April retail sales, industrial production and new housing starts; March business inventories

Regular monthly reports that were released this week included the Retail Sales report for April and the Wholesale Trade, Sales and Inventories report for March, both from the Census Bureau, the April report on Industrial Production and Capacity Utilization from the Fed, the April report on New Residential Construction from the Census Bureau, and the Regional and State Employment and Unemployment Summary for April and the April Import-Export Price Index, both from the Bureau of Labor Statistics...the week also saw the release of the first two regional Fed manufacturing surveys for May: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose to +17.8, up from +10.1 in April, indicating an accelerating pace of growth for First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions rose to +16.6 in May from +8.5 in April, indicating a larger plurality of the region's manufacturing firms also reported increases in their activity this month..

Retail Sales Down 0.2% in April after Negligible Revisions to Prior Months Sales

Seasonally adjusted retail sales decreased by 0.2% in April after retail sales March were revised slightly higher while sales for February were revised slightly lower ...the Advance Retail Sales Report for April (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $513.4 billion for the month, which was a decrease of 0.2 percent (±0.5%)* from revised March sales of $514.3 billion but 3.1 percent (±0.7 percent) above the adjusted sales of April of last year...March sales were originally reported at $514.1 billion, up 1.6% from February; they are now indicated to have risen 1.7% to $514.3 billion...February adjusted sales were concurrently revised from $506.1 billion to $505.8 billion....those revisions would have a negligible impact on 1st quarter GDP, since the downward revision to February sales virtually offsets the upward revision to March sales...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 2.3%, from $520,027 in March to $507,985 in April, while they were up 5.0% from the $483,951 million of sales in April a year ago....

We are again including below the table of monthly and yearly percentage changes in sales by business type taken from the Census marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from March to April in the first column, and then the year over year percentage change for those businesses since last April in the 2nd column; the second pair of columns gives us the revision of last month’s March advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the February to March change under "Feb 2019 r (revised)" and the revised March 2018 to March 2019 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance March estimates, before this report's revision, is here....

To compute April's real personal consumption of goods data for national accounts from this April retail sales report, the BEA will use the corresponding price changes from the April consumer price index, which we reviewed when it was released last week...to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that March retail sales excluding the 1.8% price-related increase in sales at gas stations were down by 0.4%....then, pulling the 0.2% increase in grocery & beverage sales and the 0.2% increase in food services sales out from that total, we find that core retail sales were down by nearly 0.6% for the month...since the April CPI report showed that the the composite price index of all goods less food and energy goods was 0.3% lower in April, we can thus figure that real retail sales excluding food and energy will show an decrease of around 0.3%...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were down 1.1%, the April price index for transportation commodities other than fuel was 0.4% lower, with prices for new cars and trucks 0.1% higher while prices for used cars and trucks fell 1.3%, which would suggest that real unit sales at auto & parts dealers were probably on the order of 0.7% lower once price decreases are taken into account... on the other hand, while nominal sales at clothing stores were 0.2% lower in April, the apparel price index was 0.8% lower, which means that real sales of clothing likely rose around 0.6%...

In addition to figuring those core retail sales, to make an estimate we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the April CPI report showed that the food price index was 0.1% lower, as the price index for food purchased for use at home fell 0.5% while the index for food bought away from home was 0.3% higher...thus, while nominal sales at food and beverage stores were 0.2% higher, real sales of food and beverages would have been around 0.7% higher in light of the 0.5% lower prices…on the other hand, the 0.2% increase in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants actually fell around 0.1% during the month...and while sales at gas stations were up 1.8%, there was a 5.7% increase in price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 3.9%, with a caveat that gasoline stations do sell more than gasoline, and the price index for motor oil, coolant, and fluids was 5.2% lower, which renders our estimates for real gasoline station sales questionable.…so considering those questionable real gas station sales as flat and excluding food services, we’d estimate that the income and outlays report for April will show that real personal consumption of goods fell by around 0.1% in April, after rising by a revised 1.5% in March, but after falling by a revised 0.6% in February and rising by 0.6% in January...at the same time, the 0.1% decrease in real sales at bars and restaurants would have a negligible impact on April's real personal consumption of services...

Industrial Production Falls 0.5% in April after Prior Months Revised Lower

Industrial production decreased in April after production for the prior three months was revised lower...the Fed's G17 release on Industrial production and Capacity Utilization for April reported that industrial production fell 0.5% in April after rising by a revised 0.2% in March, which left our total output a scant 0.9% higher than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, came in at 109.2 in April, after the March index value was revised from the 110.2 reported last month down to 109.7, the February index was revised from 110.3 to 109.6, and the January index was revised down from 110.2 to 110.1...

The manufacturing index, which accounts for more than 77% of the total IP index, also fell 0.5% to 104.7 in April, after the March manufacturing index was revised from 105.5 to 105.2, the February index was revised from 105.6 to 105.2, the January index was revised up from 105.9 to 105.7, and the December index was revised from 106.5 to 106.4...with the output of automotive products now 3.5% lower than a year ago and the index for appliances and furniture 5.1% lower, the manufacturing index is now 0.2% below its year ago level....meanwhile, the mining index, which includes oil and gas well drilling, rose 1.6%, from 130.3 in March to 132.4 in April, after the March index was revised down from from the originally reported 131.2, which left the mining index 10.4% higher than it was a year earlier...finally, the seasonally adjusted utility index, which typically fluctuates due to deviations from normal temperatures, fell by 3.5% due to our warmer than normal April, from 107.4 to 103.7, after the March utility index was revised from 108.4 to 107.4, now up 2.2% from February, because the February index was revised from 108.2 to 105.1, now up just 1.0% from January....after this month's revisions, the utility index is now 4.7% below that of a year ago, largely due to a much colder April last year than this year..

This report also includes capacity utilization stats, which are expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry fell to 77.9% in April from 78.5% in March, after capacity utilization for March was revised down from 78.8%, and  capacity utilization for both January and February were also revised lower...capacity utilization of NAICS durable goods production facilities fell from a revised 76.1% in March to 75.3% in April, while capacity utilization for non-durables producers fell from a revised 77.2% to 77.1%...capacity utilization for the mining sector rose to 91.4% in April from 90.3% in March, which was previously reported as 90.9%, while utilities were operating at 76.2% of capacity during April, down from their 79.1% of capacity during March, which was previously reported at 79.9%...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..  

March Business Sales Rose 1.6%, Business Inventories Were Unchanged

After the release of the April retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for March  (pdf), which incorporates the revised March retail data from that April retail report and the earlier published March wholesale and factory data to give us a complete picture of the business impact on 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 $1,470.1 billion in March, up 1.6 percent (±0.2 percent) from February's revised sales, and up 3.7 percent (±0.3 percent) from March sales of a year earlier...note that total February sales were concurrently revised up from the originally reported $1,446.8 billion to $1,447,237 million, now a 0.2% increase from January....manufacturer's sales rose 0.7% to $509,701 million in March; retail trade sales, which exclude restaurant & bar sales from the revised March retail sales reported earlier, rose 1.8% to $453,019 million, while wholesale sales rose 2.3% to $507,371 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,018.1 billion at the end of March, statistically unchanged (±0.1%) from the end of February, but 5.0 percent (±0.5 percent) higher than in March a year earlier...the value of end of February inventories was revised from the $2,017.4 billion reported last month to $2,017.8 billion, still 0.3% higher than January's inventory valuation....seasonally adjusted inventories of manufacturers were estimated to be valued at $690,862 million, up 0.4% from February, while inventories of retailers were valued at $657,414 million, 0.3% less than in February, and while inventories of wholesalers were estimated to be valued at $669,816 million at the end of March, 0.1% less than in February...

We had previously figured that there would be little impact on 1st quarter GDP based on the inventory change the wholesales report showed, and that 1st quarter GDP was underestimated by around 0.07 percentage points based on what the factory inventories report showed...  BEA's Key source data and assumptions (xls) that accompanied the release of the advance estimate of 1st quarter GDP indicates that they had estimated that the value of retail inventories March would increase by $2.2 billion before adjustment with the PPI, so the $2.1 billion decrease that this report shows means that they overestimated the 1st quarter retail inventory component at an annual rate of around $8.6 billion….with a minimal inflation adjustment , that would imply that the contribution of the retail inventory component of 1st quarter GDP was overestimated by around 0.18 percentage points, so after netting out the 3 inventory changes, this report indicates there should be a downward adjustment of around 0.11 percentage points to 1st quarter GDP when the 2nd estimate is released at the end of May...

April Housing Starts and Building Permits Reported Higher

The April report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,235,000 in April, which was 5.7 percent (±13.0 percent)* above the revised March estimated rate of 1,168,000 annually, but was still 2.5 percent (±10.4 percent)* below last April's rate of 1,267,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during April, or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, April housing starts could have been down by 8.3% or up by as much as 18.7% from those of March, with revisions of a greater magnitude in either direction from that range possible...with this report, the annual rate for March housing starts was revised from the 1,139,,000 reported last month to 1,168,000, while February starts, which were first reported at a 1,162,000 annual rate, were revised from last month's initial revised figure of 1,142,000 annually to a 1,149,000 annual rate with this report....

These annual rates of housing 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 114,100 housing units were started in April, up from the 95,800 housing units that were started in March and the 80,000 housing units that were started in February...of those housing units started in April, an estimated 81,200 were single family homes and 31,000 were units in structures with more than 5 units, up from the revised 67,300 single family starts in March and up from the 27,500 units started in structures with more than 5 units in March...

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 April, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,296,000, which was 0.6 percent (±2.6 percent)* above the revised March rate of 1,288,000, but was still 5.0 percent (±1.4 percent) below the rate of building permit issuance in April a year earlier...the annual rate for housing permits issued in March was revised from 1,269,000 to 1,288,000....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 roughly 119,300 housing units were issued in April, up from the revised estimate of 105,700 new permits issued in March.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Increased to 1.235 Million Annual Rate in April and Comments on April Housing Starts... 

 

(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 picked from the aforementioned GGO posts, contact me…)      

April's consumer and producer prices; March's trade deficit, wholesale trade, and job openings..

Regular monthly reports that were released this week included the the April Consumer Price Index and the April Producer Price Index from the Bureau of Labor Statistics, the Commerce Dept report on our international trade in goods and services for March, the Job Openings and Labor Turnover Survey (JOLTS) for March, also from the BLS, and the Wholesale Trade, Sales and Inventories report for March from the Census Bureau...in addition, the Consumer Credit Report for March was released by the Fed this week, and it showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $10.3 billion, or at a 3.1% annual rate, as non-revolving credit expanded at a 5.0% annual rate to $2,994.9 billion while revolving credit outstanding shrunk at a 2.5% rate to $1,057.2 billion...

The major privately issued report released this week was the Mortgage Monitor for March from Black Knight Financial Services….they reported that 3.65% of US home mortgages were delinquent in March, down from 3.86% in February and down from 3.73% in March a year ago, and that 0.51% of all mortgages were in the foreclosure process at the end of the month, the same percentage as in February but down from the 0.63% of mortgages that were in foreclosure in March a year ago..

April Consumer Prices Up 0.3% on Higher Rent and Energy Prices

The consumer price index rose 0.3% in April as higher prices for shelter and gasoline were only partially offset by lower prices for groceries, used cars and clothing…. the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.3% in April after it had risen 0.4% in March, 0.2% in February, been unchanged in January, in December and in November, and had risen 0.3% in October, 0.1% in September, 0.1% in August, and 0.2% in July...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 254.202 in March to 255.548 in April, which left it statistically 1.996% higher than the 250.546 index reading in March of last year, which is reported as a 2.0% year over year increase....with higher prices for gasoline a major reason for the increase in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by just 0.1% for the month, as the unadjusted core price index rose from 261.836 to 262.332, which left the core index 2.065% ahead of its year ago reading of 257.025, which is reported as a 2.1% year over year increase, up from 2.0% in March...

The volatile seasonally adjusted energy price index rose 2.9% in April, after rising 3.5% in March, 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, rising by 2.1% in October, and falling by 1.0% in September, and is now 1.7% higher than in April a year ago...the price index for energy commodities was 5.4% higher in April, while the index for energy services fell 0.1%, after rising by 0.3% in March...the energy commodity index was up 5.4% due to a 5.7% increase in price of gasoline, the largest component, and a 1.3% increase in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 1.0% lower...within energy services, the price index for utility gas service fell 0.8% after falling 0.1% in March and is now 1.4% lower than it was a year ago, while the electricity price index was unchanged, after it had risen 0.4% in March....energy commodities are now 2.9% higher than their year ago levels, with gasoline prices averaging 3.1% higher than they were a year ago, while the energy services price index is unchanged from last April, as electricity prices are still 0.6% higher than a year ago…

The seasonally adjusted food price index was 0.1% lower in April, after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3 in December, 0.2% in November, being unchanged in October, rising 0.1% in September, 0.1% in August, and 0.1% in July, as the price index for food purchased for use at home fell 0.5% in April, while the index for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.3% and prices at full service restaurants rose 0.2%, while food prices at employee sites and schools were on average 0.2% higher...

In the food at home categories, the price index for cereals and bakery products was 0.1% lower even though average bread prices rose 0.7%, because the price index for flour and prepared flour mixes fell 1.1% and the price index for fresh biscuits, rolls, muffins fell 0.6%....at the same time, the price index for the meats, poultry, fish, and eggs group was 0.2% lower, even as pork chop prices rose 2.7%, because fresh fish & seafood prices averaged 1.8% lower and egg prices fell 3.2%...on the other hand, the seasonally adjusted index for dairy products was 0.1% higher, as fresh whole milk prices rose 1.1%, while the cheese price index was unchanged...meanwhile, the fruits and vegetables index was 0.9% lower on a a 2.2% decrease in the price index for canned fruits and vegetables and a 0.9% decrease in the price index for fresh fruits, led by a 4.4% decrease in prices for oranges....the beverages index was also 0.9% lower, as the index for noncarbonated juices and drinks fell 1.3% while coffee prices were 0.4% lower...lastly, the index for the ‘other foods at home’ category was 0.6% lower, as the index for sugar and artificial sweeteners fell 1.6%, butter prices fell 3.9%, and salad dressing prices fell 1.7%....the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last April, just lettuce, which is still priced 15.9% higher than a year ago, and eggs, which are down 16.4% since last April, are the only ‘food at home’ line items that have seen prices change by more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.1% in April after rising by 0.1% in March, 0.1% in February, and by 0.2% for the five months prior to that, after rising by 0.1% in August 0.2% in July, 0.2% in June, 0.2% in May, and by 0.1% last April, the composite price index of all goods less food and energy goods was 0.3% lower, while the more heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust April retail sales for inflation in national accounts data, the index for household furnishings and supplies was down 0.5%, as the price index for window and floor coverings fell 1.4% while the price index for furniture and bedding was 0.7% lower...at the same time, the apparel price index was 0.8% lower on a 4.2% drop in the price index for boy's apparel, a 1.9% decrease in the price index for men's apparel, and a 1.6% decrease in the price index for footwear...in addition, the price index for transportation commodities other than fuel was 0.4% lower, as prices for new cars and trucks rose 0.1%, prices for used cars and trucks fell 1.3%, and the price index for motor oil, coolant, and fluids was 5.2% lower....on the other hand, prices for medical care commodities averaged 0.9% higher as prescription drugs prices rose 0.6%, nonprescription drugs prices rose 0.7%, and the price index for medical equipment and supplies rose 2.0%....meanwhile, the recreational commodities index was down 0.3% on a 1.4% decrease in TV prices, a 1.7% decrease in the price index for toys, a 0.9% decrease in the price index for sporting goods, and a 2.6% decrease in the price index for sewing machines, fabric and supplies....in addition, the education and communication commodities index was 1.1% lower on a 4.2% decrease in the index for computer software and accessories and a 1.5% decrease in the index for computers, peripherals, and smart home assistant devices...lastly, a separate price index for alcoholic beverages was 0.2% higher, while the price index for ‘other goods’ rose 0.1% on a 0.6% increase in the price index for hair, dental, shaving, and miscellaneous personal care products...

Within core services, the price index for shelter rose 0.4% on a 0.4% increase in rents, a 0.3% increase in homeowner's equivalent rent, and a 1.8% increase in lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were on average 0.6% higher....at the same time, the price index for medical care services was 0.2% higher, as doctors' services rose 0.2% and health insurance rose 1.5%...meanwhile, the transportation services index was 0.1% higher as car and truck rentals rose 0.3%, vehicle body work rose 1.0% and intercity bus fares rose 2.9%...in addition, the recreation services price index was 0.2% higher as the index for rental of video discs and other media rose 1.7% and admissions to sporting events rose 2.7%....the index for education and communication services was also 0.2% higher as technical and business school tuitions rose 0.7% and delivery services rose 0.6%....lastly, the index for other personal services was down 0.2% as the price index for legal services fell 1.2%...among core line items, prices for televisions, which are still 18.8% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.4% since last April, the price index for dishes and flatware, which is down by 11.4% from a year ago, prices for women's dresses, which are down 11.0% over the past year, and the price index for infants' equipment, which is down by 10.1% from a year ago, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is up by 10.7% over the past year, and the price index for Intercity bus fare, which has now increased 11.0% year over year, are the only line items to have increased by a double digit magnitude over that span....

Producer Prices up 0.2% in April on Higher Energy & Transportation Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.2% in April, as prices for finished wholesale goods averaged 0.3% higher, while average margins of final services providers rose 0.1%...that followed that followed a March report that showed the PPI had increased by 0.6%, with prices for finished wholesale goods up 1.0% and margins of final services providers up 0.3%, a February report that showed the PPI had increased by 0.1%, with prices for finished wholesale goods on average 0.4% higher, while margins of final services providers were unchanged, a revised January report that showed the PPI 0.2% lower, with prices for finished wholesale goods on average 0.7% lower, while margins of final services providers had increased by 0.2%, and a revised December figures that had the PPI down 0.1%, with prices for finished wholesale goods down 0.6% while margins of final services providers were 0.2% higher...on an unadjusted basis, producer prices are 2.2% higher than a year ago, same as the year over year increase that had been indicated by last month's report...meanwhile, the core producer price index, which excludes food, energy and trade services, was up 0.4% for the month, and is now also 2.2% higher than in April a year ago, up from 2.0% YoY a month ago...

As we noted, the price index for final demand for goods, aka 'finished goods', was 0.3% higher in April, after being 1.0% higher in March, 0.4% higher in February, 0.7% lower in January, 0.6% lower in December, 0.5% lower in November, 0.8% higher in October, and 0.1% lower in September....the finished goods index rose because the price index for wholesale energy was 1.8% higher, after rising 5.6% in March and 1.8% in February, while the price index for wholesale foods fell 0.2% after rising 0.3% in March, and while the index for final demand for core wholesale goods (excluding food and energy) was unchanged...wholesale energy prices rose on a 5.9% increase in the wholesale price for gasoline, even as wholesale prices for liquefied petroleum gas fell 10.7%, while the wholesale food price index fell on a 16.1% decrease in wholesale prices for fresh eggs and a 11.6% decrease in wholesale prices for fresh and dry vegetables....among wholesale core goods, the wholesale price index for footwear rose 2.2% while wholesale prices for industrial chemicals fell 1.0%..

At the same time, the index for final demand for services rose 0.1% in April, after rising 0.3% in March, being unchanged in February, rising a revised 0.1% in January, and rising a revised 0.2% in December, as the April index for final demand for trade services fell 0.5% while the index for final demand for transportation and warehousing services rose 0.8% and the core index for final demand for services less trade, transportation, and warehousing services was 0.3% higher....among trade services, seasonally adjusted margins for food and beverage retailers fell 3.1%, margins for health, beauty, and optical goods retailers also fell 3.1%, margins for apparel, jewelry, footwear and accessories retailers fell 2.6%, and margins for major household appliances retailers fell 2.0%, while margins for sporting goods and boat retailers rose 2.8%... among transportation and warehousing services, margins for airline passenger services rose 3.6% and margins for rail transportation of freight and mail rose 0.9%...among the components of the core final demand for services index, margins for arrangement of cruises and tours rose 7.8% and margins for portfolio management rose 5.9%..

This report also showed the price index for intermediate processed goods fell 0.1% in April, after rising 0.8% in March, rising 0.4% in February, but falling a revised 1.2% in both December and January...the price index for intermediate energy goods rose 0.6%, as refinery prices for gasoline rose 5.9% and refinery prices for residual fuels rose 3.2%, while producer prices for liquefied petroleum gas fell 10.7%...at the same time, prices for intermediate processed foods and feeds also rose 0.6%, as the producer price indexes for meat and for processed poultry both rose 2.8 % and producer prices for dairy products rose 1.0%...on the other hand, the core price index for intermediate processed goods less food and energy fell 0.4% as wholesale prices for thermoplastic resins and materials fell 6.7% and prices for nitrogenates fell 8.4%...however, prices for intermediate processed goods are still 0.7% higher than in April a year ago, now the 29th 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 rose 2.7% in April after rising 2.3% in March, but after falling 4.6% in February and a revised 4.7% in January, but rising a revised 3.7% in December after falling 3.3% in November....that was as the April price index for crude energy goods rose 3.7% on a 13.9% jump in crude oil prices, and as the price index for unprocessed foodstuffs and feedstuffs also rose 3.7% on a 55.9% increase in producer prices for slaughter hogs...on the other hand, the index for core raw materials other than food and energy materials fell 1.2%, as prices for aluminum base scrap fell 10.8% and prices for carbon steel scrap declined 3.7%...this raw materials index is still 2.0% lower than a year ago, as much of the increase previously reported in late 2018 has been revised lower...

Lastly, the price index for services for intermediate demand rose 0.3% in April, after rising 0.4% in March, falling 0.1% in February, rising 0.2% in January, and rising 0.1% in December and in November...the price index for intermediate trade services was 0.7% higher, as margins for intermediate metals, minerals, and ores wholesalers rose 6.1% and margins for intermediate machinery and equipment parts and supplies wholesalers rose 0.9%…at the same time, the index for transportation and warehousing services for intermediate demand rose 0.6%, as the intermediate index for transportation of passengers (partial) rose 3.6%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing rose 0.3%, as the index for securities brokerage, dealing, investment advice, and related services rose 1.2% and the index for internet advertising space sales, excluding internet ads sold by print publishers rose 2.2%.....over the 12 months ended in March, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.8% higher than it was a year ago...

March Trade Deficit Increases 1.5% on Higher Imports of Crude Oil

Our trade deficit was 1.5% higher in March, as both our imports and exports increased, but our imports increased by more....the Commerce Department report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit rose by $0.7 billion to $50.0 billion in March, from a February deficit that was revised from the originally reported $49.4 billion to $49.3 billion...in rounded totals, the value of our March exports rose by $2.1 billion to $212.0 billion on a $2.0 billion increase to $141.7 billion in our exports of goods and a $0.1 billion increase to $70.3 billion in our exports of services, while our imports rose by $2.8 billion to $262.0 billion on a $2.6 billion increase to $214.1 billion in our imports of goods and a $0.2 billion increase to $47.8 billion in our imports of services....export prices averaged 0.7% higher in March, so real exports were smaller than their nominal value by that percentage, while import prices were 0.6% higher, meaning that our real imports were likewise smaller than than their nominal value by that percentage..

Our March exports of goods rose due to greater exports of industrial supplies and materials and of foods, feeds, and beverages...referencing the Full Release and Tables for March (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1,720 million to $44,774 million on a $357 million increase in our exports of natural gas liquids, a $317 million increase in our exports of fuel oil, a $272 million increase in our exports of metallurgical grade coal, and a $256 million increase in our exports of other petroleum products, and that our exports of foods, feeds and beverages rose by $751 million to $11,349 million on a $546 million increase in our exports of soybeans...in addition, our exports of consumer goods rose by $63 million to $17,865 million, and our exports of other goods not categorized by end use rose by $165 million to $5,525 million....partially offsetting those increases, our exports of capital goods fell by $534 million to $47,511 million on a $690 million decrease in our exports civilian aircraft and a $361 million decrease in our exports of semiconductors, and our exports of automotive vehicles, parts, and engines fell by $52 million to $14,071 million on a $330 million decrease in our exports of 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 industrial supplies and materials and of foods, feeds, and beverages were also responsible for the increase in March imports...our imports of industrial supplies and materials rose by $2,397 million to $44,966 million on a $1,402 million increase in our imports of crude oil, a $467 million increase in our imports of organic chemicals, and a $396 million increase in our imports of petroleum products other than fuel oil, and our imports of foods, feeds, and beverages rose by $993 million to $13,056 million on a $213 million increase in our imports of fish and shellfish and on a $479 million increase in our imports of other foods...in addition, our imports of automotive vehicles, parts and engines rose by $92 million to $32,011 million as a $587 million increase in our imports of trucks, buses, and special purpose vehicles was offset by a $452 million decrease in our imports of new and used passenger cars, and our imports of capital goods rose by $19 million to $57,236 million as a $374 million increase in our imports of computers was offset by a $272 million decrease in our imports of electric apparatuses, a $257 million decrease in our imports of computer accessories, and a $207 million decrease in our imports of civilian aircraft...partially offsetting the increases in those end-use categories, our imports of consumer goods fell by $677 million to $56,053 million on a $1,087 million decrease in our imports of cellphones, a $584 million decrease in our imports of TVs and video equipment, a $488 million decrease in our imports of artwork, antiques and other collectibles, and a $348 million decrease in our imports of toys, games and sporting goods, and our imports of other goods not categorized by end use fell by $205 million to $9,100 million...

The Full Release and Tables pdf for this report also gives us surplus and deficit details on our goods trade with selected countries:

The March figures show surpluses, in billions of dollars, with South and Central America ($4.2), Hong Kong ($2.4), Brazil ($0.9), OPEC ($0.7), Saudi Arabia ($0.3), and Singapore ($0.2). Deficits were recorded, in billions of dollars, with China ($28.3), European Union ($15.8), Mexico ($8.6), Japan ($6.1), Germany ($5.7), Italy ($2.8), Canada ($2.1), Taiwan ($2.0), South Korea ($1.8), India ($1.8), France ($1.7), and United Kingdom ($0.2).

• The deficit with the European Union increased $3.4 billion to $15.8 billion in March. Exports decreased $1.4 billion to $27.8 billion and imports increased $2.0 billion to $43.6 billion.
• The balance with Canada shifted from a surplus of $0.5 billion to a deficit of $2.1 billion in March. Exports decreased $0.1 billion to $25.3 billion and imports increased $2.6 billion to $27.5 billion.
• The deficit with China decreased $1.9 billion to $28.3 billion in March. Exports increased $1.4 billion to $10.5 billion and imports decreased $0.5 billion to $38.8 billion.

This March trade report was not available for the advance report on 1st quarter GDP of two weeks ago, and the Advance Estimate of U.S. International Trade in Goods, which is usually used by the BEA when estimating trade figures for GDP, was not available until last week, so we have to imagine that the March trade data used in the GDP estimate was made up out of whole cloth...for the 1st quarter GDP report, the BEA's key source data and assumptions (xls) indicated that they had estimated March exports of goods would rise at a $18.0 billion annual rate from those of February, that March exports of services would fall at a $0.6 billion annual rate from those of February, that March imports of goods would rise at a $14.5 billion annual rate from those of February, and that March imports of services would fall at a $0.3 billion annual rate from those of February...hence, the trade figures the BEA had used for March in the GDP had indicated that they estimated an improvement in the March trade deficit at a $3.2 billion annual rate, whereas this report shows that March trade actually deteriorated by $0.6 billion from the previously published February figure, which would work out to an annual rate of about $2.5 billion for the first quarter...taking the $0.1 billion downward revision to February's trade deficit as a $0.4 billion annual rate adjustment to that, it would still mean that the 1st quarter's trade deficit had increased at a $2.1 annual rate over the previously published baseline...thus the annualized trade figures used in the GDP report, before adjusting for prices changes, were off by about $5.3 billion, an amount that would suggest a downward revision of 0.09 or 0.10 percentage points to 1st quarter GDP when the 2nd estimate is released at the end of May...

Note, however, that we have not adjusted for changes in price, and that Exhibit 10 in the pdf for this March report indicates that the price adjusted trade in goods for each month going back to October has been revised...the problem is that the 2nd estimate of GDP will not include those trade revisions to October, November, and December, and will only use the revised data for January, February & March, so it will be less accurate than the data available here…that GDP data will not be corrected until the annual revisions to GDP are released at the end of July.…however, Spencer England at Angry Bear has graphed the real trade data incorporating those revisions, so his post shows the accurate revision to real trade that the next GDP report will not...

March Wholesale Sales Up 2.3%, Wholesale Inventories Down 0.1%

The March report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $507.4 billion, up 2.3 percent (±0.5 percent)* from the revised February level, and 3.9 percent (±0.7 percent) higher than wholesale sales of March 2018... the February preliminary estimate of wholesale sales was revised up from $495.852 billion to $496.126 billion, which the Census reports as "unrevised from the preliminary estimate of up 0.3 percent (±0.4 percent)*" from January...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 sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this March report estimated that wholesale inventories were valued at $669.9 billion at month end, a decrease of 0.1  percent (+/-0.4%) from the revised February level but still 6.7 percent (±1.2 percent) higher than March a year ago, with the February preliminary inventory estimate concurrently revised upward from the originally reported $668.9 to $670.2 billion, which meant the change in inventories from January to February was revised from an increase of 0.2% to one of 0.4%...

The BEA's Key source data and assumptions (xls) for the advance estimate of first quarter GDP indicates that they had estimated that the value of March wholesale inventories would increase by $2.3 billion from February before price adjustments, while this report shows that wholesale goods inventories decreased by $0.4 billion...however, the value of February's wholesale inventories was concurrently revised from $1.3 billion higher, which would mean that March's inventory change vis a vis the 4th quarter was overestimated by a net $1.4 billion in the GDP report, while February's change was underestimated by $1.3 billion, which combined would suggest a negligible impact on first quarter GDP ...

Job Openings Jump in March; Hiring, Job Quitting and Layoffs Down

The Job Openings and Labor Turnover Survey (JOLTS) report for March from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 346,000 to 7,488,000 in March, after February job openings were revised up 55,000 from the originally reported 7,087,000...March's jobs openings were also up 8.6% from the 6,894,000 job openings reported in March a year ago, as the job opening ratio expressed as a percentage of the employed rose to 4.7% in March, up from the 4.5% rate in February and the 4.4% rate of March a year ago...(details on job openings by industry and region can be viewed in Table 1)...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 March, seasonally adjusted new hires totaled 5,660,000, down by 35,000 from the revised 5,695,000 who were hired or rehired in February, as the hiring rate as a percentage of all employed remained unchanged at 3.9% in March, which was also the same as the hiring rate in March a year earlier (details of hiring by sector since November are in table 2)....meanwhile, total separations fell by 142,000 to 5,434,000 in March, as the separations rate as a percentage of the employed fell from 3.7% to 3.6%, which was also down from 3.7% a year ago (see table 3)...subtracting the 5,434,000 total separations from the total hires of 5,660,000 would imply an increase of 226,000 jobs in March, less than the revised payroll job increase of 189,000 for March reported in the April 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 found that 3,409,000 of us voluntarily quit our jobs in March, down from the revised 3,447,000 who quit their jobs in February, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.3% of total employment, which was still up from 2.2% a year earlier (see details in table 4)....in addition to those who quit, another 1,700,000 were either laid off, fired or otherwise discharged in March, down by 84,000 from the revised 1,784,000 who were discharged in February, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from 1.2% a year ago...meanwhile, other separations, which includes retirements and deaths, were at 325,000 in March, down from 346,000 in February, for an 'other separations rate’ of 0.2%, same as in February but down from 0.3% in March 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 picked from the aforementioned GGO posts, contact me…)      

April’s jobs report; March incomes and outlays, construction spending, and factory inventories

The major economic releases from the past week that we'll review today include the Employment Situation Summary for April from the Bureau of Labor Statistics, and three March reports that include metrics which were either estimated or included in last week's advance estimate of 1st quarter GDP: the March report on Personal Income and Spending from the Bureau of Economic Analysis, which also includes shutdown-delayed February spending data, the March report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for March, both from the Census Bureau...in addition to those, this week also saw the release of the last regional Fed manufacturing survey for April: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to +2.0 in April, down from a revised +6.9 in March, suggesting near stagnation of the energy industry centered Texas economy…

privately issued reports released this week included the ADP Employment Report for April, the light vehicle sales report for April from Wards Automotive, which estimated that vehicles sold at a 16.43 million annual rate in April, down from the 17.48 million annual sales rate in March, and down from the 17.01 million annual sales rate in April a year ago, and the February Case-Shiller Home Price Index from S&P Case-Shiller, which actually is a relative average of December, January and February home prices...Case Shiller's report indicated that home prices nationally for those 3 months averaged 4.0% higher than prices for the same homes that sold during the same 3 month period a year earlier, down from the 4.3% year over year increase they reported a month ago…

in addition, the week saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the April Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 52.8% in April, down from 55.3% in March, which suggests a sluggish expansion in manufacturing firms nationally, and the April Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.2% in April from 56.1% in March, indicating a slightly smaller plurality of service industry purchasing managers reported expansion in various facets of their business in April...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 263,000 Jobs in April, Unemployment Rate Drops to 49 Year Low of 3.6% On Labor Force Decline

The Employment Situation Summary for April indicated strong payroll job growth, while the unemployment rate dropped because many of those unemployed stopped looking for work…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 263,000 jobs in April, after the previously estimated payroll job increase for March was revised down from 196,000 to 189,000, while the payroll jobs increase for February was revised up from 33,000 to 56,000…including those revisions, this report thus represents a total of 279,000 more seasonally adjusted payroll jobs than were reported last month, well above the 2018 average increase of 223,000 jobs per month......the unadjusted data shows that there were actually 1,126,000 more payroll jobs extant in April than in March, as the usual seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were normalized by the seasonal adjustments…

Seasonally adjusted job increases in April were spread through throughout both the goods producing and the private service sectors, with only the retail trade sector showing statistically significant 12,000 job loss on a seasonally adjusted basis, while small job losses were shown in mining, utility, and information employment... the broad professional and business services sector added 76,000 jobs, as 20,600 more than normal for this time of year were added in services to buildings, and temporary help services employed 17,900 more....employment in health care and social assistance rose by 52,600, with the addition of 26,300 jobs in individual and family services and 8,300 jobs in hospitals...the leisure and hospitality sector added 34,000 jobs, with the addition of 25,000 more spots than in a normal April in bars and restaurants, while the construction sector added 33,000 jobs above their seasonal norm, with 22,100 of those added by nonresidential specialty trade contractors.…jobs in local government increased by 27,000, with 12,900 in public education and 13,600 employed by local governments outside of school systems...and another 12,000 were employed in financial activities, with 7,800 of those working in real estate, rental and leasing...meanwhile, the other major sectors, including manufacturing, wholesale trade, transportation and warehousing, and private education all also saw smaller increases in payroll employment over the month…

The establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $27.77 an hour in April, after it had increased by a revised 5 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $23.31 an hour...employers also reported that the average workweek for all private payroll employees fell by 0.1 hour to 34.4 hours in April, while hours for production and non-supervisory personnel remained at 33.7 hours after rising 0.1 hour in March...the manufacturing workweek was also unchanged at 40.7 hours, while average factory overtime was unchanged at 3.4 hours...

At the same time, the April household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 103,000 to 156,645,000, while the similarly estimated number of those who reported being unemployed fell by 387,000 to 5,824,000; which thus meant a net 490,000 decrease in the total labor force...since the working age population had also grown by 156,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 646,000 to a near record 96,223,000....with the number of those in the labor force decreasing while the civilian noninstitutional population was increasing, the labor force participation rate fell 0.2% to 62.8%....at the same time, since the decrease in the number employed was statistically small, the employment to population ratio, which we could think of as an employment rate, remained unchanged 60.6%...however the decrease in the number unemployed was large enough to lower the unemployment rate from 3.8% to 3.6%, the lowest since 1969....meanwhile, the number who reported they were involuntarily working part time rose by 155,000 to 4,654,000 in April, which was enough to keep the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", unchanged at 7.3% of the labor force for the third month in a row, equal to the lowest since January 2001...

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..

March Personal Income Rose 0.1%, Personal Spending Rose 0.9% , PCE Price Index Up 0.2%

Note: much of the data in this Monday's release of the March Income and Outlays report from the Bureau of Economic Analysis had already been included in the release of the advance report on 1st quarter GDP on the prior Friday, as the PCE data reported here accounted for 69% of GDP...also note that while this income & outlays report usually only reports new data for one month, along with revisions to prior months, because the January government shutdown had caused delays in reports which input into this one, this month's report includes new data on personal income for March and revised personal income figures for January and February, and revised personal outlays data for January along with new personal outlays for both February and March...

Like the GDP report, 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 March'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 February to March....hence, when the opening line of this report tell us "Personal income increased $11.4 billion (0.1 percent) in March", that means that the annualized figure for all US personal income in March, $18,053.0 billion, was $11.4 billion, or a less than 0.1% greater than the annualized personal income figure for February; the actual amounts of personal income in March and in February arenot given....similarly, disposable personal income, which is income after taxes, also rose by less than 0.1%, from an annual rate of $15,938.8 billion in February to an annual rate of $15,939.4 billion in March, an increase which is considered statistically unchanged...

Meanwhile, seasonally adjusted personal consumption expenditures (PCE) for February and March, which were included in the change in real PCE in 1st quarter GDP that we reviewed last week, showed an increase at a $11.7 billion annual rate in February and an increase at a $123.5 billion annual rate in March to a rate of $13,823.9 billion in consumer spending annually, or a rounded 0.1% increase in February and a 0.9% in March, after January's PCE was revised up from the originally reported annual rate of $14,166.0 billion to $14,202.3 billion, reflecting the sharp revisions to January retails sales that we saw in the February retail sales report...for March, the current dollar increase in spending included an annualized $51.0 billion increase in spending for services, and a $72.5 billion increase in annualized spending for goods, reflecting the 1.6% increase in March retail sales reported two weeks ago....total personal outlays for March, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $126.5 billion to $14,909.4 billion, after February’s total personal outlays had risen by $14.8 billion....that left personal savings, which is disposable personal income less total outlays, at a $1,030.1 billion annual rate in March, down from the $1,156.0 billion in annualized personal savings in February, and down from the revised $1,147.7 billion in annualized personal savings in January...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 6.5% in March, from 7.3% in February and 7.2% in January, which itself was originally reported at 7.5%..

While our personal consumption expenditures accounted for 69.1% of our first 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 was done by computing the price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is then applied to the spending....from Table 9 in the pdf for this report, we find that that index rose to 109.215 in March from 109.000 in February and from 108.887 in January, giving us month over month inflation rates of 0.019725% in March and 0.010378% in February, which the BEA reports as PCE price index increases of 0.2% and 0.1% in their tables….at the same time, Table 11 gives us a year over year PCE price index increase of 1.5% in March, up from 1.3% in February, and a core PCE price index increase, excluding food and energy, of 1.6% for the past year, both well below the Fed's inflation target....applying the March inflation adjustment to the change in March PCE shows that real PCE was up 0.67029% in March, which BEA reports as a 0.7% increase in their press release and in the tables, following a slightly negative February real PCE change that they report as a 0.0% change...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 2012 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...

Construction Spending Fell 0.9% in March after Prior Months Were Revised Much Lower

The Census Bureau's report on construction spending for March (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,282.2 billion annually if extrapolated over an entire year, which was 0.9 percent (±0.8%) below the revised annualized February estimate of $1,306.4 billion, and 0.8 percent (±1.5 percent)* below the estimated annualized level of construction spending in March of last year...the annualized February construction spending estimate was revised 2.0% lower, from $1,320.3 billion to $1,293.3 billion, while the annual rate of construction spending for January was revised 1.7% lower, from $1,307.3 billion to $1,284.654 billion...

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:

• Private Construction": Spending on private construction was at a seasonally adjusted annual rate of $961.5 billion, 0.7 percent (±0.7 percent)* below the revised February estimate of $968.6 billion. Residential construction was at a seasonally adjusted annual rate of $500.9 billion in March, 1.8 percent (±1.3 percent) below the revised February estimate of $510.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $460.6 billion in March, 0.5 percent (±0.7 percent)* above the revised February estimate of $458.5 billion.
• Public Construction: In March, the estimated seasonally adjusted annual rate of public construction spending was $320.7 billion, 1.3 percent (±2.0 percent)* below the revised February estimate of $324.7 billion. Educational construction was at a seasonally adjusted annual rate of $76.6 billion, 1.5 percent (±3.5 percent)* below the revised February estimate of $77.8 billion. Highway construction was at a seasonally adjusted annual rate of $104.5 billion, 1.9 percent (±5.8 percent)* below the revised February estimate of $106.5 billion.

With the downward revisions to the prior months, it turns out that construction spending for all three months of the 1st quarter was lower than was reported by the BEA in their advance estimate of GDP last week....as we saw above, annualized construction spending for January was revised $21.8 billion lower, and annualized construction spending for February was revised $27.0 billion lower....in reporting 1st quarter GDP, the BEA's key source data and assumptions (xls) indicated that they had estimated March residential construction (at an annual rate) would be $6.7 billion less than that of the previously reported February figure, that March nonresidential construction would be valued at $454.9 billion, $1.3 billion more than that of the reported February figure, and that March public construction would decrease by $2.6 billion from previously reported February levels...totaling those changes, the 1st quarter GDP report showed March construction spending at an annual rate $8.0 billion lower than previously reported February levels...since this report shows that March construction spending was down at an $11.1 billion annual rate from February figures that were revised $27.0 billion lower, that means the total annualized construction figure used for March in the GDP report was $30.1 billion too high...averaging the overstatements in the annual rates of construction spending for the three months of the 1st quarter that were used in the GDP report, we find that this report shows that construction spending was overestimated by $26.4 billion (at an annual rate) in the 1st quarter GDP report, implying a downward revision to the related GDP components at a rate that would result in a subtraction of about 0.58 percentage points from first quarter GDP when the 2nd estimate is released at the end of May...we should caution that with a revision that large that an imbalance of inflation adjustments among the revised components might also have a material impact on the final revision..

March Factory Shipments Up 0.7%, Inventories up 0.4%

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for March from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $9.3 billion or 1.9 percent to $508.2 billion in March, following a decrease of $1.7 billion or 0.3% to $500.1 billion in February, which was revised from the decrease of $2.6 billion or 0.5 percent to $497.5 billion that was reported for February last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as revised updates to the March advance report on durable goods which was released last week...on those durable goods orders revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

• Summary: New orders for manufactured goods in March, up following two consecutive monthly decreases, increased $9.3 billion or 1.9 percent to $508.2 billion, the U.S. Census Bureau reported today.  This followed a 0.3 percent February decrease.  Shipments, up two consecutive months, increased $3.7 billion or 0.7 percent to $509.7 billion.  This followed a 0.5 percent February increase.  Unfilled orders, up two of the last three months, increased $2.7 billion or 0.2 percent to $1,181.2 billion.  This followed a 0.2 percent February decrease.  The unfilled orders‐to‐shipments ratio was 6.56, unchanged from February.  Inventories, up twenty‐eight of the last twenty‐nine months, increased $2.8 billion or 0.4 percent to $690.9 billion.  This followed a 0.3 percent February increase.  The inventories‐to‐shipments ratio was 1.36, unchanged from February.
• New orders for manufactured durable goods in March, up four of the last five months, increased $6.6 billion or 2.6 percent to $258.0 billion, down from the previously published 2.7 percent increase.  This followed a 1.3 percent February decrease.  Transportation equipment, also up four of the last five months,  led the increase, $6.1 billion or 7.0 percent to $93.8 billion.  New orders for manufactured nondurable goods increased $2.8 billion or 1.1 percent to $250.2 billion.
• Shipments of manufactured durable goods in March, up four of the last five months, increased $1.0 billion or 0.4 percent to $259.5 billion, up from the previously published 0.3 percent increase.  This followed a 0.2 percent February increase.  Transportation equipment, up following two consecutive monthly decreases, drove the increase, $1.0 billion or 1.1 percent to $90.7 billion.  Shipments of manufactured nondurable goods, up two consecutive months, increased $2.8 billion or 1.1 percent to $250.2 billion.  This followed a 0.8 percent February increase.  Petroleum and coal products, also up two consecutive months, drove the increase, $3.2 billion or 6.0 percent to $55.5 billion.
• Unfilled orders for manufactured durable goods in March, up two of the last three months, increased $2.7 billion or 0.2 percent to $1,181.2 billion, down from the previously published 0.3 percent increase.  This followed a 0.2 percent February decrease.  Transportation equipment, also up two of the last three months, drove the increase, $3.1 billion or 0.4 percent to $811.9 billion. 
• Inventories of manufactured durable goods in March, up twenty‐six of the last twenty‐seven months, increased $1.2 billion or 0.3 percent to $420.5 billion, unchanged from the previously published increase.   This followed a 0.4 percent February increase.  Machinery, up fifteen of the last sixteen months, led the increase, $0.7 billion or 1.0 percent to $71.7 billion.  
• Inventories of manufactured nondurable goods, up three consecutive months, increased $1.6 billion or 0.6 percent to $270.4 billion.  This followed a 0.2 percent February increase.  Petroleum and coal products, also up three consecutive months, led the increase, $1.2 billion or 3.0 percent to $41.5 billion.  By stage of fabrication, March materials and supplies decreased 0.1 percent in both durable goods and nondurable goods.  Work in process increased 0.5 percent in durable goods and increased 1.1 percent in nondurable goods.  Finished goods increased 0.5 percent in durable goods and increased 0.9 percent in nondurable goods.

The BEA's Key source data and assumptions (xls) for the advance estimate of first quarter GDP indicates that they had estimated that the value of non-durable goods inventories would decrease by $9.7 billion before price adjustments in March, while this report obviously shows total non-durable goods inventories increased by $1.2 billion...the value of February's non durable goods inventories was concurrently revised from $268.9 billion to $268.9 billion...that would mean that March's inventory change was underestimated by $10.8 billion in the GDP report, while February's change was overestimated by $0.1 billion, which combined would suggest an upward revision of around 0.07 percentage points to first 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 picked from the aforementioned GGO posts, contact me…) 

1st Quarter GDP, March durable goods, new and existing home sales

The key economic report of this past week was the advance estimate of 1st quarter GDP from the Bureau of Economic Analysis, which was released on Friday; other widely watched releases included the March advance report on durable goods and the March report on new home sales, both from the Census bureau, and the Existing Home Sales Report for March from the National Association of Realtors (NAR)….also released this week was the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, which rose to –0.15 in March from –0.31 in February, after February's index was revised down from the -0.29 reported last month...as a result, the 3 month average of that index fell to –0.24 in March from a revised –0.18 in February, a negative number which thus indicates that national economic activity has been below the historical trend over recent months...

This week also saw the release of two more regional Fed manufacturing surveys for April:  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 +3, following last month's reading of +10, indicating a fairly sluggish growth of that region's manufacturing, while the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to +5 in April, down from a reading of +10 in March but up from a index of +1 in February, also indicating fairly sluggish growth in that region's manufacturing....

1st Quarter GDP Grows at a 3.2% Rate, Despite Biggest Durable Goods Pullback Since Q4 2009

Our economy grew at a 3.2% rate in the 1st quarter, somewhat faster than the growth rate of the fourth quarter, as improving international trade balances, greater growth of private inventories, and a sizable increase in state and local government investment was only partially offset by slower growth in personal consumption...the Advance Estimate of 1st Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 3.2% annual rate from the output of the 4th quarter of 2018, when our real output grew at a 2.2% real rate...in current dollars, our first quarter GDP grew at a 3.84% annual rate, increasing from what would work out to be a $20,865.1 billion a year output rate in the 4th quarter of last year to a $21,062.7 billion annual rate in the 1st quarter of this year, with the headline 3.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 0.9%, aka the GDP deflator, was computed and 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 +/-0.6% in either direction before the third estimate for the quarter is released, which will be two months from now....also note that March construction and non-durables inventory data have yet to be reported, and that the BEA assumed a small increase in nonresidential construction, modest decreases in both residential and public construction, and a modest decrease in nondurable manufacturing inventories for March before they estimated 1st quarter output (see their Key source data and assumptions Excel file that accompanies this report for more specific details)..

While we cover the details on the 1st quarter below, remember that this release 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 indexes chained from 2012 prices, and then that all percentage changes in this report are calculated from those '2012 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 advance estimate of 1st quarter GDP, which we find on the BEA GDP landing page, where you can also find 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 2nd quarter of 2015, 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 the inflation adjusted value in 2012 dollars of each of those components, and table 4, which shows the change in the price indexes for each of the GDP components....

Personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, grew at a 1.8% rate in current dollars in the 1st quarter, which worked out to a real growth rate of 1.2% in consumed goods and services after an annualized 0.6% PCE price index increase was used to adjust that personal spending for inflation....however, consumer outlays for durable goods actually fell at a 5.7% rate in current dollars while prices of those durable goods were on average 0.4% lower, and thus the BEA found real growth in output of consumer durables fell at a 5.3% rate, the largest real drop since the 4th quarter of 2009, as a drop in real consumption of automobiles at a 18.4% rate more than offset a modest increase in real consumption of recreational goods and vehicles, while other durable goods were little changed....the BEA also found that real output of consumer non-durable goods grew at a 1.7% rate after a decrease in consumer spending for non-durable goods at a 0.7% rate was adjusted for an average drop in non-durable prices at a 2.4% rate, with decreased real consumption of food, clothing and energy goods more than offset by greater growth in real consumption of other nondurables... meanwhile, the 3.7% nominal growth in consumer outlays for services was deflated by a 1.6% increase in prices for services to show that real output of consumer services grew at a 2.0% annual rate, led by real growth of health care and financial services....as a result of these changes in growth from the 4th to the 1st quarter, the decrease in outlays for durable goods subtracted 0.38 percentage points from GDP, largely on a 0.49 percentage point hit from automotives, while the increased consumption of non-durable goods added 0.24 percentage points to the growth of GDP, and as increased consumption of services added 0.96 percentage points to the growth rate of the 1st quarter economy..

The real 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 during the quarter at an annual rate....thus, after inflation adjustment, real gross private domestic investment, which had grown at a 3.7% annual rate in the 4th quarter of 2018, grew at a 5.1% annual rate from there in the 1st quarter...however, real growth in fixed investment grew at a 1.5% annual rate in the 1st quarter, after growing at a 3.1% rate in the 4th quarter, as real non-residential fixed investment grew at a 2.7% rate while real residential investment contracted at a 2.7% rate...real investment in non-residential structures, however, fell at a 0.8% rate and subtracted 0.02 percentage points from 1st quarter GDP, while real investment in equipment grew at a 0.2% rate and added 0.01 percentage point to GDP, as real investment in intellectual property grew at 8.6% rate and added 0.39 percentage points to GDP, while contracting real residential investment subtracted 0.11 percentage points from the quarter’s growth rate....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, greater growth in inventories boosted gross investment and hence GDP, as real private inventories grew by an inflation adjusted $128.4 billion in the quarter, up from the $96.8 billion of inflation adjusted inventory growth that we saw in the 4th quarter, and as a result the $31.6 billion greater real inventory growth added 0.65 percentage points to the 1st quarter's growth rate, after $7.0 billion in real inventory growth in the 4th quarter had added 0.11 percentage points to that quarter's GDP....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”, the $31.6 billion increase in their growth in turn meant that real final sales of GDP were actually smaller by that much, and hence real final sales of GDP grew at a 2.5% rate in the 1st quarter, after real final sales had increased at a 2.1% rate in the 4th quarter, when the change in inventories was smaller, and hence had a smaller impact on real final sales of GDP…

At the same time, our real exports of goods and services grew at a 3.7% rate in the 1st quarter, after growing at a 1.8% rate in the 4th quarter of 2018, while our real imports shrunk at a 3.7% rate in the 1st quarter, after rising at a 2.0% rate in the 4th quarter...as you'll recall, real 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 in GDP elsewhere), so that  increase in 1st quarter exports added .45 percentage points to 1st quarter GDP....on the other hand, real increases in imports subtract from GDP because they are either consumption or investment that was added to another GDP component that shouldn't have been, because it was not produced in our country and hence is not part of our national product, so conversely a decrease in imports adds to GDP growth….hence the 3.7% decrease in real imports in the 1st quarter added .58 more percentage points to GDP, and as a result, our improving trade balance added a net 1.03% percentage points to 1st quarter GDP, after an increase in our trade deficit had subtracted 0.08% percentage points from GDP in the fourth quarter of last year...

Finally, real consumption and investment by all branches of government grew at a 2.4% annual rate in the 1st quarter, after decreasing at a 0.4% rate in the 4th quarter, as federal government consumption and investment was statistically unchanged, while state and local consumption and investment grew at a 3.9% rate.....at the federal level, inflation adjusted spending for defense grew at a 4.1% rate and added 0.16 percentage points to 1st quarter GDP growth, while real non-defense federal consumption and investment shrunk at a 5.9% rate and subtracted 0.16 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 grew at an 3.9% annual rate and added 0.41 percentage points to the quarter's growth rate, as growth of real state and local investment at an 19.9% rate added 0.35 percentage points of that to the quarter's growth rate...

March Durable Goods: New Orders Up 2.7%, Shipments Up 0.3%, Inventories Up 0.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $6.8 billion or 2.7 percent to $258.5 billion in March, after February's new orders were revised from the $250.6 billion reported last month to $251.8 billion, now down by 1.1% from January's new orders, revised from the 1.6% drop originally reported, and as a result, year to date new orders are now up by 3.0% from those of 2018...the volatile monthly new orders for transportation equipment led this month’s increase, as new transportation equipment orders rose $6.1 billion or 7.0 percent to $93.8 billion, on a 31.2% increase in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders were up 0.4%, while excluding just new orders for defense equipment, new orders rose 2.3%....at the same time, new orders for nondefense capital goods less aircraft, a category that’s a proxy for equipment investment, rose 1.3% to $69,979 million, led by a 9.0% increase in new orders for communications equipment...

Meanwhile, the seasonally adjusted value of March shipments of durable goods, which were ultimately included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.9 billion or 0.3 percent to $259.6 billion, after the value of February shipments was revised from $258.6 billion to $258.7 billion, now up 0.3% from January....higher shipments of transportation equipment were responsible for the March increase, as those shipments increased by $1.0 billion or 1.1 percent to $90.7 billion...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $1.4 billion or 0.3 percent to $420.5 billion, after the value of end of February inventories was revised from $418.9 billion to $419.149 billion, now up 0.4% from January....a $0.7 billion or 1.0 percent increase to $71.6 billion in the value of inventories of machinery accounted for half of the March increase..

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but somewhat volatile new orders, rose for the 2nd time in the past 3 months, increasing by $3.2 billion or 0.3 percent to $1,181.9 billion, after the February unfilled orders decrease was revised from $3.6 billion to $3.2 billion, now down 0.2% from January...a $3.1 billion or 0.4 percent increase to $811.9 billion in unfilled orders for transportation equipment accounted for most of the increase, while unfilled orders excluding transportation equipment orders were up $119 million, statistically a 0.0% change....the unfilled order book for durable goods is now 2.8% above the level of last March, with unfilled orders for transportation equipment now 2.5% above their year ago level, mostly on a 4.0% increase in the backlog of orders for motor vehicles...

New Home Sales Reported Higher on Lower Prices in March

The Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 692,000 homes annually during the month, which was 4.5 percent (±17.6 percent)* above the revised February annual sales rate of 662,000, and 3.0 percent (±11.4 percent)* above the estimated annual rate that new homes were selling at in March of last year....the asterisks indicates that based on their small sampling, Census could not tell whether March new home sales rose or fell from those of February, or even from home sales 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 February were revised from the annual rate of 667,000 reported last month to an annual rate of 662,000, and new home sales in January, initially reported at an annual rate of 607,000 and revised to a 636,000 rate last month, were revised back to a 625,000 a year rate with this report, while December's annualized new home sales rate, initially reported at an annual rate of 621,000 and revised from the initial revision of 652,000 to a 588,000 a year rate last month, were revised down to a 562,000 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 68,000 new single family homes sold in March, up from the estimated 56,000 new homes that sold in February and up from the 47,000 that sold in January .....the raw numbers from Census field agents were further used to estimate that the median sales price of new houses sold in March was $302,700, down from the median sale price of $315,200 in February and down from the median sales price of $335,400 in March a year ago, while the average new home sales price was $376,000, down from the $385,300 average sales price in February, but up from the average sales price of $369,200 in March a year ago....a seasonally adjusted estimate of 344,000 new single family houses remained for sale at the end of March, which represents a 6.0 month supply at the March sales rate, down from the 6.1 months of new home supply reported in February...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increased to 692,000 Annual Rate in March and A few Comments on March New Home Sales..

Existing Home Sales Decrease 4.9% in March

The National Association of Realtors (NAR) reported that existing home sales fell at a 4.9% rate from February to March on a seasonally adjusted basis, projecting that 5.21 million existing homes would sell over an entire year if the March home sales pace were extrapolated over that year, a pace that was also 5.4% below the annual sales rate projected in March of a year ago...February homes sales, now at a 5.48 million annual rate, were revised from the 5.51 annual rate reported a month ago....the NAR also reported that the median sales price for all existing-home types was $259,400 in March, which was 3.8% higher than the median price of $249,800 in March a year earlier, which they report as "the 85th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Slide 4.9% in March", is in easy to read plain English, so if you're interested in a regional breakdown, or 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 usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data estimates that roughly 400,000 homes sold in March, up 28.6% from the 311,000 homes that sold in February, but down by 7.8% from the 434,000 homes that sold in March of last year, so we can see the effect of a large springtime seasonal adjustment causing the headline to show a decrease....that same pdf indicates that the median home selling price for all housing types rose by 3.7%, from a revised $250,100 in February to $259,400 in March, while the average home sales price rose 3.0% to $297,200 from the $288,500 average sales price in February, while it was up 2.5% from the $289,900 average home sales price of March a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, again see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 5.21 million in March and Comments on March 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 picked from the aforementioned GGO posts, contact me…)