note on the graphs used here

sometime during the third week of March, the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs, and also left us with less options we had available and used before the upgrade...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....





Sunday, September 28, 2014

2nd quarter GDP revision, August’s reports on durable goods, new and existing home sales

the key release of this past week was the 3rd estimate of 2nd quarter GDP from the BEA on Friday, which showed our economy expanded at a real 4.6% rate this past spring; the week also saw the two reports on home sales for August; the Census report on new home sales and the National Association of Realtor's report on sales of existing homes...from the manufacturing sector, there was the August advance report on durable goods and two regional Fed surveys for September: the Richmond Fed, reporting for a District that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported slightly faster growth in September as the Fifth District manufacturing composite index rose to 14, up from a reading of 12 in August, in a diffusion index where positive numbers indicate expanding manufacturing activity... similarly, the Kansas City Fed, surveying an region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, also reported that Growth in Tenth District Manufacturing Activity Edged Higher (pdf) as their June composite index rose to 6 in September from 3 in August....this week also saw the release of the Chicago Fed National Activity Index for August (pdf), a weighted composite index of 85 different economic metrics grouped into four broad categories of data, which fell to –0.21 in August from +0.26 in July, with the negative number indicating growth below the historical trend.....45 of the 85 individual indicators made positive contributions as production related indicators subtracted .17 from the index, employment-related indicators added up to zero, sales, orders, and inventories added 0.08, while the the consumption and housing category subtracted 0.12 from the overall reading for August...

2nd Quarter GDP Revised to Show Growth at a 4.6% Rate

the Third Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 4.6% annual rate in the 2nd quarter, revised from the 4.2% annual growth rate reported last month, as fixed investment and net exports were revised higher...when taking the 2.1% contraction in the first quarter into account, real GDP has now grown at a 1.19% annual rate year to date....in current dollars, our 2nd quarter GDP would extrapolate to $17,328.2 billion annually, up 1.67%, or at a 6.9% annual rate from the $17,044.0 billion annualized figure of the 1st quarter...however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage change calculations in this report are based....the resulting inflation adjustment used in the second quarter, aka the "GDP deflator", implies annual inflation at a 2.1% rate, unchanged from the inflation factor reported for the second quarter last month, and up from the 1.3% deflator applied to GDP in the 1st quarter...while we cover the details below, recall that all quarter over quarter percentage changes reported in this release are given at an annual rate, which means that they're expressed as a compounded change 4 times the change that actually occurred over the 3 month period... 

real personal consumption expenditures, the largest component of GDP, were little changed from the second estimate, as they grew at a 2.5% annual rate and contributed 1.75% to the quarter's growth rate...real consumption of durable goods grew at a 14.1% rate, revised slightly from the 14.3% growth rate reported in the 2nd estimate, and added .99% to the final GDP figure; almost half of that was an increase in consumption of motor vehicles and parts, which grew at a 19.1% annual rate and added .45% to GDP; in addition, real outlays for durable household equipment and furniture grew at a 12.9% rate and added .20% to the quarter's GDP, while real consumption of recreational goods and vehicles rose at a 13.3% rate and added .25%, as all durables consumption benefitted from a negative 1.9% deflator...meanwhile, real personal consumption of non-durable goods rose at a 2.2% rate, revised from the previous estimate of a 1.9% growth rate, as inflation adjusted food and beverage outlays fell at an inflation adjusted 1.3% annual rate and inflation adjusted energy goods consumption fell at a 3.3% annual rate...so while the increase in real consumption of clothing and all other core non-durable goods added .49% to GDP, the decreased consumption of food subtracted .07% and the decrease in energy goods consumption subtracted .08%...in addition, real consumption of services grew at an 0.9% rate and added 0.42% to the quarter's growth, revised from the 0.8% growth rate and 0.40% addition reported in the 2nd estimate last month, as real outlays for housing and utilities contracted at a 3.4% rate and subtracted .40% from 2nd quarter growth on a return to more normal weather, while the health care sector grew at a 3.9% rate and added .45% to the final GDP figure...

meanwhile, seasonally adjusted real gross private domestic investment grew at a 19.1% annual rate in the 2nd quarter, up from the 17.5% that was estimated last month, as the growth rate of private fixed investment was revised to 9.5% from the 8.1% of the 2nd estimate and as such added 1.45% to the 2nd quarter's growth rate...real non-residential fixed investment grew at a 9.7% rate, rather than the 8.4% rate last estimated, as investment in non-residential structures was revised from growth at a 9.4% rate to growth at a 12.6% rate, which now has added 0.35% to the quarter's GDP growth...in addition, investment in equipment grew at a 11.2% rate, not the 10.7% rate reported last month, and added 0.63% to 2nd quarter growth, as investment in industrial equipment grew at a 27.3% rate and investment in information processing equipment grew at a 26.6% rate, and the quarter's investment in intellectual property products was revised from a growth rate of 4.4% to a 5.5% growth rate and added 0.21% to the annualized change in growth for the quarter, as R&D spending rose at a 8.0% annual clip....meanwhile, residential investment was revised to show growth at a 8.8% rate, not the 7.2% rate reported last month, and as a result added 0.27% to overall economic growth in the 2nd quarter...  

in addition, the real (inflation adjusted) change in private inventories was also revised up, as they grew by an inflation adjusted $84.8 billion, revised from the $83.9 billion increase reported a month ago, leaving us with a $49.6 billion change in inventory growth from the first quarter's inventory growth of $35.2 billion, which in turn added 1.42% to the 2nd quarter's growth rate...since higher inventories are indicative of produced goods that have not been shipped or sold, their increase by $49.6 billion leaves real final sales of GDP less than the headline figure by that amount and thus they are recorded rising at a 3.2% rate in the 2nd quarter.. 

as we mentioned when reviewing the July international trade report 3 weeks ago, the revisions to June in that report resulted in a net positive revision to GDP as well...last month, the BEA estimated that our seasonally adjusted 2nd quarter exports had increased at an inflation adjusted 10.1% annual rate while imports rose at a 11.0% rate, for an increase in the trade deficit that subtracted 0.43% from the 2nd estimate of 2nd quarter GDP...with the revision including corrected June data, we now find that 2nd quarter exports have increased at 11.1% rate, while growth in imports were revised to 11.3% from the previous estimate...as you should 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 revised increase in real exports added 1.43% to 2nd quarter growth, while the increase in real imports subtracted 1.77% from GDP, leaving us with a smaller negative .34% impact of trade on the 2nd quarter's GDP...   

lastly, while real government consumption and investment at the Federal level was mostly unrevised, state and local governments grew more than previously estimated...real federal government consumption and investment shrunk at a 0.9% rate vis a vis the first quarter, which was unrevised, as real federal spending for defense grew at a 0.9% rate and added 0.04% to GDP, while.all other federal consumption and investment fell at a 3.8% rate, rather than the 3.7% rate published in the earlier two estimates, and which still subtracted 0.10% from GDP...real state and local outlays rose at a seasonally adjusted 3.4% rate, rather than the the 2.9% increase previously reported, as real state and local investment rose at a 14.6% rate and added 0.26% to GDP while state and local consumption expenditures rose at a 1.2% rate and added 0.11% to 2nd quarter growth...  

our new FRED bar graph below, which can also be viewed as an interactive, has been updated with these latest GDP revisions…each color coded bar shows the change, in billions of chained 2009 dollars in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph below, the quarterly changes in real personal consumption expenditures are shown in blue, the quarterly changes in real fixed private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is shown in yellow, the real change in exports are shown in purple, while the change in real imports is shown in green ..then the change in state and local government spending and  investment is shown in pink, while the change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line....  

2nd quarter 2014 GDP 3rd estimate

Durable Goods Order Backlog at Record $1,165.0 Billion in August, 13.1% Higher than Year Ago

although the headlines read that new orders for durable goods fell 18.2% in August, that widely watched monthly change in new orders was again rendered meaningless by the change in volatile orders for civilian aircraft, as new orders for Boeing jetliners fell to 107, from the record 324 logged in July, and hence August's new orders merely reflect the absence of those orders that drove the July gain to a seasonally adjusted increase of 22.5% over June...the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for August (pdf) from the Census Bureau estimated that new orders for manufactured durable goods fell by a seasonally adjusted $54.5 billion to $245.4 billion, a record drop that effectively reversed the $55.1 billion or 22.5% increase in July....new orders for transportation equipment fell 42.0% to $76,804 million as new orders for non-defense aircraft fell 74.3% to $17,976, but strip out the orders for transport equipment and new orders rose 0.7% in August to $168,629 million, with a respectable 0.6% increase to $73,233 million in the important new orders for non-defense capital goods less aircraft, an indicator of business investment...meanwhile, seasonally adjusted shipments of durable goods, which will be reflected in 3rd quarter GDP, decreased by $3.7 billion or 1.5% in August to $246.1 billion, with shipments of automotive equipment, down $4.8 billion or 6.7% to $47,422 million, largely responsible, as shipments excluding transportation equipment rose 0.1% to $173,564 million....in addition, seasonally adjusted inventories of durable goods, another GDP contributor which have been up 16 out of the last 17 months, rose $1.7 billion or 0.4% to a new record at $403.0 billion, as once again inventories of motor vehicles and parts, up 0.7% to $26,877 million, influenced the overall increase...but more importantly, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, increased by $7.4 billion or 0.6% to a record  $1,165.0 billion ...once again, the order backlog for automotive equipment, up 1.3% to $17,084 million, and for civilian aircraft with their long lead times, up 0.8% to $570,069, were a large part of this aggregate increase, but even without transportation equipment, unfilled orders still increased by 0.8% to $422,930 million, with unfilled orders for non-defense capital goods up a solid 1.0% to $731,756 million...overall, unfilled orders for durable goods are now 13.1% ahead of last year's backlog...

Existing Home Sales Fall 1.8% in August as New Home Sales Rise ~18%

according to the National Association of Realtors (NAR), seasonally adjusted existing home sales fell by 1.8% in August to an annual rate of 5.05 million completed transactions, from an revised annual rate of 5.14 million sales in July, while home sales still remained 5.3% below the annual sales rate of 5.33 million units in August of last year....before the seasonal adjustment and conversion to an annualized figure, an estimated 479,000 homes sold in August, down 3.0% from the 494,000 homes that sold in July and down 7.5% from the estimated 518,000 homes that sold in August a year ago...both seasonally adjusted and unadjusted data (pdf) indicate that homes sales are down in every region of the country from a year ago, with sales in the West down the most, 12.9% lower than a year ago....the preliminary median home selling price for all housing types was $219,800 in August, down from $221,600 in July, but 4.8% higher than the $209,700 median sales price in August of last year, in home price data that is not seasonally adjusted…the average home sales price was $265,200, down from $267,500 in July, while up 3.4% from $256,600 in August a year ago, with regional average home prices ranging from a high of $341,900 in the West to the average of $211,800 for homes sold in the Midwest....foreclosed homes, which sold for an  average of 14% below the price of similar homes in their market, accounted for 6% of August sales, while short sales, at 2% of all sales, were discounted by an average of 10%...the median time on the market for all homes was 53 days in August, up from 48 days in July, and up from a median of 43 days on the market in August a year ago.…those who bought houses with cash accounted for 23% of transactions in August, down from 29% in July and the lowest overall share of all cash buyers since December 2009, while those identified as investors accounted for 12% of all transactions, down from 16% in July and down from the 17% sales to investors a year earlier....domestic 30 year mortgage rates averaged 4.12% in August, down from 4.13% in July; while the share of first time home buyers remained unchanged at 29%, still well below the historical average of 40%....2.31 million existing homes remained available for sale at the end of August, which would be a 5.5-month supply of unsold homes at the August sales pace, down 1.7% from July but up from the 2.21 million existing homes available for sale a year earlier...

while existing homes sales were somewhat lower in August, sales of new homes were around 18% higher than July sales, which themselves were revised up by nearly 4%... the Census bureau report on New Residential Sales for August estimated that new single family homes were sold at a seasonally adjusted annual rate of 504,000 in August, which was 18.0 percent (±16.3%) above the revised July rate of 427,000 annually and was 33.0 percent (±21.7%) above the annualized new homes sales pace in August of last year....the July annualized sales rate was revised up from the 412,000 annually reported a month ago to 427,000, while June's sales rate was revised down from 422,000 annually to 419,000...note that the number in parenthesis is the 90% confidence range, which indicates that based on their small sampling, Census is only 90% confident that August home sales rose between 11.3% and 54.7% over those of a year ago, and that this report may be subject to revisions even greater than that range....although August's annualized new home sales were widely reported as at the highest rate since May 2008, we should point out that 504,000 was the same annual rate first published for May of this year, which was subsequently revised down to 442,000 annually the next month...the unadjusted data from Census field reps estimated that 41,000 homes sold in August, up from 39,000 in July, while July's unadjusted sales were revised from 37,000 up to 39,000...of the 41,000 homes sold in August, 12,000 were completed, 15,000 were under construction, and 14,000 had not yet been started...the median new home sales price was $275,600;in August, down from $280,100 in July, while the average sales price was $347,900, up from July's $345,100 average, as more expensive homes were in the sales mix... the Census estimated that a seasonally adjusted 203,000 new homes remained unsold at the end of August, which was a 4.8 month supply at the June sales pace, up from from a 5.6 month supply of unsold new homes in July...

the FRED graph below shows the seasonally adjusted annual rate of new single family home sales from this Census report in thousands since January 2000 in red, and the seasonally adjusted annual rate of existing home sales from the Realtors monthly over the same time period in blue...although new home sales appears to be in a uptrend, breaking out above 450,000 annually, we’d caution that the same spike was reported in May before it was revised away...this graph can also be viewed as an interactive at the FRED site, where the annualized monthly sales extrapolations for both existing and new homes will appear as you scroll across the face of the graph...

August 2014 new and existing home sales

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

Sunday, September 21, 2014

August price indexes, industrial production, housing starts and states jobs report

there were several widely watched reports released this past week; on inflation, we saw both the August consumer price index and the August producer price index reports from the Bureau of Labor Statistics; on housing, the Census released it's estimates on August residential construction, while for manufacturing, we saw the release of the G17 on Industrial Production and Capacity Utilization for August from the Fed...we also saw the first two regional manufacturing surveys for September from Fed district banks: the September Empire State Manufacturing Survey from the New York Fed, surveying New York State and northern New Jersey, saw the composite general business conditions index rise to 27.5, up from 14.7 in August, the highest reading since October of 2009, in a diffusion index where any number above zero suggests expansion, and hence indicating robust growth of manufacturing in the 2nd District...meanwhile, the September Business Outlook Survey from the Philadelphia Fed, covering Pennsylvania and southern New Jersey, saw it's broadest diffusion index for current activity fall to 22.5 from a reading of 28.0 in August, a reading which nonetheless is still indicative of robust expansion...

August CPI Down 0.2% on Cheaper Gasoline

consumer prices fell for the first time in 16 months in August as lower gasoline prices pulled the energy index and overall prices lower; moreover, core prices were flat, the first time since October 2010 that the core price index did not increase...the Consumer Price Index for All Urban Consumers (CPI-U) for August from the Bureau of Labor Statistics showed that seasonally adjusted prices fell by 0.2% after rising only 0.1% in July....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, slipped to 237.852 in August from 238.250 in July, while it still remained 1.7% higher than the 233.877 reading from August of last year….with modest food price increases insufficient to offset decreases in energy prices, core prices, which exclude those volatile components, were statistically unchanged, as the unadjusted core index rose from 238.138 in July to 238.296 in August, while that index was also 1.7% ahead of its year ago level of 234.258...

the seasonally adjusted energy price index was 2.6% lower in August as prices for energy commodities fell 3.9% while the index for energy services fell 0.6%...the decrease in energy commodity prices was primarily due to a 4.1% drop in the price of gasoline, the largest component, while fuel oil prices fell 0.6% and prices for other fuels, including propane, kerosene and firewood, averaged a 1.2% decrease….within energy services, the index for utility gas service fell for the 3rd consecutive month, as it was down another 0.4% after falling 2.6% in June and 1.7% in May, while the electricity price index rose 0.1% in August after falling 0.3% in July...

the seasonally adjusted food index rose by 0.2% in August, after rising 0.4% in July, and it is now 2.7% higher than August a year ago....prices for food away from home rose by 0.2% as prices for meals at full service restaurants and at fast food restaurants were both 0.3% higher, while prices for food at schools fell 2.3%, and prices for other food away from home fell 0.2%.... meanwhile, the price index for food at home also rose 0.2% as higher prices for meats and dairy products were partially offset by lower prices for fruits, vegetables and beverages....cereal and bakery products averaged 0.2% higher than in July, as a 0.6% increase in prices flour and prepared mixes, a 1.1% increase in the price of bread, and a 1.8% increase in cookie prices was only partially offset by a 0.7% decrease in prices for breakfast cereals and a 2.3% decrease in the price of rice...prices in the meats, poultry, fish, and eggs group rose 1.5% as beef and veal prices were 4.2% higher, pork prices rose 1.6%, poultry prices increased by 0.4%, fish and other seafood prices averaged 0.5 higher, while egg prices fell 2.0%...over the past year, most of the items in the beef and pork groups have seen price increases greater than 10%, topped by 19% higher prices for beef roasts and 13.7% higher prices for pork chops, while the prices in the entire meats, poultry, fish, and eggs group now average 8.8% higher than a year ago....in addition, dairy products prices were 0.6% higher in August than in July as ice cream was priced 1.8% higher, cheese prices rose 0.8% and milk prices increased by 0.4%....meanwhile, the fruit and vegetable price index was 0.8% lower as fresh produce fell in price: apples were priced 3.5% lower than in July, prices for oranges fell 1.9%. potatoes were 4.0% cheaper, and lettuce and tomato prices both fell 1.7%...prices for the beverage group were lower by 0.2% as a 1.9% increase in the price of roast coffee and 0.2% higher juice prices were more than offset by 1.4% lower prices for instant coffee, 1.2% lower tea prices, and 0.4% lower prices for carbonated drinks...finally, prices for other foods at home also fell 0.2% as increases of 1.8% in the price of butter was offset by 0.6% lower prices for olives, pickles, and relishes, 0.2% lower prices for frozen dinners and 1.0% lower prices for other miscellaneous foods...however, combined with increases of 4.1% in June and 2.8% in July, butter prices are now 18.8% higher than they were last August...

for the seasonally adjusted core components of the CPI, which netted out as unchanged, we find that the grouping of all commodities less food and energy commodities fell by 0.1% in August, while overall services less energy services were statistically unchanged....the index for shelter, which is almost 32% of the CPI, rose by 0.2%, with rent of shelter and homeowner's equivalent rent both rising 0.2%, while prices for lodging away from home rose 0.8%, and water & sewer bills and the cost of household operations all rose 0.3%....meanwhile, household furnishings and supplies, the commodity component of housing, fell by 0.1% with prices for window and floor coverings 1.5% lower, living room, kitchen and dining room furniture 1.2% lower, and appliances 0.9% lower...the price index for apparel fell 0.2% in August after 3 monthly increases as a 4.5% decrease in prices for boy's apparel, a 4.0% decrease in prices for men's shirts and sweaters, and a 3.0% decrease in prices for girl's clothing were only partially offset by a 4.6% increase in prices for women's outerwear....the aggregate index for medical care, meanwhile, was unchanged in August as the medical care commodity index fell 0.1% after rising 1.0% over the previous two months, as non-prescription drug prices fell 0.7%, while the medical care service index was unchanged, as 0.3% decreases in both outpatient hospital services and prices for health insurance was offset by a 0.4% increase in prices for physicians' services and 0.6% higher charges for nursing homes and adult day services...then, while the transportation composite index showed a 1.5% decrease, that index includes gasoline, which you'll recall fell in price by 4.1%; prices for transportation commodities less fuel prices, however, were unchanged, as prices for new cars and trucks rose 0.2%, prices for used cars & trucks fell 0.3%, and the price of tires fell 0.2%...however, the transportation services index fell 0.6% on a 4.7% cut in airline fares and a 2.3% drop in prices for car and truck rentals... meanwhile, the recreation price index fell 0.4% as recreation commodities fell 0.3% on 1.0% decrease in prices for audio equipment and 0.9% lower prices for pets and pet products, while recreation services fell 0.5% on a 1.6% decrease in rental of video and audio media and 0.7% declines in sports club dues and admissions to sporting events, which was only partially offset by a 1.1% increase in photographer's fees and 0.5% higher film processing pricing....finally, the aggregate education and communication index was down 0.1% as education and communication commodities fell 0.1% as a 1.3% decline in prices for personal computers and peripheral equipment offset a 2.2% increase in prices for college textbooks, while education and communication services also fell 0.1% on a 0.5% decrease in college tuition and fees that was only partially offset by a 0.4% increase in postage and delivery services....other than the aforementioned increases in meat and butter prices, the only other line items among CPI components that showed annual price changes greater than 10% were women's outerwear, which was 19.0% higher than in August 2013, video discs and similar media, prices for which have fallen 11.4%, and televisions, which are now 14.2% cheaper than they were a year earlier...  

our FRED graph below shows the overall change in each of the major component indexes of the CPI since January 2000, with all indexes reset to 100 as of that month for an apples to apples comparison of the price changes in each...in blue, we show  the relative track of the price index for food and beverages; in bright green, we show the reset price index for all housing components, which includes rent, homeowners equivalent rent, utilities, insurance & household maintenance; in red, we have the price changes for apparel, the only index to show a net price decline over the previous decade; while the relative change in the price index for medical care shown in violet has obviously seen the greatest price increase over the period…next, the transportation price index is in orange, and shows the impact of volatile fuel prices on the cost of transportation, while the price change for education and communication over the period is tracked in brown, and in dark green is the relative strength of the index for recreation prices...finally, we’ve added the track of the overall CPI-U in black, which tends to track close to the large housing component, which makes up 41.5% of the total index…this graph can also be viewed as an interactive, wherein you can track the monthly changes in all of these relative price indexes by dragging your cursor across the graph… 

August 2014 CPI components

August Producer Prices Flat on Lower Energy Prices

the Producer Price Index for August from the BLS, meanwhile, indicated that the seasonally adjusted producer price index for final demand was unchanged for the month, after rising 0.1% in July and 0.4% in June, and now shows August wholesale prices 1.8% above their level of a year earlier...the index for final demand for services rose by 0.3% largely on the strength of a 0.3% rise in prices for final demand services less trade, transportation, and warehousing as margins for consumer loans, deposit services, and credit intermediation all rose by more than 1.0%, and also a 0.3% increase in the index for final demand for transportation and warehousing services, a measure of the change in the margins received by such services, while the margins for final demand for trade services were unchanged...meanwhile, the price index for final demand for goods, aka 'finished goods', fell 0.3% after being unchanged in July as the price index for final demand energy fell 1.5% on a 4.5% decline in producer prices for natural gas and a 1.4% decrease in wholesale gasoline prices...the price index for final demand for food also fell 0.5% as wholesale fresh egg prices fell 21.5% and wholesale seafood prices were off 5.7%...meanwhile, core final demand for goods, or producer prices for finished goods not including food and energy, were unchanged in August as a 1.4% increase in wholesale prices for pet foods was the only monthly change greater than 1.0%...

this report also showed the price index for processed goods for intermediate demand also fell 0.3%, as prices for intermediate processed foods and feeds fell 0.8% and prices for intermediate processed energy goods fell 1.7%, while intermediate core producer prices were 0.2% higher....meanwhile, the price index for intermediate unprocessed goods fell 3.3% after falling 2.7% in July on a 3.4% drop in producer prices for for unprocessed foods and feeds and a 4.9% decline in the index for raw energy materials, while prices for unprocessed nonfood materials less energy fell 0.7%......finally, the price index for services for intermediate demand rose 0.2% in August, mostly on a 0.3% increase in the index for prices for services less trade, transportation, and warehousing for intermediate demand and a 0.2% increase in prices for transportation and warehousing services for intermediate demand, while prices for indeterminate trade services fell 0.2%...over the 12 months ended in July, the index for services for intermediate demand rose 1.6%...

August Industrial Production Falls 0.1% on Automotive Sector Pullback

the August release on Industrial production and Capacity Utilization from the Fed indicated that industrial production fell 0.1% from a July reading which was revised from an increase of 0.4% to an increase of 0.2% after the June to July increase was revised from a 0.4% increase to a 0.3% increase...the industrial production index itself, which is benchmarked to 2007 production equal to 100.0, fell to 101.1 from the previously issued reading of 104.4 for July, which was revised to 104.2, while June's industrial production index was revised from 103.9 to 104.0, as May's industrial production was revised 0.2% higher...the manufacturing index, which accounts for roughly 70% of the industrial composite, fell 0.4% in August to 100.2, after the manufacturing index for July was revised up from 100.7 to 100.6, while the August level is now 3.6% higher than the level of August 2013..... meanwhile the seasonally adjusted utility index, rebounding from 2.7% decline due to a milder than normal July, rose 1.0% to an August reading of  97.6, the same reading as last August, as temperatures and A/C use were closer to normal...and for the last of our industry groups, the mining index, which includes oil & gas production, increased by 0.5% to 131.2 in August, after decreasing by 0.3% for the first time this year to in July, and is still now 8.7% higher than a year ago...

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group...among final products and nonindustrial supplies, which fell by 0.3% in August, seasonally adjusted production of consumer goods fell by 0.8% after rising a revised 0.7% in July...production of consumer durables fell 4.4% in August, reversing July's 4.4% increase, as production of automotive products fell 7.0% after increasing 7.6% in July, production of appliances, furniture and carpeting fell 2.5% after increasing 3.4% in July, while output of home electronics rose 2.4% after falling 2.3% in July....meanwhile, production of non-durable goods rose by 0.3% for the month on 0.5% increase in production of non-energy non-durables, while consumer energy production fell 0.2%...of the non-energy non-durables, production of food was 0.5% higher, and output of chemical products rose by 0.6%, while clothing production fell 2.2% and output of paper products fell 0.2%...since last August, production of durable goods has increased by 5.3%, led by a 7.4% increase in automotive production, and production of non-durable goods has risen 2.1% on a 4.1% increase in output of chemical products, while output of consumer energy products has increased 2.3%.. 

meanwhile, seasonally adjusted production of business equipment was unchanged in August after rising by a revised 1.2% in July as production of transit equipment fell 2.3% while production of information processing equipment rose 1.0% and production of industrial equipment rose 0.6%....for the year ending August, output of business equipment rose by 5.7% as production of transit equipment rose 7.1%, the output of industrial equipment rose 6.7% and production of information processing equipment rose 1.6%....in addition, production of defense and space equipment fell by 0.7% in August, although it grew by just 0.8% over the year...in addition, production of supplies for use in construction rose 0.1% for the month and was 5.4% ahead of year ago output, while production of business supplies rose by 0.6% in August and by 2.2% for the year...meanwhile, production of raw and intermediate materials that would input into other production processes rose by 0.1% in August, with output of inputs into durable goods manufacturing falling 0.5% as consumer parts for durable goods fell 3.5%, while output of non-durable intermediates rose 0.2% and outputs of energy materials fell by 0.6%...for the year, production of intermediate materials was up 4.9%, as production of inputs into durable goods rose 6.3%, production of energy intermediates rose 6.7%, while output of non-durable intermediates fell 0.2%...

with industrial production down by 0.1% in August, capacity utilization, which is the percentage of our plant and equipment that was in use during the month, likewise fell, by 0.3%, from 79.1% in July to 78.8% in August, as new capacity was also added during the month...77.2% of our total manufacturing capacity was in use during August, down from 77.6% in July, but up from the 76.1 capacity utilization rate of August a year earlier...the operating rate for NAICS classified durable goods manufacturers was at 78.0% in August, down from 78.5% in July, as the operating rate for manufacturers of motor vehicles and parts fell from 88.2% to 81.4% and the operating rate for manufacturers of fabricated metal products fell from 81.6% to 80.3%, while the August operating rate for NAICS classified manufacturers of non-durables was at 78.5%, up from 78.4% in July, with the oil and coal products industry continuing to operate at 84.2% of capacity while textile and textile product mills were only operating at a 71.7% rate.... meanwhile, capacity utilization by the 'mining' industry fell from 89.4% to 89.1%, reflecting the increase in oil and gas rig counts during the month; while the operating rate for utilities rose with the higher production, from 75.6% to 76.4%....our FRED graph for this report below shows the percentage of capacity in use for all industries monthly since 2007 in pink, while it shows the the seasonally adjusted industrial production index values for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0…  

August 2014 industrial production

Housing Starts and New Permits Fall in August

the Census report on New Residential Construction for August (pdf) gives us broad estimates of new housing permits, new housing starts, and housing completions based on a survey of a small percentage of permit offices visited by Census field agents, and is widely watched and reported on for new housing starts....in August, starts on new housing units were estimated to be at a seasonally adjusted annual rate of 956,000, which was 14.4 percent (±7.9%) below the revised July estimated pace of 1,117,000 homes hypothetically started annually, but 8.0 percent (±11.2%)* above the annual rate of 885,000 housing starts estimated in August a year ago...the numbers in parenthesis means that Census is 90% confident that housing units started in August were at a seasonally adjusted rate between 6.5% and 22.3% lower than the pace in July, and between 3.2% lower and 19.2% greater than the pace of a year ago, and the asterisk indicates they dont have sufficient data to determine whether housing stars rose or fell from a year ago...the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 86,000 total units were started in July, up from 102,800 in July, with just 58,800 of those single family dwellings...meanwhile, construction was started on 26,400 apartment units in buildings with 5 or more units, with year to date apartment starts at a 25 year high, with the caveat that the margin of error on that apartment data is ±15.1%...

the monthly data on new building permits have a much narrower margin of error than new housing starts and hence are probably a better monthly indicator of new construction trends than the volatile and often revised starts data... in August, Census estimated new permits were issued at a seasonally adjusted annual rate of 998,000, which was 5.6 percent (±1.4%) below the revised July annual rate of 1,057,000 but is 5.3 percent (±1.7%) above the 948,000 annual rate estimated for new permits in August of last year...those estimates were extrapolated from the unadjusted estimate of 86,800 new permits issued in August, which was up from the estimated 997,600 new permits issued in July...of those units permitted in August, 55,000 (±1.6%) were for single family homes, and 29,200 (±3.4%) represented permits for housing units in building with 5 or more units...our FRED graph on this report below, which can also be viewed as an interactive at the FRED site, shows the seasonally adjusted annual rate of housing units started in thousands monthly in blue, and the annual rate of housing units authorized by building permits monthly in red since 2000…note that the number in thousands shown monthly for both metrics is an estimate of how many units would be permitted or started over an entire year if that month’s pace were continued over 12 months…  

Augst 2014 new housing

August State and Regional Employment

this week also saw the release of the Regional and State Employment and Unemployment Summary for August, a report which further expands on the national employment situation summary of two weeks ago by breaking down the state and regional details...so while they tell us in opening that 24 states had unemployment rate increases, 15 states saw decreases, and 11 states had no change, we know that the unemployment rate data comes from the household survey with its large margin of error, and they make that point later in the report when they tell us just nine states and the District of Columbia had statistically significant monthly unemployment rate increases, led by South Carolina, whose unemployment rate rose from 5.8% to 6.4%, and that just four states has statistically significant unemployment rate decreases, and that the remaining 37 states had jobless rates that were not measurably different from those of a month earlier...the table with the seasonally adjusted count of the unemployed and the unemployment rate for each state is here...

as with the national report, the sections of this report that correspond to the establishment survey are more informative, in that they show the number & types of jobs added or lost in each state, ranging from the increase of 44.200 jobs in California and 27,700 jobs added in Florida, to the net decrease of 4,800 jobs in New Hampshire...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment since last July, see the following two BLS tables accompanying this release: Table 5. Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted and Table 6. Employees on nonfarm payrolls by state and selected industry sector, not seasonally adjusted ...

(the 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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, September 14, 2014

August retail sales; July consumer credit, business inventories, and job openings

it was a fairly light week for economic data, with the key release being on retail sales for August from the Census Bureau; in addition, there were also two reports on July business inventories, which will have an impact on third quarter GDP...we also saw the Fed's monthly G19 on consumer credit for July, and the Job Openings and Labor Turnover Survey (JOLTS) for July from the Bureau of Labor Statistics..

August Retail Sales Increase 0.6% Over July's 0.3% Upwardly Revised Sales

the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $444.4 billion in August, which was an increase of 0.6% (±0.5%) from the revised July sales of $441.8 billion, and 5.0% (±0.9%) above sales in August of last year....July’s seasonally adjusted sales were originally reported at $439.8 billion, and with the upward revision the June to July percentage change in sales was revised from the previously reported virtually unchanged (±0.5%)* to an increase of 0.3% (±0.2%), while June sales were revised up by over 0.1%, from $439.8 billion to $440.3 billion....estimated unadjusted sales in August, extrapolated from surveys of a small sampling of retailers, indicated sales rose to $455,181 million in August from $448,745 million in July, and up from the $441,013 million in August a year ago, so we can see there was a fairly small downward seasonal adjustment to sales data for both months...

to break down the details of this August retail sales estimate, we'll again start by including a picture of 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 July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance estimates (now called "preliminary") as of this report, likewise for each business type, with the June to July change under "June 2014 revised" and the revised July 2013 to July 2014 percentage change in the last column shown...for reference, here is what those July percentage changes looked like before this month's revision....  

August 2014 retail sales

looking at the details for August sales in the first column above, it's fairly clear that the seasonally adjusted 1.5% increase in motor vehicle and parts sales to $89,999 million was the major reason for the stronger than expected headline increase for the month; excluding motor vehicles and parts, retail sales rose 0.3% to $354,378...other than automotive products, August's retail sales were stronger than July's for miscellaneous store retailers, where sales rose 2.5% to $10,247 million, for building material and garden supply stores, where sales rose 1.4% to $27,979 million, for specialty stores, such as sporting goods, book and music stores, where sales rose 0.9% to $7,387 million, for furniture stores, where sales rose 0.7% to $8,451 million, for electronics and appliance stores, where sales also rose 0.7% to $8,847 million; for restaurants and bars, where sales rose 0.6% to $47,746 million, and for drug stores, where sales rose 0.6% to $25,338 million...the only business types that saw seasonally adjusted sales fall in August were gas stations, where sales fell 0.8% to $45,216 million, and general merchandise stores, where sales fell 0.1% to $55,538 million...

looking at the revisions to July in the table above and comparing them to the table from the advance report for July as released last month, we find that a large factor in the revision of July's sales from unchanged to an increase of 0.3% was the revision of sales of motor vehicles and parts, from the previously reported decrease of 0.3% to an increase of 0.6%; July's sales without automotive sales are now up 0.3% vs the previously reported 0.1% increase...another major upward revisions to last months sales was sales at general merchandise stores, which were originally reported as being 0.5% lower but have now been revised to an increase of 0.5%...we also find that sales at specialty stores, ie, sporting goods, book and music stores, have been revised from an increase of 0.2% to an increase of 1.0%, that sales at non-store retailers (mostly online) were revised from a decline of 0.1% to an increase of 0.5%, and that July sales at clothing stores were revised from an increase of 0.4% to an increase of 0.9%..meanwhile, July sales at miscellaneous store retailers were revised from a 0.9% increase to an increase of just 0.1%, while sales at building material and garden supply stores were revised from a increase of 0.2% to a decrease of 0.5% for July...

Consumer Credit Increases in July by the Most Since 2001

Monday saw the G.19 Release on Consumer Credit for July from the Fed, a report which we watched closely a few years back when student debt issued by the federal government was growing at a 50% annual rate...in July, total seasonally adjusted consumer credit increased at a 9.7% annual rate, or by $26.01 billion annualized to $3.24 trillion, its largest increase since November 2001... the revolving credit portion of the aggregate, which would mostly be credit card debt, increased by $5.3 billion, a 3.4% annual rate, to $880.5 billion, while non-revolving credit, which includes loans for cars and college tuition but not for real estate, rose by $20.65 billion to $2,357.1 billion, an annual growth rate of 10.6%....June's seasonally adjusted credit increase was revised to an $18.81 billion rate of increase instead of the previously reported $17.2 billion, showing a $1.81 billion increase in revolving credit and a $16.99 billion increase in non-revolving credit...the Zero Hedge bar graph below shows the seasonally adjusted monthly change in non-revolving credit outstanding in red and revolving credit monthly in blue since the beginning of 2011, with decreases in credit outstanding for any either type pointing down…the black line sums the two to track the headline change in credit that this release reports on...the heavier use of credit over the past five months has been powering auto sales to post recession highs...

July 2014 consumer credit via ZH

July Wholesale Inventories Increase by 0.1%

the first release covering inventories we saw this week was on Wholesale Trade, Sales and Inventories for July from the Census Bureau, which reported that seasonally adjusted sales of wholesale merchants rose 0.7% (+/-0.5%) to $458.6 billion from the revised June estimate of $455.2 billion, and were up 7.5% (+/-1.8%) from July a year earlier...the June preliminary sales estimate was revised upward $0.7 billion or 0.2%, and hence was up 0.4% over May...July wholesale sales of durable goods were up 0.4 percent (+/-0.9%)* over June and were up 8.0 percent (+/-1.4%) from July a year ago, as wholesale metal sales rose 4.5% while wholesale sales of professional and commercial equipment fell 0.6%...seasonally adjusted sales of nondurable goods were up 1.0 percent (+/-0.7%) from June and were up 7.2 percent (+/-2.8%) from last July as wholesale sales of groceries rose 2.9% while sales of alcoholic beverages fell 1.9%...meanwhile, seasonally adjusted wholesale inventories were valued at $533.8 billion at the end of July, 0.1% (+/-0.4%) higher than the revised June level and  7.9% (+/-0.7%) above last July's level, while June's preliminary estimate was revised downward $0.5 billion or 0.1%...wholesale durable goods inventories were up 0.3 percent (+/-0.2%) from June and up 8.4 percent (+/-1.2%) from a year ago, with wholesale inventories of hardware up 1.8% while inventories of computer equipment were down 4.0%...inventories of nondurable goods were virtually unchanged (+/-0.7%)* in July while they were up 7.0% (+/-1.2%) from last July, as wholesale inventories of drugs and druggists' sundries were up by 3.4% while wholesale inventories of farm products were down 8.2%... finally, the closely watched inventory to sales ratio of merchant wholesalers was at 1.16, down slightly from the 1.17% ratio of June but unchanged from the inventory to sales ratio of 1.16 in July of last year...

July Business Inventories Rise 0.4%

on Friday, the Census Bureau released the Manufacturing and Trade Inventories and Sales report for July, covered in the media as the business inventories report, which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers' shipments increased by 0.8 percent (±0.2%) from June to $1,360.3 billion in June, which was 5.3% (±0.6%) above the total monthly sales level of July of last year...manufacturers sales were estimated at $507,362 million, retailer's sales were estimated at $394,381 million, while merchant wholesalers accounted for $458,563 million of the overall total....meanwhile, total manufacturer's and trade inventories were estimated to have increased 0.4 percent (±0.1%) from June to a seasonally adjusted $1,750.1 billion in July, which was up 5.9 percent (±0.4%) from July a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $653,831 million, inventories of retailers were estimated to be valued at $562,475 million, and inventories of wholesalers were estimated to be valued at $533,763 million at the end of July...the month end total business inventories to total sales ratio, the metric which is watched to determine if inventories are becoming excessive, was at 1.28, down fractionally from 1.29 in both June and from July a year ago...generally, inventory growth in July was slightly off the pace of the second quarter and should the slower growth rate of July persist, it could be a slight negative for third quarter GDP...

New Hires at a Post Recession High in July as Job Openings are Unchanged

according to the Job Openings and Labor Turnover Survey for July (JOLTS) from the Bureau of Labor Statistics, seasonally adjusted job openings were at 4,673,000, virtually unchanged from June's 4,675,000, a figure which was revised up 4,000 from the originally reported 4,671,000 openings....job openings in retail sales rose by 22,000 to 487,000, while job openings in education and health care services fell by 15,000 to 806,000....job openings as a percentage of the employed labor force was unchanged from the 3.3% reading of June, but up from 2.7% a year earlier...based on 9,671,000 officially unemployed in July, there would be 2.1 unemployed who were actually looking for work during July for every job opening, and that, of course, does not count those who might have wanted a job but didn't look for work during the month...

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 include retirements and death.... in July, seasonally adjusted new hires totaled 4,872,000, up 81,000 from the 4,791,000 hired or rehired in June and the highest level of hiring since July 2007, though the hiring rate as a percentage of all employed remained unchanged from June at 3.5%, and up from 3.3% a year earlier....total hiring in construction jumped by 98,000 to 366,000, while hiring in manufacturing fell by 9,000 from June to 259,000....total separations also rose, from 4,520,000 in June to 4,559,000 in July, as the separations rate as a percentage of the employed remained unchanged at 3.3%, while it was up from 3.2% a year ago...subtracting the 4,559,000 total separations from the total hires of 4,791,000 would imply an increase of 232,000 jobs in July, 20,000 more than the revised payroll job increase of 212,000 for July reported by the BLS establishment survey last week, a difference not unexpected between these two surveys that both have wide confidence intervals...

further breaking down the seasonally adjusted job separations, we find 2,517,000 quit their jobs in July, 33,000 more than the revised 2,484,000 who quit their jobs in June, while the quits rate, an indicator of worker confidence which is being watched by the Fed, remained unchanged at 1.8% of total employment.....in addition to those who quit, another 1,659,000 were either laid off, fired or otherwise discharged in July, not much changed from 1,657,000 discharges in June, which left the discharges rate at 1.2% of all those who were employed during the month....meanwhile, other separations, which includes retirement and death, were at 382,000 in July, up a bit from 378,000 in June, for an 'other separations' rate of 0.3%, which was unchanged....our FRED graph for this report below shows job openings in blue in thousands monthly since January 2005, and monthly hires in orange and monthly separations in violet over the same span.note that when separations in purple were above  hires in orange we were losing jobs...the two major components of separations are also included, the count of layoffs and firings is tracked in red, while the number of those quitting their jobs monthly is shown in green....

July 2014 JOLTS

(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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, September 7, 2014

August’s employment report, July’s trade deficit and Mortgage Monitor, et al

the key reports of this past week were the employment situation summary from the BLS and our international trade report for July from the Commerce Dept; we'll also take a look at the Mortgage Monitor for July (pdf) from Black Knight Financial Services (BKFS, formerly LPS), which was also released this week...other reports of note released this past week included:

  • the manufacturing Purchasing Managers Index (PMI) for August from the Institute for Supply Management (ISM), which rose to 59.0%, up from 57.1% in July, the highest reading since March 2011, and indicating a larger plurality of manufacturing purchasing managers reported expansion in various facets of their business; 
  • the August Non-Manufacturing Report, also from the ISM, which showed their non-manufacturing index rose from 58.7% in July to 59.6% in August, the highest reading ever for this index, and similarly indicating that a larger percentage of service industry purchasing managers saw expansion in their business than did a month ago..
  • the Full Report on Manufacturers’ Shipments, Inventories, & Orders for July from the Census Bureau (pdf), which showed new orders for manufactured goods rose by $53.1 billion or 10.5% to a record high of $558.3 billion, factory shipments rose by $6.0 billion or 1.2% to a record $507.4 billion, factory inventories rose by $0.9 billion or 0.1% to a record high at $653.8 billion, and unfilled factory orders rose by $58.9 billion or 5.4% to $1,158.2 billion, which was also the highest level value of unfilled orders on record....  
  • the Census report on Construction Spending for July (pdf). which estimated that our seasonally adjusted construction spending for the month would work out to an annual rate of $981.3  billion in spending overall, 1.8 percent (±1.6%) above the revised June estimate of spending at a $963.7 billion annual rate and 8.2 percent (±2.3%) above last July's adjusted and annualized level of construction spending....private construction spending was at a seasonally adjusted annual rate of $701.7 billion, 1.4 percent (±0.8%) higher than the revised June estimate, with residential spending rising  0.7 percent (±1.3%)* and non-residential construction rising 2.1 percent (±0.8%), while public construction spending was estimated at $279.6 billion, 3.0 percent (±3.0%)* above the revised June estimate...
in addition, Ward's Automotive estimated that light vehicle sales were running at a 17.45 million seasonally adjusted annual rate in August, which was 6.4% higher than in July’s rate and the highest annualized monthly sales rate since January 2006...this adjusted number was based on sales of 1.51 million light vehicles sold over 27 selling days in August, as compared to the sales of 1.43 million vehicles sold over 26 selling days in July and adjusted using seasonal factors supplied by the BEA...included below is Bill McBride's graph of monthly auto sales (at a seasonally adjusted annual rate) since the beginning of 2006, wherein you can see how new car sales are now near pre-recession record levels…

August 2014 auto sales

142,000 New Jobs Added in August, the Least This Year

the August survey of business establishments and government agencies conducted by the BLS found that nonfarm payroll employment increased by a seasonally adjusted 142,000 jobs to 139,118,000 jobs in August, well below the consensus forecasts of between 220,000 and 230,000 new jobs...in addition, July's count of new payroll jobs was revised from 209,000 to 212,000, and the increase in June's non farm payroll employment was revised down, from 298,000 to 267,000, meaning that this report added just 114,000 payroll slots to the total seasonally adjusted employment figures, the worst report this year.....the unadjusted establishment data indicates that 327,000 were actually added to non-farm payrolls in August, after the seasonal loss of 1,110,000 jobs in July, bringing the estimated total actually employed by business and government in August to 138,989,000...the FRED bar graph below incorporates the seasonally adjusted revisions to the June and July reports and shows the seasonally adjusted payroll job change monthly since the beginning of 2008, with job gains above the zero line and job losses below it...

  August 2014 payroll jobs

seasonally adjusted payroll jobs increased in most major sectors in August, while manufacturing employment remaining unchanged and small job losses were recorded in the retail and information sectors...as usual, the broad professional and business services category showed the largest gains at 47,000 new payroll jobs, with 13,000 of those added by temporary help agencies while 7,800 jobs were added in business management...another 34,000 jobs were added in health care and social assistance, with the addition of 22,800 in ambulatory health care services, including 7,800 in doctors offices, and 8,700 in social assistance...20,000 jobs were added in construction, with 11,500 of those in the specialty trades and 7,200 working on construction of buildings....employment in leisure and hospitality increased by 15,000 in August, as the addition of 21,500 jobs in restaurants and bars offset the loss of 3,900 jobs in performing arts and spectator sports...job gains in other sectors were less impressive; a net 8,000 jobs were added by federal, state, & local governments, 7,000 were added in financial activities, 6,500 were added in wholesale trade, 2,000 were added in the extractive industries, and 1,200 were added in transportation and warehousing...although there were 8,400 jobs less jobs in retail, the BLS points out that was largely the function of a loss of 17,100 jobs in food and beverage stores due to employment disruptions at a grocery store chain in New England...

once again, the average workweek for all payroll employees was unchanged at 34.5 hours for the 6th month in a row, with only mining and logging, where hours were up from 44.5 per week to 44.8 hours, seeing an increase greater than a tenth of an hour... the manufacturing workweek was up 0.1 hour to 41.0 hours after falling 0.2 hour in July, while factory overtime was unchanged at 3.4 hours ...the average workweek for production and nonsupervisory employees was also unchanged at 33.7 hours, with the average health services nonsupervisory employees seeing their workweek increase a 0.2 hours to 32.1 hours...the average hourly pay for all workers rose by 6 cents an hour to $24.53 an hour, bringing the year over year increase to 50 cents, or about 2.1%, while the average pay for nonsupervisory workers also rose by 6 cents to $20.68, with their year over average hourly pay rising 51 cents, a 2.5% average annual pay increase.. 

Unemployment Rate Drops to 6.1% as Those Not Counted at a Record High

in contrast to the establishment survey, the employment data extrapolated from the August survey of 60,000 households showed that the seasonally adjusted count of the employed rose by just 16,000 to 146,368,000, a number not directly comparable to the establishment data as it includes farm workers and the self-employed... meanwhile, the count of the unemployed fell by 80,000 to 9,591,000, which thus means the number of us who were counted in the labor force fell by 64,000, leaving the unemployment rate, or the percentage of the total, at 6.1% in August, down from 6.2% in July...with an increase of 206,000 in the working age population and 64,000 less in the labor force, the count of those not in the labor force (and hence not counted when the percentages are calculated) rose 268,000 to a record high 92,269,000...as a result, the labor force participation rate fell back from 62.9 to 62.8, a 36 year low touched four times since last October...and although the employed to population ratio also fell slightly,  the decrease was statistically small enough to leave the official ratio unchanged at 59.0%......our FRED graph below shows the employment to population ratio, which we could think of as the employment rate, in blue, and the labor force participation rate in red, back to the turn of the century...

August 2014 household survey metrics

>of the seasonally adjusted total of 146,368,000 of us counted as being employed in June, 118,616,000 reported they were working full time, 127,000 more than in July, while 27,743,000 reported they were working part time, or less than 34 hours in the reference week, a decrease of 327,000 part time workers over July's count...of those, the count of those working part time who would rather work full time fell by 234,000 to 7,277,000; as a result, the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell by 0.2% to 12.0%...meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work fell by another 192,000 in August to 2,963,000, while the median duration of unemployment fell from 13.3 weeks to 13.2 weeks, numbers which have been falling since the end of extended unemployment rations disincentivized the long term unemployed to continue looking for work ...among the 92,269,000 of us not officially in the labor force and hence not counted as unemployed, 6,382,000 reported that they still wanted a job, down from 6,624,000 in July but up from 6,291,000 a year ago; of those, 2,141,000 were categorized as "marginally attached to the labor force" because they had looked for work sometime during the last year, but not during the 30 day period covered by the August survey...775,000 of those were further characterized as "discouraged workers", because they reported that they haven't looked for work because they believe there are no jobs available to them...

July Trade Deficit Falls 0.7% to $40.5 Billion

the July report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was at $40.5 billion for the month, down from the revised trade deficit of $40.8 billion in June, as our exports rose more than $1.8 billion to $198.0 billion on a $1.8 billion increase to $138.6 billion in our goods exports and a $0.1 billion increase to $59.4 billion in our services exports, while our imports rose $1.6 billion to $238.6 billion on a $1.5 billion increase to $198.8 billion in our imports of goods, while our imports of services were virtually unchanged at $39.8  billion...the June trade deficit was revised down from the previously reported $41.5 billion, which suggests there will be yet another upward revision to 2nd quarter GDP....since last July, our overall trade deficit has increased by $1.1 billion, on an $8.1 billion increase in exports and a $9.2 billion increase in imports...

end use categories of exports that saw seasonally adjusted increases in July included exports of automotive vehicles, parts, and engines, which were up $1,695 million to $15,314 million, industrial supplies and materials, which were up $1,264 million to $43,470 million on a $628 million increase in exports of petroleum products other than fuels a $268 million increase in exports of fuel oil, and a $205 million increase in exports of non-ferrous metals, and and increase in exports of capital goods, where our exports increased by $427 million to $46,097 million on a $286 million increase of industrial machines not itemized separately and a $149 million increase in exports of telecommunications equipment...on the other hand, our exports of consumer goods decreased by $650 million to $16,508 million on a $343 million decrease in exports of gem diamonds, a $130 million decrease in exports of jewelry, and a $116 million decrease in our exports of artwork and antiques...also, our exports of food, feeds and beverages decreased by $632 million to $11,061 million on $166 million lower exports of nuts, $152 million less exports of corn, $143 million less exports of soybeans, $108 million less exports of animal feeds not otherwise classified, and $104 less exports of meat and poultry..in addition, our exports of goods not categorized by end use fell by $15 million to $5,134 million...

the June to July increase in imports of goods included a $1370 million increase to $28,855 million in imports of automotive vehicles, engines and parts, and a $506 million increase to $55,942 million in industrial supplies and materials, as increases of $740 million in crude oil imports, $395 million more imports of non-monetary gold, and $298 million more in imports of fuel oil were partially offset by $217 million less imports of other precious metals, $202 million less imports of other petroleum products, $194 million less imports of natural gas, and $184 less imports of nuclear fuel materials...our imports of foods, feeds and beverages also increased by $56 million to $10,887 million as a $168 million increase in imports of fruits and frozen fruit juices was partially offset by a $151 million decrease in imports of oils and oilseeds...in addtion, our imports of of goods not categorized by end use rose by $533 million in July to $6,873 million... meanwhile, our imports of consumer goods fell by $497 million to $45,128 million on $307 million less imports of cell phones and similar products, $181 million less imports of textiles other than wool or cotton, and $164 million less imports of pharmaceuticals, which were partially offset by $161 million more imports of art and antiques....we also imported $49,110 in capital goods, $340 million less than in June, as an increase of $310 million in imports of industrial machines not itemized separately and $245 million more imports of civilian aircraft was partially offset by $133 million less imports of excavating machinery and $126 million less imports of civilian aircraft parts..

included below is Bill McBride's graph of our trade deficit from his coverage of this report, which shows the relationship of our net petroleum trade deficit to our deficit overall....reading from the top $0 line down, the black graph line tracks our deficit in petroleum trade only as a negative in billions of dollars since 1998; over the same span, the red graph shows our trade deficit for everything else except oil, also as a negative from the $0 line; combined together, those two sum to our total trade deficit, which Bill has graphed in blue...it's pretty clear that even though our oil deficit in black has generally been falling (ie, going up towards zero on this chart) over the past couple of years, our trade deficit in everything else in red has continued to grow...

July 2014 McBride trade deficit

Foreclosure Starts and 90 Day Defaults Rise Again, Average Time in Foreclosure at a Record 1001 Days

according to the Mortgage Monitor for July (pdf) from Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division), 935,460 home mortgages, or 1.85% of all mortgages outstanding, remained in the foreclosure process at the end of July, which was down from 951,384, or 1.91% of all active loans that were in foreclosure at the end of June, and down from 2.82% of all mortgages in July of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and July's so-called "foreclosure inventory" was the lowest percentage of homes in foreclosure since March of 2008...however, new foreclosure starts rose in July for the third month in a row, as the 90,690 homes foreclosed on in July was 2.7% higher than the 88,314 foreclosures started in June and 15.1% over the 78,796 foreclosures started in April; nonetheless, new foreclosures are still well off the pace of last year, as year-to-date foreclosure starts were at their lowest since 2008 and down 13.43% from a year ago...

in addition to homes in foreclosure, July data showed that 2,849,000​ mortgage loans, or 5.64% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down 1.1% from 5.70% of homeowners with a mortgage who were more than 30 days behind in June, and down from the delinquency rate of 6.41% a year earlier...of those who were delinquent in July, 1,136,000 home owners were considered seriously delinquent, which means they were 90 or more days behind on mortgage payments, but not in foreclosure at the end of the month...thus, a total of 7.49% of homeowners with a mortgage were either late in paying or in foreclosure at the end of July, and 4.10% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure...  

the graph below, from page 4 of the Mortgage Monitor pdf, shows the percentage of mortgages that were in the foreclosure process monthly since 1995 in green, the percentage of active home loans that were delinquent but not in foreclosure over the same period in red, and the total of both, representing total percentage of mortgages that were in some kind of mortgage trouble each month, in blue over the same period…we can see that the percentage of homes in foreclosure in green has been falling fairly steadily over the last two years and at 1.85% in July is now well below the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice that's still more than 4 times the pre-crisis foreclosure inventory of 0.44% from December 2005 that’s highlighted on the graph, so the percentage of homes in foreclosure is still a long way from normal …similarly, with delinquent mortgages shown in red at 5.64% of all mortgage outstanding in July, that count is down to almost half of the 10.57% of all mortgages that were delinquent but not in foreclosure at the peak of the mortgage crisis in January of 2010, but still somewhat above the December 2005 mortgage delinquency percentage of 4.27% noted on the graph...note also the seasonality of mortgage delinquencies apparent in the track of the red graph below, wherein they usually begin to increase at the beginning of the school year and peak during the holidays, and then decline at the beginning of the year as homeowners catch up on all their bills after holiday shopping... 

July 2014 LPS delinquencies and foreclosures

the next graph below, from page 7 of the Mortgage Monitor pdf, shows the historical track of the number of foreclosure starts monthly since the beginning of 2008 in red, and the track of the number of mortgages that have transitioned into 90 day delinquencies each month over the same time frame...as we mentioned earlier and as is obvious on the chart, the number of foreclosure starts has gone up over the last 3 months; similarly, the number of new 90 day defaults has now increased for four months in a row...note the callout on the graph, where BKFS tells us 53% of new foreclosure starts are now repeats, where a homeowner had previously resolved a foreclosure, presumably by catching up on payments or through a mortgage modification, only to fall behind on payments and be foreclosed on again...also note that 79% of foreclosure starts in July were on mortgages originating in 2008 or earlier, as were 74% of the new 90 day defaults...

July 2014 LPS 90 day and foreclosure starts

the next graph, from page 8 of the mortgage monitor, is a color-coded representation of the year of origination for the 90 day delinquent mortgages in each of several larger states, as well as for the US as a whole...within each bar representing the entirety of the 90 day delinquent mortgages in a state, the top virtually invisible light blue band represents the percentage of 90 day delinquent mortgages that originated this year; followed by the orange band, which represents the percentage of 90 day delinquent mortgages that originated last year (2013), followed by teal blue for 2012, purple for 2011, green for 2010, red for 2009, and dark blue for the percentage of 90 day delinquent mortgages that originated prior to 2008, which obviously represents the majority of the seriously delinquent mortgages...

July 2014 LPS 90 day by state and vintage 

next we'll include the updated table that shows the breakdown of non-current mortgages by state, taken from page 24 of the pdf...shown below for each state and the District of Columbia are the percentage of home loans that were delinquent (Del%) in July, the percentage of mortgages that are in the foreclosure process (FC%), the total mortgages that weren't current with their payments (NonCurr%) and the year over year change in the number of non-current mortgages...note that states that have a judicial foreclosure process, where the bank must prove their right to foreclose on a homeowner in court, are marked by a red asterisk, and BKFS gives this as a reason that foreclosures have been taking so long....there are now only 4 states that still have more than 4% of their mortgaged homes in the foreclosure process, and all are judicial states: New Jersey at 6.1%,  Florida with 4.8%, New York with 4.6%, and Hawaii with 4.1% of their homes with mortgages in foreclosure..

July 2014 LPS state non current table

for an overview of how this foreclosure crisis has played out from the beginning, we’ll also include below, from page 25 of the pdf, a portion of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status...the columns here 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 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 those who’ve 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 although the total counts of both mortgages that are seriously delinquent and those that are in foreclosure has been falling over the past year & a half, the average length of time for those who have been more than 90 days delinquent without foreclosure remains at 501 days, while the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 1001 days...

July 2014 LPS non current state 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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)

Sunday, August 31, 2014

2nd quarter GDP revision; July’s income and outlays, durable goods and new home sales; June’s Case-Shiller, et al

the key releases of the past week were the 2nd estimate of 2nd quarter GDP from the BEA on Thursday, and the BEA report on personal Incomes and spending for July on Friday, which gives us the largest component of 3rd quarter GDP for the month....other widely watched reports included new home sales for July released on Monday, and the Case-Shiller house price indexes and the Census report on orders, shipments, and inventories of durable goods, both released on Tuesday....other reports included the the Chicago Fed National Activity Index for July (pdf), a composite index of 85 different economic metrics grouped into four broad categories of data, which rose to +0.39 in July from +0.21 in June.as 53 of the indicators were positive, indicating growth above trend....three of the four broad categories of indicators that make up the index made positive contributions in July: production related indicators added .0.31 to the index, employment-related indicators added 0.13, sales, orders, and inventories added 0.05, while the the consumption and housing category subtracted 0.10 from the overall reading for July...we also saw the release of three regional Fed manufacturing surveys; the August Texas Manufacturing Outlook Survey from the Dallas Fed indicated somewhat slower expansion in the district as its broadest business index slipped from 12.7 in July to 7.1 in August as the production index fell from 19.1 to 6.8, in indices where positive readings indicate expansion....then the Richmond Fed, reporting for a District that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported slightly faster growth in August as the Fifth District manufacturing composite index rose to 12, up from a reading of 7 in July, as new orders and shipments both rose...in addition, the Kansas City Fed, surveying an region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported that Growth in Tenth District Manufacturing Activity Slowed Slightly (pdf) as their August composite index fell to 3 in August from 9 in July as manufacturers of non-durable goods slowed somewhat...

2nd Quarter GDP Growth Rate Revised to 4.2%

the Second Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 4.2% rate in the second quarter, revised from the 4.0% rate reported last month, as fixed investment and net exports were revised up and inventories were revised down...in current dollars, our 2nd quarter GDP would extrapolate to $17,311.3 billion annually, up 1.57%, or at a 6.4% annual rate from the $17,044.0 billion annualized figure of the 4th quarter...however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage calculations in this report are based....the resulting inflation adjustment used in the second quarter, aka the "GDP deflator", implies annual inflation at a 2.1% rate, up from the annualized 2.0% inflation factor previously reported for the second quarter, and up from 1.3% GDP deflator applied to GDP in the 1st quarter...while we cover the details below, recall that all quarter over quarter percentage changes reported in this release are given at an annual rate, which means that they're expressed as a change a bit over 4 times of the change that actually occurred over the 3 month period...

while the net growth of real personal consumption expenditures was unchanged from the 2.5% annual rate of increase reported in the first estimate, that was a coincidence of the downward revision of real non-durable goods consumption balancing the revised increase in real outlays for services....even so, real personal outlays for durable goods rose at an 14.3% annual rate in the quarter and added 1.00% to GDP, up from the 14.0% growth rate first reported, boosted in part by a negative 1.8% price deflator...deflation adjusted consumption of motor vehicles, which grew at a 19.9% annual rate, accounted for almost half of the increase in consumer spending for durables and added 0.47% to 2nd quarter growth, while real outlays for durable household equipment and furniture rose at a 12.6% annual rate and added 0.20% to GDP, and real spending for recreational goods and vehicles rose at a 8.9% rate and contributed 0.26% to the quarter's growth rate...meanwhile, real personal spending for non-durable goods rose at a 1.9% rate, down from the previous estimate of a 2.5% growth rate, as inflation adjusted food and beverage outlays fell at an inflation adjusted 1.5% annual rate and inflation adjusted energy goods consumption fell at a 3.9% annual rate...so while the increase in real consumption of clothing and all other core non-durable goods added .46% to GDP, the decrease in real outlays for food subtracted .08% and the decrease in energy goods consumption subtracted .09%...real consumption of services, however, grew at an 0.8% rate and added 0.40% to the quarter's growth, revised from the 0.7% growth rate and 0.31% addition reported last month, as real outlays for housing and utilities contracted at a 3.4% rate but only partially offset modest growth in real outlays for health care, financial services, transportation services, food services, recreation and other services..

seasonally adjusted real gross private domestic investment grew at a 17.5% annual rate in the 2nd quarter, an even stronger clip than the 17.0% that was first estimated, as the growth rate of private fixed investment was revised to 8.1% from the 5.9% estimate of last month and thus added 1.25% to the 2nd quarter's growth rate...real non-residential fixed investment grew at a 8.4% rate, rather than the 5.5% previously estimated, as investment in non-residential structures was revised from growth at a 5.3% rate to growth at a 9.4% rate, which added 0.26% to the quarter's GDP growth...in addition, investment in equipment grew at a 10.7% rate, not the 7.0% rate previously reported, and added 0.59% to 2nd quarter growth, and the quarter's investment in intellectual property products was revised from a growth rate of 3.3% to a 4.4% growth rate and added 0.17% to the annualized change in growth for the quarter...residential investment was the only category of fixed investment to see a slight downward revision, as it grew at a 7.2% rate, not the 7.5% reported last month, and as a result added 0.22% to economic growth in the 2nd quarter...

meanwhile, the real (inflation adjusted) change in private inventories was also revised down, as they grew by an inflation adjusted $83.9 billion, revised from the $93.4 billion increase reported previously, and hence there was a $48.7 billion change in inventory growth from the first quarter's increase of $35.2 billion, which added 1.39% to the quarter's growth rate...since higher inventories are indicative of produced goods that have not been shipped or sold, their increase by $47.8 billion means real final sales of GDP were less than the headline figure by that amount and thus are recorded rising at a 2.8% rate in the 2nd quarter..

the figures for the change in our real 2nd quarter net trade figures were revised as well, roughly in line with our estimates in reporting on the June trade report, which was released a week after the 1st estimate....the BEA originally estimated that our 2nd quarter exports had increased at an inflation adjusted 9.5% annual rate while imports rose at a 11.7% rate, for an increase in the trade deficit over the 1st quarter that subtracted 0.62% from the 1st estimate of 2nd quarter GDP...with the revision including corrected June data, we now find that 2nd quarter exports have increased at 10.1% rate, while growth in imports was slightly smaller than the original estimate at 11.0%...as you should 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 increase in real exports added 1.31% to 2nd quarter growth, while the nominally larger change in real imports subtracted 1.74% from the 2nd quarters's GDP...  

finally, there were only minor revisions to real government consumption and investment in this 2nd estimate...real federal government consumption and investment shrunk at a 0.9% rate vis a vis the first quarter, revised from 0.8% lower, as real federal spending for defense grew at a 0.9% rate and added 0.04% to GDP, rather than the 1.1% growth rate and 0.05% addition previously published, while.all other federal consumption and investment fell at a 3.7% rate, which was unrevised, and which subtracted 0.10% from GDP...real state and local outlays rose at a seasonally adjusted 2.9% rate, rather than the the 3.1% increase previously reported, as real state and local investment rose at a 11.1% rate and added 0.20% to GDP while state and local consumption expenditures rose at a 1.3% rate and added 0.12% to 2nd quarter growth...

our FRED bar graph below, which can also be viewed as an interactive, has been updated with these latest GDP revisions…each color coded bar shows the change, in billions of chained 2009 dollars in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph below, the quarterly changes in real personal consumption expenditures are shown in blue, the quarterly changes in gross private investment, including structures, equipment and intangibles, are shown in red, the change in imports are shown in green, the change in exports are shown in purple, while a component of investment, the quarterly change in private inventories is in yellow..then the change in state and local government spending and  investment is shown in pink, while the change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line.... 

2nd quarter 2014 GDP 2nd estimate

Personal Income Rises 0.2% in July as Spending Falls 0.1%

the other key monthly release this week, also from the Bureau of Economic Analysis, was on Personal Income and Outlays for July, which in addition to the important personal income data, also reports the monthly data on our personal consumption expenditures (PCE), which as we just saw is the major component of GDP...from that data, the BEA also computes personal savings and the national savings rate, as well as a price index for PCE, the inflation gauge the Fed targets and which is used in this report to adjust both personal income and consumption expenditures for inflation to arrive at 'real' change figures....like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the actual monthly dollar changes, which are not reported, are thus on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts, so it's frequently misreported that way...

in July, total personal income increased at a seasonally adjusted and annualized $28.6 billion rate to what would be a gross national annual income of $14,799.0 billion, which was 0.2% higher than in June, when personal income increased by 0.5% over May...disposable personal income (DPI), which is total income after taxes, increased at an annualized rate of $17.7 billion to $13,061.1 billion annualized, which was also a 0.2% increase over June, while June's DPI was also up 0.5% over May...increases in private wages and salaries accounted for $12.9 billion of the July personal income gain, with $12.3 billion of that increase seen in service industry payrolls, as manufacturing payrolls were unchanged...increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $3.7 billion of July's annualized increase, while employee contributions for government social insurance, which is subtracted from the personal income figure, increased at a $2.0 billion rate...meanwhile, proprietors' income decreased at a $2.7 billion rate in July, as a $9.0 billion decrease in farm owners incomes more than offset a $6.3 billion increase in incomes of individual proprietors of other types of business....other sources of the July personal  income increase included rental income of individuals, which increased at a $5.5 billion clip in July, personal interest and dividend income, which increased at a $1.4 billion rate, and personal transfer payments from government programs, which increased at a $8.1 billion rate..

meanwhile, seasonally adjusted personal consumption expenditures (PCE), which were a major positive factor in the 2nd quarter GDP data we reviewed earlier, fell at a $13.6 billion annual clip to $11,900.5 billion in July, which was 0.1% lower than June and an ominous start to the 3rd quarter....personal outlays for services were down at a $1.1 billion rate to an annualized $7,923.4 billion, personal spending for durable goods fell at a $9.1 billion rate to $1,298.4 billion annually, while personal consumption of non-durable goods fell at a $3.4 billion annual rate to an annualized $2,678.7 billion.....total personal outlays, which includes interest payments, and personal transfer payments in addition to PCE, fell by an annualized $12.0  billion in July to $12,322.0 billion, in contrast to the increase of $51.2 billion in June outlays....however, the lower outlays left personal savings, which is disposable personal income less total outlays, at $739.1 billion for the month, up from savings of $709.4 billion in June...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 5.7% in July, up from 5.4% in June... 

while personal consumption expenditures accounted for 68.2% of our 2nd  quarter GDP, before they were included in the computation of the change in real GDP they were first adjusted for inflation...that's done with the price index for personal consumption expenditures which is computed here, which is a chained price index based on 2009 prices = 100....that index rose to 109.114 in July from 109.023 in June, giving us a month over month inflation rate of 0.08% and a year over year PCE price index increase of 1.61%; as a result, inflation adjusted or real personal consumption expenditures fell by 0.2% July after rising 0.2% in June, which would indicate a negative PCE contribution from July to GDP for the coming third  quarter (since real PCE in April and May was relatively flat)....using the same PCE price index, disposable personal income is deflated to show that real disposable personal income, or the purchasing power of disposable income, rose just 0.1% in July, after 0.3% real increases in each of the three previous months..

our FRED graph below, which can also be viewed as an interactive, shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the scale in chained 2009 dollars for both on the left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right...the spike in income and savings at the end of 2012 was a result of bonuses and income manipulation before the year end fiscal cliff; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….although it may appear from the graph that real disposable income has been accelerating over the past 13 years, real DPI as shown below is not adjusted for increases in the population; on a per capita basis, real DPI is up just 20.7% over the span of this graph…   

July 2014 income and outlays

Backlog of Orders for Durable Goods Up 5.4% in July, 12.4% More than a Year Ago

an unusually large number of orders for the costly new Boeing 777Xs in July skewed the widely watched new orders for durable goods for the month, rendering the headline increase a one time phenomena which will likely be reversed when new orders return to a normal pace... the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau estimated that new orders for manufactured durable goods rose by a seasonally adjusted $55.3 billion, or 22.6%, to $300.1 billion, a new all time high, after rising by 2.4% in June...the increase was driven by an increase in new orders for transportation equipment, which were up $56.6 billion to $133.0 billion, which in turn was driven by a 318.0% increase to $70,281 million in new orders for commercial aircraft ...new orders excluding transportation equipment actually fell 0.8%, while the important new orders for capital goods less aircraft fell 0.5% to $72,639 million...meanwhile, seasonally adjusted July shipments of durable goods, which will be reflected in 3rd quarter GDP, increased by $8.0 billion or 3.3% to a new record $248.9 billion, with shipments of automotive equipment, up $4.8 billion or 10.4% to $50,935 million, leading the increase....in addition, seasonally adjusted inventories of durable goods, which have been up 15 out of the last 16 months, rose $2.1 billion or 0.5% to a record  $401.9 billion, with a 1.2% increase to $73,370 million of commercial aircraft inventories, which are now 15.3% higher than they were a year ago, leading the increase...finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, increased by $59.2 billion or 5.4% to a record  $1,158.5 billion ...with their long lead times, commercial aircraft orders, which were up 11.2% at $565,769 million, are a large part of this aggregate, but even without transportation equipment, unfilled orders still increased by 0.5% to $420,089 million, with unfilled orders for non-defense capital goods up a solid 1.1% to $248,439 million...overall, unfilled orders for durable goods were 12.4% ahead of last year's backlog...

New Home Sales Continue at Below a 450,000 a Year Pace

according to the Census bureau report on New Residential Sales for July (pdf), new single family homes sold at a seasonally adjusted annual rate of 412,000, which was 2.4 percent (±11.9%)* below the revised June sales rate of 422,000 homes a year, but was 12.3 percent (±17.1%)* above the 367,000 a year pace that new homes were selling at in July of last year... the asterisks indicate that based on their small sampling, Census could not be certain whether July's new home sales rose or fell from those of June or even from those of a year ago, but they're 90% confident that July home sales rose less than 9.5% or fell less than 14.3% from those of June, and that new homes could have sold as many as 29.4% more than last JUly or as few as 6.8% less than last July, a range of uncertainty to be expected in this report which has the largest margin of error of any census construction series....the unadjusted data from Census field reps estimated that 37,000 homes sold in July, down from 40,000 in June, which was revised from the original estimate of 38,000, while May's unadjusted sales were revised back up to 43,000, after they were revised down from 49,000 to 42,000 last month...of the 37,000 homes sold in July, 13,000 were completed, 13,000 were under construction, and 13,000 had not yet been started...the median new home sales price was $269,800, in July, down from $280,100 in June; while the average sales price was $339,100, up from June's $332,100 average, as more homes sold for under $200,000 or over $750,000 in July than in  June...the Census estimated that a seasonally adjusted 205,000 new homes remained unsold at the end of July, which was a 6.0 month supply at the July sales pace, down from a 5.8 month supply in June...the FRED graph below show the historical data from this Census report, with the monthly sales reported as an annualized figure…note that new home sales have been stuck in a monthly range that would result in between 400,000 and 450,000 homes being sold annually since the end of 2012...

July 2014 new home sales

June Case-Shiller Report Shows Home Prices Rising 8.1% Year Over Year

the release of the Case-Shiller Home Price Index for June includes their 2nd quarter National home price index, comparing prices for repeat sales of homes over the 2nd quarter to the 1st quarter, in addition to the usual monthly 10 city and 20 city indexes which compare home prices of the three month period of April to June vis a vis the 3 month period from March to May...for June, they reported  both the 10-City Composite and the 20-City Composite Index increased by 1.0% for the month, while both Composites posted annual home price increases of 8.1%, in contrast to year over year gains of 9.4% for the 10-City Composite and 9.3% for the 20-City Composite last month...meanwhile, the 2nd quarter national index indicated that prices were up 0.9% in June and 6.2% from the 2nd quarter of last year...all 20 cities saw home prices rise for the month; the largest one month home price increases were registered in New York City at 1.6%, while Chicago, Boston and Las Vegas saw home prices rise 1.4%; meanwhile, at the low end San Francisco saw just a 0.3% in their home price index.....the largest year over year home price increases were seen in Las Vegas at 15,2%, San Francisco at 12.9%, Los Angeles at 10.5% and Detroit at 10.3%, while Cleveland, where prices rose 0.8%, Charlotte, where prices were up 3.8%, and New York, where prices rose 4.5%, were the only cities showing an annual home price increase of less than 5%...

included below are the pair of interactive FRED graphs we created to show the historical track of home price indexes for each of the cities in the 20 city index, which are all based on 2000 home prices equal to 100.0... in our first FRED graph, we show the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles in beet red... for the larger interactive view of this graph at FRED, click here; there you can move your cursor across the graph and view the monthly price history of the changes in the price indices for all 10 cities shown below, just as we have included the home price index values for each of them for the June report in our screenshot…

June 2014 Case Shiller A-L

our second FRED graph of the Case-Shiller city indices shows the the historical price track of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…the S&P Case-Shiller index is not seasonally adjusted, but we notice that the seasonal home price swings have become more pronounced since the housing bust…again, you can click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced and  the index values for each  viewed over time with their interactive tool…

June 2014 Case Shiller M-Z

(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 that accompanies these commentaries, most from the aforementioned GGO posts, contact me…)