60% of new US oil output is being refined and exported; 200 of us will die by bomb train so that can continue

before we get to this weeks news, we're going to add a postscript to last week's coverage of the oil bomb trains....in all the excitement of reporting about trains & refineries blowing sky high in various parts of the country and Canada, we forgot to point out that a lot of that fuel being hauled cross country isn't even intended for our use; it's for export...in tracking the monthly trade report for years, i've noticed that while fracking increased, our exports of refined products have been increasing, but because the data in the trade reports from the Commerce Dept is reported in dollars and prices change continuously, it's been difficult to get a handle on how much...however, the reports from the energy Department give us the data on production and exports in barrels of oil and refined product, so we can check their records and discover exactly what has been going on under the guise of drilling our way to energy independence...

as you may recall from our discussion of the Obama administration's ruling allowing exports of ultralight oils originating from US oil shale wells, exports of US crude are prohibited by the Energy Policy and Conservation Act of 1975, except in the cases of special licenses given by the Commerce Dept, or in trade with Canada and Mexico, where NAFTA specifically mandates that trade...hence our exports of crude oil itself aren't too significant, and have generally been well less than 2% of total output until recent months, probably rising now as our exports of light Bakken crude to Canada have increased as a blender for the much heavier Canadian crude...a screenshot of an interactive graph from the EIA of our monthly crude exports since 1920 is shown below, which indicates that we exported 13,692,000 barrels of crude in December, a bit less than 2% of our 286,003,000 barrels of crude production for the month...

on the other hand, our total exports of refined products has continued to increase as fracking increased...the graph below, also from the EIA, shows our total exports of finished refined products since 1980...in December of 2014, US based oil companies exported 96,368,000 barrels of finished products, about in line with recent US refinery exports of 97,570,000 barrels , 92,803,000 barrels, and 98,373,000 barrels in December 2011, 2112 and 2013 respectively, but more than twice the 42,032,000 barrels of product US refiners exported in December 2007...in 2013, the last year the EIA (Energy Information Administration) has complete annual data for, the output of US refineries and fuel blending facilities totaled 6,746,361 barrels of various finished refinery products; in that same year, 970,997,000 barrels, or 14.4% of our total refinery output, was shipped out of the country...

NB: so we all have a sense of what kind of fuels we're exporting, we'll include a few graphs of those exports here...but for the remainder of this discussion we'll use 2013 totals, because although the EIA published December 2014 data on Friday, they have not updated their annual data and graphs, and monthly data is too noisy to easily use to accurately show the trend...when they update their annual stats, we'll update the remainder of the data and graphs we use here and repost it...

the next graph from the EIA shows 70 years of total US exports of various grades of distillate fuel oils, the majority of which are most often used as home heating oil and diesel fuel...in 2013, US refiners exported 413,888,000 barrels of fuel oil, or about 24% of our total 2013 distillate fuel oil production of 1,727,493,000 barrels...that's more than a 10 fold increase from the 40,101,000 barrels of fuel oils we exported in 2004, and clearly US exports of fuel oil continue to accelerate...

the next graph from the EIA shows 80 years of US exports of various blends of gasoline; in 2013, we exported 136,146,000 barrels of gasoline, a little more than 4% of our total 2013 production of 3,370,460,000 barrels of gasoline...while that was down from the 174,776000 barrels of gasoline US refiners exported in 2011, it's still almost 3 times as much as the 46,369,000 barrels of gasoline we exported in 2007...

you'll recall that one of the trains that exploded into flames last week was carrying ethanol; the EIA also shows that 14,737,000 barrels of ethanol were exported in 2013, which would work out to about 4.7% of our 2013 ethanol production of 316,493,000 barrels..but new data out this week from the renewable fuels association shows that US ethanol exports increased to 836 million gallons in 2014, nearly 6% of our 2014 production...that's quite remarkable considering the amount of ethanol we are compelled to use ourselves in our gasoline, and the environmental damage done by pressing marginal farmland into use for it...nearly 40% of our corn crop goes to produce ethanol, and if you didnt know already, more than 89% of US corn is now generically engineered to allow for use of herbicides...

we'll include one more export graph showing US exports of jet fuel annually since 1980...in 2013, US refiners exported 56,989,000 barrels of jet fuel, or about 10.4% of our total 2013 jet fuel production of 547,275,000 barrels...those exports represent nearly a 4 fold increase from the 15,010,000 barrels of jet fuel we exported in 2007, as shown in the interactive screenshot, and once again we can see these exports are nearly rising exponentially..

next, we're going to look at a graph that includes total US crude oil production over roughly the same time span...although the EIA graph below shows US crude oil production since 1860, you can see that recent oil output clearly bottomed in 2007 and 2008, at 1,853,166,000 barrels and 1,830,002,000 barrels respectively, and that US crude production had increased by more than 50%, to 2,717,876,000 barrels by 2013...of course, given that we’re fracking half the country, that's not a surprise, but notice that the pickup in production coincides with the increase in exports we saw in the earlier graphs...lets take a closer look at that relationship next...

using 2007 as a common baseline, our field production of crude oil rose by 864,710,000 barrels over the period from 2007 to 2013, from 1,853,166,000 barrels in 2007 to 2,717,876,000 barrels of crude in 2013...over the same period, our exports of refined products more than doubled, from 455,240,000 barrels in 2007 to 970,997,000 barrels in 2013...that's an increase in our refined products exports of 515,757,000 barrels, or on a purely number of barrels basis, nearly 60% of the increase in production that we had over the same period...now, we understand comparing crude to refined products is an apples to oranges comparison, and that one barrel of crude might produce just 16 gallons of gasoline; 8 gallons of diesel fuel, a gallon of tar and a multitude of other refined products...in addition, we know we haven't even considered oil imports, some of which are also refined and exported...but oil is fungible, so just on a quantity of liquids basis, we can still say that it's as if well over half of the new oil production brought about by hydraulic fracking has not gone to benefit Americans in terms of lower priced fuel and heat oil, but has, in effect, been shipped out of the country to enrich the oil companies...and it's not the lower quality bi-products of petroleum, like asphalt, that are being exported; it's the high grade fuels like gasoline, diesel and jet fuel...and we're not talking about supporting a lot of jobs here either; the ongoing strike of 6,500 refinery workers is said to account for 20% of US refining capacity, so by extrapolation there wouldn't be many more than 35,000 non-management refinery employees in the entire US..

which brings us to the 200 deaths that we have headlined this missive about...in the wake of the 3 exploding oil trains that headlined last weeks news, an AP exclusive brought to light a previously unreported analysis by the Department of Transportation that forecasts that an average of 10 oil or ethanol carrying trains will derail and catch fire every year over the next 20 years, causing between $4.5 billion and $6 billion in damages, and probably killing around 200 people when one of those trains eventually derails in a populated area...8% of us now live in an oil train’s expected blast zone, and the government expects that 15 such trains will probably derail this year, and presumably as safety improvements are made, the number of derailments and could be reduced to 5 a year by the year 2034...but remember, those railcars involved in last week's conflagration in West Virginia were already the safer new model cars, and the track and the train that derailed in Canada had just passed a state of the art inspection check...as we've just seen, many of these trains are now traversing the country, from North Dakota to east coast refineries (up to 80 a week through Philadelphia alone), not for our betterment, but for the purpose of delivering profits to the oil companies...and as a dozen or more trains derail this coming year and dozens of us are likely killed, it will serve as an acknowledgement that to the government-energy nexus, dead Americans are now no more than the expected cost of doing business, collateral damage in the eternal war to make profits from oil, whose lives are just as expendable as a wedding party on their way to a contested village in the Mideast...

(first posted at Focus on Fracking)

2nd estimate 4th quarter GDP; January consumer prices, home sales, and durable goods; December Case-Shiller

in addition to the heavy schedule of reports that we normally see in the last week of a month, we also had the release of the Consumer Price Index for January on Thursday, a monthly report which we usually see earlier...the usual end of the month important report was the release of the 2nd estimate of 4th quarter GDP on Friday; other widely watched reports included the S&P/Case-Shiller House Price Index for December, the January report on existing home sales from the National Association of Realtors (NAR), the report on January new home sales from the Census Bureau, and the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January, also from the Census Bureau..

in addition, this week also saw the Chicago Fed National Activity Index for January, a weighted composite index of 85 different economic metrics, which saw the headline index rise to +0.13 in January from -0.07 in December, where positive numbers indicate growth above the historical trend, and three regional Fed manufacturing indexes for February; the Texas Area Manufacturing Outlook Survey from the Dallas Fed showed contraction at -11.2, the lowest reading in nearly two years, not unexpected given the area's dependence on the oil industry; the Fifth District Survey of Manufacturing Activity from the Richmond Fed, covering Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported stagnant conditions with their composite index at zero, and the February Kansas City Fed manufacturing survey, covering a region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which also indicated near stagnant activity at 1 in February, down from 3 in January and 8 in December... a private manufacturing diffusion index, the Chicago Purchasing Manager's Index (PMI) for February from the Chicago ISM was down 13.6 to the lowest reading in five and a half years at 45.8, indicating that a plurality of Midwest purchasing execs saw contraction for the first time since 2009... remember that several paragraphs from all the reports of the past week, including the pdfs, can be viewed on one regular html webpage at the Research Economics page at OneWall.com…

Growth Rate in 4th Quarter GDP Revised to 2.2% on Lower Inventories, Higher Imports

the Second Estimate of 4th Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 2.2% rate in the 4th quarter, revised from the 2.6% growth rate reported in the advance estimate last month, as real private fixed investment and imports (which subtract from GDP) were revised higher, and the change in private inventories was revised lower...in addition, the GDP deflator, which had been reported slightly negative, was revised to show inflation at a 0.1% rate, hence the change in current dollar GDP was only revised down by 0.2%, from 2.5% in the advance estimate to 2.3% in this estimate...(see table 4 in the full pdf report for the inflation adjustments for the various components of GDP)

as we pointed out last month, the press release for this report, the source of most reporting on this release, isn't very useful in understanding the nature of this report, because it assumes to reader knows that the prefix "real" indicates inflation adjusted data, and assumes the reader knows that all figures reported as quarterly are really at an annual rate...rather than even cite that, we'd prefer to direct you to table 3 in the Full Release and Tables (pdf) so you can see how the change in 4th quarter GDP was arrived at...the right half of that table shows the current dollars amounts over several recent quarters for the various components of GDP; the left half of that table shows how they've adjusted those amounts for inflation based on prices chained from 2009...it is from those amounts in chained 2009 dollars that all changes in GDP are computed, a change that in effect no longer represents dollars, but rather indicates the annualized change in units of goods and services output of the economy...that change is what table 1 of the Full Release and Tables shows us for each component, and then table 2 in the Full Release and Tables shows us how much each of those components adds or subtracts from the final GDP figure...

overall real personal consumption expenditures, the largest component of GDP, were little changed, as they were revised to show growth at a 4.2% annual rate rather than the 4.3% growth rate reported last month, and hence they added 2.83% to the quarter's growth rate, not the 2.87% addition reported in the advance estimate (pdf from last month)...but the change in the components of personal consumption were revised considerably; the real inflation adjusted change in consumption of durable goods was revised from the 7.4% growth reported in the first estimate to a 6.0% growth rate in this estimate, and the real change in nondurable goods consumption was revised from an increase of 4.4% to an increase of 3.8% with this estimate, while the real growth in consumption of services was revised from 3.7% to growth at a 4.1% annual rate...contributing significantly to the change in real personal consumption expenditures in this estimate was a revision of the PCE price index, which is the deflator for this GDP component, from a minus 0.5% to minus 0.4%, as the deflator for goods was revised from -5.3% to -4.9%, while the deflator for services was revised from 2.0% to 1.8%...current dollar spending for goods was actually $5.4 billion lower in the 4th quarter than in the 3rd...

meanwhile, the growth of all the components of 4th quarter fixed private investment were revised higher, except for residential construction, which was revised from the originally reported growth rate of 4.1% to growth at a 3.4% rate...the real growth in fixed private investment was revised from the originally reported 2.3% to 4.5% and non-residential investment was revised from the previously reported 1.9% growth rate to growth at a 4.8% rate as growth in real investment in non-residential structures was revised from a 2.6% rate to a 5.0% rate, real investment in equipment was revised from the previous reported drop at a 1.9% rate to an increase at a 0.9% rate, and growth in real investment in intellectual property was revised from growth at a 7.1% rate to growth at a 10.9% rate...these increases came despite the fact that deflator was larger than previously estimated, as growth in the price index for fixed private investment was revised from 0.9% to 1.1% (see table 4 of the Full Release and Tables (pdf) for components)...as a result, fixed private investment contributed 0.71% to 4th quarter GDP, rather than the 0.37% addition reported last month...

in addition, real private inventories were revised to show growth at an inflation adjusted $88.4 billion in the 4th quarter after they grew by $82.2 billion in the 3rd quarter, and hence the $6.2 billion greater inventory growth only added 0.12% to the 4th quarter's growth rate, in contrast to the 0.82% addition from inventory growth reported in the advance estimate...since inventories indicate that some of the goods produced goods during the quarter are still sitting on the shelf, their increase by $6.2 billion means real final sales of GDP were lower by that much, hence increasing at a 2.1% annual rate, revised up from the real final sales increase of 1.8% reported last month...

meanwhile, both real imports and real exports were revised higher with this release, but it was the large increase in imports that did the damage...real imports had originally been reported as growing at a 8.9% rate in the quarter, and that has been revised to growth at a 10.1% rate on an 11.1% increase in imports of goods; meanwhile, our real exports grew at a 3.2% rate rather than the 2.8% rate reported in the advance estimate...as you'll recall, exports add to gross domestic product because they represent that part of our production that was not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here...thus the large increase in imports subtracted 1.58% from 4th quarter GDP while the comparatively smaller increase in our already smaller exports only added 0.42%, and as a result the increase in our trade deficit subtracted a total of 1.15 from 4th quarter GDP...

finally, there were also revisions to real government consumption and investment in this 2nd estimate...real federal government consumption and investment shrunk at a 7.5% rate vis a vis the 3rd quarter, which was unrevised, but real federal spending for defense was revised to show contraction at a 12.4% rate rather than the 12.5% contraction previously reported, while all other federal consumption and investment grew at a 1.4% rate, down from the 1.7% growth rate reported last month...real state and local outlays, on the other hand, were revised higher, from the 1.3% growth rate previously reported to growth at a 2.0% rate...thus, while the shrinking in Federal consumption and investment subtracted 0.54% from GDP, the increase in real state and local consumption and investment added 0.22% to the revised 4th quarter GDP growth figure..

January Consumer Prices Down 0.7% on Lower Gasoline

there wasn't much about the Consumer Price Index Summary for January that was a surprise...the seasonally adjusted index fell 0.7% for the month, the largest monthly drop since December 2008, and since it has now fallen for 7 months in a row, the year over year change has turned negative, indicating overall prices are now 0.1% lower than last January...the reason for the drop was, as it had been in the last half of 2014, a drop in the energy index mostly due to lower prices for gasoline...with the gasoline index down 18.7% in January, the energy index, which accounts for 8.03% of the CPI, was down 9.7%, dragging the overall index lower...without energy, other prices were up 0.1%, and since food prices were statistically unchanged, the core CPI, or the index for all items except for food and energy, was 0.2% higher in January than in December...

we're going to refer you to the press release for the Consumer Price Index Summary, which is a very readable overview, to get a better sense of how the price index and subindexes have changed in January than any few paragraphs we could write...if you scroll down to the bottom on that report, past the details about revisions, sampling errors and other technical information, you'll find links to 7 tables, and to an html version of the entire release...and if you open the following three tables from that list, you'll discover more about prices over the past few months and year over year than you'll ever want to know...

• Table 1. Consumer Price Index by expenditure category
• Table 2. Consumer Price Index by detailed expenditure category
• Table 3. Consumer Price Index special aggregate indexes

note that in table 1, we have a listing showing that the index for commodities less food and energy commodities was down 0.1% in January...that index would be suitable to use to deflate January retail sales, excluding the sales by gas stations, at groceries, and by restaurants, to determine the actual change in the amount of products sold, which is what the GDP report considers...since we already figured retail sales excluding gas station sales fell less than 0.1%, that suggests real retail sales ex-food and energy were close to unchanged in January...the BEA would, of course, deflate retail sales item by item, an exercise which we've attempted in the past, but since we dont have access to their program to automate the process, we'll forgo that effort this time, especially since the income and outlays report will be out early next week...

Table 2 gives us the line item change in price of every commodity and service that went into making up each sub-index and the CPI itself...the "relative importance" column shows us the percentage of the CPI that each of those commodities accounts for, and the column at the far right shows the price changes for this month...thus we can see that prices for the rice, pasta, and cornmeal group of cereal products were up 3.4% in January and their contribution to the CPI change was 0.126%, or roughly an eighth of a percent...and if you scroll down 2/3rds of that table to the section on prices of services, you'll see that rent of shelter, the lions share of which is owner's equivalent rent, accounted for 32.336% of the CPI and was up 0.3% in January; take away shelter, and other prices were down 1.1% for the month....the second column on that table, headed Jan.2014-Jan.2015, shows the year over year price change in each item in the index...thus scrolling back to the foods, we can see that although prices for meats, poultry, fish, and eggs fell 0.1% in January, prices for many cuts of beef are still up more than 20% from a year ago...

Order Backlog for Durable Goods Falls Second Month in a Row

in the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January (pdf), the Census Bureau estimated that new orders for manufactured durable goods rose by a seasonally adjusted $6.5 billion, or 2.8%, to $236.1 billion, following the revised December new orders decrease of 3.7%....new orders for transportation equipment were again the story here, as they rose 9.1% on a 128.5% increase in new orders for commercial aircraft; excluding transportation equipment, new orders fro durable goods were up just 0.3%, while the widely watched new orders for capital goods less aircraft were 0.6% higher...

January's seasonally adjusted shipments of durable goods decreased $2.7 billion or 1.1% to $245.1 billion, falling for the third time in the last 4 months...nominally half the decrease in shipments was in lower shipments of transportation equipment, which fell 1.7% on 3.0% lower automotive equipment shipments; excluding transportation equipment, however, shipments were still down 0.8% as shipments of capital goods less aircraft were down 0.3%....meanwhile, inventories of durable goods, up 21 out of the last 22 months, rose 0.4% again, after rising by 0.5% in each of the previous three months...inventories of primary metals, up 1.7% in January, saw the largest increase...but unfilled orders for durable goods, the metric we watch, were down for the second month in a row, falling 0.2% after falling 0.9% in December; nonetheless, unfilled orders were still 9.7% higher than a year earlier, with every industry except for defense aircraft showing more unfilled orders than a year ago...the order backlog for commercial aircraft was also down 0.2% in January, and at over half of the durable goods order book nationally, has a disproportionate influence on this metric...

Existing Home Sales Fell 4.9%, New Home Sales Were Flat

the National Association of Realtors (NAR) reported that existing home sales fell 4.9%, to their lower seasonally adjusted annual rate in nine months, as they project 4.82 million homes would sell over a year if January sales were extrapolated over an entire year... the NAR press release, which is titled Existing-Home Sales Cool in January As Available Inventory Remains Subdued, is written in plain English for reporters, so it's likely easier reading than any summary we could put together...since the report is entirely seasonally adjusted and at a meaningless annual rate, we typically want to also look at the raw data overview (pdf), which shows that sales of existing homes really fell to 282,000 in January from 413,000 in December, an actual sales decrease of 31.7%...the same pdf  indicates that the median home selling price for all housing types was $199,600 in January, down 4.1% from $208,200 in December, but 6.2% higher than the $187,900 median home sales price in January of last year, while the average home sales price was $248,100, down 2.6% from the $254,800 average in December, but up 4.9% from the $236,500 average sales price of January a year ago...for additional coverage of this report, Bill McBride has two posts, both with multiple graphs: Existing Home Sales in January: 4.82 million SAAR, Inventory down slightly Year-over-year and A Few Comments on January Existing Home Sales...

the Census report on January's New Residential Sales estimated that new single family homes were sold at a seasonally adjusted annual rate of 481,000, 0.2 percent (±22.2%)* below the revised December rate of 482,000, but 5.3 percent (±22.1%)* above the sales rate of January of last year....as you know, the asterisks after the reported figures indicate that based on their small sampling, Census could not be certain whether January's new home sales rose or fell from those of December or even from those of a year ago, and the figures in parenthesis represent the 90% confidence range for reported data in this report, which has the largest margin of error of any census construction series...the unadjusted data from Census field reps estimated that 36,000 homes sold in January, up from 34,000 in December, and indicated that the median sales price of new houses sold was $294,300 while the average sales price was $348,300....for more details and graphics, see Bill McBride's two posts, New Home Sales at 481,000 Annual Rate in January, Highest January since 2008 and Comments on New Home Sales; also see New Home Sales Stay At High Levels But Median Price Increases by Robert Oak at the Economic Populist, one of the few bloggers who even recognizes the large margin of error and likelihood of major revisions of this report..
….

for the S&P/Case-Shiller House Price Index for December, i'll direct you to Robert Oak's coverage titled Case-Shiller Shows Home Prices Still on the Rise and Not Affordable, and as usual with all housing reports, Bill McBride also has two posts, titled Case-Shiller: National House Price Index increased 4.6% year-over-year in December and A Comment on House Prices: Real Prices and Price-to-Rent Ratio in December...in addition, the Wall Street Journal has A Look at Case-Shiller by Metro Area with an interactive table...just remember that all the month over month figures for this report are comparing October, November and December prices to those of September, October and November, and hence the month over month change is equal to 1/3rd the difference between October prices and December prices...the pdf for the full report is here...

(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…)

January reports on producer prices, industrial production, and new residential construction, et al

oddly, all three of the widely watched national economic releases this week were released within a 45 minute span on Wednesday morning: Industrial Production and Capacity Utilization for January from the Fed, New Residential Construction for January (pdf) from the Census Bureau, and the Producer Price Index for January from the BLS...the past week also saw the releases of the first two Fed regional manufacturing surveys for February, the Empire State Manufacturing Survey from the New York Fed, covering New York and northern New Jersey, and the Philadelphia Fed's February Manufacturing Business Outlook Survey, covering Pennsylvania, southern New Jersey, and Delaware...significant paragraphs of those two reports, as well as from several weekly reports, can be accessed on one page at the Research Economics page at OneWall.com..

January Producer Prices Fall 0.8% on Widespread Lower Prices, Margins

probably the most interesting economic report of those released this week was the January report on the Producer Price Index from the Bureau of Labor Statistics, which showed the headline producer price index for final demand had fallen 0.8% for the month, after falling 0.2% in both November and December, and which left year over year wholesale inflation unchanged...both the monthly decrease and the year over year change are the greatest drop that this new PPI index has ever shown in the two years of its reformulated data, while prices for wholesale goods saw their largest drop in more than five years when compared to the old PPI...

every subindex of the PPI except for final demand for trade services was lower in January, as the price index for final demand for goods fell by 2.1%, led by a 10.3% decrease in prices for wholesale energy products, with a 1.2% increase in wholesale electricity prices offsetting a 24.0% decrease in wholesale gasoline prices and decreases of 19.6% and 19.2% for home heating oil and diesel fuel respectively... the index for final demand for foods was also down 1.1%, the largest drop in finished food prices since March, as fresh eggs fell 21.7% and pork prices were 7.6% lower, while seafood prices rose 10.1% and vegetable prices rose 8.1%....excluding food and energy, even core wholesale prices, as measured by the index for final demand for goods less foods and energy, fell 0.2%, with drops of 9.1% in wholesale prices for industrial chemicals and 1.1% for transformers and power regulators leading core prices lower...

in addition, the index for final demand for services fell by 0.2%, as the index for final demand for transportation and warehousing services fell 0.8%, as passenger airline margins fell 1.0% and margins for both railroads and freight truckers fell 0.7%...meanwhile, the index for  final demand for trade services, a measure of the margins received by retailers and wholesalers, rose by 0.5% as a 9.3% increase in the margins received by flooring and floor coverings retailers and generally higher margins for other retailers and wholesalers offset a 31.1% decrease in margins received by TV, video, and photographic equipment retailers....finally, the index for final demand for services less trade, transportation, and warehousing services fell 0.4% on a 4.5% decrease in prices for securities brokerage, dealing, investment advice, and related services, a 3.8% decrease in flight arrangement services, and a 1.3% decrease in prices for outpatient care, which were partially offset by a 5.0% increase in passenger car rental margins...

this report also showed the price index for processed goods for intermediate demand fell by 2.8% in January, the largest drop since a 4.1% drop in December 2008, leaving intermediate goods 5.5% lower priced than a year ago....more than half of that drop could be accounted for by an 8.3% drop in prices for intermediate energy goods, again led by a 24.0% decrease in intermediate gasoline prices...but the index for processed foods and feeds also dropped by 2.5%, as intermediate dairy products were priced 5.7% lower and prepared animal feeds fell 3.6%....and even core intermediate goods were lower, as the price index for processed goods for intermediate demand less food and energy fell 1.3% after falling 0.6% in December and 0.5% in November, with organic chemicals down 11.5%, agricultural chemicals down 6.4%, and plastic resins down 4.7%...

in addition, the price index for intermediate unprocessed goods fell by 9.4% after falling 6.4% in December and is now 18.4% below the level of a year ago, on a 23.6% drop in the index for raw energy materials led by a 30.6% decrease in crude oil prices and a 1.8% drop in producer prices for unprocessed foods and feeds, largely on an 18.7% drop in prices for slaughter hogs, while even the core index for raw materials fell 0.7% on a 3.5% drop in scrap copper prices and a 3.1% drop in scrap paper prices.....

finally, the price index for services for intermediate demand fell 0.2% in January, as a 0.3% decrease in the index for  transportation and warehousing services for intermediate demand was offset by a 0.4% decrease in prices for intermediate services less trade, transportation, and warehousing, while prices for trade services for intermediate demand were unchanged...over the 12 months ended in January, the price index for services for intermediate demand rose 1.5%...

the implication of widespread lower prices such as this report reveals is that yet to be released January reports that are reported in dollars are likely to show lower sales, orders, and inventories...hence, we should not be surprised if we see that the coming releases for such reports as the January advance report on durable goods, January wholesale sales and inventories, and January factory orders come in nominally lower than December...the key to reading those reports will be to examine which of the components are down and by how much, to reveal whether the declines are actual declines in goods ordered, sold, manufactured or inventoried, or whether the reports are actually showing an increase which just seems like a decrease because of lower prices...

January Industrial Production Up 0.2% on Cold, Revisions

industrial production increased a bit in January on above normal utility usage due to colder than normal weather in the heavily populated eastern US....the Fed's G17 release on Industrial production and Capacity Utilization for January indicated that industrial production rose 0.2% from a December reading which was revised from a decrease of 0.1% to a decrease of 0.3%...furthermore, previously reported increases in September and November were reduced by 0.2%, and the unchanged result from October was revised to a 0.1% decline...as a result, the industrial production index, which is benchmarked to 2007 production being equal to 100.0, actually fell from the 106.5 reported last month to 106.2 in January, with the index for December revised to 106.0....the manufacturing index, which accounts for roughly 70% of the industrial composite, also rose 0.2% to 102.1 in January, essentially by virtue downward revisions of the indexes for previous months; the manfacturing index for December was revised from 102.5 to 102.0, the November index was revised from 102.2 to 102.0, and the October manufacturing index was revised from 100.9 to 100.8...after revisions, that left the manufacturing index up 5.6% from last January's weather depressed reading...and in this year as well, the seasonally adjusted utility index rose 5.1% to 105.6 as electricity production rose 2.0% and natural gas output increased by 4.4% above seasonal norms, but even so, the utility index is still 6.6% below last January's reading...meanwhile, the mining index, which includes oil & gas production, fell 1.0% to 133.3 in January, after falling by 1.0% in December, as lower oil prices continued to slow the higher cost extraction processes, even as the index remained 8.5% higher than a year ago...

in the associated report on capacity utilization, which is the percentage of our plant and equipment that was in use during the month, the Fed found that the utilization rate for total industry was unchanged at 79.4% in January, although December's operating rate was revised down from the originally reported 79.7% to achieve that...78.1% of our manufacturing capacity was in use in January, up from the downwardly revised oprating  rate of 78.0% in December, with NAICS classified durable goods manufacturing operating at 78.0% of capacity, up from 77.9% in December, while NAICS non-durable manufacturers were operating at a 79.9% rate, down from 80.0% capacity utilization in December... meanwhile, capacity utilization by the 'mining' industry fell 1.5% from 88.5% to 87.5%, reflecting a pullback in drilling by the oil and gas industry due to lower oil prices, while the operating rate for utilities rose from 76.4% to 78.2%, reflecting above normal usage of gas and generating capacity due to below normal temperatures.... 

for more details, the Fed's G17 release has several paragraphs on industrial production and capacity utilization by both industry group and market group near the end of the opening page...following that, there are links to 3 charts and 14 pages of tables...in covering this report, we have generally accessed the following two tables for a more detailed breakdown of the changes in production and utilization by types of manufacturer..

• Table 1: Industrial Production: Market and Industry Groups (percent change)
• Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities

for the associated graphics, Robert Oaks includes nine primary FRED graphs in his coverage of this report here: Industrial Production Expands to Mediocre Growth for January 2014

January Housing Starts and Building Permits Mostly Unchanged

there was not much noteworthy about the report on New Residential Construction for January (pdf) from the Census Bureau; they estimated that starts on new housing units were at a seasonally adjusted annual rate of 1,065,000, which was 2.0 percent (±10.4%)* below the estimated and revised December pace, a range that indicates they don't have sufficient data to determine whether housing starts rose or fell for the month...and while housing starts were 18.7 percent (±14.5%) higher than January of last year, that was a month where housing was severely impacted by the "polar vortex" and associated storms that clobbered 1st quarter GDP.....the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 71,800 total units were started in January, down from 73,000 in December, with just 44,300 of those single family dwellings, while construction was started on 27,100 apartment units in buildings with 5 or more units....

the monthly data on new building permits, with its smaller margin of error,  are probably a better monthly indicator of new construction trends than the volatile and often revised starts data... in January, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,053,000, which was 0.7 percent (±0.6%) below the revised December annual rate of 1,060,000 but was still 8.1 percent (±2.0%) above the 974,000 annual rate estimated for new permits in January of last year...those estimates were extrapolated from the unadjusted estimate of 69,600 new permits issued in January, which was down from the estimated 83,600 new permits issued in December...
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NB: there are at least 5 dozen linked articles covering the range of this week's negotiations between Greece and the Troika at the end of this week's globalglassonion...& my coverage of last week's activity in the oil patch is here: rig count still falling, oil production and oil glut still rising…

(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…)

January retail sales; gauging the impact of December inventories on 4th quarter GDP revisions

it was a fairly light week for economic reports, but there was a widespread misinterpretation of December inventory data by the media we'll discuss today...the key release this past week was on retail sales for January from the Census Bureau; in addition, there were also two Census reports on inventories: December wholesale trade and December business inventories, giving us an early look at what impact that the change in inventories might have on fourth quarter GDP, which were only estimated when the BEA reported on GDP two weeks ago...this week also saw the import and export price index for January and the Job Openings and Labor Turnover Survey (JOLTS) for December from the Bureau of Labor Statistics...

Retail Sales Fall 0.8% on Drop in Gasoline Prices

retail sales started the new year down, but the drop in sales was due to lower gasoline prices...specifically, the Advance Retail Sales Report for January (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $439.8 billion in January, which was a decrease of 0.8% (±0.5%) from the December sales of $443.3 billion, but 3.3 percent (±0.9%) above sales in January of last year...December's sales were revised up by less than 0.1%, from $442.9 billion, but the reported percentage decline from November remained unchanged at 0.9% lower; nonetheless, the revision to 4th quarter GDP will likely be minimal...estimated unadjusted sales in January, extrapolated from surveys of a small sampling of retailers, indicated sales fell almost 21% to $399,338 million, from $506,062 million in December, and were up 2.8% from the $388,279 million of sales in January a year ago, so once again the seasonal adjustments were a major factor in this report...although this report appears weak on first perusal, we wont be able to tell if this is a real decline in goods sold until we get the consumer price data next week...

once again we'll include the table of monthly and yearly percentage changes in sales by business type taken from the Census pdf.....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from December to January in the first sub-column, and then the year over year percentage change for those businesses since last January in the 2nd column; the second pair of columns gives us the revision of last month’s October advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the November to December change under "Nov 2014 revised" and the revised December 2013 to December 2014 percentage change in the last column shown...for reference, here is what those December percentage changes looked like before this month's revision....   

 

from the above table we can see that January sales at gas stations were down 9.3% to $38,952 million, and as they accounted for 8.8% of total retail sales, retail sales excluding gas station sales were nearly stagnant, falling less than 0.1%...sales at motor vehicle and parts dealers, which account for more than 20% of this report, contributed to the January sales decrease, as they fell 0.5% to $90,778 million, leaving retail sales excluding the automotive group down 0.9%; take out car dealers and gasoline, and sales were up 0.2%...from the first column, we can see that the other businesses showing weakness in January were the specialty stores, such as sporting goods, book and music stores, which saw their seasonally adjusted sales fall 2.6% to $7,460 million, clothing stores, where sales fell 0.8% to $21,435 million, and furniture stores, where sales fell 0.7% to $8,656 million...meanwhile, miscellaneous store retailers saw January sales rise 2.6% to $10,213 million, and sales at bars and restaurants rose 0.8% to $50,067....however, since we don't know the direction or magnitude of the price changes in the goods sold, we cannot guess how this report will impact 1st quarter output, but it’s fair to say we can be reasonably sure that it will likely be lower than the 4th quarter, because nominal seasonally adjusted sales in January were somewhat lower than those of both October and November....

again, since the overall revision to December retail sales was less than 0.1%, this report will have scant impact on 4th quarter GDP revisions...however, within the business types, there were some notable revisions to the original advance report from December (percentage change table shown here) with this release (shown in 3rd column above)...the largest revision was in sales at miscellaneous stores, which were reportedly down 1.9%, and have now been revised to show sales up 0.6%...other business types seeing upward revisions included building material and garden supply centers, originally shown with a 1.9% decrease in sales, which has now been revised to a decrease of 0.7%, and for restaurants and bars, where sales were originally reported up 0.8%, which are now revised to show December sales 1.4% higher...meanwhile, sales at gas stations, first reported down 6.5%, are now shown to have seen sales fall 7.4%, while December sales at clothing stores were revised from a decrease of 0.3% to a drop of 1.2%, and sales at specialty stores, such as sporting goods and bookstores, were revised from a decrease of 0.2% to a drop of a full one percent...

Potential Impact of December Inventories on 4th Quarter GDP Revisions

the other two reports we'll look at this week were on December sales and inventories for different sectors of the economy...here's a simplistic way to think about how these reports affect GDP: if the economy consumes 10 apples at a dollar a piece in November, and 11 apples at 90 cents each in December, sales have gone down by 1% in December but monthly GDP is up 10%…if there are 10 apples on the shelf in both months, reported inventories will go down 10% in December, but the inventory contribution to GDP will stay the same…with that in mind, let's look at what was reported..  

the first release on inventories we saw this week was the Wholesale Trade, Sales and Inventories Report for December (pdf) from the Census Bureau, which estimated that seasonally adjusted sales of wholesale merchants fell 0.4 percent (+/-0.9%)* to $454.6 billion from the revised November estimate of $451.7 billion, but were up 1.4 percent (+/-0.9%) from December a year earlier...the November preliminary sales estimate was revised down by $0.6 billion or 0.1%, and hence was 0.4% lower than October...wholesale sales of durable goods were up 1.1 percent (+/-1.4%)* over November and were up 7.3 percent (+/-1.8%) from December a year ago, as wholesale sales of construction materials rose 5.4%, wholesale sales of electrical equipment rose 3.4% while wholesale computer equipment sales fell 2.1% from November...seasonally adjusted sales of nondurable goods were down own 1.7 percent (+/-1.1%) from November and down 3.5 percent (+/-1.9%) from last December, as wholesale sales of petroleum and petroleum products fell by 13.7%, largely due to lower prices...excluding oil sales, sales of non durable goods rose 2.1% in December, as wholesale drug sales rose 4.8% and miscellaneous wholesales sales rose 4.6%....note that the asterisks indicate that Census does not yet have sufficient statistical evidence to determine whether sales actually rose of fell for the periods indicated....

this release also reported that seasonally adjusted wholesale inventories were valued at $547.6 billion at the end of December, 0.1% (+/-0.4%)* higher than the revised November level and 6.7% (+/-0.9%) above last December's level, while November's preliminary inventory estimate was revised up by $0.1 billion, statistically insignificant...wholesale durable goods inventories were up 0.2 percent (+/-0.5%)*  from November and up 7.8 percent (+/-1.4%) from a year earlier, with wholesale inventories of computers, peripherals and software up 2.6% while while inventories of electrical equipment and appliances fell 1.7%....inventories of nondurable goods were down 0.1 percent (+/-0.4%)* from November while they were up 4.9% (+/-1.2%) from last December, as wholesale inventories of chemicals were up by 3.4% while wholesale inventories of petroleum and petroleum products were down by 6.2%...again, excluding inventories of petroleum and petroleum products, wholesale non-durable inventories in December were 0.5% greater than those in November...in part due to the distortion caused by lower petroleum prices, the closely watched inventory to sales ratio of merchant wholesalers rose to 1.22, up from 1.21 in November and up from the inventory to sales ratio of 1.16 in December of last year, as the inventory to sales ratio for petroleum and petroleum products, which is about 10% of wholesale sales but just 3% of wholesale inventories, rose from 0.31 to 0.34...

then on Thursday, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for December, which is  covered in the media as the "business inventories" report, and which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers' shipments was at $1,331.2 billion in December, down 0.9% (±0.9%)* from November, while 0.9% (±0.4%) above the total monthly sales level of December of last year...manufacturers sales were estimated at $488,245 million, down 1.1%, while retailer's sales were estimated down 1.1% at $393,208 million and, as previously noted, sales of merchant wholesalers were down 0.4% and accounted for $454,587 million of the overall total....once again, most of the drop in business sales was associated with lower oil prices; even manufacturer's sales are more than 10% refinery sales, as we mentioned when we discussed December factory orders..

meanwhile, total manufacturer's and trade inventories were estimated to have increased 0.1 percent (±0.2%)* from November to a seasonally adjusted $1,764.4 billion at the end of December, which was up 3.9 percent (±0.5%) from December a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued 0.3% lower at $634,786 million, inventories of retailers were estimated to be valued at $562,881 million, a 0.1% increase, and inventories of wholesalers were estimated to be valued at $547,648 million at the end of December, up 0.1% from November...the month end total business inventories to total sales ratio, the metric which is widely watched to determine if inventories are becoming excessive, was at 1.33, up from 1.31 November and up from 1.29 December a year ago, again likely a distortion caused by record high petroleum inventories... 

both sales and inventories from this report were included in 4th quarter GDP, but December inventories were only estimated when the GDP report was released two weeks ago, when the BEA assumed that wholesale and retail inventories had increased and that nondurable manufacturing inventories had decreased for the month...in reporting on this report, most analysts assumed that this report indicated that the BEA overestimated inventories and hence marked down their estimates of GDP...for instance, economists polled by Reuters estimated that GDP could be lowered by at least 0.5%; Wells Fargo economists concurred; Macroadvisers estimated a total hit of 0.6% to GDP from a combination of December reports....however, it's likely that few of these estimates have adjusted inventories for inflation, a necessary prerequisite to determine their impact on GDP...we have little to go on; we can't tell from looking at the GDP report (pdf), as it only gives us the quarterly change in inventories, and that at an annual rate to boot, and it doesn't give a deflator for inventories...so we'll try to figure it out by walking through the steps the BEA itself would likely take in arriving at that result..

we'll start with wholesale inventories, which we have already noted were up just 0.1%, largely due to a 6.2% drop in petroleum inventories...most of the inventories covered by this report would be deflated by the BEA using the producer price index for December, which showed a 1.2% drop in prices for finished goods, along with a 1.7% drop in prices for intermediate goods and a 5.0% drop in prices for raw goods...however, most of that was as the result of lower energy prices, which fell 6.6% at the finished energy goods level...that alone would indicate a real increase in energy goods inventories, which was borne out anecdotally by news articles in December indicating seasonally record stocks....looking at foods, we see wholesale prices were down 0.4% for finished foods, down 0.8% for intermediate foods, and down 6.9% for raw foodstuffs....the wholesale inventories report indicates that inventories of wholesale groceries rose by 1.1%, while inventories of farm products rose by 0.8%; once adjusted for prices, BEA should find that real inventories of wholesale groceries rose by 1.5%, while real inventories of farm products may have risen by as much as 5.8%, and it's those real inventories that would be applied to GDP...meanwhile, wholesale prices less food and energy were up 0.2% for finished goods, down 0.6% for intermediate goods, and down 0.5% for raw goods...to determine real inventories for each of those goods, the BEA would use the corresponding itemized tables in the producer price report...prices for finished wholesale goods, for instance, are listed in table 4 under "Final demand goods less foods and energy"....by way of example, wholesale inventories of computer equipment were up 2.6% in December, while their prices were down 0.7%; that would suggest that an increase of 3.3% in real inventories of wholesale computers for December would be applied to 4th quarter GDP...

similarly, inventories of goods at retail would be deflated with the various components of the consumer price index for December, which showed a drop of 0.4%...again, energy prices were a major factor, but even excluding food and energy, prices for goods less food and energy were down 0.3%...but we dont have to pick through the CPI report to get the deflator for December, because the BEA has already computed it in their income and outlays report for December, which we looked at last week...the PCE price index was down 0.2%, already implying an increased adjustment to GDP...but to adjust retail inventories, we'd have to use the PCE price index for goods, which we find was down 1.0% in December, as is shown in Table 9 of the pdf version of that report...applying that to retail inventories, which are not broken down by category, we'd estimate that real retail inventories rose 1.1% in December, in keeping with or even more than the BEA estimate...

we would find the details on factory inventories in the the Census Bureau's Full Report on Manufacturers’ Shipments, Inventories, & Orders for Decmeber (pdf), but again they would be deflated with the appropriate price index for the types of inventories the various manufactures are accumulating...many of these price indexes would again be found in the producer prices report....inventories of non-durables, which were estimated in the advance GDP report, were down 1.5% in December, but again much of that was due to an 8.8% drop in refinery inventories, which make up 15% of non-durable factory inventories…other factory inventories which fell in December included textiles, rubber products, pesticides and industrial chemicals, all of which use petroleum as an input...indeed, checking the producer price index, we find prices for industrial chemicals were down 4.4% in December, indicating the 0.6% drop in inventories of chemicals wasn't a real drop at all, but actually a real increase of around 3.8%..other components of factory inventories are less clear; to figure inventories of capital goods, for instance, we might have to estimate using the GDP deflator for equipment, which showed an annualized price increase of 1.1% in the 4th quarter….that would mean about a 0.1% per month reduction from the 0.3% nominal increase to arrive at the change in real inventories of December capital goods...

all in all, it appears that the BEA estimates for 4th quarter GDP inventories were pretty close to on the mark, and that the estimates of economic forecasters that reduced inventories will cause a major writedown of  4th quarter GDP will prove to be unfounded...of course imports, which we discussed last week, is another matter...lower prices for those will just make their real subtraction from GDP that much larger...

(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…)

January jobs report; December’s income and outlays, trade, factory orders, construction spending, consumer credit and Mortgage Monitor…

as is usual for the first week of the month, Friday saw the release of the Employment Situation for January; there were also two other important reports; the December release on Personal Income and Spending from the Bureau of Economic Analysis and the December Report on our International Trade from the Census Bureau...in addition, the Census released the Full Report on Manufacturers' Shipments, Inventories and Orders for December and the December report on Construction Spending, both of which could also impact 4th quarter GDP revisions...then on Friday, the Fed released its G19 on Consumer Credit for December, which indicated that revolving credit increased at a 7.9% annual rate in December, the largest increase since March, while non-revolving credit grew at a 4.5% rate, the slowest growth since February 2012...

the week also saw the privately issued December Mortgage Monitor from Black Knight Financial Services and the Ward's Automotive report on Light vehicle sales for January, as well as the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the January Manufacturing Report On Business, and the January Non-Manufacturing Report On Business...although the simplistic index values from the latter two reports could be called into question, both reports are readable and include anecdotal comments from purchasing managers from the 34 business types who participate in these surveys nationally...

Employers Add Over a Million Jobs in 3 Months; January Labor Force Grows by Over a Million 

for the most part, the Employment Situation Summary for January from the BLS was another positive report, although some econobloggers complained that average wages have not been rising fast enough...the seasonally adjusted establishment survey indicated employers added 257,000 jobs in January, and revisions of the two previous reports added 147,000 more jobs than previous estimated, with December now showing an addition of 329,00 jobs and November adding 423,000, which means the economy added more than a million jobs over three months for the fist time since 1997...meanwhile, the unemployment rate, which is sourced from the household survey, rose from 5.6% to 5.7% for the right reason; those counted in the labor force rose by more than a million, to 157,180,000, as self reported employment rose by 759,000 and unemployment rose by 291,000, as 354,000 more of those who weren't counted in December started to look for work in January, and the labor force participation rate rose from 62.7% to 62.9%...

as we pointed out last month, the BLS press release itself is very readable, so you can get additional details on the employment reports directly from there...remember that there are links to roughly 30 detailed tables at the end of that release, with the A tables detailing household survey data and the B tables on the establishment survey...otherwise, the employment report is the most thoroughly covered of the monthly reports, with Dean Baker providing excellent coverage of the establishment survey here: Economy Adds 257,000 Jobs in January and Mish providing the relevant numbers from the household survey here: Diving Into the Payroll Report: Wages Rebound, Revisions, Huge Jump in Labor Force...for graphics, you can check out January’s Jobs Report in 10 Charts from the Wall Street Journal, and Bill McBride's two posts: January Employment Report: 257,000 Jobs, 5.7% Unemployment Rate and Employment Report Comments and Graphs....

since it's January, when prior employment data is rebenchmarked to March of the previous year, altering the rest of the year's data, we're going to add one graph here from another WSJ post that shows the effect of these revisions on 2014 payroll data...in the graphic below, the blue bars indicate jobs added in each month of last year as originally reported, and the red bars indicate the benchmark revisions as of this report…the net effect of the revisions back to January 2010 was to add an additional 91,000 jobs to March’s originally reported & revised jobs total…

Personal Income Rises 0.3% in December; Spending Falls 0.3%

other than the employment reports and the GDP report itself, the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is probably the most important release of the month, as it gives us important personal income data, the monthly data on our personal consumption expenditures (PCE), the major component of GDP, and the PCE price index, the inflation gauge the Fed targets...it is also probably the least understood and most misreported of the monthly economic reports, which is largely due to the nearly inscrutable manner in which the press release from the BEA reports on it...to start with, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are confusingly used within the report as if they refer to the annualized amounts, making for a difficult report to unpack and report on correctly...

for example, this month's report opens by telling us "Personal income increased $41.3 billion, or 0.3 percent, and disposable personal income (DPI) increased $35.8 billion, or 0.3 percent, in December" which most would read to indicate that incomes rose $41.3 billion for the month....however, that $41.3 billion is seasonally adjusted and at an annual rate, which means that if the increase in December personal incomes were extrapolated over an entire year, those 12 months would add up to $41.3 billion... what that statement actually means is that personal incomes rose from an annual rate of $14,930.9 billion in November to an annual rate of $14,972.2 billion in December, and no where in this report will we learn how much December incomes rose before being seasonally adjusted and turned into an annual number...the same is true of disposable personal income, which is income after taxes, and all the components of the income increase that are reported here...thus, when the press release tells us: Wages and salaries increased $6.9 billion in December, that's not how much wages and salaries increased in December, that's how much wages and salaries would increase over a year if the rate of increase in December wages were extrapolated over an entire year...also note that of the "personal income" reported here, wages and salaries works out to $7,558.2 billion annualized, barely over half the annualized $14,972.2 billion personal income reported...the other major sources of personal income are transfer payments (ie social security), income on assets (dividends and interest), proprietors’ income, and rental income paid to individuals....the detailed breakdown for all of that is in the pdf for this report, linked on the sidebar of the press release... http://www.bea.gov/newsreleases/national/pi/2015/pdf/pi1214.pdf

also, personal consumption expenditures (PCE) are reported in the same manner, such that they fell at an annual rate of $40.0 billion, or 0.3%, from the annual rate of November...this was the largest seasonally adjusted drop in consumer spending since 2009, but the caveat that must be applied to that is that prices, mostly of energy related goods, were falling in December as well, so a large part of the pullback in spending was just due to lower prices...like the GDP report, the monthly personal consumption expenditures are adjusted with the price index for PCE, which is a chained type price index based on 2009 prices equal to 100...in table 9 of the pdf for this report we see that that price index fell to 108.746 in December, from 109.000 in November, a drop of 0.023%, which the BEA rounds to 0.2% when reporting it...hence, real personal consumption expenditures only fell 0.10%, which the BEA rounds to a drop of 0.1%....using the same PCE price index, disposable personal income was adjusted to show that real disposable personal income, or the purchasing power of disposable income, rose by 0.5% in December after an increase of 0.4% November...

with disposable personal income up and personal consumption expenditures down, it only goes to reason that personal savings would have increased for the month...to arrive at the figures for that, the BEA takes total personal outlays, which is the sum of PCE, personal interest payments, and personal current transfer payments, and subtracts that from disposable personal income, to show personal savings at a $643.2 billion annual rate in December, up from the $568.2 billion that we would have saved in November had November's savings been extrapolated for a year...this left the personal savings rate, or personal savings as a percentage of disposable personal income, at 4.9% in December, up from the savings rate of 4.3% in November..

Trade Deficit Jumps 17% in December Despite Lower Oil Prices

the December report on our International Trade in Goods and Services from the Commerce Department revealed a much larger trade deficit than most expected, as it increased by 17% to $46.6 billion in December from a revised $39.8 billion in November, against economists expectations that it would narrow to $37.9 billion from the $39.0 billion originally reported...and it's actually worse than that, because the price of crude oil fell by 18.6% from November to December, so when the import deficit is adjusted for prices to arrive at real import quantities, it will show correspondingly higher imports to be subtracted from 4th GDP...

our exports fell $1.5 billion in December to $194.9 billion on a decrease of $2.5 billion to $134.3 billion in our exports of goods and a $1.0 billion increase to $60.6 billion in our exports of services, while our imports rose $5.3 billion to $241.4 billion on a $4.4 billion increase to $200.3 billion in our imports of goods, while our imports of services rose $0.9 billion to $41.2 billion... the September trade deficit was revised up to $39.8 billion from the previously reported $39.0 billion, implying a downward revision of similar magnitude to 4th quarter GDP for November...furthermore, considering that import prices were down 2.5% in December, the increased dollar value of our imports means we were buying even more goods on an inflation adjusted basis, and hence those imports will subtract even more than otherwise from 4th quarter GDP...

the BEA press release provides a good overview, but to get the details on trade we have to view the full release and tables (55pp pdf) which is linked to on the sidebar...there, in exhibit 7, we see that the major reasons for the December drop in our exports were a $1,244 million drop in our exports of non-monetary gold, and a $499 million decrease in our exports of soybeans...but while our exports of soybeans are up $2,535 million to $25,522 for the year, our exports of gold fell by $11,759 million to $22,454 million for the year and were the sole reason that our 2014 exports of industrial supplies and materials fell $2,479 million to $506,835 million...and although there were several categories of imports that contributed to the the $5.3 billion December increase, most notable were the dollar-based increases of oil and fuels, as oil imports rose by $1088 million to $18,278 million, fuel oil imports rose $296 million to $2,759 million, and imports of other petroleum products rose by $464 million to $3,699 million...meanwhile our crude oil imports increased from 6.296m barrels a day in November to 7.980m barrels a day in December, a sizable jump considering US oil production hit another record in the same month..the only other category of imports that saw an increase of a similar magnitude was our imports of motor vehicles, engines and parts which rose $938 million to $28,451 million..

Construction Spending increases by 0.4% December While Factory Orders Fall 3.4%

the Census report on Construction Spending for December (pdf) estimated that our seasonally adjusted construction spending for the month would work out to $982.1 billion annually if extrapolated over an entire year, which was 0.4 percent (±1.3%)* above the revised November annual rate and 2.2 percent (±1.6%) above above last December's adjusted and annualized level of construction spending....this was a bit below expectations, and may result in a smallish downward revision to 4th quarter GDP if prices aren't a factor...private construction rose 0.1%, with residential construction up 0.3 percent (±1.3%)* to $349.6 billion annually, while nonresidential construction fell 0.1%  (±1.0%)* to $349.0 billion, as it was impacted by a 1.0% drop in power related construction, which includes gas and oil investment...meanwhile, public consruction grewby 1.1 percent (±2.1%)* to $283.5 billion annually..

the Census Bureau's Full Report on Manufacturers’ Shipments, Inventories, & Orders for October (pdf), commonly known as the factory orders report, indicated that the widely watched new orders for manufactured goods fell by $16.4 billion or 3.4% to $471.5 billion, following a revised 1.7% decrease in November, which was a larger drop than anyone expected...we had known last week that new orders for durables were reported down 3.4%; this report revised that to a 3.3% drop, while it also reported orders for non-durables were down by 3.4%...no one seemed to notice that new orders at refineries, which accounts for more than 20% of non-durable goods, was a major factor in that drop, as it was in the other sections of this report...shipments, for instance, decreased $5.3 billion or 1.1 percent to $488.2 billion, largely on a 15.7% drop in shipments from refineries, which was undoubtedly due to lower prices for refined goods...but since this report does not include prices, we can't tell how much of a factor that was..same with inventories, which were down 0.2% for the first time in 19 months, and to a lesser extent, unfilled orders, which fell $9.4 billion or 0.8 percent to $1,166.9 billion, their first drop in 11 months...

Mortgage Delinquencies Fall 7.2% in December While New Foreclosures Rise 21.0%

the Mortgage Monitor for December (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics) reported that there were 820,177 home mortgages, or 1.61% of all mortgages outstanding, remaining in the foreclosure process at the end of December, which was down from 892,796, or 1.63% of all active loans that were in foreclosure at the end of November, and down from 2.48% of all mortgages that were in foreclosure in December of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and December's "foreclosure inventory" was the lowest percentage of homes in foreclosure since early 2008... new foreclosure starts rose to 89,357 in December from 73,862 in November, the highest since September, but still below the 104,759 foreclosures that were started in December of last year...

in addition to homes in foreclosure, October data showed that 2,876,751 mortgage loans, or 5.54% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down from 6.04% of homeowners with a mortgage who were more than 30 days behind in November, and down from the delinquency rate of 6.47% a year earlier...of those who were delinquent in December, 1,132,301 home owners were considered seriously delinquent, which means they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month...thus, a total of 7.15% of homeowners with a mortgage were either late in paying or in foreclosure at the end of December, and 3.83% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

included below is the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 12 of the pdf....the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by 30 days, number of mortgages that were delinquent by 60 days, the 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 shown going back to January 2008….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… notice that the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has begun to increase again and is now at 515 days, while the average time for those who’ve been in foreclosure without a resolution is off its record high but still nearly three years at 1010 days… 

(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…)