Sunday, May 29, 2016

Coral Bleaching - The Canary We’re All Ignoring

(contributed by Emma Seddon)

Carbon monoxide gathers deadly force slowly [1]. So slowly that you don’t realise anything is happening. You get a bit irritable, then a bit woozy, then a bit lethargic. By the time you start feeling nauseous, it’s too late. All you want to do is lie down and have a little rest, to clear your head. You never wake up.

Carbon monoxide, among other gases, was (and still is) a big problem down mines. Before sophisticated technologies to both detect noxious gases and to remove the risk from them, miners used to take caged canaries into mines with them. Why? Because if toxic, undetectable gases like carbon monoxide were present, the canary would succumb before the miners [2]. A dead or suffering canary would give the miners enough warning time to get out of the shaft before the gaseous effects took hold of them. Cruel, but effective. So effective, in fact, that mine canaries were only phased out in the UK in 1986 [3].

The world at large is currently in very real danger from carbon dioxide and other greenhouse gases. We’ve got a form of canary which is currently warning us strongly that things are imminently about to get deadly for us. Unlike the miners of old, however, we’re completely ignoring it. I speak of coral bleaching [4]. Hundreds of kilometers of coral are dying, and it’s undoubtedly due to human action. We’ve had, in all fairness, multitudes of natural warnings about the danger we’re putting the planet in through our actions - but coral bleaching is one of the clearest (and deadliest) signs yet. It indicates in the strongest manner possible that our actions are not sustainable, that the planet cannot tolerate them - and that the consequences of our wholescale environmental disregard are about to catch up to us with deadly force. Yet we’re turning a blind eye. Our coral canary is lifeless in the cage, and we’re continuing to mine.

Coral bleaching is essentially the death of a coral reef. It occurs when corals are stressed, and jettison the symbiotic algae within their tissues. In human terms, this is akin to them sloughing off their skins, leaving them skeletally vulnerable. Unsurprisingly, they die swiftly thereafter, leaving behind only their white, bone-like structures. Coral stress is caused by many things, including changes in light levels and the availability of food - but scientists are 99% certain that the recent, wholescale coral bleaching phenomenon is caused by rising water temperatures [5].

Coral bleaching is not just the death of the poor corals. It also spells disaster for the many, many species which live in and around coral reefs. Coral reefs are complex habitats [6], providing sustenance and shelter for an astonishing 25% of marine life. They’re enormously important for the preservation of more oceanic species than we may think. Without the coral reefs, it is likely that a chain reaction would cause mass oceanwide extinctions - and that’s without taking into account the widespread impact of the climatic conditions causing the coral bleaching. Coral bleaching is extremely serious. So it’s very, very worrying for marine biologists that the coral bleaching we’re currently seeing is far and away the biggest and most serious bleaching event ever seen.

Thousands upon thousands of kilometers of the Great Barrier Reef are now bleached - an estimated (and horrific) 93% [7]. Many entire colonies have been obliterated [8], leaving the species which rely upon them extremely vulnerable [9]. Marine biologists - openly devastated by and angry about the phenomenon [10] - state that the coral are unlikely to recover even if action is taken on climate change, and if no action is taken, we could see the complete extinction of coral within our lifetimes. And this would not only mean the extinction of coral, but the extinction of an incomprehensibly enormous swathe of marine life.

Horrible, undoubtedly, for the oceans - but why should this bleaching be a ‘canary’ for humans? Well, scientists are more or less unanimous in stating that coral bleaching is caused by a rise in oceanic temperatures (itself caused by anthropogenic global warming). Warmer water means less oxygen, which means that not only coral (and all which relies upon it) is under threat, but everything else in the warming oceans as well. From a lesser economic point of view, coral bleaching is going to deliver a pretty hard blow to the Australian tourist industry (for which coral diving draws in millions of dollars each year). From a more serious, human life point of view, the loss of ocean species spells wholesale disaster for human communities around the globe. We rely more heavily than we realise upon oceanic resources. Over 100 million people are directly dependent upon coral reefs in one way or another for their survival [11], and many hundreds of millions more depend upon the sea for sustenance. Mass marine life extinctions spell bankruptcy at best and starvation at worst for millions of human communities worldwide. No amount of contingency plans and personal cover [12] can help you when the food and resources simply aren’t there any more. Clearly we should be concerned about coral bleaching for its impacts upon the wildlife and planet - but if we can’t muster any sympathy for that, then surely we can generate a little concern for our own impending predicament?

Apparently not, if the Australian government’s reaction is anything to go by. Although paying lip service to the problem, Australia remains committed to coal mining. Fossil fuels and the like are directly responsible for the death of the Great Barrier Reef - yet Australia recently wholeheartedly approved plans for the world’s largest thermal coal mine to be created in Queensland’s Galilee Basin [13]. The Carmichael coal mine is estimated to ultimately produce more fossil fuel emissions per year than New York city [14]. To push a not inappropriate metaphor, that’s an awful lot of dead canaries. And that’s before we’ve even touched upon the ocean dredging and spoil contamination the mining itself would create. The government only reluctantly agreed not to dump dredge spoil on the dying Great Barrier Reef itself after intense pressure from conservation groups - demonstrating the kind of astonishing, pig-headed blindness we’re up against.

How can we save the Great Barrier Reef? Sadly, we probably can’t. It’s too late for that particular canary. But we can take action now to prevent things from getting any worse. By cutting fossil fuel consumption and generally taking a bit more care of the planet, we could see the oceans beginning to recover for our children and our children’s children in a few decades. Unfortunately, if the actions of the Australian and other governments are anything to go by, it looks like we may all shortly be succumbing to carbon monoxide - both metaphorically and literally.

Sources:

1st Quarter GDP revision, April Durable Goods, April New Home Sales

  the key economic release of the past week was the 2nd estimate of 1st quarter GDP from the Bureau of Economic Analysis, which was released on Friday...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...the week also saw the release of two more regional Fed manufacturing surveys for May: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index fell to -1 in May from +14 in April, indicating that the expansion in that region's manufacturing has stalled, while the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to -5 in May from -4 in April, indicating that the regional contraction, mostly in energy related industries, continues for the fifteenth month in a row...

1st Quarter GDP Revised to Show Growth at a 0.8% 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 0.8% rate in the 1st quarter, revised up from the 0.5% growth rate reported in the advance estimate last month, as residential investment was revised higher, growth in private inventory investment decreased less than was previously estimated and exports were down less than had previously been reported...in current dollars, our first quarter GDP grew at a 1.4% annual rate, increasing from what would work out to be a $18,164.8 billion a year output rate in the 4th quarter to a $18,229.5 billion annual rate in the 1st quarter of this year, with the headline 0.8% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 0.6%, aka the GDP deflator, was applied to the current dollar change...

remember that the press release for the GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that which actually occurred over the 3 month period, and that they only use the prefix "real" to indicate that the change has been adjusted for inflation using prices chained from 2009, and then calculate all percentage changes in this report from those artificial 2009 dollar figures, which we think would be better thought of as representing quantity indexes...given the misunderstanding evoked by the text of the press release, all the data that we'll use in reporting the changes here comes directly from the pdf for the 2nd estimate of 1st quarter GDP, which is 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 2012; 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 pdf for the 1st quarter advance estimate, which this estimate revises, is here...

total real personal consumption expenditures (PCE), the largest component of GDP, were unrevised from the 1.9% growth rate reported last month…that growth figure was arrived at by deflating the 2.2% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation at a 0.3% annual rate in the 1st quarter, which was also unrevised from a month ago...real consumption of durable goods fell at a 1.2% annual rate, which was revised from a 1.6% drop in the advance report, and subtracted 0.09 percentage points from GDP, as a drop in consumption of automobiles at a 11.5% rate more than offset an increase at a 9.3% rate of in real consumption of recreational goods and vehicles, while growth in consumption of other durable goods was down as well....real consumption of nondurable goods by individuals rose at a 1.3% annual rate, revised from the 1.0% increase reported in the 1st estimate, and added 0.18 percentage points to 1st quarter economic growth, as higher consumption of food and energy goods more than offset a small decrease in consumption of clothing….at the same time, consumption of services rose at a 2.6% annual rate, with all categories of services participating, revised from the 2.7% growth rate reported last month, and added 1.20 percentage points to the final GDP tally....

meanwhile, seasonally adjusted real gross private domestic investment contracted at a 2.6% annual rate in the 1st quarter, revised from the 3.5% shrinkage estimate reported last month, as real private fixed investment shrunk at a 1.5% rate, rather than at the 1.6% rate reported in the advance estimate, while the contraction in inventory growth was somewhat smaller than previously estimated...investment in non-residential structures was revised from shrinking at a rate of 10.7% to shrinking at a 8.9% rate, and real investment in equipment was revised to show contraction at a 9.0% rate, worse than the 8.6% contraction rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from growth at a 1.7% rate to shrinking at a 0.1% rate...on the other hand, the growth rate of residential investment was revised higher, from 14.8% to 17.1% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.25 percentage points from the 1st quarter's growth rate, the decrease in investment in equipment subtracted 0.56 percentage points from growth, lower investment in intellectual property was statistically insignificant, while growth in residential investment added 0.56 percentage points to 1st quarter GDP...

in addition, the growth in real private inventories was revised from the originally reported $60.9 billion adjusted dollars to show inventory grew at an inflation adjusted $69.6 billion rate...this came after inventories had grown at an inflation adjusted $78.3 billion rate in the 4th quarter, and hence the $8.8 billion smaller real inventory growth than in the 4th quarter subtracted 0.20 percentage points from the 1st quarter's growth rate, in contrast to the 0.33 percentage point subtraction due to slower inventory growth shown in the advance estimate....since slower growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, their decrease by $8.8 billion meant that real final sales of GDP were actually greater by that much, and therefore we find that real final sales of GDP grew at a 1.0% rate in the 1st quarter, revised from 0.9% in the advance estimate...

the previously reported decrease in real exports was revised smaller with this estimate, while the reported increase in real imports was revised to show a decrease, and as a result our net trade was a smaller subtraction from GDP rather than was previously reported...our real exports fell at a 2.0% rate rather than the 2.6% rate reported in 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 smaller shrinkage subtracted 0.25 percentage points from the 1st quarter's growth rate, a bit less than the 0.31 percentage point subtraction shown in the previous report......meanwhile, the previously reported 0.2% increase in our real imports was revised to a 0.2% decrease, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their shrinkage added 0.03 percentage points to 4th quarter GDP....thus, our still weakening trade balance subtracted a net 0.21% (rounded) percentage points from 1st quarter GDP, rather than the 0.34% percentage point subtraction resulting from net negative foreign trade that was indicated in the advance estimate..

finally, there were few revisions to real government consumption and investment in this 2nd estimate, as the real growth rate for the entire government sector was unrevised at a 1.2% rate...real federal government consumption and investment was seen to have shrunk at a 1.6% rate from the 4th quarter in this estimate, which was on net unrevised from the 1st estimate...real federal outlays for defense were revised to show shrinkage at a 3.6% rate, same as previously reported, still subtracting 0.15% percentage points from 1st quarter GDP, while all other federal consumption and investment grew at a 1.6% rate, rather than the 1.5% growth rate previously reported, and added 0.04 percentage points to GDP, just as before.....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 grew at a 2.9% rate in the quarter, which was also unrevised from the 1st estimate, and added 0.31 percentage points to 1st quarter GDP...

our FRED bar graph below, which can also be viewed as an interactive at the FRED site, has been updated with these latest GDP revisions...each color coded bar shows the real inflation adjusted change, expressed 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 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 real 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 did in the recent quarter, they'll appear below the zero line...it’s fairly clear from this graph that our personal consumption expenditures have underpinned GDP growth over this period, including in the quarter just ended, while imports have been the major subtraction from that…

1st quarter 2016 GDP 2nd estimate

April Durable Goods: New Orders Up 3.4%, Shipments Up 0.6%, Inventories Down 0.2%

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 unexpectedly rose by $7.7 billion or 3.4% to $230.7 billion in April, following a revised increase of 3.1% in March new orders, which had been originally reported as a 0.8% increase...as a result, year to date new orders are now 0.8% higher than they were a year ago, as February new orders had been down by 3.3%...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the April headline change, as those transportation equipment orders rose $7.1 billion or 8.9 percent to $87.1 billion, on a 64.9% increase to $16,865 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were still up 0.4% in April; however, the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, were down 0.8% at $62,350 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, rose by $1.5 billion or 0.6  percent to $232.5 billion, after March shipments were revised from a decrease of 0.5% to a decrease of 0.8%...again, greater shipments of transportation equipment drove the change, as they rose $1.0 billion or 1.3 percent to $80.9 billion, as the value of shipments of motor vehicles rose 3.3% to $56,141 million; excluding that volatile sector, the value of other shipments of durable goods rose 0.3%, but are still 2.0% lower year to date than a year ago....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 9th time in 10 months, decreasing by $0.7 billion or 0.2 percent to $384.4 billion, after March inventories were revised from statistically unchanged to a 0.2% decrease...the 0.1% decrease in inventories of transportation equipment was not the major factor, however, as inventories of machinery fell $0.5 billion or 0.7 percent to $66.1 billion, leading inventories of nondefense capital goods excluding aircraft to a 0.3% decline...

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 $6.3 billion or 0.6 percent to $1,137.0 billion, following a March report which was revised from a 0.1% decrease to unchanged...a $6.1 billion or 0.8% increase to $787.3 billion in unfilled orders for transportation equipment was responsible for most of the increase, as unfilled orders excluding transportation equipment barely rose 0.1% to $353,965 million....compared to a year ago, the unfilled order book for durable goods is still 1.7% below the level of last April, with unfilled orders for transportation equipment 2.2% below their year ago level, on a 6.8% decrease in the backlog of orders for motor vehicles.

New Home Sales Increase in April

the widely followed Census report on new home sales is extrapolated from a small sampling of data and hence has the largest margin of error and subject to the largest revisions of any census construction series, so these reports usually aren't very reliable on a monthly basis...however, the Census report on New Residential Sales for April (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 619,000 new homes a year, which was 16.6 percent (±15.4%) above the revised estimated March rate of 531,000 new single family homes a year, and 23.8 percent (±22.8%) above the estimated annual rate that new homes were selling at in April of last year....the figures in parenthesis represent the 90% confidence range for the reported data in this release, which in this case are all positive for both month over month and year over year, suggesting that there really was a statistically significant increase in new homes sold for the month...in addition, this release indicated previously reported sales of new single family homes for March were revised from the annual rate of 512,000 reported last month to a 531,000 a year rate, while the annual rate of February's sales were revised from the previously revised 519,000 annually to an annual rate of 538,000...a seasonally adjusted estimate of 243,000 new single family houses remained for sale at the end of April, which represents a 4.7 month supply at the April sales rate, down from the 5.8 month supply reported in March ...for more details and graphs on this report, see the following 3 posts on it from Bill McBride at Calculated Risk: New Home Sales increased sharply to 619,000 Annual Rate in April, Comments on April New Home Sales, and New Home Prices....


(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 22, 2016

April consumer prices, industrial production, housing construction, and existing home sales

the most widely watched reports released this past week were the April Consumer Price Index from the Bureau of Labor Statistics, the Fed's report on Industrial Production and Capacity Utilization for Aprilthe April report on New Residential Construction from the Census Bureau, and the April report on existing home sales from the National Association of Realtors (NAR)....in addition, this week also saw the release of the Regional and State Employment and Unemployment for April from the BLS and the Chicago Fed National Activity Index (CFNAI) for April...the latter, a weighted composite index of 85 different economic metrics, rose from a downwardly revised –0.55 in March to +0.10 in April, which left the 3 month average of the index at –0.22, indicating national economic activity was below the historical trend over those recent months....we also had the release of the first two regional Fed manufacturing indexes for May: 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 fall from +9.6 in April to -9.0 in May, indicating a return to recessionary conditions in First District manufacturing, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions was unchanged at -1.8 in May, its eighth negative reading in nine months, also implying an ongoing slowdown in that region's manufacturing... 

CPI Up 0.4% in April on Higher Priced Gasoline, Services

the consumer price index rose 0.4% in April, the greatest increase in 26 months, as energy commodities and core services were higher....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.4% in April after rising 0.1% in March and falling by 0.2% in February....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 238.132 in March to 239.261 in April, which left it statistically 1.13% higher than the 236.599 index reading of last April....regionally, prices for urban consumers have risen 1.8% in the West, 0.9% in the South, 0.8% in the Midwest, and 1.9% in the Northeast over the past year, with generally greater price increases within regions in cities of more than 1,500,000 people...with higher energy prices leading the April advance, seasonally adjusted core prices, which exclude food and energy, rose by just 0.2% for the month, with the unadjusted core index rising from 246.358 to 246.992, which is now 2.15% ahead of its year ago reading of 241.802...

the seasonally adjusted energy price index rose by 3.4% in April after rising by 0.9% in March and falling by 6.0% in February and by 2.8% in both December and January, and thus the energy index still remains 8.9% lower than it was in April a year ago....prices for energy commodities were 7.8% higher while the index for energy services fell by 0.1%, after a 0.2% increase in March....the increase in the energy commodity index included a 8.1% increase in the price of gasoline, the largest component, and a 1.9% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, averaged a 0.4% decrease…within energy services, the index for utility gas service rose by 0.6% after falling by 0.7% in March, leaving utility gas priced 6.5% lower than it was a year ago, while the electricity price index fell by 0.3%, after rising by 0.4% in March...energy commodities are still priced 14.2% below their year ago levels, with gasoline averaging 13.8% lower than it was a year ago...meanwhile, the energy services price index is 3.1% lower than last April, as even electricity prices have fallen 2.1% over that period..

the seasonally adjusted food price index rose 0.2% in April, after it rose by 0.2% in March, as prices for food purchased for use at home rose 0.1% 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 0.1%...among food at home categories, the price index for cereals and bakery products was up 0.3% as prices for flour and prepared flour mixes rose 2.2% and cookie prices rose 1.6% while cakes and cupcakes fell 1.3% and prices for rice were 1.2% lower...at the same time, the price index for the meats, poultry, fish, and eggs group fell by 0.1% as prices for eggs were 6.3% lower and beef and veal prices averaged a 0.6% decrease while pork prices averaged 2.0% higher on 3.1% higher priced bacon...the index for dairy products was 0.4% higher, as cheese prices rose 0.7% while prices for whole milk were 0.2% lower... the fruits and vegetables index, meanwhile, fell 0.5% in April after falling by 1.9% in March as prices for both fresh fruits and for fresh vegetables averaged a 1.1% decrease, led by a 4.7% drop in tomato prices, while prices for processed fruits and vegetables rose 1.6% on a 2.5% increase in prices for frozen vegetables...meanwhile, the index for beverages and beverage materials was 0.3% higher as carbonated drinks prices rose 1.5% while instant and freeze dried coffee was priced 1.4% lower... lastly, prices in the other foods at home category averaged a 0.5% increase as prices for sugar and artificial sweeteners rose 2.9% and margarine was priced 2.6% higher....among food line items, only apples, which are now priced 10.5% higher than a year ago, 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 0.2% in April after rising 0.1% in March and  0.3% in both February and January, the composite of all commodities less food and energy commodities fell by 0.1% while the composite for all services less energy services was 0.3% higher....among the commodity 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 0.4% on a 0.5% decrease in prices for bedroom furniture and a 0.7% decrease in the index for tools, hardware, outdoor equipment and supplies...at the same time, the apparel price index was 0.3% lower on a 3.1% decrease in prices for girls apparel and a 2.5% decrease in prices for infants' and toddlers' apparel...prices for transportation commodities other than fuel were also down 0.3%, as prices for new cars were down 0.4% while new trucks and used cars were 0.3% lower....on the other hand, prices for medical care commodities were 0.5% higher on 0.7% higher prescription drug prices, while the recreational commodities index rose 0.2% as prices for sports vehicles including bicycles rose 2.3%, which was only partially offset by 4.2% lower prices for photographic equipment.....likewise, the education and communication commodities index was 0.7% higher as a 2.6% increase in prices for  telephone hardware, calculators, and other consumer information items and 1.6% increase in prices for college textbooks was only partially offset by a 0.6% decrease in prices for personal computers and peripheral equipment, while lastly a separate index for alcoholic beverages rose 0.2$ on a 0.6% increase in prices for beer and ale, while the index for ‘other goods’ was unchanged despite a 1.5% decrease in prices for infants' equipment...

within services, the price index for shelter rose 0.3% on a 0.3% increase in both rents and in owner's equivalent rent while costs for lodging away from home at hotels and motels fell 0.5%, and costs for water, sewers and trash collection were 0.5% higher....medical care services also rose 0.3% as glasses and eye care services and dental services both rose 0.7%...at the same time, the transportation services index rose 0.7% on a 1.2% increase in motor vehicle insurance and a 1.1% increase in airline fares....meanwhile, the recreation services index rose 0.4% after rising 0.5% in both February and March as video & audio services including rental prices rose 2.0% and admissions to sporting events rose 0.8%... on the other hand, the index education and communication services was unchanged in April as a 1.7% decrease in postage and delivery services offset 0.3% higher college tuition and 0.4% higher elementary and high school tuition and fees......lastly, other personal services were up 0.2% on a 0.6% increase in the financial services index...among core prices, the 10.2% year over year increase in moving and storage expenses was the only line item with an annual increase greater than 10%, while only telephones, which were priced 10.8% lower, and televisions, which are now 16.1% 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 figures from last week, which saw nominal sales rise 1.3%...for the most accurate estimate, and the way the BEA will be figuring 2nd quarter GDP at the end of July, 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, April's clothing store sales, which rose by 1.0% in dollars, should be adjusted with the price index for apparel, which indicated prices were down by 0.3%, to show us that real retail sales of clothing were actually up by 1.3% in April...then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales for April with the similarly real clothing consumption for the 3 months of the first quarter, January, February and March, 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 0.1%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales...those sales were up by just about 1.4% in April, while their composite price index was down 0.1%, leaving real retail sales excluding food and energy sales up by roughly 1.5%...then, for the rest of the retail aggregate, we find sales at grocery stores were up 1.1% in April, while prices for food at home were up 0.1%, suggesting a real increase of around 1.0% in the quantity of food purchased for the month...next, sales at bars and restaurants were up 0.3% in dollars, and those dollars bought 0.2% less, so real sales at bars and restaurants were only up by about 0.1%...and while gas station sales were up 2.2%, gasoline prices were up 3.4%, 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 breakout on that...weighing the food and energy components at roughly 30% of total retail sales, we can estimate that real retail sales in April were up slightly less than 1.3% from March…then, to get an approximation of the real adjusted changes for the 3 months of the first quarter, we check Table 9 in the pdf for the March personal income and outlays report, which shows real sales of goods were down 0.2% in March and down 0.6% in February....that means real, inflation adjusted April retail sales were 1.1% higher than those of February but only 0.5% higher than those of January....that still leaves real retail sales at an average of 1.0% greater than those of the first quarter, which is growth at annual rate of more than 4.0%, a pace which if continued throughout May and June, would add roughly 0.96 percentage points to 2nd quarter GDP......

Industrial Production Up 0.7% in April on Normal Weather

April gains in industrial production were stronger than expected as a return more seasonable temperatures brought utility usage back to normal from seasonally lower than normal levels in March....the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.7% in April after falling by a revised 0.9% in March...industrial production is still down 1.1% from a year ago, but that's an improvement from last month's year over year decrease of 2.0%...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 104.1 in April from 103.5 in March, which was originally reported at 103.4...at the same time, the February reading for the index was revised up from 104.0 to 104.4, January's index remained unchanged at 104.6, and December's index was revised from 104.1 to 104.0...despite the month over month increase in the April industrial production index, however, it remains below the average of the 1st quarter months, so to the extent that this report plays into GDP, April's level still suggests a net subtraction from GDP in the components that this report influences...

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3, from 103.1 in March to 103.4 in April, while the manufacturing index for January was revised down from 103.5 to 103.4 after the December index was revised down from 103.1 to 103.0...the April increase left the manufacturing index 0.4% higher than a year earlier, unchanged from March, as year ago figures had also seen a 0.3% increase.... meanwhile, the mining index, which includes oil and gas well drilling, fell from 104.4 in March to 102.0 in April, after March mining was revised up from 103.9....the mining index has still been down 8 months in a row, however, and is 13.4% lower than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 5.8% from the depressed level of March, increasing from 97.2 in March to 102.8 in April...with the utility index now closer to normal after being depressed by a warmer than normal winter, it's now 0.4% above the level of a year ago for the first time since September 2015...

this report also includes capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose to 75.4% in April from 74.9% in March; after March was revised from 74.8%....capacity utilization for all manufacturing industries rose from an unrevised 75.1% in March to 75.3% in April; utilization of NAICS durable goods production facilities rose from 75.5% in March to 75.9% in April, while capacity utilization for non-durables fell from 75.4% in March to 75.3% in April....capacity utilization for the mining sector fell to 72.5% in April, from 74.0% in March, which was originally published as 73.7%, while utilities were operating at 78.6% of capacity during April, up from the revised 74.4% of capacity during March, which was originally reported as 73.7%...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 Shows Little Discernible Change in Housing Construction Trends

the April 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 1,172,000, which was 6.6 percent (±10.2%)* above the revised March estimated seasonally adjusted annual rate of 1,099,000 housing units started, but which was still 1.7 percent (±10.1%)* below last April's rate of 1,192,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, April housing starts could have been down by 3.6% or up by as much as 16.8% from those of March, with even larger revisions subsequently possible...in this report, the annual rate for March housing starts was revised from the 1,089,000 reported last month to 1,099,000, while February starts, which were first reported at a 1,178,000 annual rate, were revised up from last month's initial revised figure of 1,194,000 annually down to 1,213,000 annually with this report....those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 108,000 housing units were started in April, up from the 89,600 units started in March...of those housing units started in April, an estimated 73,800 were single family homes and 32,400 were units in structures with more than 5 units, up from the revised 62,400 single family starts and 26,500 units started in structures with more than 5 units in March....

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in April, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,116,000 housing units, which was 3.6 percent (±1.3%) above the revised March annual rate of 1,077,000 permits, but 5.3 percent (±1.3%) below the rate of permit issuance in April a year earlier...the annual rate for housing permits issued in March was revised from 1,086,000 to 1,177,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates, which showed permits for 98,400 housing units were issued in April, up from the estimated 97,700 new permits issued in March...those April permits included 67,500 permits for single family homes, unchanged from March, and 28,200 permits for housing units in apartment buildings with 5 or more units, up from 27,300 such multifamily permits a month earlier... 

Existing Home Sales Rise 1.7% in April

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose 1.7% from March to April, projecting that 5.45 million homes would sell over an entire year if the April home sales pace were extrapolated over that year, which was also 6.0% greater than the annual sales rate projected in April of a year ago...that came after an annual sales rate of 5.36 homes in March, which was revised from the originally reported 5.33 million annual sales rate, and an annual home sales rate of 5.07 million in February...the NAR also reported that the median sales price for all existing-home types in March was $232,500, which was 6.3% higher than a year earlier, which they tell us is "the 50th consecutive monthly year over year increase in home prices", even though month to month price changes are quite volatile...the NAR press release, which is titled Existing-Home Sales Rise in April for Second Straight Month, is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this data indicates that roughly 471,000 homes sold in April, up by 11.9% from the 421,000 homes that sold in March and 4.9% more than the 405,000 homes that sold in April of last year, so we can see there was a seasonal adjustment in the published figures of over 10% to correct for the typical increase in spring home sales...that same pdf indicates that the median home selling price for all housing types rose 5.0% from a revised $221,500 in March to $232,500 in April, while the average home sales price was $275,000, up 4.0% from the $264,400 average in March, and up 4.2% from the $263,900 average home sales price of April a year ago, with the regional average home sales prices ranging from a low of $215,100 in the Midwest to a high of $364,700 in the West...for additional coverage with long term graphs on this report, see "Existing Home Sales increased in April to 5.45 million SAAR" and "A Few Comments on April 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, May 15, 2016

April retail sales and producer prices, March wholesale and business inventories, and March JOLTS

major releases of this past week included the Retail Sales report for April and the Business Sales and Inventories report for March, both from the Census bureau, the Producer Price Index for April, and the Import-Export Price Indexes for April from the Bureau of Labor Statistics, and the the Job Openings and Labor Turnover Survey (JOLTS) for March, also from the BLS...preceding the Business Inventories report, the Census also released the March report on Wholesale Trade, Sales and Inventories, which feeds into the former... the Import-Export Price Indexes indicated import prices rose 0.3% in April, largely on higher oil prices, while export prices averaged a 0.5% increase in an across the board gain...that data will be used to adjust trade figures for April when they're published 3 weeks from now...

April Retail Sales Up 1.3% in Broad Based Increase

this week's retail sales report for April was preceded by an April 29th benchmark revision based on the results of the 2014 Annual Retail Trade Survey and the final results from the 2012 Economic Census, which revised prior estimates of retail sales back to 1992 broadly higher...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 $453.4 billion for the month, which was a increase of 1.3 percent (±0.5%)* from March sales of $447.8 billion and 3.0 percent (±0.7%) above the adjusted sales of April of last year....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 2.0%, from $460,078 in March to $450,888 in April, while they were up 2.9% from the $438,217 million of sales in April a year ago, so we can see that it took a seasonal adjustment to turn those headline April sales that positive....

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 2016 revised" and the revised March 2015 to March 2016 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 2016 retail sales

looking at the above table, it's clear that a 3.2% jump to $92,574 million in seasonally adjusted sales at motor vehicle and parts dealers was in part responsible for the surprise strength in April sales, but even without that jump in automotive sales, other retail sales still increased by 0.8% to $360,864 million...2.2% higher sales at gasoline stations were a factor, but at $32,637 million they're a smaller part of the aggregate than they were when gasoline prices were higher...other retailers showing well above average increases in April sales included non-store retailers, including catalog and online, which saw sales rise by 2.1% to $45,238 million; miscellaneous store retailers, where sales rose 1.5% to $10,534 million; groceries, where sales rose 1.1% to $52,237 million; clothing stores, where sales rose 1.0% to $21,402 million; and drug stores, where sales rose 0.9% to $27,725 million...only building material and garden supply stores, where sales fell 1.0% to $29,468, saw lower sales in April, but note their year over year sales are still up 8.2%

April Producer Prices Rise 0.2%

the seasonally adjusted Producer Price Index (PPI) for final demand increased by 0.2% in April as prices for finished wholesale goods rose by 0.2%, while margins of final services providers rose by 0.1%...this followed a March report that showed the overall PPI had decreased 0.1%, with prices for finished goods up 0.2% while final demand for services was down 0.2%....producer prices are now unchanged from a year ago, but still down 1.3% from two years ago, as most of the prices reductions relating to lower oil and commodity prices were seen in early 2015...

as we noted, the index for final demand for goods, aka 'finished goods', was up 0.2% in April for the second month in a row, after falling by 0.6% in each month from December thru February, as the index for wholesale energy prices rose 0.2%, the price index for wholesale foods was 0.3% lower, and the index for final demand for core wholesale goods (ex food and energy) rose by 0.3% in April...major price changes were seen in wholesale eggs for fresh use, which were down by 29.5%, and by home heating oil, which fell by an adjusted 30.5%, as unseasonable price swings have distorted the monthly seasonally adjusted prices for heat oil all year...pet foods, which were up 2.7% in April, saw the largest price change among core goods...

meanwhile, the index for final demand for services rose by 0.1% in April after falling 0.2% in March, as the index for final demand for trade services fell 0.1%, the index for final demand for transportation and warehousing services fell 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.3% higher....noteworthy among trade services, seasonally adjusted margins for fuels and lubricants retailers were 11.5% higher, while margins for TV, video, and photographic equipment retailers were 3.9% lower...among transportation and warehousing services, margins for air transportation of freight fell 5.1% and margins for airline passenger services fell 1.7%...in the core final demand services index, margins for passenger car rentals rose 8.9% and margins for portfolio management services were 4.5% higher..

this report also showed the price index for processed goods for intermediate demand increased by 0.3%, after falling in each of the prior nine months, as intermediate processed goods prices still remain 4.6% lower than in April a year ago.... the price index for processed foods and feeds fell 0.3%, while prices for intermediate energy goods rose by 0.5% and the price index for processed goods for intermediate demand less food and energy was 0.3% higher...meanwhile, the price index for intermediate unprocessed goods was up by 2.6% after rising by 2.5% in March, in the only increases in that index since June of last year...driving that increase was a 9.0% jump in the index for crude energy goods, while the index for unprocessed foodstuffs and feedstuffs was down 1.9%, and producer prices for raw materials other than food and energy materials were up 3.5%, following a 2.1% increase in March... this raw materials index remains 12.3% lower than it was a year ago, as more than half of the year over year decrease of 26.4% seen in November has now been given up...

lastly, the price index for services for intermediate demand was 0.1% higher in April after it fell 0.3% in March, on a 0.4% increase in the index for trade services for intermediate demand and a 0.1% increase in the core price index for services less trade, transportation, and warehousing for intermediate demand, while the index for transportation and warehousing services for intermediate demand was 0.5% lower...major contributors to the rise in prices for services for intermediate demand were the 4.5% increase in intermediate portfolio management services and a 0.9% increase in index for business loans (partial)...over the 12 months ended in April, the year over year price index for services for intermediate demand, which has never turned negative, remains 0.9% higher than it was a year ago...   

March Wholesale Sales Up 0.7%, Wholesale Inventories Up 0.1%

the March report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $430.7 billion, up 0.7 percent (+/-0.5%) from the revised February level, but still down 2.0% percent (+/-1.4%) from wholesale sales of March 2015... the February preliminary estimate was revised $0.1 billion lower than reported last month, which the Census considers 'virtually unchanged' ... March wholesale sales of durable goods were down 0.2 percent (+/-0.7%)* from last month and were down 0.4 percent (+/-1.9%)* from a year earlier, with a 2.2% decrease in wholesale sales of plumbing and heating equipment and supplies showing the largest drop for the month, while wholesale sales of electrical and electronic goods rose 1.3%....wholesale sales of nondurable goods were up 1.6 percent (+/-0.7%) from February but were down 3.5 percent (+/-1.9%) from last March, with wholesale sales petroleum and petroleum products up 13.5% on higher prices...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this March report estimated that wholesale inventories were valued at a seasonally adjusted $583.6 billion at month end, an increase of 0.1 percent (+/-0.4%)* from the revised February level and 0.3 percent (+/-1.6%)* higher than in March a year ago, with the February preliminary estimate revised downward $0.4 billion or almost 0.1% at the same time....inventories of durable goods were down 0.1 percent (+/-0.4%)* from February, and down 2.2 percent (+/-1.6%)* from a year earlier, with inventories of metals and minerals down 2.0% on lower prices, while inventories of motor vehicle and parts were up 1.0%...at the same time, the value of wholesale inventories of nondurable goods were up 0.5 percent (+/-0.7%)* from February and were up 4.6 percent (+/-1.9%) from last March, as the value of inventories of raw farm products fell 4.2% while wholesale inventories of petroleum and petroleum products rose 3.3%...since the BEA assumed an increase in non-motor-vehicle merchant wholesale inventories for March when computing 1st quarter GDP, and since non-vehicle inventories were actually fairly flat, this report suggests a possible subtraction of several basis points from the next 1st quarter GDP revision...

March Business Sales Up 0.3%, Business Inventories Up 0.4%

following the release of the April retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for March (pdf), which incorporates the revised March retail data and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month...according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,289.2 billion in March, up 0.3 percent (±0.2%) from February's revised sales, but down 1.7 percent (±0.5%) from March sales of a year earlier...note that total February sales were also revised up by almost 0.1%, from $1,284.4 billion to $1,285.2 billion, although that does include the retail benchmark revision....manufacturer's sales rose by 0.5% from February to $464,674 million in March, while retail trade sales, which exclude restaurant & bar sales from the March retail sales we reported earlier, fell 0.3% to $393,859 million, and wholesale sales rose 0.7% to $430,671 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,818.6 billion at the end of March, up 0.4 percent (±0.1%) from February, and 1.5 percent (±0.5%) higher than in March a year earlier...the value of end of February inventories was revised down by less than 0.1%, from the $1,812.1 billion reported last month to $1,810,560 million with this report...seasonally adjusted inventories of manufacturers were estimated to be valued at $635,070 million, 0.2% higher than in February, inventories of retailers were valued at $599,924 million, 1.0% greater than February, while inventories of wholesalers were estimated to be valued at $583,582 million at the end of March, up 0.1% from February...when computing advance figures for GDP without this data, the BEA had assumed an increase in non-motor-vehicle retail inventories for March; we certainly have that, but since the BEA didn't put precise data behind its assumption, it's difficult to determine if, and how much, the retail increase included here is more than was assumed by the BEA....

Job Openings Up, Hiring and Firing Down in March

the Job Openings and Labor Turnover Survey (JOLTS) report for March from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 149,000, from 5,608,000 in February to 5,757,000 in March, after February's job openings were revised higher, from 5,445,000 to 5,608,000...March jobs openings were also 11.1% higher than the 5,180,000 job openings reported in March a year ago, as the job opening ratio expressed as a percentage of the employed rose to 3.9% in March from 3.8% in February, also up from 3.5% a year ago...the greatest increase in job openings was in the large professional and business services category, where openings rose by 124,000 to 1,225,000, while job openings in retail fell by 80,000 to 569,000 (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 March, seasonally adjusted new hires totaled 5,292,000, down by 218,000 from the revised 5,510,000 who were hired or rehired in February, as the hiring rate as a percentage of all employed fell from 3.8% to 3.7%, which was still better than the hiring rate of 3.6% in March a year earlier (details of hiring by industry since September are in table 2)....meanwhile, total separations also fell, by 114,000, from 5,159,000 in February to 5,045,000 in March, while the separations rate as a percentage of the employed fell from 3.6% to 3.5%, which was the same separations rate as in March a year ago (see table 3)...subtracting the 5,045,000 total separations from the total hires of 5,292,000 would imply an increase of 247,000 jobs in March, a bit more than the revised payroll job increase of 208,000 for March reported by the April establishment survey last week, but still not an unusual difference and within the expected +/-115,000 margin of error in these incomplete samplings... 

breaking down the seasonally adjusted job separations, the BLS finds that 2,980,000 of us voluntarily quit their jobs in March, up by 25,000 from the revised 2,955,000 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, which was still up from 1.9% a year earlier (see details in table 4)....in addition to those who quit, another 1,671,000 were either laid off, fired or otherwise discharged in March, down by 137,000 from the revised 1,808,000 who were discharged in February, as the discharges rate fell to 1.2% of all those who were employed during the month, from 1.3% in February and from 1.4% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 395,000 in March, down from 397,000 in February, 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...


(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 8, 2016

April jobs report, March trade deficit, construction spending, factory inventories, & Mortgage Monitor

as is usual for the week with the first Friday of the month, the Employment Situation Summary for April from the Bureau of Labor Statistics was the most widely watched release this week...but the week also saw the release of three reports for March from the Census Bureau that input into GDP, all of which hint at revisions to 1st quarter results: the Census report on our International Trade for March, the March report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for March...in addition to the jobs report, the BLS also released the revised 1st Quarter Report on Labor Productivity and Costs, which showed nonfarm business sector labor productivity decreased at a 1.0% annual rate during the quarter, as hours worked increased 1.5% and the output of goods and services from those hours increased just 0.4%...with a greater than 1.0% decrease in labor productivity and a 3.0% increase in hourly compensation, unit labor costs thus rose 4.1% in the first quarter of 2016...also on Friday, the Fed released the Consumer Credit Report for March, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $29.67 billion, or at a 10.0% annual rate, as non-revolving credit expanded at a 8.5% rate to $2,640.7 billion and revolving credit outstanding rose at a 14.2% rate to $951.6 billion...the 10.0% seasonally adjusted annual growth rate was the greatest credit expansion rate since November 2001; analysts had expected credit to rise by just $15.8 billion...

privately issued reports this week included the Mortgage Monitor for March (pdf) from Black Knight Financial Services, the report on light vehicle sales for April from Wards Automotive, which estimated that vehicles sold at a 17.23 million annual rate in April, up from the 16.46 million annual pace of March, but at a 0.5% lower daily sales rate than in April of 2015, and both of the widely followed reports from the Institute for Supply Management (ISM): the April Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) decreased from 51.8% in March to 50.8% in April, which still suggests a slight expansion in manufacturing firms nationally, and the April Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 55.7%, up from 54.5% in March, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business...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 160,000 Jobs in March; Employment Rate and Participation Rate Both Fall 0.2%

the Employment Situation Summary for April showed the weakest job creation since September and a drop in both the employment rate and the labor force participation rate, while the unemployment rate was unchanged....estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 160,000 jobs in April, after the payroll job increase for February was revised down from 245,000 to 233,000 and the March jobs increase was revised down from 215,000 to 208,000, meaning the combined number of jobs created over those months was 19,000 less than was previously reported…seasonally adjusted job increases in April were almost entirely in the private service sector, as government payrolls shrunk by 11,000 and small gains of 1,000 and 4,000 jobs in construction and manufacturing were offset by a loss of 8,000 jobs in the resource extraction sector...

the broad professional and business services sector, the largest employer overall, saw the addition of 65,000 payroll jobs, as 20,600 jobs were added by management and technical consulting services and 15,500 more were added by employment services...another 44,200 jobs were added in the health care sector, with 22,900 of those working in hospitals and another 19,300 jobs spread through several categories of ambulatory health care services...the leisure and hospitality sector added 22,000 jobs, including 18,200 jobs in bars and restaurants...another 20,000 jobs were added in the financial sector, with 7,900 of those in credit intermediation and related areas....the retail sector was notably a laggard in April, as a net of 3,000 jobs were lost in the sector which had added 47,000 jobs in March...hence, the entirety of the April weakness can be attributed to a dearth of new jobs in retail, something which shouldn't be surprising given the recent weakness in retail sales..

the establishment survey also showed that average hourly pay for all employees rose by 8 cents to $25.53 an hour, after it had increased by a revised 6 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 5 cents to $21.45 an hour...employers also reported that the average workweek for all private payroll employees increased by a tenth of an hour to 34.5 hours, recovering part of the 0.2 hour workweek decline in February, while hours for production and non-supervisory personnel also rose by a tenth of an hour to 33.7 hours...meanwhile, the manufacturing workweek remained unchanged at 40.7 hours, while factory overtime was at 3.3 hours for the fifth month in a row...

at the same time, results of the April household survey estimated that the seasonally adjusted number of those who were employed fell by 316,000 to 151,004,000; while the estimated number of unemployed also fell by 46,000 to 7,920,000; and thus the labor force decreased by a total of 362,000...since the working age population grew by 201,000 at the same time, that meant the number of employment aged individuals not in the labor force increased by 562,000 to 94,044,000, which was enough to clip the labor force participation rate by 0.2%, as it fell from 63.0% in March to 62.8% in April....with the large drop in the number employed, the employment to population ratio, which we could think of as an employment rate, also fell by 0.2% to 59.7%...meanwhile, with both the number of the employed and the unemployed down by similar proportions, the unemployment rate remained unchanged at 5.0%...at the same time, there was a relatively large 161,000 decrease in the number who reported they were involuntarily working part time, from 6,123,000 in March to 5,962,000 in April, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 9.8%% in March to its post recession low of 9.7% in April...

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 Trade Deficit Falls 13.8%, Modest Revisions are Little Boost to 1st Quarter GDP

our trade deficit fell by 13.8% in March, as the net value of both our exports and our imports decreased, but our imports decreased by much more....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 $6.5 billion to $40.4 billion in March from a February deficit which was revised from $47.1 billion to $47.0 billion...the value of our March exports fell by $1.5 billion to $176.6 on a $1.8 billion decrease to $116.8 billion in our exports of goods and a $0.3 billion increase to $59.8 billion in our exports of services, while our imports fell $8.1 billion to $217.1 billion on a $7.9 billion decrease to $175.3 billion in our imports of goods and a $0.2 billion decrease to $41.7 billion in our imports of services...export prices were unchanged on average in March, so real exports were valued at close to the nominal dollar value in national accounts data, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage. ...this report revises the Advance Report on our International Trade in Goods for March, released last week in advance of the GDP report, which estimated a trade in goods deficit of $56.9 billion, in contrast to the $58.5 billion goods deficit reported here...including the $0.1 billion revision to the February deficit, then, this report indicates that our 1st quarter trade deficit was about $0.5 billion less than the trade input data that was included in last week's 1st quarter GDP report, which would suggest an upward revision to GDP of a bit over 0.01 percentage points...

most of the drop in our March exports could be accounted for by lower exports of consumer goods, while an increase in our capital goods exports was more than offset by lower exports of automotive vehicles parts, and engines and industrial supplies and materials....referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $1,579 million to $15,463 million on a $739 million drop in our exports of gem diamonds and a $751 million decrease in our exports of pharmaceutical preparations...our exports of industrial supplies and materials fell by $793 million to $30,540 million on a $485 million drop in our exports of petroleum products other than fuel oil and a $310 million drop in our exports of organic chemicals...in addition, our exports of automotive vehicles, parts, and engines fell by $713 million to $11,946 on a $353 million decrease in our exports of automotive parts other than tires and engines, and our exports of foods, feeds and beverages fell by $363 million to $9,375 million on a $343 million decrease in export of soybeans...meanwhile, our exports of capital goods rose by $1,004 million to $43,534 on a $1,288 million increase in our exports of civilian aircraft, a $395 million increase in our exports of oilfield drilling equipment, and a $363 million increase in our exports of semiconductors, which were partially offset by somewhat lower exports of computer accessories, electrical apparatuses. generators, and telecommunications equipment, and in addition our exports of other goods not categorized by end use rose by $737 million to $5,607 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a drop in our imports of consumer goods accounted more than half of the decrease in our imports, as our imports of consumer goods fell by $5,073 million to $46,396 million on a $1,066 million drop in our imports of toys, games, and sporting goods, a $647 million decrease in our imports of textiles other than wool and cotton, a $570 million decrease in our imports of cotton apparel and household goods, a $577 million decrease in our imports of televisions and video equipment, a $488 million decrease in our imports of furniture and similar household goods, a $470 million decrease in our imports of footwear, and a $353 million decrease in our imports of household appliances, all of which were hardly offset by a $479 million increase in our imports of pharmaceutical preparations...at the same time, our imports of capital goods fell $1,568 million to $47,385 million on a $767 million decrease in our imports of computer accessories and a $337 million decrease in our imports of electrical apparatuses, and our imports of industrial supplies and materials fell by $976 million to $32,585 million on an $248 million decrease in our imports of finished metal shapes and a $221 million decrease in our imports of petroleum products other than fuel oil....in addition, our imports of automotive vehicles, parts and engines fell $742 million to $28,311 million on a $621 million decrease in our imports of automotive parts other than tires and engines, our imports of foods, feeds, and beverages fell by $656 million to $10,549 million on lower imports of most foodstuffs and a $167 million drop in our imports of beer and wine, and our imports of goods not categorized by end use fell by $1172 million to $8,328 million...

March Construction Spending Reported up 0.3%, Was Actually Down in 23 Basis Point Hit to GDP

the March report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending for the month would work out to $1,137.5 billion annually if extrapolated over an entire year, which was 0.3 percent (±1.0%)* above the revised annualized estimate of $1,133.6 billion in construction spending in February and 8.0 percent (±1.6%) above the estimated annualized level of construction spending of March last year...before we go any further, we should note that there was widespread media misreporting of the revisions included this report; for example, Bloomberg's Econoday said "February is now revised sharply higher; Reuters called it "an upwardly revised 1.0 percent jump in February", and the NY Times reported that the "February increase represented an upward revision by the government from its initial estimate that spending had fallen 0.5 percent"...they are are all wrong...February construction spending was originally reported at $1,144.0 billion annually, and it has now been revised down to $1,133.6 billion annually, and hence spending in March was below what was originally reported for February...what happened was there was a large downward revision to January spending, from the revised $1,150.1 billion figure reported last month to $1,122.0 billion with this report; hence the downwardly revised February spending was up from from January, even though it was lower than originally reported...reporters apparently took the change in the month over month percentage change to mean there was an upward change in spending... 

even worse than that, the NY Times quoted someone at Barclays in reporting "Barclays thinks the government will revise up its estimate of the economy's growth last quarter to a 0.7 percent annual rate, from its initial 0.5 percent estimate"...as noted, we have a $28.1 billion downward revision to January spending, a $10.4 billion downward revision to February spending, and March construction spending that was almost certainly lower in most sectors than was estimated by the BEA, who in their technical notes for 1st quarter GDP, noted they assumed an increase in nonresidential construction, and an increase in residential construction...not even considering whatever the downward revision to assumed March spending might be (GDP investment categories include more than is included in this report) the $38.5 billion downward revisions to January and February alone would subtract more than 0.23 percentage points from GDP, just the opposite of what Barclays is alleged to have forecast....

for March construction, then, private construction spending came in at a seasonally adjusted annual rate of $842.3 billion, 1.1 percent (±0.8%) above the revised February estimate of $832.8 billion, which was originally reported at $846.2 billion...that included residential spending at annual rate of $435.5 billion in March, 0.9 percent (±1.3%) 1.6 percent (±1.3%) above the downwardly revised February estimate of $428.8 billion, while private non-residential construction spending rose 0.7 percent (±0.8%)* to $406.8 billion from the revised February level, which was revised up...at the same time, public construction spending was estimated to be at an annual rate of  $295.2 billion, 1.9 percent (±2.0%) below the revised February estimate, with spending for public power down 14.1% and spending for sewage and waste disposal down 4.2% to an annual rate of $24,745 million....


Factory Shipments Up 0.5% in March, Factory Inventories Up 0.2%, First Increases Since June 2015

the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $5.0 billion or 1.1 percent to $458.4 billion in March, following an drop of 1.9% in February, revised from the 1.7% decrease reported last month, and a decrease of 2.9% in December, which was unrevised....however, as we learned 6 months ago, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "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 last week...this showed that new orders for manufactured durable goods increased $1.7 billion or 0.8 percent to $230.6 billion, virtually unchanged from what was reported then...

this report also indicated that the seasonally adjusted value of March factory shipments rose for the first time in 9 months, increasing by $2.2 billion or 0.5 percent to $464.7 billion, following a 0.8 percent decrease in February, which had previously been reported as an 0.7% decrease...shipments of durable goods were down $1.1 billion or 0.5 percent to $236.9 billion, virtually unchanged from what was reported last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods rose by $3.3 billion, or 1.5%, to $227.8 billion, propelled by an 8.8% increase in the value of shipments from refineries, although shipments of most other durable goods categories increased as well.....without the increase in the value of refinery shipments, the value of shipments of other non-durable goods were still up by nearly $0.7 billion, or by nearly 0.4% ..

meanwhile, the aggregate value of March factory inventories rose by $1.1 billion or 0.2 percent to $635.1 billion, also their first increase in 9 months, following a February decrease of 0.5% that was reported as a 0.4% decrease last month....inventories of durable goods increased $0.1 billion to $394.2, or virtually unchanged from what was reported was reported last week, following a 0.3% decrease in February, which had been revised from the 0.1% reported last month in the advance report.....the value of non-durable goods' inventories rose $0.96 billion or 0.4 percent to $240.83 billion, following a decrease of 0.7% in January...the value of inventories at petroleum refineries accounted for more than half of the increase in non-durable inventories, as they rose by $0.61 billion or 2.6% percent to $24.06 billion...producer prices for finished goods were unchanged in March, with producer prices for energy goods up 1.8%, so after non-durable factory inventories are adjusted for inflation, non-durable inventories still show a real increase on the order of 0.4% for the month... since the BEA assumed a decrease in nondurable manufacturing inventories for March when computing 1st quarter GDP, this unexpected inventory increase will likely add at least 0.03 percentage points to 1st quarter GDP when revised figures are published at the end of this month...

Mortgage Delinquencies Drop by 8.37% in March, Mean Time in Foreclosure Rises to Record 1071 Days

the Mortgage Monitor for March (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 630,766 home mortgages, or 1.25% of all mortgages outstanding, remaining in the foreclosure process at the end of March, which was down from 655,311, or 1.30% of all active loans, that were in foreclosure at the end of February, and down from 1.68% of all mortgages that were in foreclosure in March of last year.....these are homeowners who at least had a foreclosure notice served but whose homes had not yet been seized, and the March "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, fell to 72,762 in March from 84,305 in February and from 94,138 in March a year ago...over the past year, the average of new foreclosure starts monthly has continued at a level almost 50% 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  2,062,299 mortgages, or 4.08% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure at the end of March, down from the 4.45% of homeowners with a mortgage who were more than 30 days behind in February, and down from the mortgage delinquency rate of 4.66% in March a year earlier...of those who were delinquent in March, 732,765 home owners, or 1.45% 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 772,441 such "seriously delinquent" mortgages in February...combining the total delinquent mortgages with those in foreclosure, we find that a total of 2,693,065 mortgage loans, or 5.33% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of March, and that 1,363,531, or 2.70% of all homeowners were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

for the details of the history of both those metrics, 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 page 17 of the pdf....the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month over the past  and for each January shown going back to January 2005…in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been 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 is still down from the April 2015 record of 536 days but has now climbed back up to 514 days, while the average time for those who’ve been in foreclosure without a resolution has increased again and at 1071 days has now topped the record high last set in February…that means that the average homeowner who is in foreclosure now has been there roughly three years, which, considering that this year's new foreclosure starts were all less than 90 days old, suggests that many foreclosures started early in the crisis are still not yet completed…

March 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…)