June’s retail sales, industrial production, producer prices, new housing, and states jobs reports

  the major economic releases this past week were all on June data, including the advance report on retail sales from the Census Bureau, the G17 on industrial production from the Fed, and the Census report on residential construction, which were all weaker than expected, and the June producer price index release from the BLS, which showed wholesale prices rose more than thought...we also saw the first two regional surveys on manufacturing from Fed District banks; on Tuesday, the July Empire State Manufacturing Survey from the New York Fed, covering manufacturers in New York and northern New Jersey, reported that their broadest diffusion index for general business conditions rose to a four year high at 25.6, up from from 19.3 last month, in an index where any positive number indicates improving business for area manufacturers....then on Thursday, the Philadelphia Fed released their July Business Outlook Survey (pdf), covering manufactures in most of Pennsylvania, southern New Jersey, and Delaware, reporting that their broadest diffusion index of manufacturing activity rose to 23.9 from last month's 17.8, their highest reading since March 2011...

Retail Sales Increase 0.2% in June, Grow at a 9.5% Annual Rate in 2nd Quarter

the Advance Retail Sales Report for June (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $439.9 billion in June, which was an increase of 0.2 percent (±0.5%)*  from revised May sales of $438.8 billion, and 4.5% (±0.7%) above sales in June of last year....May’s seasonally adjusted sales were originally reported at $437.6 billion, and with the upward revision the April to May increase was revised from the previously reported 0.3 percent (±0.5%)* to an increase of 0.5% (±0.2%), while April sales were revised up by over 1%, from $436.2 billion to $436.73 billion...recall that an asterisk after Census percentage ranges indicates they do not yet have enough data to determine whether sales actually rose or fell during the period cited....estimated unadjusted sales in May, extrapolated from surveys of a small sampling of retailers, indicated sales fell to $438,468 million in June from $464,425 million in May, and up from $420,523 million in June a year ago, so we can see there was a fairly large seasonal adjustment to May's sales data, complicating month over month comparisons....

to break down the details and explain what they mean, we'll again start by including a picture of the table of monthly and yearly percentage changes in sales by business type from the Census pdf...notice there are three double columns in the table; the first double column shows us the percentage change in sales for each kind of business from the May revised figure to this June "advance" report in the first sub-column, and then the year over year percentage sales change since last June in the 2nd column; the second double column set below gives us the revision of the May advance estimates (now called "preliminary") as of this report, with the new April to May percentage change under "Apr 2014 r" (revised) and the May 2013 to May 2014 percentage change as revised in the 2nd column of the pair....then, the third double column shows the percentage change of the last 3 months of this year's sales (April, May and June) from the preceding three months (January thru March) and from the same three months of a year ago....with estimates for those 3 months now in place, we'll be able to speculate about the contribution of this report to 2nd quarter GDP...

looking at the details for June in the first two column above it's fairly clear that the seasonally adjusted 0.3% decline in motor vehicle and parts sales to $87,952 million was the major reason for the weaker than expected headline increase in June; excluding motor vehicles and parts, retail sales rose 0.4% to $351,939…you may recall that reports two weeks ago indicated June light vehicle sales were at an eight year high; it's possible the discrepancy between that report and this one may have arisen from differences in the seasonal adjustment method (there 24 selling days in June, down from the 27 selling days in May), or that this report, with its small sampling, might be revised higher when more complete data is available to the Census survey next month...excluding vehicles, June retail sales were stronger in general merchandise stores, where sales rose 1.1% to $56,037 million, non-store retailers, who saw sales rise 0.9% to $39,965 million, drug stores, where sales rose 0.9% to $24,962 million, specialty stores such as sporting goods, book and music stores, where sales rose 0.6% to $7,184 million, and food and beverage stores, where sales rose 0.4% to $55,386 million; the only areas seeing significant declines in June sales were building material and garden supply outlets, where sales fell 1.0% to $26,967 million, and retaurants and bars, where sales fell 0.3% to $46,830 million..

looking at the revisions to May in the table above and comparing them to the table from the advance report for May released last month, we find that sales at auto and other vehicle dealers, which were originally reported increasing by 1.4%, have now been revised to an increase of just 0.8%; hence, the overall revision from 0.3% growth in May sales to 0.5% growth was driven by major revisions in sales at other business types, as May sales excluding automotive were revised from a increase of 0.1% to an increase of 0.4%; driving that change were revisions to sales for two business types; sales at restaurants and bars, originally reported as down 0.2%, have been revised to show an increase of 0.9%, while sales at drug stores, which were reported 0.1% lower last month, are now seen to have increased by 1.1%...other major revisions were to May sales by general merchandize sores, first reported down 0.6%, are now revised to down just 0.1%, and May sales at food stores, last reported as down 0.1%, are now seen to have increased by 0.3%...meanwhile, sales at building material and garden supply stores, previously reported as increasing 1.1%, are now shown to have only increased 0.6%...

despite exceptionally weak retail sales as reported in each of the monthly advance reports during the 2nd quarter, the subsequent strong revisions to the upside have resulted in what is so far a respectable increase to sales for this past quarter, which you can see in the last pair of columns above; overall, retail sales in the 2nd quarter (April to June) were 2.3% higher than sales in the first quarter of this year, and 4.5% greater than retail sales in the second quarter of last year...on its face, that 2.3% increase, which implies quarterly growth at a 9.5% annual rate, would suggest a decent contribution from goods sales to the personal consumption expenditures component of GDP...however, before goods sold at retail are applied to the change in real GDP, they must first be adjusted for inflation, and as of this writing, our quarterly inflation data is incomplete (June CPI data will be released this coming week)...with what we've seen so far, prices for durable goods have been on a long term downtrend, so there wont likely be much of an inflation adjustment for durable catagories above, such as automotive, appliance and furniture sales....however, with increasing prices for non-durable goods, and especially food and energy, we'd rather suspect that sales increases we see above for business types such as gas stations, groceries, restaurants and drug stores will be somewhat lower once adjusted for inflation by the BEA when they report on second quarter GDP two weeks hence..

Industrial Production Increases 0.2% in June; 2nd Quarter Growth at 5.5% Annual Rate

the Fed's June G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.2% over a May reading which was revised down from a 0.6% increase in output to growth of 0.5%...the industrial production index, which is benchmarked to 2007 production equal to 100.0, rose to a record high 103.9 from a revised 103.7 in May, 4.3% higher than a year ago, while April was revised from 103.0 to 103.2, March was revised from 103.3 to 103.2, and February's index was revised from 102.5 to 102.2...the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 0.1% in June to 99.7, while the May manufacturing reading was revised from an increase of 0.6% at 99.5 to an increase of 0.4% at 99.6 and the April manufacturing index was revised from a 0.1% drop to 98.9 to a 0.3% gain to 99.1; net of all the revisions, the manufacturing index is now up 3.5% from a year earlier...the utility index, reflecting another milder than normal month, fell another 0.3% in June to 100.3, after falling 0.4% in May and 5.1% in April and is now just 1.8% higher than last May.... meanwhile, the mining index, which includes oil & gas production, increased by 0.8% to 130.3 in June, after increasing a revised 1.1% to 129.2 in May, 2.0% in April and 2.0% in March...the mining index is now up 7.2% year to date, and 9.7% higher than a year ago...

in addition to the breakdown of industrial production into the three major industry groups, this release also reports on industrial production by market group...among final products and nonindustrial supplies, which rose by 0.1% in June, seasonally adjusted production of consumer goods was statistically unchanged after falling a revised 0.3% in May...production of durable goods rose by 0.7% carried by a 4.0% in production of consumer electronics and a 0.7% increase in the heavily weighted automotive products sector...meanwhile, production of non-durable goods fell 0.2% as output of consumer energy products fell 1.2% while output of non-energy non-durables rose 0.2% as a 1.5% decline in clothing production and a 0.4% decrease in food and tobacco output was offset by a 1.1% increase in the output of chemical products and a 0.8% increase in paper products production...for the second quarter, production of durable goods increased at a 10.3% annual rate, led by annualized growth rates of 22.7% in home electronics, 17.5% in appliances, furniture, carpeting, and 13.8% in automotive production, while 2nd quarter production of non-durable goods fell at a 1.3% annual rate on a decrease in output of consumer energy products at a 16.5% annual rate, while non energy non durable goods production showed a 4.7% annualized increase...

seasonally adjusted production of business equipment rose 0.1% in June after rising by a revised 0.6% in May as production of transit equipment rose 1.6% while production of information processing equipment and production of industrial equipment both fell 0.3%...for the second quarter, output of business equipment rose at a 9.2% annual rate, as production of transit equipment rose at a 17.3% rate, output of industrial production equipment rose at a 10.1% rate, while production of information processing equipment fell at a 1.6% rate....meanwhile, production of defense and space equipment rose by 0.4% in June and grew at a 4.1% annual rate over the 2nd quarter...in addition, production of supplies for use in construction were up by 0.5% for the month and at a 4.2% rate for the quarter, while production of business supplies fell by 0.1% in June, reducing their annual growth rate in the second quarter to 0.6%...meanwhile, production of raw and intermediate materials that would input into other production processes rose by 0.4% in June and at an 8.2% rate for the quarter, boosted by June's 0.5% growth in durable goods parts and 0.6% growth in the output of energy materials...

in reporting on capacity utilization for June, which is the percentage of our plant and equipment that was in use during the month, the Fed found that the utilization rate for total industry was unchanged in June at 79.1%, which suggests that plant capacity increased by 0.2% during the month.....77.1% of our total manufacturing capacity was in use during June, down from 77.2% in May but up 1.0% from the factory operating rate of 76.1% in June of last year...the operating rate for NAICS classified durable goods manufacturers was at 77.3%, up from 77.1% in May with capacity utilization ranging from 84.0% for manufactures of electrical equipment, appliances, and components to 63.3% for manufactures of non-metallic mineral products, while the June operating rate for NAICS classified manufacturers of non-durables was at 78.4%, down from 78.7% in May, with the oil and coal products industry operating at 84.5% of capacity while textile mills were operating at a 70.0% rate.... meanwhile, capacity utilization by the 'mining' industry rose from a revised 89.9% to 90.0%, reflecting the likelihood that the oil and gas industry is continuing to add capacity, while the operating rate for utilities fell from 79.0% to 78.7%....our FRED graph for this report below, which can also be viewed as an interactive graph at FRED, 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…

June Producer Prices Increase 0.4% as Wholesale Gasoline Prices Rise 6.4%

the Producer Price Index for June released by the BLS reported that the seasonally adjusted producer price index for final demand rose 0.4% after falling 0.2% in May and rising by 0.6% in April, and is now 1.9% above year ago levels...the index for final demand for services rose by 0.3%, as the index for final demand for trade services rose 0.2%, the index for final demand of transportation and warehousing services rose 0.3%; and producer prices for services other than trade, transportation, and warehousing also rose 0.3%; within the later, producer prices for deposit services rose 3.2% while prices for arrangement of vehicle rentals and lodging fell 4.6%...the price index for final demand for goods, aka 'finished goods', rose 0.5% after falling by 0.2% in May, as the price index for final demand energy rose 2.1% as a 6.4% increase in wholesale prices for gasoline accounted for most of the increase; meanwhile, the price index for final demand food fell 0.2%, the same drop as in May, as finished consumer foods rose 0.4% and wholesale prices of food for export fell 3.6%, with wholesale grain prices 12.5% lower and oilseeds priced 6.5% less than May...excluding food and energy, the core producer price index for final demand goods rose 0.1% as wholesale pharmaceuticals rose 1.4% and paper products rose 1.1%, while producer prices for travel trailers and campers fell 1.1%...

this report also showed the price index for processed goods for intermediate demand rose 0.4% on a 1.3% increase in prices for intermediate processed energy goods, while prices for intermediate processed foods and feeds fell 0.1% and intermediate core producer prices rose 0.1%...meanwhile, the price index for unprocessed goods fell 0.9% on a 3.0% drop in producer prices for for unprocessed foods and feeds and a 1.1% decline in the index for unprocessed nonfood materials less energy, while raw energy materials rose 1.2%...finally, the price index for services for intermediate demand rose 0.6% in June, the largest increase since a 0.7% increase in October 2012, mostly on a 1.3% jump in the index for trade services for intermediate demand, while prices for intermediate services less trade, transportation, and warehousing moved up 0.5% and prices for transportation and warehousing services for intermediate demand saw a 0.3% rise...over the 12 months ended in June, the index for services for intermediate demand rose 1.5%...

New Housing Starts and Permits Continue to Trend Below 1 Million Annually

the June Report on New Residential Construction (pdf) from the Census Bureau includes 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, is widely watched and reported on for new housing starts without a mention of the wide margin of error inherent in the small Census sampling...in June, starts on new housing units were estimated to be at a seasonally adjusted annual rate of 963,000, which was 9.3 percent (±10.3%)* below the revised May estimate of 985,000 annually, but 7.5 percent (±14.4%)* above the annual rate of 915,000 housing starts estimated a year ago....in the footnote, the Census tells us the asterisk means they don't have sufficient statistical evidence to determine whether there was an increase or decrease in new housing starts for the month or even for the year, but that there's a 90% likelihood that seasonally adjusted new starts in June were in a range between 1.0% more than or 19.6% less than May's, and a similar likelihood that June's new housing starts were in a range between 6.9% less than a year earlier and 21.9% more than a year earlier...the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 58,500 single family homes were started in May, while construction on an estimated 25,700 apartment units was started in buildings with 5 or more units, with the margin of error on single family starts at ±10.3%, while the margin of error on apartment units started was ±19.7%...with this release, previously reported single family starts in May were revised up from 59,700 to 60,900 while units starting in buildings with more than 5 units were revised down from 33,600 to 31,400...

the monthly data on new building permits have a much smaller margin of error; but since not all permits to build actually result in construction, this again is just an estimate of intention rather than activity; in June, Census estimated new permits were issued at a seasonally adjusted annual rate of 963,000, which was 4.2 percent (±1.5%) below the revised May annual rate of 1,005,000 and 2.7 percent (±1.8%) below the 938,000 annual rate estimated for new permits in May of last year...those estimates were extrapolated from the unadjusted estimate of 91,400 new permits issued in June, which was down from the estimated 92,200 permits issued in May...of those permitted in June, 60,800 (±1.2%) were for single family homes, and 27,700 (±1.0%) 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…ie, the number shown monthly for either metric is an estimate of how many units would be permitted or started in a year if that month’s pace were continued over 12 months…

Regional and State Employment and Unemployment for June

finally, on Friday the Bureau of Labor Statistics released the Regional and State Employment and Unemployment Summary for June, which basically takes the same data that we saw in the national employment report two weeks ago and breaks it down by state and region.....so while they tell us in opening that 22 states had unemployment rate decreases, 14 states had increases, and 14 states had no change, we know that comes from the household survey with its large margin of error, and they make that point later when they tell us just six states had statistically significant monthly unemployment rate decreases, led by Illinois whose unemployment rate fell from 7.5% to 7.1%, and only Vermont, whose unemployment rate rose from 3.3% to 3.5%, saw a statistically significant monthly unemployment rate increase....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 of jobs added or lost in each state, ranging from the 37,400 jobs added in Florida to the loss of 9,100 in West Virginia...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change since last April, 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 ...for an even more detailed and graphic look at state employment data, statistician Nathan Yau of the data visualization and statistics blog FlowingData.com has created a new interactive graphic of specific jobs by state and salary with boxes representing the respective size of each job category and their subcategories, with an interactive slider to highlight those jobs that come with a median salary at or above a preset level...

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were 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…)

May’s wholesale sales and inventories, job openings and turnover, and consumer credit

there were just a handful of relatively minor reports released this week, and all were on May data...we'll start with the Census report on Wholesale Trade: Sales and Inventories for May (pdf), which estimated that seasonally adjusted sales of merchant wholesalers increased by 0.7% (+/-0.5%) to $453.2billion for the month and by 6.6% (+/-1.4%) over the sales of May 2013, not adjusted for inflation....wholesale sales of durable goods were up 0.2% (+/-0.7%)*, as a 3.2% increase in wholesale sales of metals and minerals was partially offset by a 1.6% decrease in wholesale sales of computers, peripheral equipment and software, while wholesale sales of nondurable goods were up were up 1.1 percent (+/-0.5%) from April on a seasonally adjusted 6.6% increase in wholesale sales of farm products...

meanwhile, May's seasonally adjusted wholesale inventories, which will impact 2nd quarter GDP, rose 0.5% (+/-0.4%) from the downwardly revised April figure to $532.7 billion at the end of May, a level 7.9% (+/-0.9%) higher than a year earlier, as inventories of durable goods rose 1.0% (+/-0.4%) on a 2.1% increase in metals and minerals stocks and a 1.9% increase in inventories of motor vehicles and vehicle parts and supplies, while inventories of nondurable goods fell 0.3% (+/-0.5%)* on a 3.2% decrease in wholesale inventories of farm products, which was partially offset by a 2.0% increase in wholesale inventories of petroleum and petroleum products...with wholesale inventories and sales both rising, the inventories to sales ratio for wholesalers was unchanged from April at 1.18…

Job Openings at 7 Year High in May as Hiring, Firing Falls

according to the May Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics, seasonally adjusted job openings rose by 171,000 to a new 7 year high of 4,635,000, as job openings in health care and social assistance rose from 658,000 to 736,000 and job openings in restaurants and bars rose from 589,000 to 644,000, while job openings in retail fell from 570,000 in March to 460,000 in April... jobs open at the end of April were revised up by 9,000 from the originally reported 4,455,000 opening to 4,464,000, and job openings as a percentage of the employed labor force rose to 3.2% from 3.1%, up from 2.8% a year earlier and up from 2.7% in January ...based on 9,799,000 officially unemployed in May, there would be 2.1 who were actually looking for work during May for every job opening; that, of course, does not count those who might have wanted a job but didn't look for work during the month...jobs are now staying unfilled longer than ever; the average job opening went unfilled for 25.1 days in May, the longest duration since 2001, when those record were first kept...

this 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 May, seasonally adjusted new hires totaled 4,718,000, down 52,000 from the 4,770,000 hired or rehired in April, as the hiring rate as a percentage of all employed fell from 3.5% to 3.4%, but still remained up from 3.3% a year earlier...total hiring in the professional and business services category decreased by 43,000 to 967,000 in May, hiring in health care and social assistance services fell by 36,000 to 463,000, while hires at bars and restaurants rose 10,000 to 702,000....total separations also fell, from 4,550,000 in April to 4,495,000 in May, as the separations rate as a percentage of the employed slipped from 3.3% to 3.2%, the same as it was a year ago...subtracting the 4,495,000 total separations from the total hires of 4,718,000 would imply an increase of 223,000 jobs in May, virtually the same as the revised payroll job increase of 224,000 for April reported by the BLS establishment survey last week, a rare match between these two surveys that both have wide confidence intervals...

further breaking down the seasonally adjusted job separations, we find 2,527,000 quit their jobs in May, 60,000 more than the 2,467,000 who quit their jobs in April, while the quits rate, an indicator of worker confidence which is being watched by the Fed, remained unchanged at 1.8% of total employment...that quitting rate varied considerably between industries, ranging from a high of 3.8% of restaurant and bar workers who quit to a low quit rate of 0.6% for government employees....in addition to those who quit, another 1,575,000 were either laid off, fired or otherwise discharged in April, down 126,00 from 1,701,000 discharges in April, which pushed the discharges rate down to its low for the year at 1.1% of all those who were employed during the month....meanwhile, other separations, which includes retirement and death, were at 392,000 in April, up a bit from 382,000 in April, 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....

May Consumer Credit Up $19.6 Billion on Car Loans as Credit Card Growth Slows

G-19 report on Consumer Credit for May, which showed that seasonally adjusted consumer borrowing outstanding at the end of May was up $19.6 billion over April to $3,194.6 billion, increasing at an annual rate of 7.4% over April's revised $3,175.0 billion total...revolving credit, which is mostly credit card debt, grew at an annual rate of 2.5%, increasing to $872.2 billion in May from $870.4 billion in April, and slowing from what now appears to be a one time spike at a 12.5% growth rate in April, while non-revolving debt, which includes long term borrowing for items such as cars and yachts and tuition, but not real estate, rose at an annual rate of 9.7% to a seasonally adjusted $2,322.4 billion from $2,304.6 billion in April....

the Zero Hedge bar graph below shows the seasonally adjusted monthly change in non-revolving credit outstanding in red and the change in revolving credit monthly in blue since the beginning of 2011, with negative changes pointing down, while the black line on the graph sums the two to track the headline change in overall credit that this release reports on...we can see the relatively large jump in credit card debt (blue) last month seems to have been a one time phenomena, and note that higher borrowing overall over the last three months is more than likely is related to the post-recession highs in automobile sales that we'd been seeing over those months..

the unadjusted consumer credit data shows that outstanding revolving credit is still $22.6 billion below the level of credit card debt at year end, as $40.0 billion in credit card debt was paid down in the first quarter; moreover, aggregate credit card balances outstanding are still $81.6 billion below the early recession level of $916.8 billion at the end of 2009...so the panicked reports last month that consumers were "maxing out their credit cards" were greatly exaggerated...moreover, data from the American Bankers Association indicates that delinquency rates on bank issued credit cards fell to 2.44% in the first quarter, 36% below their 15-year average, and just off the 24 year low of 2.41% hit a year earlier...contrast that to the mortgage delinquency rate of 5.62% for May that we reported on last week, and it appears consumers have their credit cards well controlled.....

the truncated section of table below, excerpted from the second table in the report, shows the actual level of credit outstanding in billions of dollars by type and by holder at year end for each year from 2009 to 2013, and then also at the end of the March, April and May of this year…note that revolving credit outstanding in May remains below the year end level for each of the past five years, and that non-revolving credit, which is mostly car and student loans, continues to rise as borrowing for both tuition and vehicles remains strong…in the revolving credit section, we can also see the rapid expansion of student debt held by the Federal government, from $223.1 billion in 2009 to $781.1 billion as of May...although their are other holders of the nearly $1.2 trillion in student debt outstanding, those held by the Federal government are student loans originating from the Department of Education…

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were 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…)

June’s employment situation, May’s trade deficit and Mortgage Monitor, et al

the two key reports this week, on the June employment situation and on our international trade for May, were both released on Thursday due to the holiday on Friday...other widely watched reports released earlier in the week included several sentiment diffusion indexes, starting with the June Chicago Purchasing Manager's Index (pdf), which slipped back to 62.6 in June, from a seven month high of 65.5 in May, but was up from a year ago reading of 52.0,  in an index where values over 50 means more Chicago area purchasing managers saw ongoing expansion than saw contraction in their businesses...that was followed on Tuesday by the release of the national manufacturing purchasing manager index (PMI) from the Institute of Supply Management (ISM), which reported their PMI was at 55.3% in June, down from 55.4% in May, as the production index fell from 61.0% to 60.0%, the employment index was unchanged at 52.8%, and the new orders index rose from 56.9% in May to 58.9% in June...on Tuesday we also saw the Texas Area Manufacturing Survey for June from the Dallas Fed, which saw it's broadest general business activity index rise from 8 to 11.4, in a diffusion index where positive numbers are indicative of expansion...then on Thursday, the ISM released their June Non-Manufacturing Report which saw their composite non manufacturing index (NMI) for service industries slip to 56.0%, down from 56.3% in May, suggesting slightly slower expansion in June than in May...the hard data on manufacturing this week came by way of the Full Report on Manufacturers’ Shipments, Inventories, & Orders for April from the Census Bureau (pdf), which showed new factory orders fell by $2.6 billion or 0.5% to $497.7 billion, factory shipments rose by $0.3 billion or 0.1% to a record $498.3 billion, factory inventories rose by $5.0 billion or 0.8% to a record high at $651.5 billion, and unfilled factory orders rose by $6.7 billion or 0.65 to $1,087.4 billion, which was also the highest level value of unfilled orders on record....

in other releases, the Census report on Construction Spending for May (pdf) estimated that our seasonally adjusted construction spending for the month would work out to an annual rate of $956.1 billion in spending, 0.1 percent (±1.6%)* above the revised April estimate of $955.1 billion annualized and 6.6 percent (±2.1%) above last years level of construction spending...private construction spending was at a seasonally adjusted annual rate of $682.8 billion, 0.3 percent (±1.2%)* lower than the revised April estimate, with residential spending falling 1.5 percent (±1.3%) and non-residential construction rising 1.1 percent (±1.2%)*, while public construction spending was estimated at $273.3 billion, 1.0 percent (±3.0%)* above the revised April estimate. with school construction 0.6 percent (±5.1%)* below the revised April estimate and highway construction 0.7 percent (±8.1%)* above April's level...earlier, the National Association of Realtors released their Pending Home Sales Index, which is based on contract signings and which increased to 103.9 in May from 97.9 in April, indicating higher existing home sales will likely be closed in June and July...finally, Ward's Automotive estimated that cars and light trucks were selling at a seasonally adjusted annual rate of 16.92 million in May, the highest rate of auto sales since early July 2009...an unadjusted 1.41 million light vehicles sold over the 24 selling days in June, actually down from the 1.60 million vehicles that sold over the 27 selling days in May…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 approaching pre-recession record levels…

Employers add 288,000 Jobs in June in Best First Half Since 1999

the June survey of business establishments and government agencies conducted by the BLS found that nonfarm payroll employment increased by a seasonally adjusted 288,000 jobs to 138,780,000 jobs in June, well above consensus forecasts of between 200,000 and 220,000 new jobs...in addition, April's count of new payroll jobs was revised from 282,000 to 304,000, and the increase in May's non farm payroll employment was revised from 217,000 to 224,000, meaning that this report added 317,000 to the total seasonally adjusted employment figures, and furthermore meant the 1,385,000 jobs added in the first six months of 2014 the best annual start to new payroll jobs numbers in any year since 1999....the unadjusted establishment data indicates that 582,000 were actually added to non-farm payrolls in June, for a 3 month hiring total of 2,654,000 new spring jobs before seasonal adjustments, bringing the estimated total actually employed by business and government in June to 139,761,000...the FRED bar graph below incorporates the revisions to the April & May 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...

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seasonally adjusted payroll jobs increased in all major sectors in June, led by the increase of 67,000 jobs in the  broad professional and business services category, with 18,100 of those in employment services and another 9,600 in services to buildings and dwellings...an additional 40,200 slots were added in retail trade, with 12,100 of those in vehicle and parts dealers and 7,600 in building material and garden supply stores, and another 39,000 jobs were added by leisure and hospitality establishments, with 32,800 of those newly employed in bars and restaurants...there were also 26,000 additional government paid jobs, with 22,000 of those at the local level and 18,000 of those in education....the health care sector added 21,000 jobs, with 5,700 of those in nursing and residential care facilities, while 12,700 were added in social assistance, including 8,100 in child care services...employment in transportation and warehousing increased by 17,000 in June, including 5,500 more couriers and messengers, while the financial sectors also added 17,000 new positions, with the 8,500 added in insurance carriers and 8,500 in real estate predominating...in addition, 16,000 jobs were added in manufacturing, all in durable goods manufacturing, and 15,100 were added in wholesale trade, with 8,900 of those involved in distribution of durable goods...in addition, 9,000 were added in information services, 6,000 in construction, and 4,000 in resource extraction...

again, the average workweek for all payroll employees was unchanged at 34.5 hours for the 4th month in a row, with a three tenths of an hour shorter workweek in the wholesale trade sector offsetting slightly longer workweeks elsewhere, with the manufacturing workweek at 41.1 hours and factory overtime at 3.5 hours both unchanged....the average workweek for production and nonsupervisory employees was also unchanged at 33.7 hours, with the average retail nonsupervisory employees seeing their workweek increase a tenth of an hour to 30.1 hours...the average hourly pay for all workers rose by a 6 cents an hour to $24.45 an hour bringing the year over year increase to 47 cents, or less than 2%, while the average pay for nonsupervisory workers increased by 4 cents to $20.58, with their year over average hourly pay rising 48 cents, a 2.3% average annual pay increase..

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

individual employment data extrapolated from the June survey of 60,000 households took a bit of the bloom off the results of the survey of employers, as the households report that most of those new jobs appear to be part time...with the margin of error in the count of the unemployed in this volatile report at +/- 300,000, however, we'd caution to wait to see if trends shown here don't reverse in successive surveys...June saw the seasonally adjusted count of the employed rise by 407,000 to 146,221,000 while the count of the unemployed fell by 325,000 to 9,474,000, leaving the unemployment rate, or the percentage of the total, at 6.1% in June, down from 6.3% in May and down from 7.5% in June of 2013...with the labor force thus growing by 81,000 while the working age noninstitutional population rose by 192,000, another 110,000 of us were thus not in the labor force in June, and the count of those not counted rose to another record high at 92,120,000...that left the labor force participation rate statistically unchanged at 62.8% for the third month in a row, matching the 36 year low set in October...however, the increase in the employed vis-a-vis the population was enough to raise the employed to population ratio by 0.1% to 59.0%, the first time it has topped 59% since August 2009...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; as an interactive at FRED, you can view the monthly metrics of this entire graph by running your cursor across it, just as the June data is shown in the screenshot below...

>of the seasonally adjusted total of 146,221,000 of us who counted as being employed in June, 118,204,000 reported they were working full time, 523,000 less than in May, while 28,018,000 reported they were working part time, or less than 34 hours in the reference week, an increase of 799,000 part time workers over May's count...of those, the count of those working part time who would rather work full time rose by 275,000 to 7,544,000, while the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", slipped by another 0.1% to 12.1%...meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work fell by 293,000 in June to 3,081,000 and the average length of time of unemployment for those counted as unemployed fell from 34.5 weeks to 33.5 weeks, as the long term employed no longer receive unemployment rations and hence have no incentive to search for work monthly and thus be counted...among the 92,120,000 of us not officially in the labor force and hence not counted as unemployed, 6,694,000 reported that they still want a job, down from 7,031,000 in May; of those, 2,028,000 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 June survey...676,000 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...

May Trade Deficit Improves to $44.4 billion but Still 2nd Worst in a Year

the May 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 $44.4 billion, down from the revised trade deficit of $47.0 billion in April, as our exports rose $2.0 billion to $195.5 billion on a $1.6 billion increase to $136.7 billion in our goods exports and a $0.3 billion increase to $58.8 billion in our services exports, while our imports fell $0.7 billion to $239.8 billion on a $0.7 billion decrease to $200.0 billion in our imports of goods while our imports of services were virtually unchanged at $39.9 billion...the April trade deficit was revised down from the previously reported $47.2 billion...even though May's trade deficit was down from April's, it was still higher than the $44.2 billion deficit of March, the highest monthly trade deficit in the first quarter, and you may recall the 1st quarter trade deficit rose by 15.2% over the 4th quarter and subtracted 1.53% from 1st quarter GDP...currently, the average of the April and May trade deficit is 10.8% higher than the average first quarter trade deficit and is on track to subtract roughly 1.09% from second quarter GDP...

a major factor in our increase in May exports was an increase in our exports of automotive vehicles, parts, and engines, which rose by $778 million to $13,494 million, reversing the contraction in our automotive exports over the first four months this year...other end use categories of exports that saw seasonally adjusted monthly increases in May included consumer goods, which rose by $421 million to 16,758 million on a $418 million increase in our exports of gem diamonds, and industrial supplies and materials, which rose by $170 million to $42,149 million as a decrease of $328 million in our exports of organic chemicals was more that offset by increases of $113 million in our exports of crude oil, $154 million in our exports of fuel oil, and $973 million in our exports of other petroleum products...our exports of foods, feeds, and beverages rose by $69 million to $11,961 million as an increase of $134 million in our exports of fish and shellfish more than offset a decrease of $86 million in our exports of animal feeds; in addition, our exports of goods not categorized by end use rose by $498 million to $5,656 million...the only end use category of exports to see a decrease in May was capital goods, exports of which fell by $168 million to $45,639 million on a $464 million decrease in exports of civilian aircraft, which was partially offset by an increase of $267 million in our exports of engines for civilian aircraft..

end use categories of imports that saw seasonally adjusted decreases in May included industrial supplies and materials, imports of which fell by $1,723 million to $55,965 million on a $2,090 million decrease in imports of crude oil which was partially offset by a $448 million increase in imports of other petroleum products, and consumer goods, of which our imports fell by $456 million to $46,944 million, mostly because we imported $460 million less cell phones and similar household products...with May imports of $10,554 million, we also imported $198 million less foods, feeds, and beverages than in April, on decreases of $87 million in cocoa bean imports, $56 million less meat imports, and $51 billion lower imports of fruits and frozen juices; in addition, our imports of goods not categorized by end use also fell by $697 million to $6,231 million...import categories that saw increases in May included automotive vehicles, parts, and engines, which rose by $1,332 million to $28,499 million, and capital goods, which rose by $1,025 million to $49,656 million on $371 million more imports of industrial machines not otherwise listed separately, $232 million more imports of oilfield drilling equipment, $173 million more imports of computer accessories, $144 million more imports of medical equipment and $106 more imports of electrical apparatuses..

we'll again include Bill McBride's graph from his coverage of this report below to illustrate how our trade deficit continues to grow despite our lower oil imports....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 has generally been falling (ie, going up towards zero on this chart), our deficit in everything else in red has spiked this year, pushing our overall trade deficit further into negative territory...so while our deficit with OPEC fell from $6.7 billion in April to $4.2 billion in May, our goods deficit with China rose from $27.3 billion to $28.8 billion over the same span...

Mortgage Delinquencies Unchanged in May as Foreclosure Starts Tick Up

we also want to take a quick look at the Mortgage Monitor for May (pdf) from Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division), which was also released Thursday...according to BKFS data, 966,000 home mortgages, or 1.91% of all mortgages outstanding, remained in the foreclosure process at the end of May, which was down from 1,016,287, or 2.02% of all active loans in April and down from 3.05% of all mortgages in May of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and May's so-called "foreclosure inventory" was the lowest percentage of homes in foreclosure since 2008...however, new foreclosure starts rose in May for the first time in 8 months, as the 86,258 homes foreclosed on in May was 9.5% higher than 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 2007 and down 32% from a year ago...

in addition to homes in foreclosure, May data showed that 2,839,000​ mortgage loans, or 5.62% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, statistically unchanged from the 2,821,000 homeowners, also 5.62% of those with a mortgage, who were more than 30 days behind in April, but down from the total delinquency rate of 6.08% a year earlier...of those who were delinquent in May, 1,169,000  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, with 7.53% of homeowners with a mortgage who were either late in paying or in foreclosure, a 4.22% portion of them remained in serious trouble, aka "seriously delinquent" at the end May...

the graph below, from page 18 of the Mortgage Monitor pdf, shows the percentage of active home loans that were delinquent monthly since 1995 in red, and the percentage of mortgages that had been in the foreclosure process monthly in green 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 1.91% in May is now well below the October 2011 peak of 4.29% of mortgages in the foreclosure process…but notice they're 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 5.62% of all mortgage outstanding in May, that count is nearly down to half of the 10.57% of 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 delinquency percentage of 4.27% noted on the graph...negative equity is a factor; while 8.9% of all homes are underwater based on the BKFS home price index, a full 80% of seriously delinquent homeowners remain underwater…also note the seasonality of mortgage delinquencies apparent in the track of the red graph, 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...in the face of higher heating bills this winter, we were surprised that the decline in mortgage delinquencies continued on the same seasonal downward trend...

as usual, this month's mortgage monitor is a 31 page graphic presentation of mortgage conditions with only 3 pages of summary data in table form (pages 25 through 27 of this pdf); the topics covered graphically in the May mortgage monitor include originations and prepayments, ie, new mortgages, and homeowners who are paying off their mortgage ahead of its term, foreclosure starts and foreclosure inventory, and home prices and negative equity; since our concern in following this report has been homeowners who are in trouble, we'll include a few graphics below to expand on that...

the next graph below, from page 11 of the pdf, focuses on foreclosure starts; which are indicated for the month that the loan servicer refers a delinquent mortgage to its attorneys for foreclosure, and are usually initiated with an official notice of delinquency or foreclosure, depending on state regulations...the red line tracks the count of new foreclosures started monthly since the beginning of 2008, with the count of new foreclosures obviously falling steadily since the peak years of 2009 and 2010, when between 200,000 and 300,000 foreclosures were started each month...the May increase in new foreclosures, evident at the right end of that red line, appears to be a normal occasional uptick in a generally downward trend...the blue line on the same graph tracks the number of new 90 day delinquencies each month over the same time period...note the bullet points; over half of new foreclosures are against those who'd been in foreclosure previously, caught up on their payments and got out of foreclosure, and have now fallen behind again, to have foreclosure proceedings restarted once more; also that 79% of new foreclosures are against those who bought their homes before the housing bust in 2008...

the next graph below, from page 15 of the pdf, shows the number of foreclosure starts in blue and foreclosure sales in red monthly since the beginning of 2005...a foreclosure sale is the legal auction wherein the bank acquires the title after the foreclosure completes; after a foreclosure sale, the home moves into the bank's property inventory, also known as REO (Real Estate Owned - definitions are on page 30 of the pdf)....here we can see that foreclosure starts peaked at 316,000 in March 2009 and remained elevated until recently, with starts in both November and December in the 105,000 range, while completed foreclosures peaked at 124,000 in September 2010 and dropped rapidly after the foreclosure fraud scandals…what the two graphs together show is that for the duration of the mortgage crisis, foreclosure starts have been running far in excess of foreclosures completed, which results in that large ongoing foreclosure inventory of homes and homeowners stuck in the foreclosure process, which as we noted earlier, is still more than 4 times the pre-crisis level…this also means that homeowners are marooned in the foreclosure process for extremely long periods of time; as of May, the average home in the foreclosure process has been delinquent for 993 days, up from 985 in April (see table, pg 27 of the pdf)

nonetheless, even though foreclosures which have been started are not being completed, the aggregate foreclosure inventory continues to decline because of the diminishing number of new foreclosure starts...the next graphic is a map from page 17 of the Mortgage Monitor which shows the year over year percentage change in foreclosure inventory inventory for each state; those with the lightest shading have seen the largest decline of the percentages of homes that remain in foreclosure over the past year, while those in the darkest red shades are states where the percentage in foreclosure has declined the least...the non-judicial states of Arizona and Nevada, where foreclosures are being completed quickly, have seen declines of homes in foreclosure of 53% and 54% respectively...meanwhile, the percentage in foreclosure in New York is down 18% year over year, and New Jersey has only seen a 13% decline...

finally, we'll include the updated table that we've often featured in coverage of this report which shows the breakdown of non-current mortgages by state, taken from page 26 of the pdf...shown below for each state and the District of Columbia are the percentage of home loans that were delinquent (Del%) in May, 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 delayed 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 5.2%, New York with 4.7%, and Hawaii with 4.3% of their homes with mortgages in foreclosure..

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were 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…)

1st Qtr GDP revision, May’s personal income & spending, durable goods, new and existing home sales, & the April Case-Shiller index

the key reports this past week were the 3rd estimate of first quarter GDP, which showed our economy actually shrank at a 2.9% rate in the first quarter, and the May report on personal income and outlays, which indicated another monthly decrease in inflation adjusted personal spending; there were also reports on new and existing home sales for May, and the release of Case-Shiller home price index for April...for manufacturing, we saw the advance report on durable goods, and two regional Fed manufacturing surveys; the Richmond Fed, reporting for a District that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported somewhat slower growth in June as the Fifth District manufacturing composite index slipped to 3, down from a reading of 7 in May, in a diffusion index where numbers above zero indicate expanding 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 Slowed Somewhat as their June composite index slipped to 6 from 10 in May...this week also saw the release of the Chicago Fed National Activity Index for May, a composite index of 85 different economic metrics grouped into four broad categories of data, each constructed to have an average value of zero, such that a positive index reading corresponds to growth above trend and a negative index reading corresponds to growth below trend…their national index increased to +.21 in May from –0.15 in April as 52 of the 85 indicators were positive, with production-related indicators adding 0.20 to the overall index, employment-related indicators adding 0.10, the sales, orders, and inventories category adding 0.04, while the consumption and housing metrics subtracted 0.12 from the overall reading for May..

1st Quarter GDP Revised to –2.9% as Investment, Exports Tumble

the Third Estimate of our 1st quarter GDP from the Bureau of Economic Analysis showed that our economy shrank at a 2.9% rate in the first quarter, revised from the 1.0% rate reported last month, which revised the growth of 0.1% reported in the 1st estimate...this was the largest revision of the 2nd estimate to the 3rd estimate in BEA records going back to 1976, and except for the 4th quarter of 2008 and the 1st quarter of 2009 at the depth of the recession, our worst quarterly economic contraction in 24 years...in current dollars, our 1st quarter GDP would extrapolate to $17,016.0 billion annually, down 1.7% from the $17,089.6 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, it's adjusted for inflation using chained 2009 dollars, resulting in the reported 2.9% annualized decrease in the output of goods and services produced by labor and property in the US....the inflation adjustment used in the first quarter, aka the "GDP deflator", implies annual inflation at a 1.3% rate, unchanged from the 2nd estimate, and down from 1.6% GDP deflator applied to GDP in the 4th quarter...while we cover the details below, recall that all quarter over quarter percentage changes in this report are all given at an annual rate, which means that they're expressed as a rate of change a bit over 4 times the change that actually occurred over the 3 month period... 

the revision to seasonally adjusted real personal consumption expenditures (PCE) was by far the largest factor in the downward revision to 1st quarter growth...originally reported to growing at a 3.1% rate, the BEA has revised growth in real personal consumption expenditures to just 1.0%, the the slowest growth of personal spending since the last quarter of 2009...as a result, real PCE only added .71% to first quarter GDP, vis a vis the 2.09% contribution from personal spending that was shown in the 2nd estimate...thus, with all other major components of GDP already shrinking, the revision to PCE accounted for 1.38% of the overall downward revision of 1.9%...real personal outlays for durable goods rose at an annual 1.2% rate in the quarter, rather than the 1.4% rate previously reported, even though the current dollar spending for durable goods fell by over 1.0%, as the price deflator for durable goods was negative 2.5%...deflation adjusted outlays for motor vehicles accounted for more than half of the increase in consumer spending for durables, while real outlays for durable household equipment and furniture shrunk at a 1.6% annual rate...meanwhile, real personal spending for non-durable goods fell at a 0.3% rate, reversing the previous estimate of a 0.4% increase, as inflation adjusted food and beverage outlays fell at an inflation adjusted 1.3% rate and seasonally adjusted real purchases of clothing and footwear fell at a 4.2% rate...so, while the increase in real durable goods spending added 0.9% to GDP, the contraction in real outlays for non-durables subtracted 0.5% ...the major revision to real PCE, however, was in real consumer outlays for services, as they were originally estimated to have grown at a 4.3% rate and have now been revised to indicate 1st quarter growth at a 1.5% rate...within those services, the major revision was to consumption of health care, which was previously seen growing at a 9.1% rate and now is seen as contracting at a 1.4% rate...apparently the BEA encountered some difficultly in estimating the contribution from Obamacare, which was ultimately corrected by a subsequent Census report...real outlays for recreation services and food services and accommodation were also down fractionally; however, with real spending for housing and utilities up at a 9.4% rate due to the colder than normal winter, the services component of real PCE still managed the gain of 1.5% that raised GDP .67% from what it otherwise might have been...

last month we noted the second estimate of GDP showed the worst slowdown in investment since 2009, and this final revision didnt change that much, as it was estimated 1st quarter gross private domestic investment shrunk at an 11.7% rate, same as the second estimate, while it subtracted 1.97% from the rate of GDP change rather than the 1.98% hit reported last month...the lion's share of the contraction in investment resulted from a slowdown in the growth of inventories, as they grew by $45.9 billion, an inflation adjusted $65.8 billion less than the $111.7 billion increase in inventories in the 4th quarter, and revised down from the $49 billion indicated by the second estimate...as a result, the inventory growth contraction subtracted 1.70% from 1st quarter GDP rather than the 1.62% reported last month.... fixed investment declined as well, subtracting 0.27% from GDP, as fixed investment fell by $11.3 billion, or at a 1.8% annual rate vs the 2.3% rate estimated last month; investment in non-residential structures fell at a 7.7% rate, revised from the 7.5% rate of decline previously reported, investment in equipment fell at a 2.8% rate, revised from a 3.1% decrease, as investment in information processing equipment fell by an inflation adjusted $8.6 billion, while real investment in intellectual property increased by an inflation adjusted $9.7 billion or at a 6.3% rate, revised from a 5.1% increase, as research and development spending was up $7.4 billion....on net, the reduced investment in non-residential structures subtracted 0.22% from GDP, lower equipment investment took off 0.16% the final figure, while the increase in intellectual property investment added 0.24% to GDP...meanwhile, the contraction in investment in residential structures was revised from a 5.0% rate to a 4.2% annualized decline and subtracted 0.13% from the final rate of GDP change...

the real 1st quarter net trade figures were revised down as well, as we expected in noting the revision to March trade when the April trade report was released....the BEA originally estimated that our 1st quarter exports had dropped at an inflation adjusted 6.0% annual rate while imports increased at a 0.7% rate, for an increase in the trade deficit over the 4th quarter that subtracted 0.95% from the 2nd estimate of GDP....with the revised data for March trade now available, they now show that real exports of goods and services fell at a 8.9% rate, $47.4 billion inflation adjusted dollars less than the 4th quarter, while real imports increased by an inflation adjusted $11.0 billion, or at a 1.8% rate...as you should recall, exports add to gross domestic product because they are that part of our products that are 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 imports subtracted 0.29% from GDP, rather than the .12% previously estimated, while the 8.9% decline in exports subtracted 1.25% from GDP, up from 0.83%...hence, with the change in both exports and imports both subtracting more from GDP that previously estimated, the 1st quarter growth rate of our output took a 1.53% hit from the 1st quarter increase in the trade deficit...

meanwhile, there were only minor revisions to real government consumption and investment in this third  estimate...real federal government consumption and investment grew at a 0.7% rate over the first quarter, as real federal spending for defense fell at a 2.5% rate rather than the 2.4% rate previously recorded, while the defense spending contraction still subtracted 0.11% from GDP, which was unchanged from the last report...all other federal consumption and investment rose at a 5.9% rate, which was unrevised, and added 0.16% to GDP...real state and local consumption expenditures rose at an adjusted $2.4 billion rate, rather than the the $2.5 billion increase previously reported, while real state and local investment outlays fell at a $9.6 billion rate, not by $10.1 billion as previously estimated; hence, while state and local consumption added 0.06% to GDP, the contraction in state and local investment outlays subtracted 0.18% from 1st quarter growth, a bit less than the 0.20% reported last month...

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 changes in gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the change in imports are shown in green, the change in exports are shown in purple, while 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...you can clearly see the widespread weakness in all components of GDP in the far right group representing the first quarter of 2014, with personal consumption expenditures in blue, gross private investment in red, and exports in purple all posting their worst quarter since the recession in 2009..

Personal Income Increases 0.4% in May; Real Personal Outlays Drop 0.1%

the major monthly release of the week, also from the Bureau of Economic Analysis, was on Personal Income and Outlays for May, 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 the price index for PCE, which is the inflation gauge the Fed says it targets and which is used in this report to adjust both personal income and consumption expenditures for inflation....like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts, often leading to confused media coverage... 

total personal income increased at a seasonally adjusted and annualized $58.8 billion rate in May, to $14,587.3 billion annually, which was 0.4% higher than in April, when personal income increased by 0.3%....disposable personal income (DPI), which is income after taxes, increased at an annualized rate of $55.6 billion to $12,877.2 billion, which was also a 0.4% increase over April, while April's DPI was up 0.4% over March, revised from the 0.3% increase in DPI reported last month...increases in private wages and salaries of $27.8 billion accounted for less than half of the personal income increase in May, but that increase was nonetheless higher than the $17.9 billion increase in April payrolls; increases in service industry payrolls accounted for $20.4 billion of the May wages and salaries increase...increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $3.7 billion of May's annualized income increase, while employee contributions for government social insurance, which are subtracted from the personal income figure, increased at a $4.0 billion annual rate...other sources of the May income increase included proprietors' income, which increased at a $3.4 billion rate, with $2.2 billion of that increase going to farm owners and $1.1 billion to individual proprietors of other types of business, rental income of individuals, which increased at a $2.2 billion rate, and personal interest and dividend income, which increased at a $13.5 billion rate...in addition, increases in personal transfer payments from government programs, which have been a major factor in the personal income increases since the beginning of the year, increased by $10.7 billion in May, with $8.6 billion of that increase coming from programs other than Social Security, Medicare, Medicaid, Veterans benefits or unemployment comp....

meanwhile, seasonally adjusted personal consumption expenditures (PCE), which are the basis for the change in real PCE in the GDP data we reviewed earlier, rose at a $18.3 billion annual rate in May to $11,830.8 billion, 0.15% higher than April, which was itself up $2.3 billion, or less than 0.1%, from March....the current dollar increase in May spending included a $9.4 billion annualized increase to $1,303.9 billion in outlays for durable goods, mostly reversing the 11.1 billion decline in April, a $4.8 billion increase to $2,678.7 billion annualized in spending for non-durable goods, and an annualized $4.1 billion increase to an annual rate of $7,848.2 billion in spending for services...total personal outlays for March, which includes interest payments, and personal transfer payments in addition to PCE, increased by an annualized $$18.0 billion to $12,256.9 billion, which left personal savings, which is disposable personal income less total outlays, at $620.3 billion for the month, up from $582.7 billion in personal savings in April... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 4.8% in March, up from 4.5% in April and 4.2% in March and the highest savings rate so far this year... 

while personal consumption expenditures accounted for 68.6% of our first quarter GDP, before they were included in the computation of 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 index based on 2009 prices = 100....that index rose to 108.660 in May from 108.407 in April, giving us a month over month inflation rate of 0.23% and a year over year PCE price index increase of 1.71%; as a result, inflation adjusted or real personal consumption expenditures fell by 0.1% May after falling 0.2% in April, which would seem to indicate a negative PCE contribution to GDP for the coming second quarter; however, as March real PCE was up 0.6% over February which was in turn was 0.3% above January, the April and May personal consumption expenditures are still running at an annual rate slightly above the 1st quarter overall, and baring a significant downturn in June should still make a small contribution to 2nd quarter GDP...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 by 0.2% in May, the same increase as in April...also note that even with the annual increase in the PCE price index to 1.77% and the core PCE price index to 1.49%, both still remain below the 2.50% PCE inflation target the Fed has been trying to hit..... 

the picture of our interactive FRED graph below 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 shown in the current datat box and 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 below is not adjusted for increases in the population; on a per capita basis, real DPI is up just 19.7% over the span of this graph… 

New Orders for Durable Goods Fell 1.0% in May While Unfilled Orders Rose 0.6%

in another report out on the same day as the GDP release, the Census Bureau released the May Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders (pdf), which estimated that the widely watched new orders for manufactured durable goods fell by a seasonally adjusted $2.4 billion or 1.0% to $238.0 billion, the first decrease in new orders since January...however, the decrease was largely the result of a 31.4% drop in new orders for defense capital goods to $8,785 million; excluding defense, new orders actually rose 0.6% in May; furthermore, new orders for transportation equipment also fell for the first time in 4 months, by $2.3 billion or 3.0 percent to $74.4 billion, on a pullback in orders for commercial and defense aircraft; thus, excluding both the volatile transport and defense sectors, orders for all other durable goods rose 2.5%.....meanwhile, seasonally adjusted April shipments of durable goods, which will be reflected in 2nd quarter GDP, rose for the fourth consecutive month, increasing $0.6 billion or 0.3% to a record $238.6 billion; the strongest increase was a 1.6% jump in shipments of primary metals to $26,998 million, while a 5.9% decrease in shipments of commercial aircraft limited the increase in transportation sector shipments to 0.1%...in addition, seasonally adjusted inventories of durable goods, which have been up 13 out of the last 14 months, rose $3.8 billion in May to a record $397.8 billion, a 1.0% increase, in part driven by a 2.3% increase to $72,207 million in inventories of commercial aircraft and parts, while a decrease in motor vehicle inventories to $26,243 million limited the increase in transport sector inventories, which are up 10.6% over last year, to 1.1% in May....finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, were up $6.6 billion or 0.6% to $1,087.4 billion, also a new record for unfilled orders...unfilled orders for transportation equipment, up $4.6 billion or 0.7% to $675.8 billion, were again a major factor, as the $504,698 million order backlog for non-defense aircraft is always the largest line item....except for the 0.4% decrease in unfilled orders for defense capital goods, increases in the unfilled order book were seen across the board by all other categories of durable manufacturers in May...

New and Existing Home Sales increase in May

according to the National Association of Realtors, seasonally adjusted existing home sales rose by 4.9% in May to an annual rate of 4.89 million completed transactions, from an revised annual rate of 4.66 million in April, but home sales still remained 5.0% below the annual sales rate of 5.15 million-units sold last May...before the annualization and seasonal adjustment, an estimated 472,000 homes sold in May, up 11.8% from the 422,000 homes that sold in April, but still down 8.2% from the 514,000 homes that sold in May a year ago...both seasonally adjusted and unadjusted data (pdf) indicate that homes sales increased in every region of the country, ranging from a seasonally adjusted 0.9% increase in the West to an 8.7% increase in the Midwest...the median home selling price for all housing types was $213,400, up from $201,500 in April and 5.1% higher than the $203,100 median sales price in May of last year, in home price data that is not seasonally adjusted…the average home sales price was $260,700, up from $260,700 in April and $241,700 a year ago, with regional average home prices ranging from $339,900 in the West to the average of $197,900 for homes sold in the Midwest....foreclosed homes, which sold for an average of 18% below the market, accounted for 8% of May sales, while short sales, at 3% of the total, were discounted by an average of 11%...the median time on the market for all homes was 47 days in May, down from 48 days in April, but up a from 41 day median in May a year ago…those who bought houses with cash accounted for 32% of transactions in May, unchanged from April and down from 33% in May of 2013; those identified as investors accounted for 16% of all transactions, down from 18% in April and 18% a year earlier...mortgage rates averaged 4.19% in May, down from 4.34% in April; nonetheless, the share of first time home buyers fell to 27%, down from 29% in April and 29% in May of last year...

meanwhile, the Census bureau report on New Residential Sales for May (pdf) also showed that home sales increased for the month, by even more than what is typically the largest margin of error of any census construction series...Census estimated that new single family homes were sold at a seasonally adjusted annual rate of 504,000 in May, which was 18.6 percent (±17.3%) above the revised April rate of 425,000...that means if May's home sales were extrapolated out for an entire year at the normal seasonal rates of sales, Census figures something between 430,525 and 577,575 new homes would be sold....meanwhile, Census could not be certain that May's new home sales rose from those of a year ago, as they were estimated at 16.9 percent (±19.6%)* above last year's sales, a range which includes the possibility that they were 2.7% less than last years...the unadjusted data from Census field reps estimated that 49,000 homes sold in May, up from the revised sales of 40,000 in April and up from the revised sales of 40,000 new homes in May a year ago...of those 49,000 May home sales, 15,000 were completed, 16.000 were under construction, and 18,000 had not yet been started...the median new home sales price was $282,000 in May, up from $275,800 in April; while the average sales price was $319,200, up from April's $320,100 average... the Census estimated that a seasonally adjusted 189,000 new homes remained unsold at the end of May, which was a 4.5 month supply at the May sales pace, down from a 5.3 month supply in April....the interactive FRED graph below show the historical data from this Census report, with the monthly sales reported as an annualized figure…although new homes sales are still well below those of the boom years, it’s clear that they have also risen well above the 400K annual level below which they were mired for 4 years...

Case-Shiller April Report Shows Home Prices Rising 10.8% Year Over Year

the Case-Shiller Home Price Index for April, tracking prices for repeat sales of homes over the three month period of February to April vis a vis the 3 month period from January to March, showed the 10-City Composite index with a 1.0% increase in home prices while the 20-City Composite Index was up 1.1% for the month, while both Composites posted annual home price increases of 10.8%, in contrast to year over year gains of 12.6% for the 10-City Composite and 12.4% for the 20-City Composite last month...all 20 cities saw home prices rise for the month; the largest one month home price increases were registered in Boston at 2.9%, in San Francisco and Seattle at 2.3%, and in Atlanta and Chicago at 2.0%, while New York at the low end eked out an increase of 0.1%...the largest year over year home price increases were seen in Las Vegas at 18.8%, San Francisco at 18.2%, San Diego at 15.3% and Detroit at 15.0%, while Cleveland, where prices rose 2.7%, was the only city showing an annual home price increase of less than 5%...it's worth noting that the index is based on closing prices when they're recorded in county records, and typically represent contract prices agreed to roughly 45 to 60 days before the closing; hence, the home price changes indicated by this report already average nearly 6 months old...

we'll again include below screenshots of 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, 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 index values for each of them for the April report in our screenshot… 

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…

(the above are the comments that accompanied my regular sunday morning links emailing, synopses which in turn were 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…)