Sunday, May 28, 2017

1st quarter GDP revision; April durable goods, new home sales, and existing home sales.

the major release of this past week was the second estimate of 1st quarter GDP from the Bureau of Economic Analysis; other widely watched releases included the April advance report on durable goods and the April report on new home sales, both from the Census bureau, and the Existing Home Sales Report for April from the National Association of Realtors….this week also saw the Chicago Fed National Activity Index for March, a weighted composite index of 85 different economic metrics, which rose to +0.49 in April from +0.07 in March,  after the March index was revised from the +0.08 reported last month...as a result, the 3 month average of that index rose to +23 in April, up from a neutral reading in March, which indicates that national economic activity has been above the historical trend over recent months...

two regional Fed manufacturing surveys for May were also released this week: 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 plunged to +1, following last month's reading of +20, indicating virtual stagnation in 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 rose to +8 in May, up from + 7 in April but down from readings of +20 in March and +14 in February, thus indicating a more modest pace of growth in that region's manufacturing...

1st Quarter GDP Revised to Show Growth at a 1.2% Rate

the Second Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.2% rate in the 1st quarter, revised up from the 0.7% growth rate reported in the advance estimate last month, as real personal consumption expenditures and fixed investment were revised higher, and real government outlays were down less than had previously been reported...in current dollars, our first quarter GDP grew at a 3.4% annual rate, increasing from what would work out to be a $18,869.4 billion a year output rate in the 4th quarter of 2016 to a $19,027.6 billion annual rate in the 1st quarter of this year, with the headline 1.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.2%, aka the GDP deflator, was applied to the current dollar change...

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 changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the second estimate of 1st quarter GDP, which we find linked to on the sidebar of the BEA press release...specifically, we cite the data from table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2013, from table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts....the full pdf for the 1st quarter advance estimate, which this estimate revises, is here...

growth in real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 0.3% growth rate reported last month to indicate growth a a 0.6% rate with this estimate…that growth figure was arrived at by deflating the 3.0% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated  consumer inflation at a 2.4% annual rate in the 1st quarter, which was also unrevised from a month ago...real consumption of durable goods fell at a 1.4% annual rate, which was revised from the 2.5% drop shown in the advance report, and subtracted 0.11 percentage points from GDP, as a drop in consumption of automobiles at a 13.9% rate more than offset increases in real consumption of furniture, appliances and recreational goods and vehicles....real consumption of nondurable goods by individuals rose at a 1.2% annual rate, revised from the 1.5% increase reported in the 1st estimate, and added 0.18 percentage points to 1st quarter economic growth, as higher consumption of food and most other non-durables was partially offset by decreases in consumption of clothing and energy….at the same time, consumption of services rose at a 0.8% annual rate, revised from the 0.4% growth rate reported last month, and added 0.37 percentage points to the final GDP tally, as a 1.5% decrease in the growth rate in real consumption of housing and utilities offset real growth in other services....

in addition, seasonally adjusted real gross private domestic investment grew at a 4.8% annual rate in the 1st quarter, revised from the 4.3% growth estimate reported last month, as real private fixed investment grew at a 11.9% rate, rather than at the 10.4% rate reported in the advance estimate, while the contraction in inventory growth was somewhat larger than previously estimated...real investment in non-residential structures was revised from growth at a 22.1% rate to growth at a 28.4% rate, while real investment in equipment was revised to show growth at a 7.2% rate, down from the 9.1% growth rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from growth at a 2.0% rate to growing at a 6.7% rate...meanwhile, the growth rate of residential investment was revised slightly higher, from 13.7% to 13.8% annually…after those revisions, the increase in investment in non-residential structures added 0.69 percentage points to the 1st quarter's growth rate, the increase in investment in equipment added 0.39 percentage points to the quarter's growth, greater investment in intellectual property added 0.27 percentage points, while growth in residential investment added 0.50 percentage points to the increase in 1st quarter GDP...

meanwhile, the growth in real private inventories was revised from the originally reported $10.3 billion in inflation adjusted dollars to show inventory grew at an inflation adjusted $4.3 billion rate...this came after inventories had grown at an inflation adjusted $49.6 billion rate in the 4th quarter, and hence the $45.3 billion smaller real inventory growth than in the 4th quarter subtracted 1.07 percentage points from the 1st quarter's growth rate, revised from the 0.93 percentage point subtraction due to slower inventory growth shown in the advance estimate....however, since slower growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, that decrease by $45.3 billion meant that real final sales of GDP were actually greater by that much, and therefore the BEA finds that real final sales of GDP rose at a 2.2% rate in the 1st quarter, revised from 1.6% rate shown in the advance estimate...

the previously reported increase in real exports was little changed with this estimate, while the previously reported increase in real imports was revised lower, and as a result our net trade was a slightly larger addition to GDP rather than was previously reported...our real exports grew at a 5.8% rate, unrevised from the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their increase added 0.69 percentage points to the 1st quarter's growth rate....meanwhile, the previously reported 4.1% increase in our real imports was revised to a 3.8% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, that increase subtracted 0.55 percentage points from 1st quarter GDP....thus, our improving trade balance added a net 0.13% (rounded down) percentage points to 1st quarter GDP, rather than the 0.07% percentage point addition resulting from our improving foreign trade balance that was indicated in the advance estimate..

finally, there was also an upward revision to real government consumption and investment in this 2nd estimate, as the entire government sector shrunk at a 1.1% rate, revised from the 1.7% shrinkage of government indicated by the 1st estimate....real federal government consumption and investment was seen to have shrunk at a 2.0% rate from the 4th quarter in this estimate, which was revised from the 1.9% rate shown in the 1st estimate...real federal outlays for defense were revised to show shrinkage at a 3.9% rate, less than the 4.0% rate previously reported, but still subtracting 0.16% percentage points from 1st quarter GDP, while all other federal consumption and investment grew at a 0.7% rate, rather than the 0.9% growth rate previously reported, and added 0.02 percentage points to GDP, revised from the 0.03 percentage point addition shown last month...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 those goods or services...meanwhile, real state and local consumption and investment contracted at a 0.6% rate in the quarter, which was revised from the 1.6% shrinkage shown in the 1st estimate, and subtracted 0.06 percentage points from 1st quarter GDP, as real growth in state and local consumption expenditures added 0.06 percentage points, while real state and local investment shrunk at a 6.4% rate subtracted 0.12 percentage points from the quarter's growth...

April Durable Goods: New Orders Down 0.7%, Shipments Down 0.3%, Inventories Up 0.1%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for April (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods fell by $1.6 billion or 0.7 percent to $231.2 billion in April, the first decrease in five months...durable goods orders for March were revised to show a 2.3% increase to $232.7 billion, revised from the 0.7% increase to $238.7 billion reported a month ago, as there was an intervening benchmark revision on May 18th that revised all previously published factory data back to 2002...as is usually the case, the volatile monthly change in new orders for transportation equipment led the April headline change, as those transportation equipment orders fell $1.0 billion or 1.2 percent to $78.5 billion, on a 9.2% decrease to $11,482 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were still down 0.4% in April, while the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, were virtually unchanged at $62,855 million...

the seasonally adjusted value of April's shipments of durable goods, which will be inputs into various components of 2nd quarter GDP after adjusting for changes in prices, fell by $0.7 billion or 0.3  percent to $232.4 billion, after March shipments were revised from a increase of 0.2% to a decrease of 0.1%...again, shipments of transportation equipment led the change, as they fell $0.6 billion or 0.5 percent to $77.2 billion, as the value of shipments of commercial aircraft fell 3.0% to $11,247 million; excluding that volatile sector, the value of other shipments of durable goods fell 0.2%, but are still 3.4% higher year to date than a year ago....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 9th time in 10 months, increasing by $0.6 billion or 0.1 percent to $394.2 billion, after the value of March inventories was revised from $648.3 billion to $648.5 billion, now a 0.2% increase from February...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the third time in four months, increasing by $2.4 billion or 0.2 percent to $1,122.9 billion, following a March report which was revised from a 0.2% increase to one of 0.3%...a $1.3 billion or 0.2 percent increase to $766.6 billion in unfilled orders for transportation equipment was responsible for more than half of the aggregate increase, even as unfilled orders excluding transportation equipment rose 0.3% to $356,327 million....compared to a year ago, the unfilled order book for durable goods is still 1.2% below the level of last April, with unfilled orders for transportation equipment 3.1% below their year ago level, on a 4.0% decrease in the backlog of orders for commercial aircraft...

New Home Sales Fall in April

the Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 569,000 homes annually during the month, which was 11.4 percent (±10.5 percent) below the revised March annual rate of 642,000 new home sales, but still 0.5 percent (±11.3 percent)* above the estimated annual rate that new homes were selling at in April of last year....the asterisk indicates that based on their small sampling, Census could not tell whether April new home sales rose or fell from those in April 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 March were revised from the annual rate of 621,000 reported last month to an annual rate of 642,000, while sales in February, initially reported at an annual rate of 592,000 and revised to a 587,000 rate last month, were revised to an annual rate of 602,000, and new home sales in January, initially reported at an annual rate of 555,000 and revised from a 558,000 rate to a 585,000 rate last month, were again revised higher to a 599,000 a year rate with this release...

the annual rates of sales reported here are seasonally adjusted and extrapolated from the estimates of canvassing Census field reps, which indicated that approximately 55,000 new single family homes sold in April, down from the estimated 61,000 new homes that sold in March but up from the 50,000 new homes that sold in February and from the 45,000 that sold in January .....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in April was $309,200, down from the median sale price of $318,700 in March and down from the median sales price of $321,3004 in April a year ago, while the average new home sales price was at $368,300, down from the $385,400 average sales price in March, and down from the average sales price of $380,000 in April a year ago....a seasonally adjusted estimate of 268,000 new single family houses remained for sale at the end of April, which represents a 5.7 month supply at the April sales rate, up from the 4.9 months of new home supply now reported for March...

for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 569,000 Annual Rate in April and A few Comments on April New Home Sales...

Existing Home Sales 2.3% Lower in April

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell at a 2.3% rate from March to April, projecting that 5.57 million existing homes would sell over an entire year if the April home sales pace were extrapolated over that year, a pace that was still 1.6% above the annual sales rate projected in April of a year ago....the NAR also reported that the median sales price for all existing-home types was $244,800 in April, 6.0% higher than in April a year earlier, which they report as "the 62nd consecutive month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Slip 2.3 Percent in April", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data indicates that roughly 449,000 homes sold in April, down 1.3% from the downwardly revised 455,000 homes that sold in March, and down by 4.3% from the 470,000 homes that sold in April of last year...that same pdf indicates that the median home selling price for all housing types rose by 3.5%, from a revised $236,600 in March to $244,800 in April, while the average home sales price rose 3.2% to $287,500, from the $278,700 average sales price in March, while it was up 5.1% from the $273,600 average April home sales price of a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Slip 2.3 Percent in April" and A Few Comments on April Existing Home Sales..

 

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

Sunday, May 21, 2017

April industrial production and new housing starts

regular monthly reports that were released this week included 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 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 fell to -1.0, down from +5.2 in April, suggesting an end to growth of First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose to +38.8 in May from +22.0 in April, indicating a significant plurality of the region's manufacturing firms reported increases in their activity this month...

Industrial Production Up 1.0% in April

industrial production increased in April by the most since February 2014 on widespread increases among all its components, led by a 6.5% jump in motor vehicle assemblies...the Fed's G17 release on Industrial production and Capacity Utilization for April reported that industrial production rose 1.0% in April after rising by a revised 0.4% in March, which left total output 2.2% higher than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 105.1 in April, after the February index was revised up from 103.5 to 103.7, which reduced the March gain to 0.4% from the previously reported 0.5%...

the manufacturing index, which accounts for more than 77% of the total IP index, rose 1.0% to 103.9 in April, after the March index was revised from 102.9 to 102.8, and the February index was revised from 103,3 to 103.2...as a result, the manufacturing index now stands 1.7% above its year ago level....meanwhile, the mining index, which includes oil and gas well drilling, rose 1.2%, from 106.9 in March to 108.2 in April, after the March index was revised up from from the originally reported 106.1, which left the mining index 7.3% higher than it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, rose by 0.7% in April, from 101.5 to 102.2, after the March utility index was revised from 101.3 to 101.5, up 8.2% from February...

this report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 76.7% in April from 76.1% in March, after capacity utilization for both January and February were identically revised from 75.7% to 75.8%...capacity utilization of NAICS durable goods production facilities rose from a revised 74.6% in March to 75.3% in April, while capacity utilization for non-durables producers rose from a revised 76.8% to 77.5%...capacity utilization for the mining sector rose to 83.3% in April from 82.5% in March, which was previously reported as 81.9%, while utilities were operating at 76.3% of capacity during April, up from their 75.8% of capacity during March, which was previously reported at 75.7%...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.. 

April Housing Starts and Building Permits Reported Lower

the March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were started at a seasonally adjusted annual rate of 1,172,000 in April, which was 2.6 percent (±8.8 percent)* below the revised March estimate of 1,203,000 annually, but was still 0.7 percent (±7.0 percent)* above last April's rate of 1,164,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during April, or even from a year ago, with the figures in parenthesis the most likely range of the change indicated; in other words, April housing starts could have been up by 6.6% or down by as much as 11.4% from those of March, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for March housing starts was revised from the 1,215,000 reported last month to 1,203,000, while February starts, which were first reported at a 1,288,000 annual rate, were revised from last month's initial revised figure of 1,303,000 annually back to a 1,288,000 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 106,600 housing units were started in April, up from the 97,600 housing units that were started in March and the 87,800 housing units that were started in February..

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 1,229,000, which was 2.5 percent (±1.1 percent) below the revised March rate of 1,260,000 permits, but was still 5.7 percent (±1.4 percent) above the rate of building permit issuance in April a year earlier...the annual rate for housing permits issued in March was unrevised....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 102,900 housing units were issued in April, down from the revised estimate of 112,500 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 decreased to 1.172 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 from the aforementioned GGO posts, contact me…)

Sunday, May 14, 2017

April retail sales and consumer and producer prices; March business inventories and job openings

regular monthly reports that were released this week included the the April Consumer Price Index, the April Producer Price Index, and the April Import-Export Price Index from the Bureau of Labor Statistics, and the Retail Sales report for April, the Wholesale Trade, Sales and Inventories report for March, and the Business Sales and Inventories report for March from the Census Bureau...in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for March...

Consumer Prices Rose 0.2% in April on Higher Energy and Shelter Costs

the consumer prices increased by 0.2% in April, as higher prices for energy and shelter more than offset lower prices for most other goods and services...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.2% in April, after it had dropped 0.3% in March, but after it had risen 0.1% in February, 0.6% in January, 0.3% in December, 0.2% in November, 0.4% in October, 0.3% in September, and 0.2% in August....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 244.524 in April from 243.801 in March, which left it statistically 2.200% higher than the 239.261 index reading in April of last year...with higher prices for energy a major contributor to the increase in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 251.290 to 251.642, which left the core index 1.883% ahead of its year ago reading of 246.992...

the volatile seasonally adjusted energy price index increased by 1.1% in April, after it had fallen by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% in September...thus, energy prices are now averaging 9.3% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were 1.3% higher in April, while the index for energy services rose by 0.9%, after falling 0.3% in March....the increase in the energy commodity index included a 1.2% increase in the price of gasoline, the largest component, and a 3.8% seasonally adjusted increase in the index for fuel oil, even as the underlying price of fuel oil fell 0.3% on an unadjusted basis…within energy services, the index for utility gas service rose by 2.2% after falling by 0.8% in March, but utility gas is still priced 12.0% higher than it was a year ago, while the electricity price index was up 0.6%, after it slipped 0.1% in March....energy commodities are still priced 14.5% above their year ago levels, with gasoline prices averaging 14.3% higher than they were a year ago.…meanwhile, the energy services price index is 4.4% higher than last April, as even electricity prices have increased by 2.4% over that period..

the seasonally adjusted food price index rose 0.2% in April, after rising 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged for the 6 prior months, as prices for food purchased for use at home rose 0.2% while prices for food bought to eat away from home also rose 0.2%, with average prices at fast food outlets up 0.3%, while average prices at full service restaurants were 0.2% higher...in the food at home categories, the price index for cereals and bakery products decreased by 0.3% as prices for flour and mixes were 1.7% lower...the price index for the meats, poultry, fish, and eggs group was down 0.6% as pork prices fell 0.7%, chicken prices fell 1.9%, and fresh fish prices fell 2.1%, while the index for dairy products was 0.2% lower on 1.3% decrease in the price of milk....the fruits and vegetables index, on the other hand, was 2.2% higher on a 5.1% increase in prices for fresh vegetables, led by an 18.0% increase in the price of lettuce....the beverages index was 0.3% lower as noncarbonated juices and drink prices fell 0.5%....lastly, prices in the ‘other foods at home’ category were on average 0.1% higher, as olives, pickles and relishes averaged a 3.1% decrease while frozen and freeze dried foods rose 1.7%.....among food at home line items, only eggs, which are still priced 15.8% lower than a year ago, and lettuce, which is now up 14.3% year over year, have seen price changes 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 April after falling by 0.1% in March but after rising by 0.2% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% last April, May and June, the composite of all goods less food and energy goods was down 0.2%, while the more heavily weighted composite for all services less energy services was 0.1% 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 fell by 0.3%, as prices for furniture and bedding fell 0.6% and laundry equipment fell 1.2%...the apparel price index was also 0.3% lower, led by a 2.5% decrease in prices for men's apparel....prices for transportation commodities other than fuel were down 0.2%, as prices for new vehicles fell 0.2% and prices for used cars and trucks fell 0.5%...prices for medical care commodities were 0.8% lower on a 0.9% decrease in prescription drug prices....in addition, the recreational commodities index fell 0.5% on 5.2% lower prices for sewing machines and fabric supplies and 1.2% lower priced toys, while the education and communication commodities index was 0.7% lower on a 1.2% decrease in prices for college textbooks and a 0.9% decrease in prices for computer software...lastly, a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ was up 1.9% on a 4.5% increase in prices for cigarettes...

within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.2% increase in owner's equivalent rent, and a 2.4% increase in lodging away from home at hotels and motels, while the household operations services index was up 0.1%....the index for medical care services was unchanged as prices for hospital services rose 1.0% while physicians services fell 1.2%...meanwhile, the transportation services index was 0.2% lower on a 1.6% decrease in car and truck rental and a 2.9% decrease in intercity train fare...the recreation services price index was unchanged, as higher video and audio services were offset by lower admissions and club fees...the index for education and communication services was 0.2% lower as charges for wireless telephone services were 1.7% lower...lastly, the index for other personal services was up 0.1% as laundry and dry cleaning services were 0.4% higher...among core prices, only televisions, which are still 17.9% cheaper than a year ago, and wireless phone services, which have now dropped 12.9% from a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude.. 

April Retail Sales Up 0.4% after March Sales Revised Higher

this week's retail sales report for April was preceded by an April 26th benchmark revision based on the results of the 2015 Annual Retail Trade Survey, which revised prior estimates of retail sales all the way back to 1992...thus this release reports changes from that revision, as if the prior reports we've covered had never been published...from that revised figure for March then, the Advance Retail Sales Report for April (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $474.9 billion for the month, which was a increase of 0.4 percent (±0.5%)* from March sales of $473.1 billion and 4.5 percent (±0.9 percent) above the adjusted sales of April of last year...March sales were originally reported at $470.8 billion, down 0.2% from February; they are now indicated to have risen 0.1%....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 3.6%, from $484,144 in March to $466,734 in April, while they were up 1.0% from the $ 461,954 million of sales in April a year ago.....

once again, we are including below the table of monthly and yearly percentage changes in sales by business type taken from the Census pdf....taking into account the benchmark revision, 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 sub-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 2017 revised" and the revised March 2016 to March 2017 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance March estimates, before the benchmark revision, is here....

April 2017 retail sales table

because April consumer prices were generally lower across the board, real sales for April will tend to be higher than those shown above; the exceptions are for food, where prices rose 0.2%, and for gasoline sales, where prices rose 1.2%...ie, the 0.2% food price increase, combined with the 0.4% decrease in grocery store sales, would imply that real food consumption was down by 0.6%...on the other hand, the 0.6% decrease in furniture prices implies a real increase of 0.1% in the quantity of furniture sold, despite the 0.5% decrease in furniture store sales...likewise, the 0.8% nominal increase in sales at auto dealerships implies at least a 1.0% increase in real unit auto sales, since new vehicles prices were down 0.2% and prices for used cars and trucks were 0.5% lower...without working out the precise details on an item by item basis, we'd estimate that real retail sales were up around 0.6% in April, maybe more, in a strong start to 2nd quarter PCE...

Producer Prices Rose 0.5 in April on Higher Food and Energy Prices

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.5% in April, as prices for finished wholesale goods increased 0.5%, while margins of final services providers increased by 0.4%...this followed a March that indicated the PPI was 0.1% lower, with prices for finished wholesale goods down 0.1%, while margins of final services providers also decreased by 0.1%, and a February report that indicated the PPI was 0.3% higher, with prices for finished wholesale goods up 0.3%, while margins of final services providers increased by 0.4%....on an unadjusted basis, producer prices are now 2.5% higher than a year earlier, up from the 2.3% YoY increase indicated a month ago, for the largest year over year increase since February 2012...

as noted, the price index for final demand for goods, aka 'finished goods', rose by 0.5% in April, after falling by 0.1% in March, but after rising by 0.3% in February, 1.0% in January, 0.6% in December, 0.1% in November, 0.3% in October, and 0.5% in September.. the index for wholesale energy prices rose 0.8%, the price index for wholesale foods rose 0.9%, and the index for final demand for core wholesale goods (ex food and energy) rose 0.3%...the largest wholesale energy price change was a 5.2% increase in wholesale prices for liquefied petroleum gas, while the wholesale food price index moved up on increases of 19.8% for fresh fruits and 28.5% for fresh and dry vegetables....among wholesale core goods, prices for industrial chemicals increased 1.2%, while wholesale prices for cigarettes moved up 2.2%..

at the same time, the index for final demand for services rose by 0.4% in April, after falling by 0.1% in March but after after rising by 0.4% in February, and by 0.2% in January, as the index for final demand for trade services was down 0.3%, while the index for final demand for transportation and warehousing services rose 0.7%, and the index for final demand for services less trade, transportation, and warehousing services was 0.8% higher....among trade services, seasonally adjusted margins for major household appliances retailers decreased 8.5% while margins for fuels and lubricants retailers fell 14.6%...among transportation and warehousing services, margins for airline passenger services were 2.0% higher...in the core final demand for services index, margins for loan services (partial) rose 4.1% and margins for securities brokerage, dealing, and investment advice rose 6.6%..

this report also showed the price index for processed goods for intermediate demand was 0.5% higher, after rising 0.1% in March, 0.4% in February, 1.1% in January, and by a revised 0.6% in December... the price index for intermediate energy goods rose 1.3%, while prices for intermediate processed foods and feeds fell 0.6%, and the core price index for processed goods for intermediate demand less food and energy was 0.5% higher...prices for intermediate processed goods are now 5.4% higher than in April a year ago, now the sixth consecutive year over year increase, after 16 months of lower 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 3.3% in April, after falling 4.2% in March and 0.2% in February, but after rising 4.0% in January and 7.3% in December...the index for crude energy goods rose 14.1% as crude oil prices rose 15.7%, while the price index for unprocessed foodstuffs and feedstuffs fell 2.3%, as the index for slaughtered hogs fell 10.7%...in addition, the index for core raw materials other than food and energy materials fell 0.7%, as wholesale prices for iron and steel scrap fell 5.2% and wholesale prices for paper scrap fell 6.3% ... this raw materials index is now up 13.9% from year ago, in contrast to a prior year over year decrease of 26.4% that we saw just 17 months ago, in November of 2015...

lastly, the price index for services for intermediate demand was 0.9% higher in April, after being 0.2% lower in March, 0.5% higher in February, and 0.2% higher in January and in December.. the index for trade services for intermediate demand was 0.7% higher, as margins for chemical products wholesalers and hardware, building material, and supplies wholesalers both rose 2.5%…the index for transportation and warehousing services for intermediate demand was up 0.4%, as intermediate prices for air transportation of passengers rose 1.9%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand rose 1.0%, as the intermediate price index for loan services (partial) rose 4.5% percent...over the 12 months ended in February, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.6% higher than it was a year ago...  

March Business Sales Unchanged, Business Inventories Up 0.2%

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 report and the earlier published March 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 $1,361.0 billion in March, actually unchanged (±0.1 percent)* from February's revised sales, but up 6.5 percent (±0.4 percent) from March sales of a year earlier...note that total February sales were concurrently revised up from the originally reported $1,360.7 billion to $1,361.0 billion, still a 0.2% increase from January....manufacturer's sales fell 0.1% to $478,815 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, rose 0.1% to $416,686 million, while wholesale sales were virtually unchanged at $465,492 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,840.8 billion at the end of March, up 0.2 percent (±0.1%) from the end of February, and 2.6 percent (±0.3%) higher than in March a year earlier...at the same time, the value of end of February inventories was revised down from the $1,839.9 billion reported last month to $1,836,877 million, now just 0.2% higher than January....seasonally adjusted inventories of manufacturers were estimated to be valued at $629,747 million, statistically unchanged from February, and inventories of retailers were valued at $616,522 million, 0.5% more than in February, while inventories of wholesalers were estimated to be valued at $594,563 million at the end of March, 0.2% higher than in February... 

Job Quitting Increases in March; Job Openings, Hiring, and Layoffs Little Changed

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 61,000 to 5,743,000 in March, after February job openings were revised down 61,000 from the originally reported 5,743,000...March's jobs openings were still down from the 5,852,000 job openings reported in March a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 3.8% in March, while it was down from the 3.9% 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 5,260,000, up by 11,000 from the revised 5,249,000 who were hired or rehired in February, as the hiring rate as a percentage of all employed remained unchanged at 3.6% in March, which was down from the 3.7% hiring rate in March a year earlier (details of hiring by sector since October are in table 2)....meanwhile, total separations rose by 80,000 to 5,088,000 in March, as the separations rate as a percentage of the employed rose from 3.4% to 3.5%, same as a year ago (see table 3)...subtracting the 5,071,000 total separations from the total hires of 5,314,000 would imply an increase of 178,000 jobs in March, more than double the revised payroll job increase of 79,000 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 founds that 3,116,000 of us voluntarily quit our jobs in March, up from the revised 3,036,000 who quit their jobs in February, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.1% of total employment, while it was up from 2.0% a year earlier (see details in table 4)....in addition to those who quit, another 1,615,000 were either laid off, fired or otherwise discharged in March, up by 21,000 from the revised 1,594,000 who were discharged in February, as the discharges rate remained unchanged at 1.1% of all those who were employed during the month...meanwhile, other separations, which includes retirements and deaths, were at 357,000 in March, down from 378,000 in February, for an 'other separations rate’ of 0.2%, down from 0.3% in February and 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 from the aforementioned GGO posts, contact me…)

Sunday, May 7, 2017

April’s jobs report; March incomes and outlays, trade deficit, 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 four 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, the Commerce Dept report on our international trade in goods and services for March, and 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, 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 $16.4 billion, or at a 5.2% annual rate, as non-revolving credit expanded at a 6.2% annual rate to $2,805.8 billion and revolving credit outstanding grew at a 2.4% rate to $999.8  billion...

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 16.81 annual rate in April, up from the 16.53 million rate in March, but down 3% from the 17.23 million annual rate in April a year ago, and the Mortgage Monitor for March (pdf) Black Knight Financial Services, which indicated that mortgage delinquencies fell 14.08% in March to their lowest rate in 11 years, while foreclosure starts rose 4.15% to 60,030, still 17.2% lower than a year 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 54.8% in April, from 57.2% in March, which suggests a slower expansion in manufacturing firms nationally, and the April Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 57.5% in April from 55.2% in March, indicating a larger 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 211,000 Jobs in April, Unemployment Rate Drops to 4.4%

the Employment Situation Summary for April indicated a modest increase in payroll job growth, while the employment rate rose even as the participation rate dropped…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 211,000 jobs in April, after the previously estimated payroll job increase for March was revised down from 98,000 to 79,000, while the payroll jobs increase for February was revised up from 219,000 to 232,000…that means that this report represents a total of 205,000 more seasonally adjusted payroll jobs than were reported last month, a bit above the past year's average of 186,000 jobs per month...the unadjusted data shows that there were actually 1,026,000 more payroll jobs extant in April than in March, as 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 service sectors, with only the information sector losing 7,000 jobs on a seasonally adjusted basis, as telecommunications companies cut 5,300 employees....the leisure and hospitality sector added 55,000 jobs, with the addition of 26,200 spots in bars and restaurants....the broad professional and business services sector added 39,000 jobs, as 9,900 more than normal for this time of year were employed in services to buildings....employment in health care and social assistance rose by 36,800, with the addition of 17,100 jobs in individual and family services...meanwhile, 19,000 more were employed by financial services, with the addition of 14,000 jobs by insurance carriers...in addition, the other major sectors, including construction, manufacturing, mining, retail, wholesale trade, transportation and warehousing, utilities, education, and government, all also saw small increases in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 7 cents an hour to $26.19 an hour in April, after it had increased by a revised 2 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 6 cents to $21.96 an hour...employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.4 hours in April, after the March workweek was revised 0.1 hour lower, while hours for production and non-supervisory personnel rose to 33.7 hours after 8 months at 33.6 hours...in addition, the manufacturing workweek was up 0.1 hours at 40.7 hours, while average factory overtime decreased by 0.1 hours to 3.2 hours...

meanwhile, the April household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 156,000 to 153,156,000, while the similarly estimated number of those unemployed fell by 146,000 to 7,056,000; which should have meant a net 10,000 increase in the total labor force, but the BLS logged it as a 12,000 increase...since the working age population had grown by 174,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 162,000 to 94,375,000....with the increase of those in the labor force a bit smaller than the increase in the civilian noninstitutional population, it was enough to lower the labor force participation rate 0.1% to 62.9%....at the same time, the increase in number employed as a percentage of the increase in the population was great enough to lift the employment to population ratio, which we could think of as an employment rate, 0.1% to 60.2%...in addition, the decrease in the number unemployed was also large enough to lower the unemployment rate from 4.5% to 4.4%....meanwhile, the number who reported they were involuntarily working part time fell by 81,000 to 5,272,000 in April, which was also enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.9% in March to 8.6% in April, the lowest since November 2007....

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

March Personal Income Rose 0.2%, Personal Spending Little Changed, PCE Price index Down 0.2%

this week's Monday release of the March Income and Outlays report from the Bureau of Economic Analysis was actually concurrent with the release of the advance report on 1st quarter GDP on the prior Friday, and much of the data in this report has already been included in that report...and like that 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....thus, when the opening line of the press release for this report tell us "Personal income increased $40.0 billion (0.2 percent) in March...", it means that the annualized figure for all types of personal income in March, $16,472.8 billion, was $40.0 billion, or more than 0.2% greater than the annualized personal income figure for February; the actual increase in personal income in March over February is not given....similarly, disposable personal income, which is income after taxes, also rose by more than 0.2%, from an annual rate of $14,393.5 billion in February to an annual rate of $14,428.5 billion in March...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for March, which were included in the change in real PCE in 1st quarter GDP that we reviewed last week, rose at a $5.7 billion annual rate to a level of $13,099.5 billion in consumer spending annually, less than a 0.1% increase from February, which itself was revised down from the originally reported annual rate of $13,106.0 billion to $13,093.7 billion...the current dollar increase in March spending included a $34.0 billion annualized increase in spending for services, offset by a $19.6 billion decrease in annualized spending for durable goods, and a $8.7 billion decrease in annualized spending for non durable goods...total personal outlays for March, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $4.9 billion to $13,579.3 billion, which left personal savings, which is disposable personal income less total outlays, at a $849.1 billion annual rate in March, up from the revised $819.0 billion in annualized personal savings in February...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.9%, from 5.7% in February, which itself was originally reported at 5.6%..

while our personal consumption expenditures accounted for 68.8% 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's done with the price index for personal consumption expenditures, which is also included in this report, which is a chained price index based on 2009 prices = 100....from Table 9 in the pdf for this report, we find that that index fell from 112.264 in February to 112.005 in March, giving us a negative month over month inflation rate of -0.2307%, which the BEA reports as a decrease of -0.2%….at the same time, Table 11 gives us a year over year PCE price index increase of 1.8%, and a core price increase, excluding food and energy, of 1.6% for the past year, both still below the Fed's inflation target....applying the March inflation adjustment to the change in March PCE shows that real PCE was up 0.2756%, which BEA reports as a 0.3% increase in their press release and in the 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 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...

March Trade Deficit Little Changed as Lower Imports Offset Lower Exports

our trade deficit was slightly lower in March, after our February deficit was revised slightly higher...the Census report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit fell by $0.05 billion to $43.71 billion in March, from a February deficit that was revised from the originally reported $43.56 billion to $43.76 billion...the value of our March exports fell by $1.7 billion to $191.0 billion on a $2.1 billion decrease to $126.3 billion in our exports of goods and an increase of $0.4 billion to $64.7 billion in our exports of services, while our imports also fell $1.7 billion to $234.7 billion on a $1.7 billion decrease to $191.8 billion in our imports of goods and a less than $0.1 billion decrease to $42.9 billion in our imports of services...export prices averaged 0.2% higher in March, so the real growth in exports was less than the nominal dollar value by that percentage, while import prices were 0.2% lower, meaning real imports were greater than the nominal dollar values reported here by that percentage...

the decrease in our March exports of goods came about as a result of lower valued exports of industrial supplies and materials and of automotive goods, offset by an increase in our exports of capital goods...referencing the Full Release and Tables for March (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $1,779 million to $36,586 million on a $617 million decrease in our exports of fuel oil, a $595 million decrease in our exports of other petroleum products, a $253 million decrease in our exports of crude oil, and a $224 million decrease in our exports of natural gas....in addition, our exports of automotive vehicles, parts, and engines fell by $851 million to $12,959 million on $814 million lower exports of passenger cars, and our exports of consumer goods fell by $588 million to $16,553 million on a $695 million decrease in our exports of pharmaceuticals and a $418 decrease in our exports of gem diamonds....partially offsetting those decreases, our exports of capital goods rose by $696 million to $43,561 million on a $377 million increase in our exports of engines for civilian aircraft and a $364 million increase in our exports of telecommunications equipment, our exports of foods, feeds and beverages rose by $290 million to $10,809 million, and our exports of other goods not categorized by end use rose by $421 million to $5,356 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of all categories of goods other than passenger cars were responsible for the decrease in March imports...our imports of capital goods fell by $920 million to $50,311 million on a $326 million decrease in our imports of civilian aircraft and a $240 million decrease in our imports of computers....our imports of industrial supplies and materials fell by $709 million to $42,786 million, as our imports of crude oil fell by $590 million and our imports of other petroleum products fell by $436 million...in addition, our imports of consumer goods fell by $517 million to $48,478 million on a $307 million decrease in our imports of toys, games and sporting goods, our imports of foods, feeds, and beverages fell by $510 million to $11,001 million, and our imports of other goods not categorized by end use fell by $200 million to $7,194 million....partially offsetting those decreases, our imports of automotive vehicles, parts and engines rose by $1145 million to $30,283 million on a $1,108 million increase in our imports of new and used passenger cars...

in the advance report on 1st quarter GDP last week, our March trade deficit was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP  release...that report estimated that our March goods trade deficit was at $64.8 billion on a Census adjusted basis, up 1.4% from February, on goods exports of $125.5 billion and goods imports of $190.3 billion...this report revises that and shows that our actual goods trade deficit in March on a Census basis was at $64.2 billion, on adjusted goods imports of $191.8 billion and adjusted goods exports of $125.8 billion...at the same time, the February goods trade deficit was revised higher from the advance figures by a bit more than $1.2 billion…those revisions from the previously published data mean that the 1st quarter trade deficit in goods was $0.6 billion more than was included in last week's GDP report, or roughly $2.5 billion on an annualized basis, which would subtract about 0.06 percentage points from 1st quarter GDP when the 2nd estimate is published at the end of May....

Construction Spending Fell 0.2% in March after Prior Months Were Revised Much Higher

the Census Bureau's report on construction spending for March (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,218.3 billion annually if extrapolated over an entire year, which was 0.2 percent (±2.1%)* below the revised annualized February estimate of  $1,220.7 billion, but 3.6 percent (±1.5 percent) above the estimated annualized level of construction spending in March of last year...the annualized February construction spending estimate was revised 2.3% higher, from $1,192.8 billion to $1,220.7 billion, while the annual rate of construction spending for January was revised 1.3% higher, from $1,183.84 billion to $1,198.78 billion...

private construction spending was at a seasonally adjusted annual rate of $940.2 billion in March, little changed (± 3.3 percent)* from the revised February estimate of $940.1 billion, which had been previously reported at $917.36 billion...residential spending was at a  $503.4 billion rate, up 1.2 percent (±1.3 percent)* from the revised annual rate of $497.4 billion in February, while private non-residential construction spending of $436.8 billion was 1.3 percent (± 3.3 percent)* below the revised February estimate of $442.6 billion....meanwhile, public construction spending was estimated to be at an annual rate of $278.1 billion in March, 0.9 percent (±2.0 percent)* below the revised February estimate of $280.7 billion, with construction spending for education down 2.0 percent (±2.6 percent)*  to an annual rate of $70.2 billion...

with the upward revisions, construction spending for all three months of the 1st quarter was higher 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 $14.94 billion higher, and annualized construction spending for February was revised $27.9 billion higher...in reporting 1st quarter GDP, the BEA's technical note (pdf) indicated that they had estimated March residential construction would be $0.9 billion more than that of the previously reported February figure, with single family construction valued at $258.2 billion and multifamily construction valued at $62.3 billion, and that March nonresidential construction would be valued at $433.2 billion, $0.5 billion more than that of the reported February figure...with this report, March residential construction spending at a $503.4 billion rate was up by $6.0 billion from the revised February figure, with new single family construction valued at $258,479 million annually and new multifamily construction at $66,080 million, while March nonresidential construction spending was at $436,785 billion, down $5.9 billion from the revised February figure...hence, total private construction spending in March was roughly $7.67 billion more, at an annual rate, than the figures used by the BEA to compute 4th quarter GDP...therefore, over the 3 months, the annualized figure for 1st quarter construction spending would have thus averaged $16.84 billion more than the figure used by the BEA when computing 1st quarter GDP, which would mean that this report implies a 0.41 percentage point upward revision to 1st quarter GDP, assuming there aren’t major revisions to prices...

March Factory Shipments Down 0.1%, Inventories Flat

the Full Report on Manufacturers' Shipments, Inventories, & Orders for March (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $0.8 billion or 0.2 percent to $478.2 billion, the eighth increase in nine months, following an increase of 1.2% in February, which was revised from the 1.0% increase 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 March advance report on durable goods we reported on last week...this report now shows that new orders for manufactured durable goods rose by $2.1 billion or 0.9 percent to $239.4 billion in March, revised from the 0.7% increase to 238.7 billion figure that was published last week....

this report also indicated that the seasonally adjusted value of March factory shipments fell for the 1st time in 8 months, decreasing by $0.5 billion or 0.1 percent to $478.8 billion, following a 0.2% increase in February....shipments of durable goods were up $0.6 billion or 0.3 percent from February at $240.1 billion, revised from the 0.2% increase reported by the durables report last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods were down by $1.3 billion or 0.5 percent to $238,746 million, after the value of February's shipments was revised from $240.5 billion to $240,050 million..

meanwhile, the aggregate value of March factory inventories fell for the first time in six months, decreasing by a statistically insignificant $0.1 billion to $629.7 billion, after a February increase of 0.2%...March inventories of durable goods increased $0.7 billion or 0.2 percent to $386.0 billion, revised up from the previously published 0.1 percent increase, following a 0.2 percent February increase.....the value of non-durable goods' inventories fell by $0.8 billion or 0.3 percent to $243.73 billion, following little change in February non-durable inventories...however, the BEA's technical note for 1st quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase at a seasonally adjusted annual rate of $18.1 billion in March, so after annualizing the actual decrease, that would indicate that they overestimated the 1st quarter GDP inventory component by about $28.1 billion on an annualized basis, which would seem to imply that 1st quarter GDP will have to be adjusted downwards by 0.67 percentage points to account for what this report shows..

 

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

Sunday, April 30, 2017

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

the key 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 February Case-Shiller Home Price Index, which actually is a average of December, January and February relative home prices...Case Shiller’s Index indicated that home prices nationally for those 3 months averaged 5.8% higher than prices for the same homes that sold during the same 3 month period a year earlier….also released was the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, which fell to +0.08 in March from +0.27 in February, after February's index was revised from the +0.34 reported last month...as a result, the 3 month average of that index fell to +0.03 in February, down from a revised +0.16 in February, which indicates that national economic activity has been close to the historical trend over recent months...

the week also saw the last three regional Fed manufacturing surveys for April: the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity composite index was unchanged at +16.8, indicating steady expansion of the Texas 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, reported its broadest composite index slipped to +20, following last month's reading of +22, still indicating a robust expansion in 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 +7 in April, down from readings of +20 in March and +14 in February, indicating a somewhat slower pace of growth in that region's manufacturing....

1st Quarter Growth Slows to 0.7% Rate on Weakest Personal Consumption Since 2009

our economy grew at a 0.7% rate in the 1st quarter, the slowest pace in 3 years, as personal consumption of motor vehicles and services slowed, and the increase in private inventories decreased, even as fixed private investment grew at the fastest rate in five years...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 0.7% annual rate over the output of the 4th quarter of 2016, when our real output grew at a 2.1% real rate...in current dollars, our first quarter GDP grew at a 3.0% annual rate, increasing from what would work out to be a $18,869.4 billion a year output rate in the 4th quarter to a $19,007.3 billion annual rate in the 1st quarter of this year, with the headline 0.7% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.3%, aka the GDP deflator, was applied to the current dollar change... as usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have now averaged +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate for the quarter is released, which will be two months from now....also note that March construction and some March inventory data have yet to be reported, and that the BEA assumed a small increase in nonresidential construction, a small increase in residential construction, and a substantial increase in nondurable manufacturing inventories for March before they estimated 1st quarter output...also note that revised retail sales data were made available on Wednesday, too late to be incorporated into this report, which will shave another 0.2% off the the first quarter's growth rate when the second estimate of GDP is published at the end of May...

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 changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the advance estimate of 1st quarter GDP, which we find linked to on the sidebar of the BEA press release...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 2013, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...

personal consumption expenditures (PCE), which accounts for nearly 69% of GDP, grew at a 2.7% rate in current dollars in the 1st quarter, which became a 0.3% real growth rate of consumed goods and services after an annualized 2.4% PCE price index increase was used to adjust that spending for inflation....consumer outlays for durable goods fell at a 1.6% rate in current dollars while prices of those durable goods were on average 0.9% higher, and thus the BEA found real growth in output of consumer durables fell at a 2.5% rate, as a drop in real consumption of automobiles at a 16.1% rate more than offset increases in real consumption of furniture, appliances and recreational goods and vehicles...the BEA also found that real output of consumer non-durable goods grew at a 1.5% rate after increased consumer spending for non-durables at a 5.1% rate was adjusted for higher non-durable prices at a 3.6% rate, with decreased consumption of clothing and energy goods more than offset by greater growth of real consumption of food at home and other nondurables... meanwhile, the 2.6% nominal growth in consumer outlays for services was deflated by a 2.2% increase in prices for services to show real output of consumer services grew at a 0.4% annual rate, as a 2.3% decrease in the growth rate in real outlays for housing and utilities offset real growth in other services...as a result of these changes in growth from the 4th to the 1st quarter, the decrease in outlays for durable goods subtracted 0.19 percentage points from GDP, largely on a 0.45 percentage point hit from automobiles, while increased consumption of non-durable goods added 0.22 percentage points to the growth of GDP, and increased consumption of services added 0.21 percentage points to the growth rate of the 1st quarter economy..

the change in other components of the change in GDP are computed by the BEA in the same manner as PCE; ie, the actual annualized increase in current dollar spending for the quarter is adjusted with an inflation factor for that component, yielding the change in real units of goods or services produced in the quarter at an annual rate...thus, real gross private domestic investment, which had grown at a 9.4% annual rate in the 4th quarter of 2016, grew at a 4.3% annual rate from there in the 1st quarter...however, real growth in fixed investment grew at a 10.4% annual rate in the 1st quarter, after growing at a 2.9% rate in the 4th quarter, as real non-residential fixed investment grew at a 9.5% rate, and real residential investment grew at a 13.7% rate...real investment in non-residential structures grew at a 22.1% rate and added  0.55 percentage points to 1st quarter GDP, real investment in equipment grew at a 9.1% rate and added 0.49 percentage points to GDP, and real investment in intellectual property grew at 2.0% rate and added 0.08 percentage points to GDP, while the 13.7% growth rate of residential investment added 0.50 percentage points to GDP....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

however, much slower growth in inventories reduced gross investment and hence GDP, as real private inventories grew by an inflation adjusted $10.3 billion in the quarter, down from the $49.6 billion of inflation adjusted inventory growth that we saw in the 4th quarter, and as a result the $39.2 billion slower real inventory growth subtracted 0.93 percentage points from the 1st quarter's growth rate, after $42.5 billion greater real inventory growth in the 4th quarter added 1.01 percentage points to that quarter's GDP....however, since slower growth in inventories indicates that less of the goods produced during the quarter were left in storage or "sitting on the shelf”, the decrease in their growth by $39.2 billion in turn means real final sales of GDP were actually greater by that much, and hence real final sales of GDP rose at a 1.6% rate in the quarter, after real final sales had only increased at a 1.1% rate in the 4th quarter, when the change in inventories was positive…

meanwhile, our real exports of goods and services rose at a 5.8% rate in the 1st quarter, after falling at a 4.5% rate in the 4th quarter of 2016, while our real imports rose at a 4.1% rate in the 1st quarter, after rising at a 9.0% 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 the increase in 1st quarter exports added .68 percentage points to 1st quarter GDP...on the other hand, real 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 in our country and hence is not part of our national product….hence the 4.1% 1st quarter increase in real imports subtracted 0.61 percentage points from GDP, and therefore our improving trade balance added a net 0.07% percentage points to 1st quarter GDP, after a big increase in our trade deficit had subtracted 1.82% percentage points from GDP in the fourth quarter of last year...

finally, real consumption and investment by all branches of government shrunk at a 1.7% annual rate in the 1st quarter, after increasing at a 0.2% rate in the 4th quarter, as federal government consumption and investment fell at a 1.9% rate, while state and local consumption and investment fell at a 1.6% rate.....inflation adjusted federal spending for defense fell at a 4.0% rate and subtracted 0.16 percentage points from 1st quarter GDP growth, while real non-defense federal consumption and investment rose at a 0.9% rate and added 0.03 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 fell at a 1.6% annual rate and subtracted 0.17 percentage points from the quarter's growth rate, as real growth in state and local consumption expenditures added 0.05 percentage points while shrinkage in real state and local investment at an 11.2 rate subtracted 0.22 percentage points from the quarter's growth...

we'll again include our FRED GDP graph, so you can picture how these GDP components all come together...in our FRED bar graph below, each color coded bar 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, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...from this we can clearly see that the unusual collapse in real personal consumption expenditures was responsible for the weakness in the 1st quarter's growth rate, and that only the greatest growth in fixed private investment in five years kept the quarter's GDP growth rate from being negative...

1st quarter 2017 advance GDP

March Durable Goods: New Orders Up 0.7%, Shipments Up 0.2%, Inventories Up 0.1%

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 $1.6 billion or 0.7 percent to $238.7 billion in March, after February's new orders were revised from the $235.4 billion reported last month to $237.1 billion, still 2.3% more than January's new orders…as a result, year to date new orders are now up by 3.4% from those of 2016...the volatile monthly new orders for transportation equipment were responsible for the month’s increase, as new transportation equipment orders rose $2.0 billion or 2.4 percent to $83.3 billion, on a 26.1% increase in new orders for defense aircraft and a 7.0% increase in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders fell 0.2%, while excluding just new orders for defense equipment, new orders rose 0.1%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose 0.2% to $65.0 billion...

meanwhile, the seasonally adjusted value of March shipments of durable goods, which were included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.6 billion or 0.2 percent to $239.8 billion, after the value of February shipments increased 0.2% from January...higher shipments of transportation equipment led the March increase, as those shipments increased by $0.4 billion or 0.5 percent to $81.7 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $0.5 billion or 0.1 percent to $385.7 billion, after end of February inventories were revised from $385.1 billion to $385.2 billion, still up 0.2% from January....

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 consecutive month, increasing by $2.5 billion or 0.2 percent to $1,119.0 billion, after the nominal February decrease was revised to a 0.1% increase...a $1.6 billion or 0.2 percent to $755.5 billion increase to $752.7 billion in unfilled orders for transportation equipment led the overall increase, as unfilled orders excluding transportation equipment orders were also up 0.2% to $363,541 million...the unfilled order book for durable goods is still 0.9% below the level of last March, with unfilled orders for transportation equipment still 2.7% below their year ago level, mostly on a 3.6% decrease in the backlog of orders for commercial aircraft...

New Home Sales Reported Higher 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 621,000 homes annually during the month, which was 5.8 percent (±15.5 percent)* above the revised February annual sales rate of 587,000 new home sales and 15.6 percent (±15.0 percent) above the estimated annual rate that new homes were selling at in March of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether March new home sales rose or fell from those of February, 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 592,000 reported last month to an annual rate of 587,000, and new home sales in January, initially reported at an annual rate of 555,000 and revised to a 558,000 rate last month, were revised up to a 585,000 a year rate with this report, while December's annualized new home sales rate, initially reported at an annual rate of 536,000 and revised from a revised 535,000 to a 530,000 a year rate last month, were again revised to a 551,000 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 58,000 new single family homes sold in March, up from the estimated 48,000 new homes that sold in February and up from the 43,000 that sold in January .....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in March was $315,100, up from the median sale price of $293,100 in February and down from the median sales price of $311,400 in March a year ago, while the average new home sales price was $388,200, up from the $373,60 average sales price in February, and up from the average sales price of $367,700 in March a year ago....a seasonally adjusted estimate of 268,000 new single family houses remained for sale at the end of March, which represents a 5.2 month supply at the March sales rate, down from the 5.4 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 increase to 621,000 Annual Rate in March and A few Comments on March 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…)