 17.0 percent (±22.4 percent)* above the estimated annual rate that new homes were selling at in September of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether September new home sales rose or fell from those of August, or even from those of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in August were revised from the annual rate of 580,000 reported last month to a 561,000 a year rate, while home sales in July, initially reported at an annual rate of 571,000 and revised to a 580,000 a year rate last month, were revised to a 582,000 a year rate with this report, and while June's annualized home sale rate, initially reported at an annual rate of 610,000 and revised from the first revision at a 630,000 a year rate to a 614,000 a year rate last month, were revised up to a 619,000 a year rate with this release...

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 52,000 new single family homes sold in September, up from the estimated 45,000 new homes that sold in August and the estimated 50,000 that sold in July...most of the September increase was in the South, where new home sales increased from 25,000 in August to 31,000 in September...

the raw numbers from Census field agents further estimated that the median sales price of new houses sold in September was $319,700, up from the median sale price of $303,800 in August and up from the median sales price of $314,800 in September a year ago, while the average September new home sales price was $385,200, up from the $364,300 average sales price in August, and up from the average sales price of $366,100 in September a year ago....a seasonally adjusted estimate of 279,000 new single family houses remained for sale at the end of September, which represents a 5.0 month supply of homes at the September sales rate, down from the reported 6.1 months supply of new homes available in August...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 667,000 Annual Rate in September and  A few Comments on September New Home Sales...

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…) 

Sunday, October 22, 2017

September’s industrial production, new housing construction, and existing home sales

regular reports released this past week included Industrial production and Capacity Utilization for September from the Fed, the September report on New Residential Construction from the Census Bureau, the Existing Home Sales Report for September from the National Association of Realtors (NAR), and the Regional and State Employment and Unemployment report for September from the Bureau of Labor Statistics...this week also saw the release of the first two regional Fed manufacturing surveys for October: the Empire State Manufacturing Survey for October from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +24.4 in September to a three year high of +30.2 in October, suggesting that First District manufacturing was growing at a robust pace, while the Philadelphia Fed Manufacturing Survey for October, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from +23.8 in September to +27.9 in October, also suggesting ongoing strong growth in that region's manufacturing...

Industrial Production Up 0.3% in September, after major revisions to August and July

the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production increased by 0.3% in September after falling by 0.7% in August...the percentage change from July to August was revised from down 0.9% to down 0.7%, while the percentage change from June to July was revised from up 0.4% to down 0.1%....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose from 104.3 in August to 104.6 in September; at the same time, the index for August was revised from the previously reported 104.7 to 104.3, while the July index was revised from 105.7 to 105.1, the June reading for the index was revised from 105.3 to 105.2, and the May index was revised from 105.1 to 105.0....for the 3rd quarter as compared to the 2nd quarter, industrial production fell at a 1.5% annual rate, its first quarterly decrease since the second quarter of 2016....however, total industrial production was still 1.6% higher than in September a year earlier....

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.1, from 102.9 in August to 103.0 in September, after August's manufacturing index was revised down from 103.3...July's manufacturing index was also revised lower, from 103.6 to 103.2...meanwhile, the mining index, which includes oil and gas well drilling, rose from 109.7 in August to 110.1 in September, after the August index was revised down from 110.3....however, the mining index is still 9.8% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 1.5% in September, from 98.9 to 100.4, after the previously reported 5.5% August decrease was revised to one of 4.9%, while the previously reported 1.5% July increase was revised lower, to an increase of 0.5%...

this report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose to 76.0% in September from 75.8% in August, which had previously been reported at 76.1% ...capacity utilization of NAICS durable goods production facilities rose from 74.2% in August to 74.9% in September, after August's figure was revised down from 74.5%, while capacity utilization for non-durables producers fell from a downwardly revised 77.0% to 76.3%...capacity utilization for the mining sector rose to 83.5% in September, up from 83.4% in August, which was originally reported as 83.9%, while utilities were operating at 74.8% of capacity during September, up from their 73.7% of capacity during August, which was revised up from 73.9%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories.... 

Housing Starts, Building Permits Reported Down in September

the September report on New Residential Construction (pdf) from the Census Bureau reported that their widely watched estimate of new housing units that were started during the month was at a seasonally adjusted annual rate of 1,127,000, which was 4.7 percent (±8.1 percent)* below the revised August estimated annual rate of 1,183,000 housing unit starts, but was 6.1 percent (±8.8 percent)* above last September's pace of 1,132,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, September's housing starts could have been up by 3.4% or down by as much as 12.8% from those of August, with even larger revisions possible after a number of months...in this report, the annual rate for August housing starts was revised from the 1,180,000 reported last month to 1,183,000, while July starts, which were first reported at a 1,155,000 annual rate, were revised up from last month's initial revised figure of 1,190,000 annually to 1,185,000 annually with this report....

those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 101,300 housing units were started in September, down from the 103,800 units started in August...of those housing units started in September, an estimated 72,300 were single family homes and 27,900 were units in structures with more than 5 units, down from the revised 77,900 single family starts in August, but up from the 25,200 units started in structures with more than 5 units in August...

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in September, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,215,000 housing units, which was 4.5 percent (±1.6 percent) below the revised August rate of 1,272,000 permits, and was 4.3 percent (±1.7 percent) below the rate of building permit issuance in September a year earlier...the annual rate for housing permits issued in August was revised from 1,300,000 down to 1,272,000  annually....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 100,500 housing units were issued in September, down from the revised estimate of 119,600 new permits issued in August...the September permits included 66,300 permits for single family homes, down from 76,600 single family permits in August, and 31,000 permits for housing units in apartment buildings with 5 or more units, down from 39,600 such multifamily permits a month earlier...

for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.127 Million Annual Rate in September and Comments on September Housing Starts... 

September Existing Home Sales Inch Up from August

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 0.7% from August to September, the first increase in four months, projecting that 5.39 million homes would sell over an entire year if the September home sales pace were extrapolated over that year, a pace that was still 1.5% below the annual sales rate projected in September of a year ago; August sales at a 5.35 million annual rate were unrevised from last month's report...the NAR also reported that the median sales price for all existing-home types was $245,100 in September, down from $253,100 in August but 4.4% higher than in September a year earlier, which they say "marks the 67th straight month of year-over-year gains"...the NAR press release, which is titled "Existing-Home Sales Inch 0.7 Percent Higher in September", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 465,000 homes sold in September, down by 13.1% from the 535,000 homes that sold in August, and down by 4.3% from the 486,000 homes that sold in September of last year, so we can see that it was just the seasonal adjustment that caused the annualized published figures to show an increase...that same pdf indicates that the median home selling price for all housing types fell 2.4%, from a revised $253,100 in August to $245,100 in September, while the average home sales price was $286,700, down 3.1% from the $294,400 average sales price in August, but up 3.5% from the $277,000 average home sales price of September a year ago, with the regional average home sales prices ranging from a low of $225,900 in the Midwest to a high of $386,200 in the West... for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Inch 0.7 Percent Higher in September" and A Few Comments on September Existing Home Sales...

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)

Sunday, October 15, 2017

September's retail sales, consumer prices and producer price index; August's business inventories and job openings

the key reports released this past week were Retail Sales for September and Business Sales and Inventories for August from the Census Bureau, and the September Consumer Price Index and the September Producer Price Index from the Bureau of Labor Statistics...in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for August...

September CPI up 0.5% on Gasoline Price Spike

the consumer price index increased by 0.5% in September, as gasoline prices spiked after the Texas Gulf Coast refineries were shut down by Hurricane Harvey, accounting for about three-fourths of the month’s overall price increase...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.5% in September after rising 0.4% in August. 0.1% in July, being unchanged in June and after falling 0.1% in May....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 245.519 in August to 246.819 in September, which left it statistically 2.233% higher than the 241.428 index reading of last September, which is reported as a 2.2% year over year increase...with higher prices for gasoline driving the gain in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 252.460 to 252.941, which put it 1.69% ahead of its year ago reading of 248.731...

the volatile seasonally adjusted energy price index increased by 6.1% in September, after it had risen 2.8% in August but after it fell by 0.1% in July, 1.6% in June, and 2.7% in May...however, energy prices are now averaging 10.1% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were up by 12.6% in September, while the index for energy services fell by 0.2%, after falling 0.1% in August, 0.2% in July and 0.5% in June... the increase in the energy commodity index included a 13.0% jump in the price of gasoline, the largest component, and a 8.2% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.8%…within energy services, the index for utility gas service fell by 0.8% after decreasing by 0.5% in August and 2.3% in July, but utility gas is still priced 3.8% higher than it was a year ago, while the electricity price index was unchanged for the second month in a row....energy commodities are now priced 18.9% above their year ago levels, with gasoline prices averaging 19.3% higher than they were a year ago...meanwhile, the energy services price index is now 2.2% higher than last September, as electricity prices have also risen by 1.7% over that period..

the seasonally adjusted food price index was up 0.1% in September, after rising 0.1% in August, 0.2% in July, being unchanged in June, rising 0.2% in May, 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as the index for food purchased for use at home was unchanged in September, while prices for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.4% and prices at full service restaurants both rose 0.2%, while food prices at schools rose 2.1%...

in the food at home categories, the price index for cereals and bakery products increased by 0.1%, as prices for bread fell 0.7% while other bakery product prices rose 1.0%...the price index for the meats, poultry, fish, and eggs group was down 0.4% as beef prices fell 0.7% and ham prices fell 2.2%, while the index for dairy products was 0.6% lower on 1.6% decrease in the price of fresh milk other than whole...the fruits and vegetables index was 0.2% lower on a 0.8% decrease in prices for fresh vegetables, and a 1.5% decrease in prices for frozen fruits and vegetables...on the other hand, the beverages index was 0.4% higher as roast coffee prices were up 1.3% and carbonated drink prices rose 0.5%....lastly, prices in the ‘other foods at home’ category were 0.3% lower on average, as butter prices fell 2.0% and salad dressing prices were 0.6% lower.......among food at home line items, only bacon, which is now priced 13.4% higher than a year ago, has seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.1% in September after rising by 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods fell by 0.2%, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust September retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.4% lower on a 1.5% decrease in prices for laundry appliances and a 3.2% drop in prices for dishes and flatware, while the apparel price index was 0.1% lower as a 3.2% increase in prices for men's suits and outerwear was offset by a 5.1% decrease in prices for women's outwear...prices for transportation commodities other than fuel were down 0.3%, as prices for new cars were down 0.5% while prices for motor oil, coolant, and fluids fell 0.9%...meanwhile, prices for medical care commodities were 0.8% lower on a 1.4% decrease in nonprescription drug prices...on the other hand, the recreational commodities index was unchanged as another 1.5% drop in TV prices was offset by a 1.0% increase in prices for film and photographic supplies and a 1.2% increase in the index for toys, games, hobbies and playground equipment...at the same time, the education and communication commodities index was 1.2% lower on 1.9% decreases in prices for college textbooks and for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.4% on 0.8% higher beer prices, while the price index for ‘other goods’ was up 0.5% on a 1.1% increase in the index for hair, dental, shaving, and other personal care products and a 1.7% increase in prices for stationery, gift wrap and other personal paper supplies..

within core services, the price index for shelter rose 0.3% on a 0.2% increase in rents, a 0.2% increase in owner's equivalent rent, and a 1.7% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.3% and other household operation costs were unchanged....meanwhile, the index for medical care services was up 0.1%, as prices for both hospital services and physicians' services were up 0.2% while health insurance was 0.2% lower...at the same time, the transportation services index was 0.3% higher on an 1.8% increase in intracity mass transit fees and 0.8% higher motor vehicle repairs....the recreation services index rose 0.2% as film processing rose 2.1% and video & audio rental services rose 1.2%, while the index for education and communication services also rose 0.2% as wireless telephone services rose 0.4% and college tuitions rose 0.6%...lastly, the index for other personal services was unchanged as tax return services rose 0.1% and legal services fell 0.2%...among core prices, only the index for clocks, lamps, and decorator items, which is now 13.1% lower than a year ago, and prices for wireless phone services, which are now 11.7% lower than a year ago, have seen prices drop by more than 10% over the past year, while no core line item has seen prices rise by a double digit magnitude in that span..  

Retail Sales Increased by 1.6% in September after July and August Sales were Revised Higher

seasonally adjusted retail sales increased in September after retail sales for July and August were both revised higher...the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $483.9 billion during the month, which was 1.6 percent (±0.5%) higher than August's revised sales of $476.5 billion and 4.4 percent (±0.7%) above the adjusted sales in September of last year...August's seasonally adjusted sales were revised from $474.8 billion to $476.5 billion, while July sales were also revised higher, from $475.8 billion to $476,752 million, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 4.8%, from $491,572 million in August to $468,192 million in September, while they were up 4.1% from the $449,948 million of sales in September a year ago...

since it's the end of the quarter for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what it shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month's September "advance" report figure in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called "preliminary") as of this report, with the new July to August percentage change under "Jul 2017 (r)" (revised) and the August 2016 to August 2017 percentage change as revised in the 2nd column of the pair; for your reference, the table of last month’s advance estimate of August sales, before this month's revisions, is here.... then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and then from the same three months (July, August and September) of a year ago....that first column of that pair gives us a snapshot comparison of 2nd quarter sales to third quarter sales which, when adjusted for price changes, can useful in estimating the impact of this report on 3rd quarter GDP:

September 2017 retail sales table

from this table, we can see that the 1.6% increase in September sales was underpinned by a 3.6% increase to $100,061 million in seasonally adjusted sales at motor vehicle and parts dealers; without which retail sales would have shown a 1.0% increase for the month...given that last week's September light vehicle sales report from Wards Automotive indicated a 15.2% increase in vehicles sales as hurricane victims replaced their damaged cars, we'd think even that 3.6% increase is an underestimation based on limited data and will likely be revised higher over the next two months....also note that there was an 5.8% increase to $39,414 million in sales at gas stations, which was driven by 13% higher prices for gasoline, which means retail sales ex vehicles and gasoline were only up 0.5%...since many gas stations in Texas and Florida were closed or out of fuel after the hurricanes, real gasoline sales almost certainly fell during the month, despite the higher dollar volume of sales...

nonetheless, this report will change the complexion of the first estimate of 3rd quarter GDP, which will be out in a couple weeks...as we saw when we reviewed the Consumer Price report earlier, the composite of all goods less food and energy goods fell by 0.2%, which means real sales will be on average 0.2% higher than the percentage increase reported here....that boost in unit sales from lower prices is especially true for the new car component, which saw prices fall 0.5% in September...when we looked at the August report Personal Income and Outlays from the BEA a couple weeks back, we computed that 3rd quarter real PCE had grown at a 1.41% annual rate for the two months of the 3rd quarter, and would only add 0.98 percentage points to the growth rate of GDP...although we did not note it at the time, that weakness in the first two months of the 3rd quarter was due to falling personal consumption expenditures of durable goods, and specifically of automobile sales in August...hence, this report not only shows the reversal of the decline in auto sales and strong real growth overall, it also revises the goods component of PCE for July and August higher at the same time...

Producer Prices Up 0.4% in September on Higher Priced Gasoline, Trade Services

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in September, as prices for finished wholesale goods increased 0.7%, while margins of final services providers increased by 0.4%...this followed an August report that indicated the PPI was up 0.2%, with prices for finished wholesale goods up 0.5%, and margins of final services providers up 0.1%, and a July report that indicated the PPI was down 0.1%, with prices for finished wholesale goods down 0.1%, and margins of final services providers down 0.2%....excluding food, energy and trade services, core producer prices were up 0.2% in September, after rising 0.2% in August and being unchanged in July...on an unadjusted basis, producer prices are now 2.6% higher than a year earlier, the highest annual producer inflation reading since February 2012, while the core producer price index increased to 2.1% higher than a year earlier...

as we noted, the price index for final demand for goods, aka 'finished goods', rose 0.7% in September, after rising 0.5% in August, slipping 0.1% in July, being unchanged in June, falling by a revised 0.5% in May, rising by 0.5% in April, falling by 0.2% in March, and rising by 0.4% in February and by 1.0% in January... the index for wholesale energy prices rose 3.4% in September after rising 3.3% in August, while the price index for wholesale foods was unchanged and the index for final demand for core wholesale goods (ex food and energy) was 0.3% higher...the largest wholesale energy price change was a 10.9% increase in the wholesale price of gasoline, which by itself accounted for two-thirds of the increase in the September goods index....meanwhile, a 20.6% increase in the wholesale price of eggs was offset by lower wholesale prices for beef and veal, chicken, seafood and dairy products....among wholesale core goods, wholesale prices for motor homes rose 1.5% and the index for appliances was up 0.9%…

at the same time, the index for final demand for services rose 0.4% in September, after rising 0.1% in August, falling by 0.2% in July, and rising by a revised 0.3% in May and in June, as the September index for final demand for trade services rose 0.8%, the index for final demand for transportation and warehousing services rose 1.0%, while the index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for food and alcohol wholesalers increased 2.5%, while margins for chemicals and allied products wholesalers rose 2.3%... among transportation and warehousing services, margins for airline passenger services were 1.4% higher...in the core final demand for services index, margins for passenger car rentals rose 9.7%, the index for deposit services (partial) increased 3.3% while prices for residential real estate loans (partial) fell 2.6%..

this report also showed the price index for processed goods for intermediate demand was 0.5% higher, after rising 0.5% in August, falling 0.1% in July, but after rising by a revised 0.1% June and falling by a revised 0.1% in May....the price index for intermediate energy goods rose 2.4% on a 10.9% increase for gasoline, while prices for intermediate processed foods and feeds fell 0.6% on a 3.5% drop in wholesale prices for processed poultry, and the core price index for processed goods for intermediate demand less food and energy was 0.2% higher...prices for intermediate processed goods are now 4.3% higher than in September a year ago, now the eleventh consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods fell 0.4% in September, after falling 0.7% in August and 0.4% in July, but after rising a revised 0.5% in June and falling a revised 1.0% in May....the price index for crude energy goods fell 0.8%, even as crude oil prices rose 1.1%, while the index for unprocessed foodstuffs and feedstuffs fell 1.7%, as prices for slaughter hogs dropped 18.4% and prices for raw milk fell 3.9%...however, the index for core raw materials other than food and energy materials rose 2.0%, as prices for nonferrous metal ores rose 6.5% and wholesale prices for copper scrap rose 7.2% ...this raw materials index is still up 7.0% from a year ago, up from the year over year increase of 6.8% that we saw in August...

lastly, the price index for services for intermediate demand rose 0.1% in September after rising 0.2% in August, but after falling 0.3% in July, which had been its first decrease since last September... the index for trade services for intermediate demand was 0.4% higher, as margins for intermediate machinery and equipment parts and supplies wholesalers rose 1.8 percent…the index for transportation and warehousing services for intermediate demand was up 0.6%, as intermediate prices for air mail and package delivery services other than USPS rose 1.3%...on the other hand, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.1% lower, as margins for business loans (partial) fell 3.7%, and intermediate prices for loan services (partial) fell 2.9%...over the 12 months ended in September, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.7% higher than it was a year ago...

Business Sales and Business Inventories Both Up 0.7% in August

after the release of the September retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data from that September report and the earlier published August wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,369.2 billion in August, up 0.7 percent (±0.2%) from July revised sales, and up 5.5 percent (±0.4 percent) from August sales of a year earlier....note that total July sales were concurrently revised up from the originally reported $1,358.8 billion to $1,359.5 billion....manufacturer's sales were 0.5% higher at $475,942 million in August, while retail trade sales, which exclude restaurant & bar sales from the revised August retail sales we reported earlier, fell 0.1% to $419,884 million, while wholesale sales rose 1.7% to $473,383 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,889.0 billion at the end of August, also up 0.7 percent (±0.1%) from July, and 3.6 percent (±0.3%) higher than in August a year earlier...the value of end of July inventories were revised to $1,875.9 billion from the $1,873.9 billion reported last month...seasonally adjusted inventories of manufacturers were estimated to be valued at $655,564 million, 0.4% higher than in July, inventories of retailers were valued at $625,351 million, 0.7% more than in July, while inventories of wholesalers were estimated to be valued at $608,083 million at the end of August, 0.9% higher than in July...

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index...while we reviewed the September index earlier, the producer price index for August indicated that prices for finished goods increased 0.5%, prices for intermediate processed goods were 0.4% higher, while prices for unprocessed goods were 0.7% lower...retail inventories are all finished goods, as are the lion's share of wholesale inventories, while factory inventories, which we looked at last week, are roughly evenly split between the three stages of production...a gross increase of 0.7% in nominal inventories thus implies an significant real increase in inventories at all stages, in addition to the real increase that was seen in July...since real 2nd quarter inventories were little changed, these real inventory increases in the 3rd quarter will substantially boost 3rd quarter GDP...

Job Openings, Hiring, Layoffs and Job Quitting All Lower in August

the Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 58,000, from 6,140,000 in July to 6,082,000 in August, after July job openings were revised 30,000 lower, from 6,170,000 to 6,140,000...August jobs openings were still 10.8% higher than the 5,491,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 4.0% in August, which was still up from 3.7% a year ago...although job openings decreased in many sectors, the the largest percentage drop was the 51,000 job opening decrease to 93,000 openings in the educational services sector (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in August, seasonally adjusted new hires totaled 5,430,000, down by 91,000 from the revised 5,521,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed fell from 3.8% to 3.7%, the same as in August a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 134,000, from 5,362,000 in July to 5,228,000 in August, while the separations rate as a percentage of the employed fell from 3.7% to 3.6%, which was still up from 3.5% in August a year ago (see table 3)...subtracting the 5,228,000 total separations from the total hires of 5,430,000 would imply an increase of 202,000 jobs in August, somewhat more than the revised payroll job increase of 169,000 for August reported by the September establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,124,000 of us voluntarily quit our jobs in August, down by 70,000 from the revised 3,194,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.2% to 2.1% of total employment, the same rate it was at a year earlier (see details in table 4)....in addition to those who quit, another 1,729,000 were either laid off, fired or otherwise discharged in August, down by 60,000 from the revised 1,789,000 who were discharged in July, as the discharges rate remained unchanged at 1.2% of all those who were employed during the month, while it was up from the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 376,000 in August, down from 379,000 in July, for an 'other separations rate’ of 0.3%, the same as in July but up from 0.2% in August of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)

Sunday, October 8, 2017

September’s jobs; August’s trade deficit, new construction, and factory inventories

in addition to the Employment Situation Summary for September from the Bureau of Labor Statistics, this week also saw the release of four August reports from the Census Bureau that entail large contributions to 3rd quarter GDP: the August report on our International Trade, the August report on Construction Spending (pdf), the Full Report on Manufacturers' Shipments, Inventories and Orders for August and the August report on Wholesale Trade, Sales and Inventories...also released from the Fed this week was the Consumer Credit Report for August, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $13.1 billion, or at a 4.2% annual rate, as non-revolving credit expanded at a 3.2% rate to $2,766.4 billion and revolving credit outstanding rose at a 7.0% rate to $999.7  billion....

this week’s privately issued reports included the ADP Employment Report for September, the September report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 18.47 million annual rate in September, up from the 16.03 million annual pace in August and the highest vehicle sales rate since summer 2005, and the Mortgage Monitor for August (pdf) released by Black Knight Financial Services, which indicated that 3.93% of all mortgages were delinquent in August, up from 3.90% in July but down from 4.24% in August of 2016, and that 0.76% of all mortgages were in the foreclosure process, down from from 0.78% in July and down from 1.04% a year ago...both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM) were also released: the September Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 60.8% in September, up from 56.3% in August, suggesting a somewhat more robust expansion in manufacturing firms nationally, and the September Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to a twelve year high of 59.8% in September, up from 55.3% in August, indicating a somewhat larger plurality of service industry purchasing managers reported expansion in various facets of their business in September...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...

Employers Cut 33,000 Jobs in September; Unemployment Rate Falls to 4.2%, a 16 Year Low

the Employment Situation Summary for September was impacted by both Hurricanes Harvey and Irma as recovery from Harvey was far from complete at the time of the two surveys while Irma made landfall on September 10th, the beginning of the week that the surveys were conducted…here is the BLS explanation of how those hurricanes affected the data:

Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures. For both surveys, collection rates generally were within normal ranges, both nationally and in the affected states. In the establishment survey, employees who are not paid for the pay period that includes the 12th of the month are not counted as employed. In the household survey, persons with a job are counted as employed even if they miss work for the entire survey reference week (the week including the 12th of the month), regardless of whether or not they are paid.

hence, since those who were temporarily laid off because of the hurricanes were not counted as employed by the establishment survey, it projected a seasonally adjusted loss of 33,000 jobs in September, the first drop in seven years....in addition, the previously estimated payroll job increase for July was revised down from 189,000 to 138,000, while the payroll jobs increase for August was revised up from 156,000 to 169,000…that means that this report represents a total of 71,000 fewer seasonally adjusted payroll jobs than were reported last month...the unadjusted data, however, shows that there were actually 340,000 more payroll jobs in September, largely due to the beginning of the school year, so the seasonal adjustment in effect knocked the headline jobs number down to a negative.. 

the seasonally adjusted job changes for September indicated job increases in resource extraction, construction, and most service sectors, as the jobs losses were concentrated in the leisure and hospitality sector, which lost 111,000 jobs, as a net of 104,700 workers in bars and restaurants were laid off and not paid....elsewhere, the only job losses were in the information sector, with a reduction of 9,000 payroll jobs, in retail sales, which saw 2,900 fewer employed, in non-durable manufacturing, which shed 5,000 employees, and the miscellaneous "other services", which also saw employment fall by 5,000...sectors adding more than 10,000 jobs in September included transportation and warehousing, which gained 21,800 spots, as 9,400 employees were added by ground passenger transporters, private educational services, which added 13,900 employees, health care and social assistance, which added 13,100, jobs, and the broad professional and business services sector, which added 13,000 jobs, with 5,900 of those in temporary help employment services...

with the loss of jobs in the low paying leisure and hospitality sector, the September establishment survey also showed that average hourly pay for all employees rose by rose by 12 cents to $26.55 an hour, after it had increased by 4 cents an hour in August; at the same time, the average hourly earnings of production and non-supervisory employees increased by 9 cents to $22.23 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in September, while hours for production and non-supervisory personnel was unchanged at 33.6 hours, after their August workweek figure was revised lower by a tenth of an hour...at the same time, the manufacturing workweek was unchanged at 40.7 hours without a revision, while average factory overtime was likewise unchanged at 3.3 hours...

meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who reported being employed, even if they didn’t work during the survey week, rose by an estimated 906,000 to 154,345,000, while the estimated number of unemployed fell by 331,000 to 6,801,000, and hence the labor force increased by a total of 575,000...since the working age population had grown by 205,000 over the same period, that meant the number of employment aged individuals who were 'not in the labor force' fell by 368,000 to 94,417,000, which was enough to increase the labor force participation rate from 62.9% to 63.1%...in addition, the large increase in number employed was also enough to boost the employment to population ratio, which we could think of as an employment rate, by 0.3%, as it rose from 60.1% to 60.4%...at the same time, with the relatively large decrease in the number unemployed was also enough to cut the unemployment rate from 4.4% to 4.2%, the lowest since January 2001....meanwhile, the number of those who reported they were forced to accept just part time work fell by 133,000, from 5,255,000 in August to 5,122,000 in September, which lowered the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.6% in August to 8.3% of the labor force in September, the lowest since June 2007....

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..

August Trade Deficit Down 2.7% on Higher Exports of Consumer and Capital Goods

our trade deficit fell by 2.7% in August as the value of our exports increased while the value of our imports decreased....the Census report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit fell by $1.2 billion to $42.4 billion in August from a revised July deficit of $43.56 billion...the value of our August exports rose by $0.8 billion to $195.3 billion on a $0.6 billion increase to $129.2 billion in our exports of goods and a $0.2 billion increase to $66.1 billion in our exports of services, while our imports fell by $0.4 billion to $237.7 billion on a $0.3 billion decrease to $193.6 billion in our imports of goods while our imports of services fell $0.1 billion to $44.1 billion...export prices were on average 0.6% higher in August, so the relative change in real August exports would be lower than the nominal dollar amount by that percentage, while import prices were 0.6% higher, meaning that relative real imports were similarly smaller than the nominal dollar values reported here by that percentage...

the increase in our August exports of goods resulted from higher exports of consumer goods and of capital goods, which were partially offset by lower exports of industrial supplies and farm products...referencing the Full Release and Tables for August (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $1015 million to $16,760 million on a $646 million increase in our exports of pharmaceuticals and a $252 million increase in our exports of gem diamonds, and that our exports of capital goods rose by $407 million to $45,295 million on a $372 million increase of in our exports of telecommunications equipment and a $225 million increase in our exports of semiconductors...in addition, our exports of automotive vehicles, parts, and engines rose by $60 million to $13,029 million on a $476 million increase in our exports of new and used passenger cars which was offset by a $516 million decrease in our exports of trucks, buses, and special purpose vehicles...partially offsetting those increases, our exports of industrial supplies and materials fell by $954 million to $36,552 million on a $717 million decrease in our exports of fuel oil, and a $354 million decrease in our exports of other petroleum products, and our exports of foods, feeds and beverages fell by $417 million to $11,830 million on a $239 million decrease in our exports of corn and a $152 million decrease in our exports of wheat....in addition, there was also $28 million decrease to $5,211 million in our exports of other goods not categorized by end use..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of industrial supplies and of capital goods were responsible for the $0.3 billion drop in our goods imports, because our imports of motor vehicles rose at the same time...our imports of industrial supplies and materials fell by $523 million to $39,997 million, on a $206 million decrease in our imports of finished metal shapes and a $197 million decrease in our imports of copper, while our imports of capital goods fell by $495 million to $53,660 million on a $286 million decrease in our imports of computer accessories and a $214 million decrease in our imports of civilian aircraft...in addition, our imports of foods, feeds, and beverages fell by $80 million to $11,570 million on a $149 million decrease in our imports of fish and shellfish. and our imports of other goods not categorized by end use fell by $94 million to $7,857 million...partially offsetting the decreases in those categories, our imports of automotive vehicles, parts and engines rose by $675 million to $30,035 million on a $455 million increase in our imports of passenger cars, and our imports of consumer goods rose by $99 million to $48,877 million on a $542 increase in our imports of pharmaceuticals...

to gauge the impact of July and August goods trade on 3rd quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can estimate that 2nd quarter real exports of goods averaged 125,251 million monthly in 2009 dollars, while similarly inflation adjusted July and August goods exports were at 126,270 million and 125,216 million respectively, in that same 2009 dollar quantity index representation.... annualizing the change between the second and third quarter figures, we find that the 3rd quarter's real exports are running at a 1.58% annual rate above those of the 2nd quarter, or at a pace that would add about 0.13 percentage points to 3rd quarter GDP if continued through September.....in a similar manner, we find that our 2nd quarter real imports averaged 187,682 million monthly in chained 2009 dollars, while inflation adjusted July and August imports were at 188,073 million and 186,977 million respectively...that would indicate that so far in the 3rd quarter, real imports have been shrinking at annual rate of around 0.33% from those of  the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 0.33% rate would conversely add about 0.04 percentage points to 3rd quarter GDP....hence, if our July and August trade deficit in goods is maintained throughout September, our improving balance of trade in goods would add about 0.17 percentage points to the growth of 3rd quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all the relevant price changes...

Construction Spending Clips 55 basis points from Q3 GDP Despite 0.5% August Rise

the August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $1,218.3 billion, which was 0.5 percent (±1.3 percent)* above the revised estimate of $1,212.3 billion in construction spending in July, but 0.3 percent (±1.8%)* below the estimated annualized level of construction spending of August of last year....July construction spending was originally reported at a $1,211.5 billion annual rate, and it has thus been revised up to a $1,212.3 billion annual rate, while June construction spending was revised up from a $1,221.6 billion annual rate to a $1,226.4 billion rate, which suggests that growth in 2nd quarter GDP was underestimated by a tenth of a percent...

quoting further details from the Census release: "Spending on private construction was at a seasonally adjusted annual rate of $954.8 billion, 0.4 percent (±1.2 percent)* above the revised July estimate of $950.5 billion. Residential construction was at a seasonally adjusted annual rate of $520.9 billion in August, 0.4 percent (±1.3 percent)* above the revised July estimate of $518.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $433.9 billion in August, 0.5 percent (± 1.2 percent)* above the revised July estimate of $432.0 billion.  In August, the estimated seasonally adjusted annual rate of public construction spending was $263.5 billion, 0.7 percent (±2.3 percent)* above the revised July estimate of $261.7 billion. Educational construction was at a seasonally adjusted annual rate of $67.3 billion, 3.5 percent (±3.9 percent)* above the revised July estimate of $65.0 billion. Highway construction was at a seasonally adjusted annual rate of $81.9 billion, 1.3 percent (±5.1 percent)* below the revised July estimate of $83.0 billion."

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of August spending reported in this release on 3rd quarter GDP is difficult because all the figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price... in lieu of the multiple prices indexes for construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), we've opted to use the producer price index for final demand construction as an inexact shortcut to make that adjustment and thereby produce an estimate...

that producer price index showed that aggregate construction costs rose 0.3% in August after rising 1.2% in July, 0.2% in and June and being unchanged from April to May...on that basis, we can estimate that construction costs for August were roughly 1.5% more than June, roughly 1.7% more than those of May and 1.7% more than those of April, and obviously 0.3% more than those of July...we then use those percentages to inflate lower priced spending figures for each of those months, which is arithmetically the same as adjusting higher priced July and August construction spending downward, for comparison purposes...annualized construction spending in millions of dollars for the second quarter is given as 1,226,429 for June, 1,236,722 for May, and 1,217,658 for April, while it was $1,212,277 million for July and $1,218,312 million for August...thus to compare July and August’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((1,218,312 + 1,212,277 * 1.003) / 2 ) / ((1,226,429 * 1.015 + 1,236,722 * 1.017 + 1,217,658 *1.017) / 3) = 0.97605, meaning real construction over July and August was down 2.2395% vis a vis the 2nd quarter...in GDP terms, that means real construction for the 3rd quarter fell at a 9.24% annual rate from that of the 2nd quarter, or at a pace that would subtract about 0.55 percentage points from 3rd quarter GDP, should September follow the same trend… 

Factory Shipments Up 0.5% in August, Factory Inventories Up 0.4%

the Census Bureau's own summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for August, which includes revisions to last week's advance durable goods report, is quite complete, so we'll just quote directly from it here:

New orders for manufactured goods in August, up two of the last three months, increased $5.4 billion or 1.2 percent to $471.7 billion, the U.S. Census Bureau reported today. This followed a 3.3 percent July decrease. Shipments, up eight of the last nine months, increased $2.2 billion or 0.5 percent to $475.9 billion. This followed a 0.2 percent July increase. Unfilled orders, up two of the last three months, increased $0.2 billion or virtually unchanged to $1,132.6 billion. This followed a 0.3 percent July decrease. The unfilled orders to-shipments ratio was 6.77, unchanged from July. Inventories, up nine of the last ten months, increased $2.9 billion or 0.4 percent to $655.6 billion. This followed a 0.4 percent July increase. The inventories-to shipments ratio was 1.38, unchanged from July.

New orders for manufactured durable goods in August, up two of the last three months, increased $4.5 billion or 2.0 percent to $233.5 billion, up from the previously published 1.7 percent increase. This followed a 6.8 percent July decrease. Transportation equipment, also up two of the last three months, led the increase, $3.7 billion or 5.1 percent to $77.5 billion. New orders for manufactured nondurable goods increased $0.9 billion or 0.4 percent to $238.2 billion.

Shipments of manufactured durable goods in August, up three of the last four months, increased $1.3 billion or 0.5 percent to $237.8 billion, up from the previously published 0.3 percent increase. This followed a 0.1 percent July increase. Machinery, up six of the last seven months, led the increase, $0.5 billion or 1.7 percent to $31.6 billion. Shipments of manufactured nondurable goods, up four of the last five months, increased $0.9 billion or 0.4 percent to $238.2 billion. This followed a 0.3 percent July increase. Petroleum and coal products, up two consecutive months, drove the increase, $0.9 billion or 2.2 percent to $42.3 billion.

Unfilled orders for manufactured durable goods in August, up two of the last three months, increased $0.2 billion or virtually unchanged to $1,132.6 billion, unchanged from the previously published increase. This followed a 0.3 percent July decrease. Fabricated metal products, up seven of the last eight months, drove the increase, $0.4 billion or 0.6 percent to $79.2 billion.

Inventories of manufactured durable goods in August, up thirteen of the last fourteen months, increased $1.5 billion or 0.4 percent to $400.8 billion, up from the previously published 0.3 percent increase. This followed a 0.5 percent July increase. Machinery, up nine of the last ten months, led the increase, $0.6 billion or 0.9 percent to $69.1 billion. Inventories of manufactured nondurable goods, up three consecutive months, increased $1.4 billion or 0.6 percent to $254.8 billion. This followed a 0.3 percent July increase. Petroleum and coal products, up two consecutive months, led the increase, $1.3 billion or 3.7 percent to $36.4 billion..

to gauge the effect of August factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was up 0.2% to $228,679 million; the value of work in process inventories was up 0.7% at $203,637 million, and materials and supplies inventories were valued 0.5% higher at $223,248 million...the producer price index for August indicated that prices for finished goods increased 0.5%, prices for intermediate processed goods were 0.4% higher, while prices for unprocessed goods were 0.7% lower....assuming similar valuations for like inventories, that would suggest that August's real finished goods inventories shrank by roughly 0.3%, while real inventories of intermediate processed goods were 0.3% greater, and that real raw material inventory inventories were 1.2% greater...those are in addition to July’s inventories, which saw all stages of factory inventories higher…since real 2nd quarter inventories were little changed, any real inventory increases in the 3rd quarter will boost 3rd quarter GDP...

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)