Sunday, August 21, 2016

July consumer prices, industrial production, and new home construction

this week's key reports were the July Consumer Price Index from the Bureau of Labor Statistics, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau...other reports released this week included Regional and State Employment and Unemployment for July from the BLS, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index fell from +0.55 in July to -4.21 in August, suggesting First District manufacturing was again contracting, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from -2.9 in July to +2.0 in August, suggesting a subdued level of growth has returned to that region's manufacturing for only the 3rd time in the past year...

July Consumer Price Index Nets Zero Change on Lower Gasoline, Groceries

the consumer price index was unchanged in July, as price increases for most core services were offset by lower prices for groceries and energy commodities...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted price index for July was unchanged after rising 0.2% in June, 0.2% in May, 0.4% in April and 0.1% in March....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell, from 241.038 in June to 240.647 in July, which left it statistically 0.835% higher than the 238.638 index reading of last July....regionally, prices for urban consumers have risen 1.4% in the West, 0.8% in the Northeast, 0.7% in the South, and 0.4% in the Midwest over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people...with mostly lower commodity prices mostly offsetting higher prices for services, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index also falling from 247.821 to 247.768, which put it 2.20% ahead of its year ago reading of 242.436...

the volatile seasonally adjusted energy price index fell by 1.6% in July after rising by 1.3% in June, 1.2% in May and 3.4% in April, but after falling by more than 11.5% over this past winter, and thus the energy price index still remained 10.9% lower than it was in July a year ago....prices for energy commodities were 4.4% lower while the index for energy services rose by 1.0%, after falling by by 0.5% in June....the decrease in the energy commodity index included a 4.6% drop in the price of gasoline, the largest component, and a 1.6% decrease in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 1.4% increase…within energy services, the index for utility gas service rose by 3.1% after falling by 0.4% in June, but utility gas was still priced 0.4% lower than it was a year ago, while the electricity price index rose by 0.5%, after falling by 0.5% in June...energy commodities are now priced 19.4% below their year ago levels, with gasoline prices averaging 19.9% lower than they were a year ago...meanwhile, the energy services price index is still 0.9% lower than last July, as even electricity prices have fallen 1.0% over that period..

the seasonally adjusted food price index was unchanged in July, after it fell by 0.2% in June, as 0.2% lower prices for food purchased for use at home offset 0.2% higher prices for food bought to eat away from home, where average prices at both fast food outlets and at full service restaurants rose 0.2%...in the food at home categories, the price index for cereals and bakery products was 0.2% lower on 0.7% lower prices for rice and cuts in prices for cookies and pastries....the price index for the meats, poultry, fish, and eggs group fell by 0.6% as prices for beef fell 1.4% and both pork and egg prices averaged 0.6% lower....in addition, the index for dairy products was 0.4% lower on a 1.4% drop in prices for fresh whole milk... meanwhile, the fruits and vegetables index rose 0.3% after falling by 0.1% in June, 0.7% in May and 0.5% in April, as a 0.4% increase in prices for fresh fruits and a 0.9% increase for canned vegetables more than offset a 2.1% drop in lettuce prices and 1.8% lower priced potatoes...the beverages index was also 0.3% higher on a 0.6% increase in prices for noncarbonated juices and drinks and a 1.9% pop in prices for non-coffee beverage materials including tea... lastly, prices in the other foods at home category were on average 0.2% lower as 1.1% higher prices for margarine and 1.4% higher salad dressing were offset by a 2.1% drop in prices for peanut butter and 1.3% lower prices soups.....among food line items, only eggs, which are now priced 29.0% lower than a year ago, and ground beef, which has fallen by 10.2%, have 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 July after rising by 0.2% in April, in May and in June, the composite of all goods less food and energy goods fell by 0.1%, while the 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 July retail sales for inflation in national accounts data, the index for household furnishings and supplies was unchanged as a 1.8% decrease in prices for major appliances was offset by 1.4% higher floor and window coverings, and the apparel price index was also unchanged as 0.6% higher prices for men's apparel was offset by a 5.5% drop in girls apparel...prices for transportation commodities other than fuel were down 0.2%, as prices for used cars and trucks were down another 1.0% after falling 1.1% in June and 1.3% in May...at the same time, prices for medical care commodities were 0.4% higher after a 1.1% increase in June on a 0.9% increase in prescription drug prices...meanwhile, the recreational commodities index fell 0.4% as TV prices fell another 2.0%, and the education and communication commodities index was 0.3% lower as a 1.7% price drop for telephone hardware more than offset a 0.4% increase in prices for educational books and supplies...lastly a separate index for alcoholic beverages fell 0.1% on a 0.3% decrease in prices for wine bought for use at home, while the index for ‘other goods’ was down 0.3% on a 1.5% drop in prices for stationery, stationery supplies and gift wrap..

within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.3% increase in owner's equivalent rent while costs for lodging away from home at hotels and motels dropped 2.7%, and costs for water, sewers and trash collection were 0.3% lower....the index for medical care services rose 0.5% as physicians' services rose 0.7%, while the transportation services index fell 0.2% on a 2.6% decrease in car and truck rentals...at the same time, the recreation services index rose 0.1% as video & audio rental services fell 2.9% while admissions to sporting events rose 2.4%... meanwhile, the index for education and communication services fell 0.2% as college tuition fell 0.3% as did wireless telephone service...lastly, other personal services were up 0.4% on a 1.6% increase in legal fees...among core prices, a 12.3% year over year increase in moving and storage expenses was the only line items with an annual increase greater than 10%, while only telephone hardware, which has fallen by 11.3%, and televisions, which are now 20.1% cheaper than a year ago, saw prices drop by more than 10% over the past year...

Industrial Production Up 0.7% in July, Largest Increase in 20 Months

the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.7% in July after rising by a revised 0.4% in June...however, industrial production is still down 0.5% from a year ago, as it has seen three consecutive quarterly decreases...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 104.8 in July from 104.1 in June, which was essentially unchanged from a month ago...at the same time, the May reading for the index was revised up from 103.5 to 103.7, and April reading for the index was revised up 103.8 to 103.9...

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.5, from 103.1 in June to 103.6 in July, after June's manufacturing index was revised down from 103.2.... meanwhile, the mining index, which includes oil and gas well drilling, rose from 103.4 in June to 104.2 in July, after the June index was revised up from 102.7 and prior months were revised higher as well....nonetheless, the mining index still remains 10.2% lower than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 2.1% in July after rising a revised 2.1% in June, as warmer weather than is typical for July over most of the country boosted use of air conditioning and pushed the utility index to 3.5% above its year earlier reading...

this report also includes capacity utilization figures, which are 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 from 75.4 in June to 75.9% in July....capacity utilization by NAICS durable goods production facilities rose from 76.1 in June to 76.5 in July, while capacity utilization for non-durables producers rose from 74.6% to 74.9%....capacity utilization for the mining sector rose to 74.9% in July, up from 74.1% in June, which was originally reported as 73.6%, while utilities were operating at 81.0% of capacity during July, up from their 79.4% of capacity during June...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....   

New Housing Construction Little Changed in July

the July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,211,000, which was 2.1 percent (±8.8%) above the revised June estimated annual rate of 1,186,000 housing units started, and was 5.6 percent (±14.7%) above last July's pace of 1,147,000 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, July's housing starts could have been down by 6.7% or up by as much as 10.9% from those of June, with even larger revisions possible...in this report, the annual rate for June housing starts was revised from the 1,189,000 reported last month to 1,186,000, while May starts, which were first reported at a 1,164,000 annual rate, were revised down from last month's initial revised figure of 1,136,000 annually to 1,128,000 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 Census field agents, which estimated that 114,000 housing units were started in July, up from the 110,600 units started in June...of those housing units started in July, an estimated 72,700 were single family homes and 40,500 were units in structures with more than 5 units, down from the revised 75,400 single family starts in June, but up from the 33,500 units started in structures with more than 5 units in June...

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 July, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,152,000 housing units, which was just 0.1 percent (±1.2%) below the revised June rate of 1,153,000 permits, but was 0.9 percent (±1.5%) above the rate of building permit issuance in July a year earlier...the annual rate for housing permits issued in June was unrevised....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 95,800 housing units were issued in July, down from the revised estimate of 114,400 new permits issued in June...the July permits included 61,100 permits for single family homes, down from 74,700 in June, and 32,200 permits for housing units in apartment buildings with 5 or more units, down from 36,900 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.211 Million Annual Rate in July and Comments on July 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 from the aforementioned GGO posts, contact me…)           

Sunday, August 14, 2016

July retail sales and producer prices; June wholesale sales, business inventories, and JOLTS

the three key reports of this past week, Retail Sales for July and Business Sales and Inventories for June from the Census bureau, and the July Producer Price Index from the Bureau of Labor Statistics, were all released on Friday...earlier in the week, the BLS also released the July Import-Export Price Index and the Job Openings and Labor Turnover Survey (JOLTS) for June, while the Census Bureau released the June report on Wholesale Trade, Sales and Inventories in advance of the composite business inventories report of Friday...quarterly reports released this week included the 2nd Quarter Household Debt and Credit Report, which reported that household debt increased by $35 billion or 0.3% to $12.29 trillion, the MBA's 2nd Quarter National Delinquency Survey, which indicated that mortgage delinquencies were at a 10 year low, and the 2nd Quarter Labor Productivity and Costs report from the BLS, which reported labor productivity decreased at a 0.5% annual rate, as output increased 1.2 percent while hours worked increased 1.8 percent, and that unit labor costs increased 2.0% over the quarter, as hourly compensation rose 1.5% and labor productivity decreased 0.5%....

July Retail Sales Unchanged After June Sales Revised 0.2% Higher

seasonally adjusted retail sales were little changed in July after retail sales for June were revised higher, while May sales were revised a bit lower....the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $457.7 billion during  the month, which was statistically unchanged (±0.5%)* from June's revised sales of $457.9 billion but 2.3 percent (±0.7%) above the adjusted sales in July of last year...June's seasonally adjusted sales were revised from the $457.0 billion originally reported to $457.9 billion, while May sales were revised lower, from $454.4 billion to $454.1 billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 0.6%, from $463,844 million in June to $469,523 million in July, while they were up just 0.7% from the $457,710 million of sales in July a year ago...revisions to May and June indicate that 2nd quarter sales were roughly $0.6 billion higher than previously reported, or that they increased at a $2.4 billion annual rate, which should be enough to lift 2nd quarter GDP by 0.5 percentage points when the 2nd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the May to June change under "May 2016 (r)evised" and the revised June 2015 to June 2016 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance June sale estimates, before this month's revision, is here....

July 2016 retail sales table

from the above table, we can see that without the 1.1% increase to $93,210 million in seasonally adjusted sales at motor vehicle and parts dealers, retail sales would have shown a 0.3% decrease for the month, but that decrease was conversely mostly caused by the 2.7% decrease to $33,329 million in sales at gas stations, which we figure to be mostly due to lower prices...if we take out gas station sales in addition to motor vehicles and parts, we find July retail sales are still statistically unchanged from the previous month...also notice the other larger month over month changes: non-store retailers, including catalog and online, saw sales rise by 1.3% to $47,705 million, which puts their sales 14.1% ahead of last July, while sales at specialty stores, such as sporting goods, book & music stores fell 2.2% to $7,835 million...the 0.9% drop to $53,116 million in sales at normally stable groceries stores is also suspect, but we'll have to wait till the release of the July consumer price index next week to judge that and determine the real economic impact of July sales…

Producer Prices Drop 0.4% in July on Lower Food Prices and Retail Margins

the seasonally adjusted Producer Price Index (PPI) for final demand decreased by 0.4% in July as prices for finished wholesale goods fell by 0.4%, while margins of final services providers fell by 0.3%...this followed a June report that showed the overall PPI had increased 0.5%, with prices for finished goods up 0.8% while final demand for services rose 0.4%....producer prices are now down 0.2% from a year ago, the largest year over year decrease since December 2015, as most of the price decreases relating to lower oil and commodity prices were seen in early 2015...

as we noted, the index for final demand for goods, aka 'finished goods', fell by 0.4% in July, after rising by 0.8% in June, 0.7% in May and 0.2% in April, as the index for wholesale energy prices fell1.0% from June to July and the price index for wholesale foods was 1.1% lower, while the index for final demand for core wholesale goods (ex food and energy) was unchanged...major wholesale price changes included a 6.6% drop in prices for gasoline, an 18.7% drop in grain prices, and an 11.5% drop in prices for oilseeds...despite the drop in wholesale foods overall, wholesale eggs were priced 43.3% higher, for the largest increase in this final demand for goods category...

meanwhile, the index for final demand for services fell by 0.3% in July after rising  0.4% in June, 0.2% in May, and 0.1% in April, as the index for final demand for trade services fell 1.3%, while the index for final demand for transportation and warehousing services rose 0.1%, and the core services index for final demand for services less trade, transportation, and warehousing services was 0.2% higher....noteworthy among trade services was a 6.0% drop in seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers, which accounted for 60% of the drop in the index...margins for machinery and equipment wholesaling (-2.2%); health, beauty, and optical goods retailing (-2.3%); food retailing (-1.2%) and automotive fuels and lubricants retailing (-2.0%) were also lower...among transportation and warehousing services, margins for courier, messenger, and postal services were 0.6% higher...in the core final demand services index, margins for computer training school services rose 5.4%, margins for traveler accommodation services rose 3.9% and margins for securities brokerage, dealing, investment advice, and related services were 1.9% higher, while margins for passenger car rental services fell 13.9%.....

this report also showed the price index for processed goods for intermediate demand increased by 0.2%, after rising 0.9% in June, 0.8% in May and 0.3% in April but falling in each of the prior nine months, as prices for intermediate processed goods still remain 3.7% lower than in July a year ago.... the price index for intermediate energy goods rose by 0.8%, prices for processed foods and feeds were unchanged, and the price index for processed goods for intermediate demand less food and energy was 0.1% higher...meanwhile, the price index for intermediate unprocessed goods was down by 0.4%, after rising by  2.8% in June, 1.3% in May, 3.0% in April and 1.6% in March, in the only increases in that index since June of last year...driving the July decrease was a 3.6% drop in the index for unprocessed foodstuffs and feedstuffs, which fell on a 22.2% drop in the price of unprocessed corn; at the same time, the index for for crude energy goods rose 5.0%, while the index for core raw materials other than food and energy materials was 0.8% lower.... this raw materials index is now 8.7% lower than it was a year ago, but almost two thirds of the year over year decrease of 26.4% seen in November 2015 has since been retraced...

lastly, the price index for services for intermediate demand was 0.3% higher in July, after rising 0.8% in June and falling 0.2 in May, as the index for trade services for intermediate demand rose 0.4%, the index for transportation and warehousing services for intermediate demand was 0.3% higher, and the core price index for services less trade, transportation, and warehousing for intermediate demand was up 0.2%...driving the increase in prices for services for intermediate demand was a 1.9% increase in the index for intermediate services related to securities brokerage and dealing; in addition, the indexes for chemicals and allied products wholesaling, television advertising time sales; metals, minerals, and ores wholesaling, deposit services (partial), and courier, messenger, and postal services also rose...over the 12 months ended in July, the year over year price index for services for intermediate demand, which has never turned negative, is still 1.6% higher than it was a year ago...    

June Wholesale Sales Up 1.9%, Inventories Up 0.3%

the June report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $444.6 billion, up 1.9 percent (+/-0.5%) from the revised May level, but still down 0.4% percent (+/-1.1%) from wholesale sales of June 2015... the May preliminary estimate was revised up $0.9 billion or 0.2% to $436.4 billion from the $435.5 billion sales reported last month ... May wholesale sales of durable goods were up 1.2 percent (+/-0.9%) from last month and were up 1.8 percent (+/-1.8%) from a year earlier, with a 7.7% increase in wholesale sales of hardware, and plumbing and heating equipment leading the increase for the month, while the value of wholesale sales of electrical and electronic goods also rose 2.5%....wholesale sales of nondurable goods were up 2.5 percent (+/-0.7%) from May, but were down 2.5 percent (+/-1.6%) from last June, with wholesale sales of both petroleum and petroleum products and farm product raw materials up 5.1%, mostly on higher prices...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 on the shelf represent goods that were produced but not sold, and this June report estimated that wholesale inventories were valued at a seasonally adjusted $590.9 billion at month end, an increase of 0.3 percent (+/-0.2%) from the revised May level but just 0.2 percent (+/-1.6%) higher than in June a year ago, with the May preliminary estimate revised upward from $589.2 billion to $589.3 billion at the same time....inventories of durable goods were down 0.3 percent (+/-0.4%)* from May and down 2.4 percent (+/-1.4%) from a year earlier, with inventories of lumber and other construction materials up 1.8%, while inventories of electrical and electronic goods were down 0.9%...at the same time, the value of wholesale inventories of nondurable goods were up 1.1 percent (+/-0.5%) from May and were up 4.5 percent (+/-2.5%) from last June, as the value of inventories of raw farm products rose 4.0% and wholesale inventories of drugs and drug store supplies rose 4.5%...

the BEA's technical note for 2nd quarter GDP indicates that they had estimated that the value of wholesale inventories in June to be virtually unchanged from May, based on the new Advance Economic Indicators Report from the Census Bureau, which had been released before the advance GDP report...this report thus revises that and reports that June wholesale inventories were actually $1.55 billion more than had been indicated in the GDP report, or a revision to annualized nominal growth in inventories at $6.2 billion rate, thus implying an upward revision of 0.13 percentage points to 2nd quarter GDP...note that i am not adjusting these GDP revision estimates for inflation because i am assuming the same deflators as were used in the advance report on 2nd quarter GDP will be used in the revisions…

June Business Inventories Up 0.2%, Less than Estimated by the BEA

on Friday, following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June (pdf), which incorporates the revised May retail data from that June report and the earlier published 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 $1,307.8 billion in June, up 1.2 percent (±0.2%) from May revised sales, but still down 0.6 percent (±0.4%) from June sales of a year earlier...note that total May sales were revised from the originally reported $1,291.8 billion to $1,292.9 million....manufacturer's sales were up 0.7% to $460,027 million in June, while retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, rose 0.9% to $403,186 million, and as we noted earlier, wholesale sales rose 1.9% to $444,596 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,813.7 billion at the end of June, up 0.2 percent (±0.1%) from May, and 0.5 percent (±0.6%)* higher than in June a year earlier...the value of end of May inventories was revised down slightly from the $1,810.0 billion reported last month to $1,809.9 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $619,119 million, 0.1% lower than in May, inventories of retailers were valued at $603,694 million, 0.5% more than in May, while inventories of wholesalers were estimated to be valued at $590,864 million at the end of May, up 0.3% from May...

last week we looked at June factory inventories and judged that the BEA's 2nd quarter GDP factory inventory component was roughly $18.8 billion higher than what was eventually reported, implying a 0.57 percentage point hit to GDP...conversely, earlier today we judged that June wholesale inventories were under-reported at a $6.2 billion rate, implying an upward revision of 0.13 percentage points to 2nd quarter GDP...for retail inventories, the BEA's technical note for 2nd quarter GDP indicates that they had estimated that the value of June retail inventories in June to be $604.2 billion, up from $601.2 billion in May...this report thus revises that and reports that June wholesale inventories were actually $0.5 billion less than had been indicated in the GDP report, which would be a revision to annualized nominal growth in inventories at $2.0 billion annual rate, thus suggesting a downward revision of 0.04 percentage points to 2nd quarter GDP, based on those overestimated retail inventories...together, the BEA's overestimation of 2nd quarter business inventories would thus imply a 0.48 percentage point reduction to 2nd quarter GDP when the 2nd estimate is released at the end of August...

Job Openings and Hiring Up in June, Job Quitting and Firings Down

the Job Openings and Labor Turnover Survey (JOLTS) report for June from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 110,000, from 5,514,000 in May to 5,624,000 in June, after May job openings were revised higher, from 5,500,000 to 5,514,000...June jobs openings were also 8.8% higher than the 5,168,000 job openings reported in June a year ago, as the job opening ratio expressed as a percentage of the employed rose from 3.7% in May to 3.8% in June, which was also up from 3.5% a year ago...job openings increased in several sectors, with the 37,000 job opening increase to 1,021,000 openings in health care and social assistance the largest increase for the month (see table 1 for more details)...like most BLS releases, the press release for 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 June, seasonally adjusted new hires totaled 5,131,000, up by 84,000 from the revised 5,047,000 who were hired or rehired in May, as the hiring rate as a percentage of all employed rose from 3.5% to 3.6%, the same as in June a year earlier (details of hiring by industry since January are in table 2)....meanwhile, total separations fell by 69,000, from 4,978,000 in May to 4,909,000 in June, while the separations rate as a percentage of the employed slipped from 3.5% to 3.4%, which was also down from the 3.5% separations rate of June a year ago (see table 3)...subtracting the 4,909,000 total separations from the total hires of 5,131,000 would imply an increase of 222,000 jobs in June, somewhat less than the revised payroll job increase of 292,000 for June reported by the July establishment survey last week, but still not an unusual difference and within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 2,909,000 of us voluntarily quit our jobs in June, down by 33,000 from the revised 2,942,000 who quit their jobs in May, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 2.0% of total employment, which was still up from 1.9% a year earlier (see details in table 4)....in addition to those who quit, another 1,643,000 were either laid off, fired or otherwise discharged in June, down by 58,000 from the revised 1,701,000 who were discharged in May, 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 a discharges rate of 1.3% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 357,000 in June, up from 334,000 in May, for an 'other separations rate’ of 0.2%, which was unchanged from May but down from 0.3% in June 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…)           

Monday, August 8, 2016

July jobs, June income and outlays, trade deficit, construction spending, factory inventories, and Mortgage Monitor

in addition to the Employment Situation Summary for July from the Bureau of Labor Statistics, this week also saw the release of four June reports that included metrics which were either estimated or embodied in last week's release of 2nd quarter GDP:  the June report on Personal Income and Spending from the Bureau of Economic Analysis, the Census report on our International Trade for June, the June report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for June...we also saw the Consumer Credit Report for June from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.3 billion, or at a 4.1% annual rate, as non-revolving credit expanded at a 2.1% rate to $2,673.1 billion and revolving credit outstanding rose at a 9.7% rate to $960.8 billion...

the week’s privately issued reports included the ADP Employment Report for July, the Mortgage Monitor for June (pdf) from Black Knight Financial Services, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 17.77 million annual rate in June, up 6.5% from the 16.61 million annual rate in June, and up nearly 2.0% 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 July Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) slipped to 52.6% in July, down from 53.2% in June, which still suggests a sluggish expansion in manufacturing firms nationally, and the July Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.5%, from 56.5% in June, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in July...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 255,000 Jobs in July, Employment Rate and Participation Rate Tick Up

the Employment Situation Summary for July reported decent job creation during the month and increases in both the employment to population ratio and the labor force participation rate…estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 255,000 jobs in July, after the payroll job increase for June was revised up from 287,000 to 292,000 and the payroll jobs increase for May was revised up from 11,000 to 24,000…that means that this report represents a total of 273,000 more seasonally adjusted payroll jobs than were reported last month...the unadjusted data shows that there were actually 1,030,000 fewer payroll jobs in July, after June had produced 660,000 more, so payroll job changes in both months saw substantial seasonal adjustments to produce the reported headline numbers...

seasonally adjusted job increases in July were spread throughout the most sectors of the economy, while only the resource extraction sector saw a decrease of 7,000 jobs...the broad professional and business services sector added 70,000 jobs, with 17,000 of those in temporary help employment services, 8,200 in computer systems design and 8,100 in accounting and bookkeeping...another 48,800 jobs were added by the health care and social assistance sector, with 17,100 additional jobs in hospitals and 8,900 in offices of physicians...the leisure and hospitality sector added 45,000 more jobs with the addition of 21,200 more jobs in bars and restaurants and 10,000 more jobs in performing arts and spectator sports...in addition, various levels of government saw the addition of 38,000 jobs, with 21,600 of those in local school districts, and the financial sector saw the addition of 18,000 jobs, with 7,200 of those in real estate...14,700 more jobs were added in retail, 14,000 more in construction and 11,000 more in durable goods manufacturing, with 6,700 of those in the automotive sector...

the establishment survey also showed that average hourly pay for all employees rose by 8 cents an hour to $25.69 an hour, after it had increased by 2 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $21.59 an hour...employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.5 hours in July, the first increase in 6 months, while hours for production and non-supervisory personnel also rose by a tenth of an hour to 33.7 hours...meanwhile, the manufacturing workweek was unchanged at 40.7 hours, while factory overtime rose a tenth of an hour to 3.3 hours after June overtime was revised a tenth of an hour lower...

at the same time, the July household survey indicated that the seasonally adjusted number of those who reported being employed rose by an estimated 420,000 to 151,517,000, while the estimated number of unemployed fell by 13,000 to 7,770,000; and hence the labor force increased by a total of 407,000...since the working age population had grown by 223,000 over the same period, that meant the number of employment aged individuals who weren’t in the labor force fell by 184,000 to 94,333,000, a reduction that was enough to boost the labor force participation rate by 0.1% to 62.8%...in addition, the relatively 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 0.1% to 59.7%...meanwhile, even with the large increase in the employed, the unemployment rate remained unchanged at 4.9%...at the same time, there was also an increase of 97,000 in those who reported they were forced to accept just part time work, from 5,843,000 in June to 5,740,000 in July, which meant the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", rose from 9.6% of the labor force in June to 9.7% in July....

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..

June Personal Income Rose 0.2%, Personal Spending Up 0.4%

like the GDP report last week, the June Income and Outlays report also went through an annual revision with revisions back to 2013 for all of the metrics it reports, including personal consumption expenditures (PCE), the personal income and disposable personal income data, our savings and savings rate, and the PCE price index, the inflation gauge the Fed targets...Zero Hedge has a useful review of those revisions, if you can get past their hyperbole....since all the revisions made to personal consumption expenditures had already been incorporated into the GDP revisions that we looked at last week, today we'll only consider those revisions from recent months that are relevant to putting this month's change in perspective...

also like the GDP report, all the dollar values reported in this report are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if June'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 May to June....thus, when the opening line of the press release for this report tell us "Personal income increased $29.3 billion (0.2 percent) in June..", they mean that the annualized figure for all types of personal income in June, $15,883.0 billion, was $29.3 billion, or 0.2% greater than the annualized personal income figure for May; the actual increase in personal income in June over May is not given....similarly, disposable personal income, which is income after taxes, rose by less than 0.2%, from an annual rate of $13,916.4 billion in May to an annual rate of $13,941.0 billion in June...with the annual revision, the annualized figure for May personal income was revised from $15,896.7 billion to $15,853.7 billion, and disposable personal income was revised from the originally reported $13,891.1 billion annually to $13,916.4 billion...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for June, which were included in the change in real PCE in 2nd quarter GDP, rose at a $53.0 billion annual rate to a level of $12,738.8 billion in consumer spending annually, more than 0.4% higher than in May, which itself was revised from the originally reported annual rate of $12,699.4 to $12,685.8 billion...the current dollar increase in June spending was driven by a $39.2 billion annualized increase to an annualized $8,644.2 billion spending for services and a $17.8 billion increase to $2,712.8 billion in annualized spending for non-durable goods, while outlays for durable goods fell at an annualized $4.0 billion rate to an annualized $1,381.9 billion...total personal outlays for June, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $58.3 billion to $13,209.0 billion, which left personal savings, which is disposable personal income less total outlays, at a $732.0 billion annual rate in June, down from the revised $765.8 billion in personal savings in May...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 5.3%, from 5.5% in May, which itself was originally reported at 5.3%..

while our personal consumption expenditures accounted for 68.8% of our second 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, which is included in this report, which is a chained price index based on 2009 prices = 100....from Table 9 in the pdf, we find that that index rose from 110.525 in May to 110.637 in June, giving us a month over month inflation rate of 0.1013%, which BEA reports as an increase of +0.1%; at the same time, Table 11 gives us a year over year PCE price index increase of 0.9%, and a core price increase, excluding food and energy, of 1.6% for the year, both still below the Fed's inflation target...applying the June inflation adjustment to the change in June PCE shows that real PCE was up 0.316%, which BEA reports as a 0.3% change in their tables...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 3B in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...for more details on this report, see Consumer Spending Outpaces Income Growth Again from Robert Oak at the Economic Populist, where he includes 13 FRED graphs showing the revised longer term trend of the metrics we've discussed here...

May Trade Deficit Up 8.7% on Higher Oil, Drugs, and Cellphone Imports

our trade deficit increased by 8.7% in June as the value of both our exports and our imports increased, but our imports increased by much more....the Census report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit rose by $3.6 billion (rounded) to $44.5 billion in June from a revised May deficit of $41.0 billion...the value of our June exports rose by $0.6 billion to $183.2 billion on a $0.5 billion increase to $120.4 billion in our exports of goods and a $0.1 billion increase to $62.8 billion in our exports of services, while our imports rose $4.4 billion to $227.7 billion on a $4.4 billion increase to $186.4 billion in our imports of goods while our imports of services fell $0.2 billion to $41.2 billion...export prices were on average 0.8% higher in June, so the relative real amount of June exports would be lower than the nominal amount by that percentage, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage....

the increase in our June exports largely resulted from higher exports of foods, feeds and beverages, consumer goods and capital goods, which were partially offset by an decrease in exports of automotive vehicles, parts, and engines.... referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages rose by $587 million to $10,960 million on a $344 million increase in our exports of corn, our exports of consumer goods rose by $427 million to $15,995 million on a $182 million increase in our exports of artwork and antiques and a $138 million increase in our exports of pharmaceuticals, and our exports of capital goods rose by $339 million to $43,034 million on increases of $1,081 million in exports of civilian aircraft and $227 million in exports of civilian aircraft engines, which were partially offset by a $204 million decrease in exports of computer accessories....on the other hand, our exports of automotive vehicles, parts, and engines fell by $433 million to $12,172 million on a $376 million decrease in our exports of new and used passenger cars, our exports of industrial supplies and materials fell by $92 million to $32,443 million on a $355 million decrease in our exports of crude oil which was partially offset by a $206 million increase in our exports of fuel oil, and our exports of other goods not categorized by end use fell by $117 million to $5,301 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that increased imports of industrial supplies and materials, consumer goods, and capital goods were responsible for the jump in our imports and hence the increase in our trade deficit...our imports of industrial supplies and materials rose by $2296 million to $38,466 million on increases of $1428 million in our imports of crude oil, $287 million in our imports of fuel oil, $438 million in our imports of other petroleum products, and $236 in our imports of nuclear fuel materials....in addition, our imports of consumer goods rose by $1,567 million to $49,808 million on a $1,388 million increase in our imports of pharmaceuticals and a $1071 million increase in our imports of cellphones, and our imports of capital goods rose by $1027 million to $49,725 million on a $740 million increase in our imports of civilian aircraft...partially offsetting those increases, our imports of automotive vehicles, parts and engines fell by $541 million to $28,460 million on a $738 million decrease in our imports of trucks, buses, and special purpose vehicles, our imports of foods, feeds, and beverages fell by $336 million to $10,464 million on a $138 million decrease in our imports of fruits and juices, and smaller decreases in several other food line items, and our imports of goods not categorized by end use fell by $86 million to $7,520 million...

in the advance report on 2nd quarter GDP, our June trade deficit was estimated based on the Advance Report on our International Trade in Goods which was released last week, before the GDP release...that report estimated that our June goods trade deficit was at $63.3 billion on a Census basis, up from the $61.1 goods deficit in May, on goods exports of $120.2 billion and goods imports of $183.5 billion...this report revises that and shows that our actual goods trade deficit in June was $66.0 billion on a balance of payments basis, and $65.5 billion on a Census basis, on Census adjusted goods imports of $184.4 billion and Census adjusted goods exports of $119.4 billion...in addition, the May trade deficit was revised lower by $0.1 billion, as exports of services were revised upward $0.2 billion, while exports of goods were revised upward less than $0.1 billion and small revisions to May goods and services imports balanced each other out...together, those revisions from the previously published data mean that the 2nd quarter trade deficit was roughly $2.1 billion more than was included in last week's GDP report, or roughly $8.4 billion more annually, indicating a downward revision of 0.12 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August...

Construction Spending Fell 0.6% in June after Prior Months Were Revised Lower

the Census Bureau report on construction spending for June (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,133.5 billion annually if extrapolated over an entire year, which was 0.6 percent (±1.3%)* below the revised annualized estimate of $1,140.9 billion of construction spending in May and only 0.3 percent (±1.6%)* above the estimated annualized level of construction spending in June of last year...the May construction spending estimate was revised 0.2% lower, from $1,143.3 billion to $1,140.9 billion, while the annual rate of construction spending for April was revised down 0.9%, from $1,152.4 billion to $1,142.5 billion....

private construction spending was at a seasonally adjusted annual rate of $851.0 billion in June, 0.6 percent (±1.0%)* below the revised May estimate of $856.6  billion, with residential spending of $445.8 billion statistically unchanged (±1.3%)* from the downwardly revised annual rate of $445.9 billion in May, while private non-residential construction spending fell 1.3 percent (±1.0%) to $405.2 billion from the revised May level, which included a 4.5% decrease in spending for construction of manufacturing facilities....at the same time, public construction spending was estimated to be at an annual rate of $282.5 billion, 0.6 percent (±2.5%)* below the revised May estimate of $284.3 billion, with public spending for highways down 1.4 percent (±5.4%)* to an annual rate of $88.0 billion...

construction spending for all three months of the 2nd quarter was lower than reported by the BEA in the advance report for 2nd quarter GDP...as we saw above, annualized construction spending for April was revised $9.9 billion lower, and annualized construction spending for May was revised $2.4 billion lower...in reporting 2nd quarter GDP, the BEA's technical note indicated that they had estimated June residential construction would be $3.9 billion greater than that of the previously reported May figure, and that June nonresidential construction would be $1.4 billion greater than that of the reported May figure...with this report, May residential construction spending was revised from the originally reported $451.9 billion to $445.9 billion, while May nonresidential construction spending was revised from the originally reported $407.4 billion to $410.7 billion....that means the BEA overestimated June construction spending by $8.0 billion...the annualized figure for 2nd quarter construction spending would thus be $6.8 billion less than the figure used by the BEA when computing 2nd quarter GDP, implying a .23 percentage point reduction to 2nd quarter GDP...

Factory Shipments Up 0.7% in June, Factory Inventories Down 0.1% in Big Hit to GDP

the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $6.9 billion or 1.5 percent to $447.4 billion in June, following a decrease of 1.2% in May, which was revised from the 1.0% decrease reported 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 a revised update to the advance report on durable goods we reported on last week...this report showed that new orders for manufactured durable goods fell by $9.0 billion or 3.9 percent to $219.8 billion, revised from the previously published 4.0% decrease to $219.8 billion, by virtue of a $0.3 billion downward revision to May orders..

this report also indicated that the seasonally adjusted value of June factory shipments rose for the fourth month in a row, after being down 8 straight months, increasing by $3.1 billion or 0.7% to $460.0 billion, following a $0.2 billion increase in May that was considered statistically unchanged...shipments of durable goods were up by $2.2 billion or 1.0 percent or 0.4 percent to $232.4 billion, virtually unchanged from what was published last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods rose by $0.8 billion, or 0.3%, to $227.6 billion, as a $1.4 billion, 3.9% increase in the value of shipments of coal and petroleum products accounted for the increase...

meanwhile, the aggregate value of June factory inventories fell for the 13th time in the past fourteen months, decreasing by $0.5 billion or 0.1 percent to $619.1 billion, following a May decrease of 0.1% that was virtually unrevised from the previously published figure....June inventories of durable goods decreased in value by $1.0 billion or 0.3 percent to $381.3 billion, revised from the 0.2% decrease that was reported in the advance report....the value of non-durable goods' inventories increased by $0.5 billion or 0.2% to $237.9 billion, following a decrease of 0.3% in May...the BEA's technical note for 2nd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $19.3 billion, so if i'm reading this right, that would indicate a substantial reduction to the 2nd quarter GDP inventory component on the order of $18.8 billion, or a 0.57 percentage point hit to GDP...

Mortgage Delinquencies and New Foreclosures Up Again in June, Mean Time in Foreclosure Slips to 1087 Days

the Mortgage Monitor for June (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 558,345 home mortgages, or 1.10% of all mortgages outstanding, remaining in the foreclosure process at the end of June, which was down from 574,035, or 1.13% of all active loans, that were in foreclosure at the end of May, and down from 1.56% of all mortgages that were in foreclosure in June of last year.....these are homeowners who at least had a foreclosure notice served but whose homes had not yet been seized, and the June "foreclosure inventory" now represents the lowest percentage of homes that remained in the foreclosure process since the summer of 2007... new foreclosure starts, which have been volatile from month to month, rose to 69,250 in June from 62,085 in May but were down from 78,100 in June a year ago; the 58,728 new foreclosures in April was the lowest in over ten years, so new foreclosures are now on a par with the foreclosure start level we saw before the mortgage crisis began...

in addition to homes in foreclosure, BKFS data also showed that 2,177,765 mortgages, or 4.31% of all mortgage loans, were at least one monthly mortgage payment overdue but not in foreclosure at the end of May, up from the 4.25% of homeowners with a mortgage who were more than 30 days behind in May, but down from the mortgage delinquency rate of 4.79% in June a year earlier...of those who were delinquent in May, 692,370 home owners, or 1.36% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was down from 719,283 such "seriously delinquent" mortgages in May...combining the total number of delinquent mortgages with those in foreclosure, we find that a total of 2,736,110 mortgage loans, or 5.41% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of May, and that 1,225,715, or 2.47% of all homeowners, were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

for the details of the historical mortgage crisis metrics covered by the Mortgage Monitor, we're including below that part of the monthly table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 16 of the pdf....the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month over the past 6 months and for each January shown going back to January 2005…in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been delinquent and stuck in foreclosure because of the lengthy foreclosure pipelines…with the recent slowing of new foreclosures, the average length of delinquency for those who have been more than 90 days delinquent without foreclosure remains stuck at 519 days, but is still down from the April 2015 record of 536 days, while the average time of delinquency for those who’ve been in foreclosure without a resolution has dropped back to 1087 days from the record 1092 days set last month, but that’s still means that the average homeowner who is in foreclosure now has been there roughly three years, which, considering that this year's new foreclosure starts were all less than 6 months old, suggests that many foreclosures started early in the crisis are still not yet completed… 

June 2016 LPS loan counts and days delinquent table

(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, July 31, 2016

2nd quarter GDP and annual revision, June durable goods and new home sales

the key economic release of the past week was the 1st, or advance estimate of 2nd quarter GDP from the Bureau of Economic Analysis, which was accompanied by an annual revision to national accounts data over the prior three years....the other widely watched releases of the past week included the June advance report on durable goods and the June report on new home sales, both from the Census bureau, and the Case-Shiller house price indexes for May from S&P Case-Shiller, which saw their national home price index remain 5.0% higher than the same month's report a year ago...in addition, this week saw the release of last three regional Fed manufacturing surveys for July: those were the Texas area manufacturing survey from the Dallas Fed, which reported its broadest general business activity index rose from -18.3 in June to –1.3 in July, still the 19th consecutive month of contractionary readings in the oil patch economy; the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported its broadest composite index rose to +10 in July from -10  in June, after a revised 0 in May and a +14 reading in April, suggesting a return to expansion in that region's manufacturing; and the Kansas City Fed manufacturing survey for July, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to -6 in July, down from 2 in June and -5 in May, suggesting that the regional contraction, mostly in energy related industries, continues for the 17th month...and from the private sector, we had the Chicago Business Barometer for July from the ISM Chicago (pdf) which saw it's purchasing manager's index slip to 55.8 in July, after a 1½-year high of 56.8 in June, in an index where readings above 50 suggest growth...

Advance Estimate of 2nd Quarter GDP & Revisions From 2013 to Present

the Advance Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis released on Friday included an annual revision to the past 3 years of GDP releases, revising previously published data from the first quarter of 2013 through the first quarter of 2016, which on net indicated that economic growth over the period from 2013 to 2015 was at a 2.2% annual rate, revised from the 2.1% composite annual growth previously published for that period of the recovery, which was still the weakest economic expansion since World War II...GDP growth for 2013 was revised from 1.5% to 1.3%; our growth rate for 2014 was revised from 2.6% to 3.0%, and our growth rate for 2015 was revised from 2.4% to 2.5%...

the first quarter of 2016, which had been revised to a growth rate of 1.1% when we reviewed it a month ago, has now been revised to show growth at a 0.8% rate… major components that were revised lower included residential fixed investment, which was revised from growth at a 15.6% rate to growth at a 7.8% rate, growth in real private inventory investment, which was revised from growth at a inflation adjusted $68.3 billion rate, to real growth at $40.7 billion rate, and a revision to exports, from growth at a 0.3% rate to contraction at a 0.7% rate....those downward revisions were partially offset by an upward revision to nonresidential fixed investment, from contraction at a 4.5% rate to shrinking at a 3.2% rate, an upward revision to personal consumption expenditures (PCE), from a 1.5% growth rate to growth at a 1.6% rate, an upward revision to state and local government spending, from growth at a 3.2% rate to growth at a 3.5% rate, a downward revision to imports (a negative for GDP), from decreasing at a 0.5% rate to decreasing at a 0.6% rate, and an upward revision to federal government spending, from contraction at a 1.6% rate to contraction at a 1.5% rate...thus the estimates for the 1st quarter of 2016 have gone from the initial estimate of growth at a 0.5% rate, to an 0.8% growth rate in the 2nd estimate, to a 1.1% rate of growth in the 3rd estimate, and finally back to growth at a 0.8% rate in this annual revision...

all of those revisions should leave you with the sense to take this initial advance estimate of 2nd quarter growth, which was released on Friday with some June data still not reported, with a grain of salt...the Advance Estimate of 2nd Quarter GDP indicated that the real output of goods and services produced in the US grew at a 1.2% annual rate over the output of the 1st quarter of this year, which we have just seen was revised to show growth at a 0.8% rate...the BEA cautions that the source data is incomplete and also subject to revisions, which have now averaged +/-0.6% in either direction from the advance to the third estimate, and +/- 1.2% from the advance estimate to the final reading...note that June construction, international trade and inventory data have yet to be reported, and that information on the assumptions used for those reports and unavailable source data for this advance estimate is provided in a technical note that is posted with the news release...

while we cover the details on the 2nd 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 they only use the prefix "real" to indicate that the change has been adjusted for inflation using prices chained from 2009, and then calculate all percentage changes in this report from those nonsense 2009 dollar figures, which we think would be better thought of as a quantity indexes...given the misunderstanding evoked by the text of the press release, all the data that we'll use in reporting here comes from the pdf for the 1st estimate of 2nd quarter GDP, which is linked to on the sidebar of the BEA 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 2012, table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years, table 3a, which shows the current dollar value of each of the GDP components, table 3b, which shows the inflation adjusted value of each of those components, and table 4, which shows the change in the price indexes for each of the components, and which is used to convert current dollar figures into units of output represented by chained dollar amounts...the intervening tables in this release (ie, 1a, 1b, 2a, 2b,etc) give us the previously published data for each of those metrics going back to the 4th quarter of 2012, should anyone be interested in the finer details of the annual revision..

personal consumption expenditures (PCE), which accounts for nearly 69% of GDP, grew at a 6.1% rate in current dollars in the 2nd quarter, in contrast to the first quarter increase at a revised 1.9% rate, but once the inflation adjustments were made with the PCE price indices for each quarter, real PCE rose 4.2% in the 2nd quarter after rising 1.6% in the first...consumer spending for durable goods rose at a 6.1% rate, mostly on a jump in spending for recreational goods and vehicles, but since prices for those durable goods fell by 2.3%, real output of durable goods represented by that spending increased at a 8.4% rate...consumer spending for non durables rose at a 8.5% rate, but the PCE price index for non-durables was up 2.5%, mostly on higher energy prices, reducing real growth in consumption of non durables to a 6.0% rate...in a like manner, personal outlays for services were reduced by a 2.5% deflator to show real 2nd quarter growth in services was at a 3.0% rate...thus, with real growth in all components of personal consumption expenditures, real growth in output of consumer durable goods added 0.60 percentage points to the change in GDP, real growth in non-durable goods output for consumers added 0.85 percentage points to 2nd quarter GDP growth, and real growth in services provided to consumers added 1.35 percentage points to the change in 2nd quarter GDP...

just as personal consumption expenditures are adjusted for inflation using the PCE price indices to arrive at real PCE, the other current dollar components of GDP are also adjusted for inflation with the quantity indexes shown in table 5 of the GDP pdf to yield the real change in the output of goods or services.....hence, real gross private domestic investment, which had fallen at a 3.3% annual rate in the 1st quarter as equipment investment and inventories fell, crashed at a 9.7 annual rate in the 2nd quarter, as investment in everything except intellectual property fell...real non residential fixed investment fell at a 2.2% annual rate as real investment in non-residential structures fell at a 7.9% rate and real investment in equipment fell at a 3.5% rate, while investment in intellectual property grew at 3.5% rate...so while real investment in intellectual property added 0.14 percentage points to the GDP growth rate, the decrease in real investment in non-residential structures and real investment in equipment subtracted 0.22 and 0.21 percentage points respectively...in addition, residential investment fell at a 6.1% rate, its first drop since the 1st quarter of 2014, and subtracted 0.24 percentage points from the 2nd quarter's GDP...for an easy to read table as to what's included in each of those investment categories, see the NIPA Handbook, Chapter 6, page 3...

meanwhile, in the first drop since the recession, investment in real private inventories fell by an inflation adjusted $8.1 billion in the 2nd quarter, after they had grown by an adjusted $40.7 billion in the 1st quarter, and as a result the $48.8 billion downward swing in inventory growth subtracted 1.16 percentage points from the 2nd quarter's growth rate, after a $16.2 billion decrease in inventory growth in the 1st quarter had subtracted 0.41 percentage points from that quarter's GDP growth...however, smaller inventories indicates that less of the goods produced during the quarter were being left "sitting on the shelf”, so their quarter over quarter decrease by $48.8 billion meant that real final sales of GDP were relatively greater by that much, and hence real final sales of GDP increased at a 2.4% rate in the 2nd quarter, in contrast to the real final sales increase at a 1.2% rate in the 1st quarter, when the change in the increase in inventories was smaller..

after adjustment for higher export and import prices, real exports increased and real imports were slightly lower in the 2nd quarter, as our real exports of goods and services rose at a 1.4% rate in the second quarter, after falling at a 0.7% rate in the 1st quarter, while our real imports fell at a 0.4% rate in the 2nd quarter after falling at a 0.6% rate in the 1st 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 in GDP elsewhere), 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 2nd quarter increase in real exports added .16 percentage points to 2nd quarter GDP, in contrast to the first quarter export decrease, which subtracted 0.09 percentage points from that quarter's GDP...on the other hand, since imports subtract from GDP, their decrease at a 0.4% rate conversely meant that 0.06 more percentage points were added to 2nd quarter GDP....thus, with an upward rounding of the sum, our improving trade balance added a total of 0.23 percentage points to 2nd quarter GDP, after a revised barely improved trade deficit added 0.01 percentage points in the first quarter..

finally, real consumption and investment by branches of government fell at a 0.9% annual rate in the 2nd quarter, after increasing at a 1.6% rate in the first quarter, as federal government consumption and investment fell at a 0.2% rate and state and local consumption and investment fell at a 1.3% rate.....inflation adjusted federal spending for defense fell at a 3.0% rate and that subtracted 0.12 percentage points from 2nd quarter GDP growth, while real non-defense federal consumption and investment rose at a 3.9% rate and added 0.11 percentage points to 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, which fell at a 1.3% annual rate, subtracted 0.14 percentage points from the quarter's growth rate, as real state and local investment fell at a 10.4% rate and accounted for 0.20 percentage points of GDP subtraction...

our FRED bar graph below has been updated to include 2nd quarter GDP as well as the revisions to each of the GDP components from prior years resulting from this week's annual revision...each color coded bar below shows the real change, in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2013...in each quarterly grouping of seven bars on this graph, the quarterly changes in real (ie, inflation adjusted) personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, as they did in the recent quarter, they will appear above the line as an addition to GDP, and when they increase, they'll appear below the zero line...it’s fairly clear that our personal consumption expenditures has underpinned GDP growth over this period, while increasing imports, and more recently falling inventory investment, have been the major negatives…in the 2nd quarter, on the far right, we see that our personal consumption expenditures was only major positive, while both fixed investment and inventory investment dragged GDP lower…

2nd qtr 2016 advance GDP

June Durable Goods: New Orders Down 4.0%, Shipments Up 0.4%, Inventories Down 0.2%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for May (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $9.3 billion or 4.0% to $219.8 billion in June, following a revised drop of 2.8% in May new orders, which had been originally reported as a 2.2% decrease...year to date new orders are now statistically unchanged from those of 2015, vs the 1.7% year over year change we saw in this report last month...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the June headline change, as those transportation equipment orders fell $8.5 billion or 10.5 percent to $72.2 billion, on a 58.8% decrease to $6,745 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were still down 0.5% in June, as new orders for computers and electronic products were also down 2.2% to $23,606 million...at the same time, the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, were up 0.2% to $62,330 million...

the seasonally adjusted value of June's shipments of durable goods, which were inputs into various components of 2nd quarter GDP after adjusting for changes in prices, rose by $0.9 billion or 0.4 percent to $232.5 billion, after May shipments were revised from a decrease of 0.2% to an decrease of 0.3%....a 1.1% increase in shipments of transportation equipment drove the change, as such shipment rose $1.1 billion to $81.2 billion, as the value of shipments of motor vehicles rose 2.7% to $55,041 million...excluding that volatile sector, the value of other shipments of durable goods fell 0.2%, as new orders for nondefense capital goods excluding aircraft were down 0.4% to $62,762 million, which was reflected in the contractionary 2nd quarter GDP equipment investment figures...

meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 11th time in 12 months, decreasing by $0.7 billion or 0.2 percent to  $381.5 billion, after May's inventories were revised from a 0.3% decrease to a 0.4% decrease...again, falling inventories of transportation equipment were the major factor in the inventory decrease, as they fell $1.1 billion or 0.9 percent to $123.0 billion, on a 2.2% decrease to $62,451 million in inventories of civilian aircraft...excluding the drop in inventories of transportation equipment, all other durable goods inventories increased 0.2% to $258,535 million...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, fell for the first time in four months, dropping by $9.7 billion or 0.9 percent to $1,127.9 billion, following a May increase that was revised from 0.2% to statistically unchanged...a $9.0 billion or 1.1 percent to $774.9 billion decrease in unfilled orders for transportation equipment was responsible for most of the decrease, but unfilled orders excluding transportation equipment were still down 0.2% to $353,029 million....compared to a year earlier, the unfilled order book for durable goods is now 1.9% below the level of last June, with unfilled orders for transportation equipment 2.7% below their year ago level, largely on a 5.7% decrease in the backlog of orders for motor vehicles... 

June New Home Sales Trending Above Those of a Year Ago

the Census report on New Residential Sales for June (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 592,000 new homes a year, which was 3.5 percent (±23.9%)* above the revised May rate of 572,000 new single family homes a year and 25.4 percent (±27.9%)* above the estimated annual rate that new homes were selling at in May of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether June new home sales rose or fell from those of May or even from those in June 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....since these initial new home sales reports are not very reliable and often see significant revisions, reports that new home sales were at an eight year high should be taken with a large grain of salt; April's reported 8 year high has since been revised away...with this report; sales new single family homes in May were revised from the annual rate of 551,000 reported last month to a 572,000 a year rate, April's annualized home sale rate, initially reported at 619,000, were revised from last months downward revision of 586,000 down to 572,000, while the annual rate of March's sales, revised from 531,000 to an annual rate of 522,000 last month, were now revised higher, to an annual rate of 537,000...

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of Census field reps, which showed that approximately 54,000 new single family homes sold in June, unchanged from the 54,000 new homes that sold in May but down from the 56,000 new homes that sold in April....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in June was $306,700, up from the median sale price of $288,800 in May, while the average June new home sales price was $358,200, up from $351,400 average in May, and up from the average sales price of $329,300 in June a year ago....a seasonally adjusted estimate of 244,000 new single family houses remained for sale at the end of June, which represents a 4.9 month supply at the June sales rate, down from the reported 5.3 month supply in May....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales increased to 592,000 Annual Rate in June, Highest since 2008 and A few Comments on June 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, July 24, 2016

June’s new housing construction and existing home sales

it's been a slow week, with the June report on New Residential Construction from the Census Bureau and the June report on existing home sales from the National Association of Realtors (NAR) the only two reports with a broad following that were released this week....other reports released this week included Regional and State Employment and Unemployment for June from the BLS, and the Philadelphia Fed Manufacturing Survey for July, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions fell from +4.7 in June to -2.9 in July, suggesting a return to the contraction in that region's manufacturing... in addition, this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for June, a weighted composite index of 85 different economic metrics, which rose from a downwardly revised -0.56 in May to +0.16 in June...that still left the 3 month average of the index at –0.39, indicating national economic activity has been well below the historical trend during the 2nd quarter...

New Housing Construction Little Changed in June, New Permits Down YoY

the June report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in June was at a seasonally adjusted annual rate of 1,189,000, which was 4.8 percent (±13.5%) above the revised May estimated annual rate of 1,136,000 housing units started, but which was still 2.0 percent (±12.9%) below last June's pace of 1,213,000 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, June's housing starts could have been down by 8.7% or up by as much as 18.3% from those of May, with even larger revisions possible...in this report, the annual rate for May housing starts was revised from the 1,164,000 reported last month to 1,136,000, while April starts, which were first reported at a 1,172,000 annual rate, were revised down from last month's initial revised figure of 1,076,000 annually to 1,155,000 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 Census field agents, which estimated that 111,600 housing units were started in June, up from the 106,200 units started in May...of those housing units started in June, an estimated 76,700 were single family homes and 33,300 were units in structures with more than 5 units, up from the revised 71,100 single family starts but down from the 34,700 units started in structures with more than 5 units in May...

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 June, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,153,000 housing units, which was 1.5 percent (±1.3%) above the revised May rate of 1,136,000 permits, but 13.6 percent (±0.6%) below the rate of building permit issuance in June a year earlier...the annual rate for housing permits issued in May was revised from 1,138,000 to 1,136,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 114,000 housing units were issued in June, up from the revised estimate of 107,700 new permits issued in May...the June permits included 74,400 permits for single family homes, up from 70,200 in May, and 36,600 permits for housing units in apartment buildings with 5 or more units, up from 34,900 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.189 Million Annual Rate in June and Comments on June Housing Starts...

Existing Home Sales Up 1.1% in June

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose 1.1% from May to June, projecting that 5.57 million homes would sell over an entire year if the June home sales pace were extrapolated over that year, a pace that was also 3.0% greater than the annual sales rate projected in June of a year ago, and the highest monthly annual rate since February 2007...that came after an annual sales rate of 5.51 million homes in May, which was revised from the originally reported 5.53 million annual sales rate, and an annual home sales rate of 5.43 million in April...the NAR also reported that the median sales price for all existing-home types in June was $247,700 in June, up from $238,900 in May and 4.8% higher than in June a year earlier, which they report as "the 52nd consecutive monthly year over year increase in home prices".....the NAR press release, which is titled "Existing-Home Sales Ascend Again in June, First-time Buyers Provide Spark", 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…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually 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 583,000 homes sold in June, up by 11.0% from the 525,000 homes that sold in May, but just 1.9% more than the 572,000 homes that sold in June of last year, so we can see there was again a seasonal adjustment in the annualized published figures of over 10% to correct for the typical early summer increase in home sales...that same pdf indicates that the median home selling price for all housing types rose 3.8%, from a revised $238,900 in May to $247,700 in June, while the average home sales price was $292,100, up 4.0% from the $280,900 average in May, and up 4.2% from the $280,200 average home sales price of June a year ago, with the regional average home sales prices ranging from a low of $235,900 in the Midwest to a high of $379,900 in the West...for additional coverage with long term graphs on this report, see "Existing Home Sales increased in June to 5.57 million SAAR" and "A Few Comments on June Existing Home Sales" from Bill McBride at Calculated Risk...

 

(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…)