Sunday, April 24, 2016

March new home construction and existing home sales reports

there were just two widely watched reports released this week: the March report on New Residential Construction from the Census Bureau, and the March report on existing home sales from the National Association of Realtors (NAR)....this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, constructed such that a zero value indicates economic growth at the historical trend rate...the CFNAI fell from a downwardly revised –0.38 in February to –0.44 in March, which left the 3 month average of the index at –0.18 in March, indicating national economic activity has been slower than the historical trend during the 1st quarter....in addition, the Philadelphia Fed reported on its Manufacturing Outlook Survey for April, which covers most of Pennsylvania, southern New Jersey, and Delaware...the Philly Fed indicated its broadest diffusion index of current manufacturing conditions decreased from 12.4 in March to -1.6 in April, its seventh negative reading in 8 months, suggesting a return to contraction for the region's manufacturing...

March Housing Starts Still Ahead of Last Year's Pace; Permits Down 7.7%

the March report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started was at a seasonally adjusted annual rate of 1,089,000, which was 8.8 percent (±11.1%)* below the revised February estimated seasonally adjusted annual rate of 1,194,000 housing units started, but which was still 14.2 percent (±11.7%) above last March's rate of 954,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been up by 2.3% or down by as much as 19.9% from those of February, with even larger revisions subsequently possible...in this report, the annual rate for February housing starts was revised from the 1,178,000 reported last month to 1,194,000, while January starts, which were first reported at a 1,099,000 annual rate, were revised from last month's initial revised figure of 1,120,000 annually down to 1,117,000 annually with this report....

those annual rates of starts indicated by the headline count were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 88,700 housing units were started in March, actually up from the 82,700 units started in February...of those housing units started in March, an estimated 63,000 were single family homes and 24,800 were units in structures with more than 5 units, up from the revised 57,800 single family starts and 24,100 units started in structures with more than 5 units in February....the unadjusted estimates also show that housing starts increased in all regions of the country, although none by such a margin as to be within a 90% range of certainty...

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 March, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,086,000 housing units, which was 7.7 percent (±1.2%) below the revised February annual rate of 1,177,000 permits, but 4.6 percent (±0.9%) above the rate of permit issuance in March a year earlier...the annual rate for housing permits issued in February was revised from 1,167,000 to 1,177,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates, which showed permits for 98,500 housing units were issued in March, again actually up from the estimated 84.500 new permits issued in February...those March permits included 67,700 permits for single family homes, up from a revised 53,000 single family permits in February, and 27,800 permits for housing units in apartment buildings with 5 or more units, down from 29,100 such multifamily permits a month earlier... 

Existing Home Sales Rise 5.1% in March

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose 5.1% in March, projecting that 5.33 million homes would sell over an entire year if the March home sales pace were extrapolated over that year, which was also 1.5% greater than the annual sales rate projected in March of a year ago...that came after an annual sales rate of 5.07 homes in February, which was revised from the originally reported 5.08 million annual sales rate, and an annual home sales rate of 5.47 million in January...the NAR also reported that the median sales price for all existing-home types in March was $222,700, which was 5.7% higher than a year earlier, which they promote as "the 49th consecutive monthly year over year increase in home prices" although monthly price changes are quite volatile...the NAR press release, which is titled Existing-Home Sales Spring Ahead in March, 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 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 data indicates that roughly 420,000 homes sold in March, up by 33.8% from the 314,000 homes that sold in February and 3.7% more than the 405,000 homes that sold in March of last year, so we can see there was a large seasonal adjustment to correct for the typically large jump in spring home sales...that same pdf indicates that the median home selling price for all housing types rose 5.0% from a revised $212,100 in February to $222,700 in March, while the average home sales price was $265,200, up 3.9% from the $255,300 average in February, and up 3.5% from the $256,300 average home sales price of March a year ago, with the regional average home sales prices ranging from a low of $205,200 in the Midwest to a high of $355,400 in the West...for additional coverage with long term graphs on this report, see "Existing Home Sales increased in March to 5.33 million SAAR" and "A Few Comments on March 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…)

Sunday, April 17, 2016

March retail sales, consumer and producer prices, industrial production, & state jobs reports; February business inventories

major releases of this past week included Retail Sales for March and Business Sales and Inventories for February, both from the Census bureau, the March Industrial Production and Capacity Utilization report from the Fed, and the three major price indexes for March from the Bureau of Labor Statistics: the Consumer Price Index, the Producer Price Index, and the Import-Export Price Indexes, all of which are used by the BEA in computing the various deflators of the components of GDP...in addition, this week also saw the release of the Regional and State Employment and Unemployment report for March and the first regional Fed manufacturing index for April: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from +0.6 in March to +9.6 in April, its most expansionary reading in more than a year, indicating a return to growth for First District manufacturing...

March Retail Sales Down 0.3% After February Sales Revised Up 0.2%

seasonally adjusted retail sales fell 0.3% in March after retail sales for February were revised 0.2% higher....the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $446.9 billion for the month, which was a decrease of 0.3 percent (±0.5%)* from February's revised sales of $447.9 billion but 2.8 percent (±0.8%) above the adjusted sales of March of last year...February's seasonally adjusted sales were revised from the $447.3 billion originally reported to $448.243 billion, while January's sales, which were revised down to $448.0 billion from the originally reported $449.9 billion last month, were revised higher from there, to $448,114 million with this report....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 11.3%, from $412,328 million in February to $459,015 in March, while they were up 3.6% from the $442,876 million of sales in March a year ago, so we can see that there was a major seasonal adjustment to turn those headline March sales negative....

since you're all familiar with the table from this report showing retail sales by business type that we've been including with this report for the past 3 years, we'll again post a copy of it here...to once again explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2016 r" (revised) and the February 2015 to February 2016 percentage change as revised in the 2nd column of the pair...for your reference, our copy of this same table from last month’s advance February estimates, before this month's revisions, is here.... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of a year ago....

March 2016 retail sales table

from looking at this table, it's clear that the 2.1% decrease to $97,658 million in seasonally adjusted sales at automobile and parts dealers was responsible for the headline March sales decrease; without that nominal drop in automotive sales, other retail sales increased by 0.2% to $354,434 million...on the other hand, 0.9% higher sales at gasoline stations were a boost to the aggregate, probably just due to higher gas prices, without which such sales we would have seen retail sales down 0.4%...meanwhile, the only retailers showing large increases in March sales were building material and garden supply stores, where sales rose 1.4% to $30,240 million, and drug stores, where sales were up 1.0% to $27,407 million...at the same time, sales at clothing stores fell 0.9% to $21,140 million, and sales at bars and restaurants fell 0.8% to $53,750 million..

Consumer Prices Up 0.1% in March, Reducing March PCE

consumer prices for energy and most services were higher in March, while prices for most foods groups and other goods were lower, resulting in an incremental increase in the CPI for the first time since November....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in March after falling by 0.2% in February and after they had been unchanged in January and fallen 0.1% in December...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 237.111 in February to 238.132 in March, which left it statistically 0.85% higher than the 236.119 index reading of last March....regionally, prices for urban consumers have risen 1.5% in the West, 0.7% in the South, 0.5% in the Midwest, and 0.6% in the Northeast over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people, except for in the Midwest, where prices have been up 1.0% in nonmetropolitan cities of less than 50,000...with energy prices higher and food prices lower, seasonally adjusted core prices, which exclude food and energy, also rose by just 0.1% for the month, with the unadjusted core index rising from 245.680 to 246.358, which is now 2.2% ahead of its year ago reading of 241.067...

the seasonally adjusted energy price index rose by 0.9% in March after falling by 6.0% in January and by 2.8% in both December and January, and thus the energy index still remains 12.6% lower than it was in March a year ago....prices for energy commodities were 1.9% higher in March while the index for energy services saw a 0.2% increase, after increasing by 0.1% in February....the increase in the energy commodity index included a 2.2% increase in the price of gasoline, the largest component, and a 1.7% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 1.8% decrease…within energy services, the index for utility gas service fell by 0.7%, leaving utility gas priced 9.2% lower than it was a year ago, while the electricity price index rose by 0.4%, after falling by 0.2% in February...energy commodities are still priced 21.2% below their year ago levels, with gasoline 20.9% lower priced than it was a year ago, which doesn't even include the 18.7% one month drop in the gasoline index last January...meanwhile, the energy services price index is 3.3% lower than last March, as even electricity prices have fallen 1.7% over that period..

the seasonally adjusted food price index fell 0.2% in March, after it rose by 0.2% in February, as prices for food purchased for use at home fell 0.5% while prices for food away from home rose 0.2%, as average prices at fast food outlets rose 0.3% while average prices at full service restaurants rose 0.2%....for food at home, five of the six major grocery store food indexes were lower, with only the catch-all "other foods at home" showing a 0.4% increase on a 2.0% increase in butter prices, a 1.5% increase in prices for sauces and gravies and a 1.4% increase in prices for soups...a 1.9% drop in prices for fruits and vegetables led the price decrease in foods at home, as fresh vegetable prices fell 3.2% on a 7.2% drop in the price of tomatoes, and prices for fresh fruits other than apples, bananas and citrus were 1.7% lower...meanwhile, the price index for cereals and bakery products was down 0.6% as prices for flour and prepared flour mixes fell 1.9% and prices for breakfast cereal prices were 1.0% lower....at the same time, the price index for the meats, poultry, fish, and eggs group fell by 0.5% as prices for eggs were 5.2% lower and poultry prices were 0.8% lower, more than offsetting a 0.7% increase in the price index for beef and veal...the index for dairy products was also 0.5% lower, as milk prices fell 1.3% and cheese prices fell 0.4% while ice cream prices rose 1.1%...lastly, the index for beverages and beverage materials was 0.3% lower as prices for roast coffee fell 1.7% and tea prices fell 1.2%, more than offsetting a 0.1% increase in prices for carbonated drinks...only two food line items have seen price changes greater than 10% over the past year; ham prices, which were down 0.9% in March, are 10.4% lower than they were in March a year ago, while apple prices are now 11% higher than last year, after rising 1.6% this month....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 March after rising 0.3% in both February and January, the composite of all commodities less food and energy commodities fell by 0.2% while the composite for all services less energy services was 0.2% higher....among the commodity components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.2% on a 1.7% decrease in prices for appliances other than major appliances and a 1.8% decrease in prices for furniture not including bedroom, living room and kitchen furniture...apparel prices were 1.1% lower on a 7.9% decrease in prices for men's pants and shorts, a 3.0% decrease in prices for men's suits, sport coats, and outerwear, a 2.2% decrease in prices for infants' and toddlers' apparel, and a 3.7% decrease in prices for watches and jewelry, which were only partially offset by a 1.0% increase in prices for women's suits and separates...at the same time, prices for transportation commodities other than fuel were down 0.1%, as prices for new cars were down 0.2% while prices for tires fell 0.4%....on the other hand, prices for medical care commodities were 0.3% higher on 0.5% higher prescription drug prices, while the recreational commodities index was 0.3% lower as prices for TVs fell 2.4% and prices for recreational books were 4.9% lower...likewise, the education and communication commodities index was 0.5% lower on a 2.0% decrease in prices for computer software and accessories and a 0.7% decrease in prices for telephone hardware, calculators, and other consumer information items, while lastly the separate index for alcoholic beverages was unchanged despite an 0.8% drop in prices for wine at home, and the index for other goods rose 0.2% on a 0.5% increase in cigarette prices...

within services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.2% increase in owner's equivalent while costs for lodging away from home at hotels and motels fell 2.1%, and costs for water and sewerage maintenance were 0.5% higher....medical care services rose 0.1% as glasses and eye care services rose 0.4% while dental services fell 0.3%...at the same time, the transportation services index rose 0.2% on a 2.2% increase in car and truck rentals and a 1.6% increase in ship fares, while airline fares were 0.9% lower....meanwhile, the recreation services index rose 0.5% for the 2nd month in a row as admissions to movies, theaters, and concerts rose 2.3% and club dues and fees for participant sports and group exercises rose 0.9%... in addition, education and communication services were 0.1% higher on a 0.5% increase in delivery services and 0.3% higher elementary and high school tuition and fees......lastly, other personal services were up 0.2% on a 1.3% increase in the financial services index...among core prices, the 12.4% increase in moving and storage expenses was the only line item with a year over year increase greater than 10%, while only telephones, which were priced 14.3% lower, and televisions, which are now 16.6% cheaper, saw their prices drop by more than 10% over the past year...

with this release, we can now attempt to estimate the economic impact of the retail sales report we covered earlier...for the most accurate estimate, and the way the BEA will be figuring 1st quarter GDP at the end of April, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, March's clothing store sales, which fell by 0.9% in dollars, should be adjusted with the price index for apparel, which indicated prices were down by 1.1%, to show us that real retail sales of clothing were actually up 0.2% in March...then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales for the 3 months of the first quarter, January, February and March, with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually....the short cut we usually take to get a ballpark estimate of real sales is to apply the composite price index of all commodities less food and energy commodities, which was down 0.2%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales...those sales were down just about 0.25% in March, while their price index was down 0.3%, leaving real retail sales excluding food and energy sales still down by about 0.05%...then, for the rest of the retail aggregate, we find sales at grocery stores were unchanged in March, while prices for food at home were down  0.5%, suggesting a real increase of around 0.5% in the quantity of food purchased for the month...next, sales at bars and restaurants were down 0.8% in dollars, and moreover those dollars bought 0.2% less, so real sales at bars and restaurants were down about 1.0%...and while gas station sales were up 0.9%, gasoline prices were up 2.2%, suggesting a real decrease in the amount of gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have the details on that...weighing the food and energy components at roughly 30% of total retail sales, we can estimate that real retail sales in March were down slightly more than 0.1% from February…then looking at Tables 8 and 9 in the personal income and outlays report, we can see that real personal consumption expenditures of goods were at a 3,909.2 billion annual rate in February, already lower than the $3,917.9 billion annual rate of real personal consumption expenditures of goods in the 4th quarter...in very round numbers that would suggest March real personal consumption expenditures of goods, 0.1% lower than February's, would reduce 1st quarter GDP by roughly 0.08 percentage points...

Wholesale Prices 0.2% Higher in March, Margins of Service Providers 0.2% Lower

the seasonally adjusted Producer Price Index (PPI) for final demand decreased by 0.1% in March as prices for finished wholesale goods rose by 0.2%, while margins of final services providers fell by the same amount...this followed a February report that showed the overall PPI had decreased 0.2%, with prices for finished goods down 0.6% while final demand for services was unchanged....producer prices thus remain 0.1% lower than a year ago, and 1.0% lower than two years ago, as the producer price index was down 0.9% over the span from March 2014 to March 2015, following the large crash of oil prices at the beginning of last year...

as we noted, the index for final demand for goods, aka 'finished goods', was up 0.2% in March after falling by 0.6% in February and by 0.7% in both January and in December, as the index for wholesale energy prices rose 1.8% on a 10.5% increase in wholesale prices for home heating oil and a 16.0% increase in wholesale prices for LP gas, which were partially offset by a 1.5% drop in gasoline prices....at the same time, the price index for wholesale foods was 0.9% lower on a 27.4% drop in wholesale prices of eggs for fresh use, reversing February's 28.9% egg price hike, and a 12.0% drop in wholesale price index for fresh and dried vegetables that followed a 19.0% drop the month before....excluding food and energy, the index for final demand for core wholesale goods rose by 0.1% in March, as a 1.5% drop in wholesale prices for industrial chemicals and a 1.1% decrease in prices for household appliances were offset by a 1.3% increase in wholesale prices for sporting and athletic goods and a 2.9% increase in wholesale prices for jewelry, platinum and karat gold..

meanwhile, the index for final demand for services fell 0.2% in March after being unchanged in February and rising by 0.5% in January, as the index for final demand for trade services fell 0.5%, the index for final demand for transportation and warehousing services fell 0.3%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.1% lower....noteworthy among trade services, seasonally adjusted margins for chemical wholesales were 6.9% lower and margins for fuels and lubricants retailers were 4.9% lower, while margins for book retailers were 2.5% higher...among transportation and warehousing services, margins for truck transportation of freight fell 0.7% and margins for rail transportation of freight fell 0.5% while margins for air transportation of freight were 1.3% higher...in the core final demand services index, margins for passenger car rentals fell 6.0% and margins for consumer loans were 2.2% lower..

this report also showed the price index for processed goods for intermediate demand fell by 0.2% after a 0.7% decrease in February, as intermediate processed goods prices have now been down 18 out of the last 20 months and remain 5.5% lower than in March a year ago.... the price index for processed foods and feeds fell 0.6%, while prices for intermediate energy goods were unchanged and the price index for processed goods for intermediate demand less food and energy was 0.1% lower...meanwhile, the price index for intermediate unprocessed goods was up 2.5% after falling 2.1% in February, in its first increase since June of last year...driving that increase was a 6.1% jump in the index for crude energy goods, while the index for unprocessed foodstuffs and feedstuffs was down 0.1%, and producer prices for raw materials other than food and energy materials was up 2.1% in only its second increase in nine months... this raw materials index remains 14.1% lower than it was a year ago, as most commodity prices remain depressed...

lastly, the price index for services for intermediate demand was 0.3% lower in March after it rose 0.3% in February, on a 1.1% decrease in the index for trade services for intermediate demand and a 0.2% decrease in the index for transportation and warehousing services for intermediate demand, while the core price index for services less trade, transportation, and warehousing for intermediate demand was unchanged...a 6.9% decrease in margins for intermediate chemicals and allied products wholesaling and a 2.4% drop in margins for intermediate business loans outweighed 1.3% higher margins for intermediate staffing services...over the 12 months ended in March, the year over year price index for services for intermediate demand, which has never turned negative, remains 1.4% higher than it was a year ago...   

Industrial Production Down 0.6% from February's Revised Level

two weeks before this week's release of the March report on Industrial production and Capacity Utilization, the Fed released the results of its annual benchmark revisions to the Industrial Production and Utilization data for the period covering January 1986 through February 2016, incorporating newly available annual data on output and prices...hence, this revision also changed the benchmark for all of the indexes, which had previously been set with 2012's level of activity equal to 100.0, and that means all of the previously published and reported on indexes now have a new benchmark, or basis...the net of all these revisions is that industrial production growth has been slower than previously reported, as it's now seen that total industrial production increased by an average of about 2 1/2 percent from 2011 through 2014 before falling roughly 1 1/2 percent in 2015...that also means that industrial production did not return to its pre-recession high until November 2014, six months later than previously estimated....below we're including a graphic of the revised index from Doug Short's coverage of this revision
April 2016 industrial production revisions

what's shown on the graph above is pretty obvious; industrial production figures as we've been reporting on them over the past year are shown in pink; the new industrial production index values, as of the benchmark revision, are shown in blue..as Doug's callout notes, the February's reported industrial production index had been down 1.47% from the previously published high in December 2014; it's now 2.34% below the level of November 2014, which now marks the new high....this current March release reports & in some cases revises all the new figures as if the old data had never been reported previously...

thus, starting from these newly published figures of two weeks ago, the March release on Industrial production indicated that industrial production fell by 0.6% for the second month in a row, after it had risen by 0.5% in January, which was revised from the 0.6% increase for January shown in the benchmark revision and the 0.8% increase for January published a month ago...February's 0.6% decrease was revised from the 0.5% decrease shown in both the benchmark revision and last month's report...the industrial production index, with the benchmark set for the revised average 2012 production to equal to 100.0, fell to 103.4 in March from in February, which was originally reported at 106.3 with last month's report...at the same time, the January index was revised from the revised reading of 104.7 to 104.6, and hence the industrial production index is now 2.0% lower than a year ago....to the extent that this report plays into GDP, the average index reading of 104.0 for the months of January, February and March is more than half a percent below the 104.6 index average for October, November and December, suggesting a noticeable negative impact on the 1st quarter GDP components that this index influences...

the manufacturing index, which accounts for more than 75% of the total IP index, fell by 0.3, from 103.4 in February to 103.1 in March, after the index for February was revised down from 103.6 to 103.4...that left the manufacturing index just 0.4% higher than a year earlier, largely because of the considerable downward revision in the annual revision.... meanwhile, the mining index, which includes oil and gas well drilling, fell to 103.9 in March from 107.0 in February, which was originally published as 108.1...the mining index has now been down 7 months in a row and is 12.9% lower than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.2% from the already depressed level of February, dropping from 97.5 in February to 96.4 in March...with the utility index already depressed by a warmer than normal winter, it's now 7.7% below the level of last March, when demand for heating was closer to normal...

this report also gives us capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which were also extensively revised with the benchmark revision....after the revisions, seasonally adjusted capacity utilization for total industry fell from 75.3% in February to 74.8% in March; the previously published capacity utilization figure for February was 76.7%..capacity utilization for all manufacturing industries fell from 75.4% in February to 75.1% in March; utilization of NAICS durable goods production facilities fell from 76.0% in February to 75.5% in March, while capacity utilization for non-durables fell from 75.4% in February to 75.3% in March....capacity utilization for the mining sector fell to 73.7% in March from 75.6% in February, which was originally published as 77.5%, while utilities were also operating at 73.7% of capacity during March, down from the revised 74.6% of capacity during February...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....  

February Business Inventories Down 0.1%; Real Growth Still at a Pace Greater than 4th Quarter

following the release of the retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for February (pdf), which incorporates the revised February retail data and previously 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 $1,284.4 billion in February, down 0.4 percent (±0.2%) from January's revised sales, and down 1.4 percent (±0.4%) from February sales of a year earlier...note that total January sales were also revised down by more than 0.5%, from $1,296.2  billion to $1,289.5 billion....manufacturer's sales fell by 0.7% from January to $462,807 million in February, while retail trade sales, which exclude restaurant & bar sales from the revised February retail sales we reported earlier, fell 0.2% to $394,050 million, and wholesale sales fell 0.2% to $427,560 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,812.1 billion at the end of February, down 0.1 percent (±0.1%)* from January, but 1.2 percent (±0.5%) higher than in February a year earlier...the value of end of January inventories was revised up by less than 0.1%, from the $1,812.3 billion reported last month to $1,813,781 million with this report...seasonally adjusted inventories of manufacturers were estimated to be valued at $634,282 million, 0.4% lower than in January, inventories of retailers were valued at $594,470 million, 0.6% greater than January, while inventories of wholesalers were estimated to be valued at $583,346 million at the end of February, down 0.5% from January...

before the change to inventories are included in GDP data, they must first be adjusted any changes in price to determine the real change in inventories...all the price changes used to adjust inventories come from the various components of the producer price index, even those of retail, which are valued as finished goods...last week we looked at both factory inventories and wholesale inventories, in light of 0.7% lower finished goods prices for January, 0.6% lower finished goods prices for February, 1.2% lower intermediate goods prices for January, and 0.7% lower finished goods prices for February, and judged that real inventories for both were up, with wholesale inventories possibly adding incrementally to 1st quarter GDP....the value of retail inventories, up 0.4% in January and 0.6% in February, would be adjusted with finished goods for those months, suggesting a 1.1% real increase in January retail inventories, followed by a 1.2% increase in real February inventories...that follows nominal inventory increases of 0.1%, 0.2%, and 0.2% for October, November, and December respectively, which would have been adjusted with finished goods producer price index decreases of 0.3%, 0.1% and 0.6% for those same months, resulting in real retail inventory growth at 0.4%, 0.3%, and 0.8% for those months of the 4th quarter...that suggests real inventories have been growing at a faster pace through January and February than they were in the 4th quarter, which would thus a;so boost 1st quarter GDP...that insight comes with the caveat that the Atlanta Fed's GDPNow model still projects that inventories will subtract 0.65 percentage points from 1st quarter GDP...

State and Regional Employment Report for March

the Regional and State Employment and Unemployment Summary for March expands on the national employment situation summary of two weeks ago by breaking down the state and regional details...as with most BLS reports, the press release is very readable & self explanatory, with BLS referring to appropriate tables linked to at the bottom of the press release wherever relevant, where there are tables covering data for all 50 states...the BLS table corresponding to household survey data, includingthe seasonally adjusted count of the unemployed and the unemployment rate for each state, is here....South Dakota at 2.5% and New Hampshire at 2.6% had the lowest unemployment rates in March, while Alaska had the highest unemployment rate at 6.6%, followed by West Virginia with a 6.5% jobless rate..

for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment for each since last March, see the following two BLS tables accompanying this release: Table 5. Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted and Table 6. Employees on nonfarm payrolls by state and selected industry sector, not seasonally adjusted ...the latter two tables are very detailed, giving you both actual and seasonally adjusted totals for jobs in each state and the District of Columbia in several categories, including construction, manufacturing, trade, transportation and utilities, financial, professional and business services, education and health services, leisure and hospitality and government....the 22 page pdf version of this report has even more details also includes map graphics for both the employment rate and the year over year payroll jobs increase by state and region...



(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 10, 2016

February’s foreign trade, factory and wholesale sales and inventories, job openings, and Mortgage Monitor

the key release of this past week was the Census report on our International Trade for February, which gives us data on our exports and imports and hence a clarification of the growth in other sectors of the domestic economy...in addition, we also saw two reports that give us two thirds of the inventory data for the first two months of the year: the Full Report on Manufacturers' Shipments, Inventories and Orders for February and the February report on Wholesale Trade, Sales and Inventories (pdf), both from the Census bureau....the week also saw the release of the Job Openings and Labor Turnover Survey (JOLTS) for February by the Bureau of Labor Statistics, and the Consumer Credit Report for February from the Fed, which showed that overall credit expanded by a seasonally adjusted $17.3 billion, or at a 5.8% annual rate, as non-revolving credit expanded at a 6.6% rate to $2,627.0 billion and revolving credit outstanding grew at a 3.7% rate to $940.6 billion.....the week also saw the private release of the Mortgage Monitor for February (pdf) from Black Knight Financial Services, which we'll take a look at later in this synopsis, and the March Non-Manufacturing Report On Business from the Institute of Supply Management; which saw their NMI (non-manufacturing index) rise to 54.5%, up from 53.4% in January, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business...

Trade Deficit up 2.6% in February, on Track to Subtract 0.65 Percentage Points from 1st Quarter GDP

our trade deficit rose by 2.6% February, as the net value of both our exports and our imports increased, but our imports increased by more....the Census report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $1.2 billion to $47.1 billion in February from a January deficit which was revised from $45.7 billion to $45.9 billion...the value of our February exports rose by $1.8 billion to $178.1 billion on a $1.8 billion increase to $118.6 billion in our exports of goods and a fractional decrease to $59.5 billion in our exports of services, while our imports rose $3.0 billion to $225.1 billion on a $2.7 billion increase to $183.3 billion in our imports of goods and a $0.3 billion increase to $41.8 billion in our imports of services...export prices averaged 0.4% lower in February, so the real exports were greater than the nominal dollar value by that percentage, while import prices were 0.3% lower, similarly incrementally increasing the actual amount of real imports over the dollar values reported here...

the February increase in our exports of goods resulted from greater exports of consumer goods, automotive vehicles, parts and engines, foods and feeds, and other goods, which were partially offset by lower exports of industrial supplies and capital goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $1064 million to $17,043 million on a $629 million increase in our exports of gem diamonds and $341 million increase in our exports of pharmaceutical preparations...our exports of automotive vehicles, parts and engines rose by $344 million on a $568 increase in our exports of new and used passenger vehicles which was partially offset by a $280 million decease in our exports of automotive parts and accessories other than tires and engines....our exports of foods, feeds and beverages rose by $310 million to $9,738 million on small increases in many categories of foods and feeds....in addition, our exports of other goods not categorized by end use rose by $618 million to $4,811 million....meanwhile, our exports of capital goods fell $271 million to $42,532 on a $181 million decrease in our exports of civilian aircraft and a $170 million decrease in our exports of electrical apparatuses, and our exports of industrial supplies and materials fell by $179 million to $31,308 million on a $143 million drop in our exports of petroleum products other than fuel oil...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a jump in imports of consumer goods alone more than accounted for the February increase in our imports, as our imports of consumer goods rose $3,596 million to $51,501 million on a $1,344 million jump in our imports of pharmaceutical preparations, a $552 increase in our imports of toys, games, and sporting goods, a $387 million increase in our imports of textiles other than wool and cotton, a $305 million increase in our imports of cell phones and similar household items and a $271 million increase in our imports of furniture and similar household goods...in addition, our imports of capital goods rose $988 million to $48,967 million on a $422 million increase in our imports of civilian aircraft, a $394 million increase in our imports of computers and a $319 million increase in our imports of computer accessories, and our imports of foods, feeds, and beverages rose by $488 million to $11,210 million on increased imports of fish and shellfish, fruits and juices, beer and wine, and other foods...in addition, our imports of goods not categorized by end use rose by $111 million to $7,201 million...offsetting those increases, our imports of automotive vehicles, parts and engines fell $1526 million to $29,042 million on a $1303 million decrease in our imports of new and used passenger vehicles and a $193 million decrease in our imports of parts and accessories, and our imports of industrial supplies and materials fell by $948 million to $33,606 million on an $890 million drop in our imports of crude oil, a $206 million drop in our imports of fuel oil and a $222 million decrease in our imports of other petroleum products...

to assess the impact of February and January trade data on 1st quarter growth figures, we first need to adjust the value of January's and February's imports and exports for changes in price to get the real quantity of both, and then compare those figures to the similarly adjusted 4th quarter figures...however, exhibit 10 in the pdf for this report already gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can estimate that 4th quarter real exports of goods averaged 118,760 million monthly in 2009 dollars, while inflation adjusted January and February exports were at 115,988 and 118,544 million respectively, according to that same 2009 dollar quantity index representation....averaging January and February goods exports and then annualizing the change between that average and the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 4.9% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.40 percentage points from 1st quarter GDP.....in a similar manner, we find that our 4th quarter real imports of goods averaged 178,901 million monthly in chained 2009 dollars, while inflation adjusted January and February imports were at 177,759 and 181,890 million respectively after that same adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 2.01% annual rate from those of the 4th quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 2.01% rate would thus subtract another 0.25  percentage points from 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to subtract 0.65 percentage points from 1st quarter GDP...

Factory Shipments Down 0.7% in February, Factory Inventories Down 0.4%

in the widely watched Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf), the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $8.0 billion or 1.7 percent to $454.0 billion in February, following an increase of 1.2% in January, revised from the 1.6% increase reported last month, and a decrease of 2.9% in December, which was unrevised....however, as we learned 5 months ago, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "the factory orders report"; instead, they use shipments data as a proxy for non-durable orders, which means that both the "new orders" and "unfilled orders" sections of this report really only useful as a revised update to the advance report on durable goods we reported on 2 weeks ago...in the case of February's new orders for durable goods, then, this February Full Report showed that new orders for manufactured durable goods fell $7.0 billion or 3.0% percent to $229.1 billion, revised down from the 2.8% decrease to $229.4 billion reported two weeks ago, which followed a January increase of 4.3% that was revised from the 4.2% increase indicated in that advance report, as new orders for non-defense capital goods excluding aircraft fell by a steeper 2.5% than the 1.8% drop reported in the advance report...including the $1.0 billion decrease in shipments of non-durable goods with the decrease in those orders for durables, then, the Census Bureau reported that new orders for manufactured goods fell by $8.0 billion or 1.7%, which thus became the headline for this report carried in the news media...

more importantly, then, this report indicated that the seasonally adjusted value of February factory shipments fell by $3.4 billion or 0.7 percent to $462.8 billion, the 10th decreasing 11 months, following a 0.2 percent decrease in January, which had previously been reported as a $1.4 billion or 0.3% increase...shipments of durable goods were down $2.4 billion or 1.0 percent to $238.0 billion, revised down from the from the 0.9% decrease reported in the durables report, as lower shipments of transportation equipment led the decrease, falling $1.0 billion or 1.2 percent to $78.9 billion, on a 8.4% drop in shipments of commercial aircraft...without those transportation sector shipments, however, factory shipments were still 0.6% lower, as the value of shipments (and hence of "new orders") of non-durable goods fell by $1.0 billion, or 0.4%, to $225.8 billion with a 2.1% drop in shipments from refineries and a 0.5% drop in shipments of food products accounting that decrease...without the decrease in the value of refinery shipments, the value of shipments of other non-durable goods would have been statistically unchanged...

meanwhile, the aggregate value of February factory inventories fell by $2.6 billion or 0.4 percent to $634.3 billion, their 8th nominal decrease in a row, following a January decrease of 0.2% that was reported as a 0.4% decrease last month....inventories of durable goods fell by $1.3 billion or 0.3 percent to $394.1 billion, $0.2 billion lower than was reported was reported two weeks ago but unchanged in terms of statistical significance, following a 0.2% decrease in January, which had been revised from the 0.1% reported last month in the advance report.....the value of non-durable goods' inventories fell $1.3 billion or 0.5 percent to $240.17 billion, following a decrease of 1.0% in January...the value of inventories at petroleum refineries, down in value most of the year, drove the decrease in non-durable inventories, as they fell by $1.4 billion or 5.4% percent to $24.06 billion, which was undoubtedly mostly due to lower prices...producer prices for finished goods were down 0.6% in February, with producer prices for energy goods down 3.4%, so once factory inventories are adjusted for inflation in our national accounts data, they will likely show a real February increase on the order of 0.2%...

February Wholesale Sales Down 0.2%, Wholesale Inventories Down 0.5%

the February report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $427.6 billion, down 0.2 percent (+/-0.5%) from the revised January level, and 3.1% percent (+/-1.2%) lower than wholesale sales of February 2015... the January preliminary estimate was revised down $0.8 billion or 0.2 percent, leaving January's sales 1.9% below the December level... February wholesale sales of durable goods were up 1.2 percent (+/-0.7%) from January and were down 3.4 percent (+/-1.8%) from a year earlier, with a 3.1% increase in wholesale sales of electrical and electronic goods leading the increase for the month, while wholesale sales of machinery fell 1.4%....wholesale sales of nondurable goods were down 1.6 percent (+/-0.7%) from January and were down 6.2 percent (+/-1.9%) from last February, with wholesale sales petroleum and petroleum products down 10.1% on lower 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 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 February report estimated that wholesale inventories were valued at a seasonally adjusted $583.3 billion at month end, a decrease of 0.5 percent (+/-0.4%) from the revised January level but 0.6 percent (+/-1.4%)* higher than February a year ago, with the January preliminary estimate revised downward $2.1 billion or almost 0.4%, and with the January change revised from 0.3% growth to a 0.2% contraction....inventories of durable goods were down 0.1 percent (+/-0.4%)* from January and were down 1.3 percent (+/-1.4%)* from a year earlier, with inventories of lumber and other construction materials down 1.6% on lower prices, while inventories of electrical and electronic goods were up 2.0% on lower sales...at the same time, the value of wholesale inventories of nondurable goods was down 1.1 percent (+/-0.4%) from January, but was up 3.7 percent (+/-1.9%) from last February, as the value of inventories of raw farm products fell 4.2% while wholesale inventories of drugs and drug store sundries fell 3.5%..

as you know, to approximate the effect of the change in wholesale inventories, valued here in current dollars, to the change in GDP, we must first convert these dollar figures into an approximation of the change in the quantity of goods that were inventoried...the BEA does that by deflating the value of each of the categories of inventories with the appropriate sub-index from the producer price index for the same month... however, since inventories are notoriously difficult to estimate without knowing the month that each subset of the total was inventoried, and since the BEA does not break out wholesale inventories from other business inventories in the GDP report, that means all we have to go on is the monthly wholesale data for the 4th quarter...thus we'll just make a rough estimation by referring to the aggregate producer price index for February, which also includes January's price changes, and adjust nominal inventories with them monthly...in February, producer prices for finished goods fell 0.6%, largely on a 3.4% decrease in wholesale energy prices, after January's producer prices for finished goods fell 0.7% on a 5.0% drop in wholesale energy prices...that suggests that the January change in real wholesale inventories was an increase by about 0.5%, after which February real wholesale inventories rose by around 0.1%...that would suggest real wholesale inventories at the end of February were about 0.6% higher than they were at the end of the 4th quarter...our records and prior estimations of the change in wholesale inventories over the 4th quarter was of a real increase in wholesale inventories of about 0.5%…since the GDP calculation looks at the change in the growth of inventories, that means that wholesale inventories at the end of February look like they will be an incremental addition to 1st quarter GDP…

note that our estimate of an small increase in real inventories in the first quarter appears to differ from the assessment of the Atlanta Fed, who’s GDP now algorithm changed their forecast for the contribution of inventory investment to first-quarter real GDP growth from –0.4 percentage points to –0.7 percentage points after the release of this wholesale trade report…we don't necessarily disagree with the Atlanta Fed’s take, because they certainly had to revise their previous forecast lower on the large January revision…the revision to January with this report changed that month’s nominal wholesale inventories from 0.3% growth to a 0.2% contraction….that in effect cut the January growth in real inventories in half, from roughly 1.0% to 0.5%…we assume Atlanta Fed’s prior -0.4 percentage point estimated contribution to GDP had indicated higher wholesale inventories were more than offset by lower factory & retail inventories…after this report, wholesale inventories wont be doing much offsetting of any lower inventories elsewhere…

Job Openings Down, Hiring and Job Quitting Up in February

the Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 159,000, from 5,604,000 in January to 5,445,000 in February, after January's job openings were revised higher, from 5,541,000 to 5,604,000...February jobs openings were still 9.2% higher than the 5,131,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed fell to 3.7% in February from 3.8% in January but was still up from 3.5% a year ago...the greatest decreases in job openings were in health care and social assistance, where openings fell by 147,000 to 899,000, while job openings in private educational services rose by 48,000 to 131,000 (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, 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 February, seasonally adjusted new hires totaled 5,422,000, up 297,000 from the revised 5,125,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed rose from 3.6% to 3.8%, which was also up from the hiring rate of 3.6% in February a year earlier (details of hiring by industry since September are in table 2)....meanwhile, total separations also rose, by 73,000, from 4,977,000 in January to 5,050,000 in February, while the separations rate as a percentage of the employed remained unchanged at 3.5%, which was still up from the separations rate of 3.4% a year ago (see table 3)...subtracting the 5,050,000 total separations from the total hires of 5,422,000 would imply an increase of 372,000 jobs in February, somewhat more than the revised payroll job increase of 245,000 for February reported by the March establishment survey last week, implying that one of those surveys might be off by more than the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 2,950,000 of us voluntarily quit their jobs in February, up 99,000 from the revised 2,851,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.0% to 2.1% of total employment, which was also up from 1.9% a year earlier (see details in table 4)....in addition to those who quit, another 1,715,000 were either laid off, fired or otherwise discharged in February, up 11,000 from the revised 1,704,000 who were discharged in January, which left the discharges rate unchanged at 1.2% of all those who were employed during the month, also same as a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 385,000 in Febuary, down from 422,000 in January, for an 'other separations' rate of 0.3%, which was unchanged....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...

Mortgage Delinquencies Drop 12.57% in February While Mean Time in Foreclosure Rises to Record 1064 Days

the Mortgage Monitor for February (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 655,311 home mortgages, or 1.30% of all mortgages outstanding, remaining in the foreclosure process at the end of February, which was down from 659,237, which was also 1.30% of all active loans, that were in foreclosure at the end of January, and down from 1.72% of all mortgages that were in foreclosure in February of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the February "foreclosure inventory" remains at the lowest percentage of homes that were in the foreclosure process since the fall of 2007... new foreclosure starts, which have been volatile from month to month, rose to 84,305 in February from 71,900 in January and from 77,208 in February a year ago; this was the highest number of new foreclosures in any month since March 2015, when 92,164 were foreclosed on...over the past year, the average of new foreclosure starts monthly remains at a level about one-third higher than the average number of new foreclosures we saw monthly in the precrisis year of 2005...

in addition to homes in foreclosure, BKFS data also showed that  2,251,899 mortgages, or 4.45% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure at the end of February, down from the 5.09% of homeowners with a mortgage who were more than 30 days behind in January, and down from the mortgage delinquency rate of 5.30% in February a year earlier...of those who were delinquent in February, 772,441 home owners, or 1.53% 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 also down from 831,284 such "seriously delinquent" mortgages in January...combining the total delinquent mortgages with those in foreclosure, we find that a total of 2,907,210 mortgage loans, or 5.75% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of February, and that 2.82% of all homeowners were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

the first graph below, from page 5 of the Mortgage Monitor, show the mortgage delinquency rate, or the percentage of mortgages at least one mortgage payment overdue but not in foreclosure, at the end of each month since the beginning of 2005...as noted on the graph, at 4.45%, the national mortgage delinquency rate is now at the lowest its been since April 2007...that's down by much more than half from January 2010, when 10.57% of all mortgages nationally that weren't yet in foreclosure were behind by at least one house payment....before the mortgage crisis, the delinquency rate was generally in a range between 3.75% and 4.25%, with the seasonal highs typically in December...

February 2016 LPS delinquency rate graphs

the next graph, also from page 5 of the Mortgage Monitor, shows the monthly percentage change in the mortgage delinquency rate over that same span...as they note on the chart, the 12.57% decrease in mortgage delinquencies we saw in this February report was the largest monthly drop in mortgage delinquencies in 10 years, percentage wise ...what they don't note is that followed a 6.62% increase in mortgage delinquencies in January, the first time that mortgage delinquencies had increased in January in at least 5 years, and possibly the largest increase in any January, when mortgage delinquencies normally fall, as homeowners catch up on their overdue bills after Christmas spending...what appears to have caused both aberrations was that January 31st fell on a Sunday, and hence mortgage payment checks that would have arrived January 30th or the 31st were not processed on the weekend, leaving those mortgages technically delinquent at the end of January.... that "check in the mail" scenario did not repeat in February, however, since the 29th fell on a Monday, and as a result of having two checks processed during the month, those January delinquent mortgages thus "cured" in February...

February 2016 LPS delinquency rate graphs no 2

the next graph, also from page 5 of the Mortgage Monitor, shows the monthly percentage change in the serious delinquency rate over the same period, beginning in 2005....as we noted earlier, the number of seriously delinquent mortgages had dropped from 831,284 in January to 772,441 in February, a 7.1% drop, which BKFS notes on the graph was the largest drop in serious delinquencies in 12 months and the 2nd largest drop in 5 years...but once again, that had followed a 2.9% spike in serious delinquencies in January, again at a time of year when such serious delinquencies are normally falling...taking January and February together, the drop in both the simple delinquencies and the more serious ones was not outside the range of the normal drop in delinquencies that would normally occur over the first two months of the year...

February 2016 LPS 90 day delinquency change

finally, we're including below that part of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from the bottom part of page 16 of the pdf, even though the 2015 data has now been cycled off this month (for monthly 2015 data, see here)....the columns in the table below show the total active mortgage loan count nationally for each month shown, 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 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 stuck in that process because of the lengthy foreclosure pipelines…the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has fallen from the April 2015 record of 536 days and is now at 489 days, while the average time for those who’ve been in foreclosure without a resolution has increased again and at 1064 days has now topped the record high last set in November… that means that the average homeowner who is in foreclosure now has been there nearly three years, which, considering that new foreclosure starts are less than 30 days old, suggests that many foreclosures started early in the crisis are still not yet completed…

February 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, April 3, 2016

March employment report, February's income and outlays and construction spending, & January's Case-Shiller HPI

the important economic releases this week were the Employment Situation Summary for March from the Bureau of Labor Statistics and the February report on Personal Income and Spending from the Bureau of Economic Analysis, which includes 2 months of data on personal consumption expenditures and hence accounts for 46% of 1st quarter GDP....also impacting GDP, the week saw the release of the February report on Construction Spending from the Census Bureau and the Commerce Dept preview of the Advance International Trade in Goods for February, which showed our trade deficit in goods increased to $62,864 million in February, from $62,228 million in January...since that advance report is short on background data and usually revised, we will wait to cover it in detail when the full international trade report is released next week...

the week also saw the release of the Case-Shiller house price indexes for January from S&P Case-Shiller, and light vehicle sales for March from Wards Automotive, which estimated that vehicles sold at a 16.46 million annual rate in March, down 5.6% from the 17.43 million annual rate in February, and the lowest vehicle sales rate since January of last year....in addition, the week also saw the release of three widely watched manufacturing diffusion indexes for March, with indexes generated from business growth surveys that weigh the positive responses of executives against the negative ones...those included the Texas area manufacturing survey from the Dallas Fed, which reported its broadest general business activity index rose more than 18 points, from -31.8 to -13.6, while their production index rose above zero to 3.3, after two months of negative readings, suggesting a moderation of the area's energy based recession, the Chicago Business Barometer for March from the ISM Chicago (pdf) which increased by 6.0 points to 53.6 in March, led by increases in production and employment, where readings above 50 suggest growth, and the March Manufacturing Report On Business from national the Institute for Supply Management (ISM), which saw the manufacturing PMI (Purchasing Managers Index) rise from 49.5% in February to 51.8% in March, indicating that a small plurality of manufacturing purchasing managers nationally saw growth in the various facets of their business for the first time in 6 months...

Employers add 215,000 Jobs in March; Unemployment Rate Rises to 5.0%

the Employment Situation Summary for March showed a modest increase in payroll jobs, a modest increase in average hourly pay, a relatively large increase in those working just part time for economic reasons, and nominal increases in both the unemployment rate and the employment rate, as well as an uptick in the labor force participation rate....

estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 215,000 jobs in March, after the payroll job increase for February was revised up from 242,000 to 245,000, and the January jobs increase was revised down from 172,000 to 168,000, meaning the combined number of jobs created in those months was just 1,000 less than was previously reported, in one of the smallest two month revisions we've seen…seasonally adjusted job increases in March were fairly widespread throughout government, construction and the private service sector, while the manufacturing sector saw a net loss of 29,000 jobs, with 24,000 of those in industries producing durable goods, and the resource extraction sector lost 12,000 jobs, 9,900 in the broad "support activities for mining" sector, which includes support for oil and gas drilling....

47,700 jobs were added by retailers, with 12,000 of those in general merchandise stores and 10,200 in drug stores...after a seasonal adjustment, 37,000 jobs were added in construction, with 11,600 working for residential specialty trade contractors, and 11,200 in heavy and civil engineering construction...36,800 jobs were added in the health care and social assistance sector, with 27,400 of those spread through ambulatory health care services and another 10,200 in hospitals....the leisure and hospitality sector added 40,000 jobs, including 24,800 jobs in bars and restaurants...the broad professional and business services sector, the largest employer overall, saw the addition of another 33,000 payroll jobs, as 13,500 jobs were added in professional and technical services and 12,500 more were employed in services to buildings...another 20,000 were added by various governments, with 19,000 of those at the state and local level, mostly outside of education...

meanwhile, the average hourly pay for all employees rose by 7 cents to $25.43 an hour, after it had decreased by 2 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.37 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours, after it had fallen by 0.2 hours in February, while hours for production and non-supervisory personnel were also unchanged at 33.7 hours...meanwhile, with 29,000 fewer working, the manufacturing workweek still fell 0.1 hours to 40.6 hours, while factory overtime was at 3.3 hours for the fourth month in a row...

at the same time, results of the March household survey estimated that the seasonally adjusted number of those who were employed rose by 246,000 to 151,320,000; while the estimated number of unemployed also rose by 151,000 to 7,966,000; and thus the labor force increased by 396,000...the relatively large increase in the unemployed was enough to increase the unemployment rate, as it rose from 4.9% to 5.0% ...with the net increase in the number employed and unemployed greater than the 191,000 increase in the civilian working age population, the count of those ‘not in the labor force’ fell by 206,000 to 93,482,000, which was enough to increase the labor force participation rate from 62.9% in February to 63.0% in March, its fifth increase in as many months....with the decent increase in the employed, the employment to population ratio, which we could think of as an employment rate, also rose by 0.1% to 59.9%...however, there was also a 135,000 increase in the number who reported they were involuntarily working part time, from 5,988,000 in February to 6,123,000 in March...like the unemployment rate, that increase was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", which rose to 9.8%%, from a post recession low of 9.7% in February...

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...thus, when you read a line such as "the unemployment rates for adult men (4.5 percent), adult women (4.6 percent), teenagers (15.9 percent), Whites (4.3 percent), Blacks (9.0 percent), Asians (4.0 percent), and Hispanics (5.6 percent) showed little or no change in March.(See tables A-1, A-2, and A-3.)", you can quickly open Table A-1, Table A-2.and Table A-3, where you would see that the unemployment rate for black Americans rose 0.2%, from 8.8% in February to 9.0% in March, largely as the result of an increase in the black teenage unemployment rate from 23.3% to 25.3%...

February Personal Income up 0.2%; 2 Months PCE Would Add 0.88 Percentage Points to Q1 GDP

other than the employment report and the GDP report itself, the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is probably the most important economic release we see monthly; in the case of the February report Personal Income and Outlays from the Bureau of Economic Analysis, it alone gives us nearly half the data that will go into 1st quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for more than 2/3rds of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated....the same report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase for a year if February's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's 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 January to February..

for example, when the opening line of the press release for this report tell us "Personal income increased $23.7 billion, or 0.2 percent, and disposable personal income (DPI) increased $23.7 billion, or 0.2 percent, in February", they mean that the annualized figure for seasonally adjusted personal income in February, $15,697.9 billion, was $23.7 billion, or actually somewhat less than 0.2% greater than the annualized  personal income figure of $15,674.2 billion extrapolated for January; the actual, unadjusted change in personal income from January to February is not given...similarly, annualized disposable personal income, which is income after taxes, also rose by less than 0.2%, from an annual rate of an annual rate of $13,664.8 billion in January to an annual rate of $13,688.5 billion in February...likewise, all the contributors to the increase in personal income, listed under "Compensation" in the press release, are also annualized amounts, all of which can be more clearly seen in the Full Release & Tables (PDF) for this release...so when the press release, or a news account copying from it says, "Wages and salaries decreased $9.4 billion in February, in contrast to an increase of $46.5 billion in January.", that really means wages and salaries would fall by $9.4 billion over an entire year if February's seasonally adjusted decrease in wages and salaries were extrapolated over that year, just as personal current transfer payments from government agencies rose at a $14.1 billion annual rate and interest and dividend income, sometimes the largest contributor to the monthly personal income increase, rose at a $7.3 billion annual rate in February....so you can see what's written in the press release is misleading, and often leads to media reports that parrot those lines the same way the BEA wrote them, and why we favor referencing the pdf in reviewing this report...

for the personal consumption expenditures (PCE) that we're most interested in today, BEA reports that they increased at a $11.0 billion rate, or a bit less than 0.1 percent, as the annual rate of PCE rose from $12,484.2 billion in January to $12,495.2 in February; that happened as the January PCE figure was revised down from the originally reported $12,520.4 billion annually, and prior months, which were included in last Friday's 4th quarter GDP, were revised as well....the current dollar increase in February spending resulted from a $38.2 billion annualized increase to an annualized $8,542.9 billion annualized in spending for services, which was partially offset by a $27.2 billion decrease to $3,952.3 billion in spending for goods....total personal outlays for February, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $10.4 billion to $12,954.9 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $733.6 billion annual rate in February, up a bit from the revised $720.3 billion in annualized personal savings in January... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.4% in February from January's savings rate of 5.3%...

as you know, before personal consumption expenditures are used in the GDP computation, they must first be 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....the BEA does that with the price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, also included in this report....looking at Table 9 in the pdf, we see that that index fell from 109.942 in January to 109.825 in February, a month over month deflation rate that's statistically -0.106%, which BEA reports as an decrease of 0.1 percent, following the PCE price index increase of ~0.1% in January...applying that inflation adjustment to the nominal amounts left real PCE up 0.2% in February, after January's real PCE increase was revised to statistically unchanged from the previously reported 0.4% increase...note that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that February's chained dollar consumption total works out to 11,377.7 billion annually, roughly 0.2% more than January's 11,355.6 billion...

however, in estimating the impact of the change in PCE on the change in GDP, the month over month change doesn't help us much, since GDP is reported quarterly...thus we have to compare real PCE from January and February to the the real PCE of the 3 months of the fourth quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 4th quarter was represented by 11,330.7 billion in chained 2009 dollars..(ie, same as shown in table 3 of the pdf for the 4th quarter GDP report)...by averaging the annualized chained 2009 dollar figures for January and February, 11,355.6 billion and 11,377.7 billion, we get an equivalent annualized PCE for the two months of the 1st quarter that we have data for so far....when we compare that average of 11,366.6 to the 4th quarter real PCE of 11,330.7, we find that 1st quarter real PCE has grown at a 1.28% annual rate for the two months we do have (note the math to get that annual rate: (((11,290.0 + 11,323.4) /2 ) / 11,262.4) ^ 4 = 1.01275171...this means that if March real PCE does not improve from the average of January and February, growth in PCE would add just 0.88 percentage points to the growth rate of the 1st quarter, which would be the weakest contribution from PCE since the first quarter of 2014...

Construction Spending Decreased 0.5% in  February after January Revised 0.8% Higher

the report on February construction spending (pdf) from the Census Bureau estimated that February's seasonally adjusted construction spending would work out to $1,144.0 billion annually if extrapolated over an entire year, which was 0.5 percent (±1.6%) below the revised annualized estimate of $1,150.1 billion of construction spending in January but still 10.3 percent (±2.1%) above the estimated annualized level of construction spending of February last year...the January spending estimate was revised 0.8% higher, from $1,140.8 billion to $1,150.1 billion, while December's construction spending was revised from $1,123.5 billion to $1,125.9 billion, which would suggest that the final report on 4th quarter GDP was short by 0.06 percentage points...

private construction spending was at a seasonally adjusted annual rate of $846.2 billion in February, 0.1 percent (±1.0%) below the revised January estimate of $847.2 billion, with residential spending of $447.9 billion 0.9 percent (±1.3%) above the upwardly revised annual rate of $443.8 billion in January, while private non-residential construction spending fell 1.3 percent (±1.0%) to $398.3 billion from the revised January level on a 6.0% decrease in private spending for construction of manufacturing facilities and a 15.0% decrease in communication construction spending...at the same time, public construction spending was estimated to be at an annual rate of $297.8 billion, 1.7 percent (±3.1%) below the revised January estimate, with spending for education down 4.2 percent (±2.6%) to $66.4 billion and spending for highway construction down 2.1 percent (±11.5%) to an annual rate of $101.7 billion, but still 24.5% higher than a year earlier...

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments.... however, gauging the impact of the January and February spending reported in this release on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price...moreover, the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for the various components of non-residential investment, such as the Turner Construction building-cost indices for several types of buildings and the Engineering News Record construction cost index for utilities construction, while it specifies use of the Census Bureau construction price indexes for new one-family houses under construction and for new multi-family homes under construction for residential investment....so to quickly come up with rough estimate on real construction over January and February, we've decided to use the producer price index for final demand construction as an inexact shortcut... that index showed that aggregate construction costs were down 0.1% in February and down 0.4% in January, after they had been unchanged in December and down 0.2% in November...on that basis, we can estimate that the average of real January and February construction spending was $31.1 billion, or 2.77% higher than that of the 4th quarter average, or growing at a 11.5% annual rate, a pace that which, if sustained through March, would add 1.90 percentage points to 1st quarter GDP...

S&P/Case-Shiller Home Price Indices remained unchanged in January

the Case-Shiller house price indexes for January indicated a 5.1% year over year increase in sales prices on repeat home sales in the ten cities of the original index, a 5.7% year over year increase in the 20 City Composite, and a 5.4% increase in home prices nationally since the January report of last year, led by an 11.8% increase in home prices in Portland, a 10.7% increase in home prices in Seattle, and a 10.5% increase in home prices in San Francisco....Case-Shiller also reports no change since last month in the national, 10 city and 20 city indexes, all of which compare prices of houses sold in November, December and January to those sold in October, November, and December, and hence the change in the month over month indexes are arithmetically equal to 1/3rd the difference between October home prices and January home prices, ie, not really a useful monthly change at all...seasonally adjusting those so called month over month indexes shows that the National, 10-City Composite, and 20-City Composite rose 0.5%, 0.8%, and 0.7%, respectively, from the prior month's seasonally adjusted index; thus, while home prices in 11 of the 20 cities showed an actual increase in their January price index when compared to those of October, after those seasonal adjustments were applied, home prices in all 20 of the cities increased...the full pdf of the release, titled Home Price Increases Continue in January, is here, and it includes full unadjusted and adjusted tables for all 20 cities and the 3 indexes, as well as graphs and commentary....for coverage of this Case-Shiller report on the web, see the following two posts from Bill McBride, which include several graphs: Case-Shiller: National House Price Index increased 5.4% year-over-year in January, followed by his analysis in Real Prices and Price-to-Rent Ratio in January.... 

as we mentioned, since Case-Shiller indexes are simple averages of home price changes over 3 months, they are not very useful for monthly comparisons...that's simply because two of the months are being compared to themselves, leaving only prices changes from the current month, and the month before the month before last left in each month over month comparison....this is also the case with any three month average, which we can represent by (a + b + c) / 3, with a being the current month, b being last month, and c being the month before that...another way of writing that same expression is "a/3 + b/3 + c/3 " .... when one compares that to the prior month 3 month average, represented by (b + c + d) / 3, where d is the month before the month before last, we end up comparing (a/3 + b/3 + c/3) to (b/3 + c/3 + d/3), and since two of our elements in that comparison are identical, the comparison simply becomes a/3 to d/3, or one-third the difference between months a and d....nonetheless, such 3 month averages are used by economists everywhere, including at the Fed, as if they're providing some special insight, even though the comparison they offer borders on nonsense...


(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my blog post for this week 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)