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, November 16, 2014

October’s retail sales, September’s inventories and job openings, & the 3rd quarter’s mortgage delinquencies

it was a fairly light week for economic data, with the key release being on retail sales for October from the Census Bureau; in addition, there were also two Census reports on September wholesale and business inventories, which might have an impact on third quarter GDP revisions...we also saw the Job Openings and Labor Turnover Survey (JOLTS) for September from the Bureau of Labor Statistics, and the 3rd quarter National Delinquency Survey from the Mortgage Banker's Association, a report which covers the same data as the monthly mortgage monitor...

Retail Sales Increase 0.3% in October

the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $444.5 billion in October, which was an increase of 0.3% (±0.5%)* from the revised September sales of $443.0 billion, and 4.1% (±0.9%) above sales in October of last year.....recall that the asterisk on October’s sales indicates that from their small sampling of retail outlets, Census cannot yet determine for sure whether sales rose or fell for the month...September's seasonally adjusted sales were originally reported at $442.7 billion, and although there was a small upward revision, the percentage change from August to September remained unrevised as a drop of 0.3% (±0.2%).....estimated unadjusted sales in October, extrapolated from surveys of a small sampling of retailers, indicated sales rose to $440,562 million in October from $425,110 million in September, and up from the $421,358 million in October a year ago, so we can see there were small upward seasonal adjustments to sales data for both months...

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

October 2014 retail sales table

looking at the details for October sales in the first column above, we see that motor vehicle and parts sales rose by 0.5% to a seasonally adjusted $89,659 million after falling 1.2% in September; however, excluding motor vehicles and parts, retail sales still rose 0.3% in October to $354,832...other than automotive products, October's retail sales gains were stronger than average for nonstore (online and mail order) retailers, where sales rose 1.9% to $40,839 million; for specialty stores, such as sporting goods, book and music stores, where sales rose 1.2% to $7,479 million; for bars and restaurants, where sales rose 0.9% to $48,645 million; for health and drug stores, where sales rose 0.7% to $25,491 million; for miscellaneous store retailers, where sales rose 0.6% to $10,065 million, and for clothing stores, where sales rose 0.5% to $21,122 million...on the other hand, October sales were weaker at electronics and appliance stores, where sales fell 1.6% from the September high to $9,189 million, at gas stations, where sales fell 1.5% to $43,860 million on lower gas prices, and at department stores, where sales fell 0.3% to $13,785 million, while overall sales at general merchandise stores were flat at $55,760 million..

although the September 0.3% decrease in overall retail sales went essentially unrevised, there were revisions in sales for many of the component business types worth noting...the table of component changes from last month's advance release is here, while the revised changes for September are shown in the last two columns in the table above...we can first note that September sales at auto dealers, the largest component of retail sales, were revised from the originally reported 0.8% decrease to a drop of 1.3%, although the decrease for the entire automotive sales group was a bit less at 1.2%...what that revision means is that retail sales for September excluding the automotive sales was unchanged, rather than the 0.2% decline reported a month earlier...other retail businesses seeing a sizable negative revision to their September sales included general merchandize stores, which had been reported seeing 0.2% sales growth, and are now seen with a 0.2% decline in sales, miscellaneous stores, whose September sales were revised from a decrease of 0.2% to a 1.7% decrease, and clothing stores, where a 1.2% decrease was revised to 1.5% lower sales...several business types also saw their September sales revised higher; sales at electronics and appliance stores, which had been reported with a 3.4% increase, have been revised to show a 4.7% increase, largely on the strength of iphone6 sales; furniture stores, where sales had been reported down 0.8%, are now seen as unchanged; nonstore or online sales, originally reported down 1.1%, are now seen dropping just 0.3% in September; similarly, sales at  building materials and garden supply stores, which were originally reported as down 1.1%, have been revised to a 0.6% decrease; sales at specialty store sales, as sporting goods, book and music stores, were also revised from a 0.1% decrease to a 0.5% increase, and sales at food and beverage stores, originally reported as unchanged, are now seen as 0.4% higher in September...

September Wholesale Inventories and Overall Business Inventories Both Rise 0.3%

the first release covering inventories we saw this week was on Wholesale Trade, Sales and Inventories for September from the Census Bureau, which reported that seasonally adjusted sales of wholesale merchants rose 0.2 percent (+/-0.9)* to $454.3 billion from the revised August estimate of $455.2 billion, and were up 5.2% (+/-1.6%) from September a year earlier...the August preliminary sales estimate was revised upward $0.4 billion or 0.1%, and hence was down 0.8% from July...September wholesale sales of durable goods were up 0.5 percent (+/-0.9%)* over August and were up 5.4 percent (+/-1.6%) from September a year ago, as wholesale hardware, plumbing & heating equipment sales rose 4.8% while miscellaneous wholesale sales fell 1.5%...seasonally adjusted sales of nondurable goods were down 0.1% (+/-1.4%)* from August but were up 5.1 percent (+/-3.0%) from last September as wholesale sales of apparel and piece goods rose 4.0% while sales of paper products fell 2.6%...note that the asterisks indicate that Census does not have sufficient statistical evidence to determine whether sales actually rose of fell for the periods indicated....in addition, this release reported that seasonally adjusted wholesale inventories were valued at $538.8 billion at the end of September, 0.3% (+/-0.4%)* higher than the revised August  level and  7.4% (+/-0.9%) above last September's level, while August's preliminary inventory estimate was revised downward $0.6 billion or 0.1%...wholesale durable goods inventories were up 0.8 percent (+/-0.4%) from August and up 9.0 percent (+/-1.4%) from a year ago, with wholesale inventories of computers and peripherals up 3.4% while inventories of electrical equipment were down 0.7%...inventories of nondurable goods were down 0.6%(+/-0.4%) from August while they were up 4.9% (+/-0.7%) from last September, as inventories of wholesale chemicals were up by 2.4% while wholesale inventories of petroleum and petroleum products were down 5.3%... finally, the closely watched inventory to sales ratio of merchant wholesalers was at 1.19, unchanged from August but up from the inventory to sales ratio of 1.16 in September of last year...

on Friday, the Census Bureau released the Manufacturing and Trade Inventories and Sales report for September, covered in the media as the business inventories report, which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers' shipments was at $1,352.5 billion in September, virtually unchanged (±0.3%)* from August, while 4.1% (±0.6%) above the total monthly sales level of September of last year...manufacturers sales were estimated at $503,424 million, retailer's sales were estimated at $394,793 million, while merchant wholesalers accounted for $454,298 million of the overall total....meanwhile, total manufacturer's and trade inventories were estimated to have increased 0.3 percent (±0.1%) from August to a seasonally adjusted $1,756.1 billion at the end of September, which was up 5.3 percent (±0.5%) from September a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $655,190 million, inventories of retailers were estimated to be valued at $562,078 million, and inventories of wholesalers were estimated to be valued at $538,832 million at the end of September...the month end total business inventories to total sales ratio, the metric which is watched to determine if inventories are becoming excessive, was at 1.30, unchanged from August but up from 1.28 September a year ago...

Job Openings Slip In September as Job Quits Hit Post Recession High

the September Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 118,000 to 4,735,000 at the end of September, while the estimate for jobs open at the end of August was revised up by 18,000 from the originally reported 4,835,000 openings to 4,853,000....job openings in restaurants and hotels fell 24,000 to 605,000 and openings in construction fell 23,000 to 98,000, while openings in professional and business services rose by 36,000 to 964,000.....job openings as a percentage of the employed labor force fell to 3.3% from 3.4% in August, but it was still up from 2.8% in September a year ago and up from a low of 2.7% in January...based on 9,262,000 officially unemployed in September, there would be two unemployed who were actually looking for work during September 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...

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 deaths.... in September, seasonally adjusted new hires totaled 5,026,000, up 284,000 from the 4,742,000 hired or rehired in August, as the hiring rate as a percentage of all employed rose from 3.4% to 3.6%, the same level as July and also up from the 3.4% hiring rate in September a year earlier...while hiring fell in construction by 54,000 to 276,000, it rose by 111,000 to 548,000 in health care services and rose by 48,000 to 280,000 in manufacturing....total separations also rose, from 4,531,000 in August to 4,788,000 in September, as the separations rate as a percentage of the employed rose from 3.3% to 3.4%, and up from 3.3% a year ago...subtracting the 4,788,000 total separations from the total hires of 5,026,000 would imply an increase of 238,000 jobs in September, 18,000 less than the revised payroll job increase of 256,000 for September 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 that a post recession high of 2,753,000 quit their jobs in September, 243,000 more than the revised 2,510,000 who quit their jobs in August, while the quits rate, an indicator of worker confidence which is being watched by the Fed, rose from 1.8% to 2.0% of total employment.....in addition to those who quit, another 1,647,000 were either laid off, fired or otherwise discharged in September, up 28,000 from the 1,619,000 discharges in August, which left the discharges rate unchanged at 1.2% of all those who were employed during the month....meanwhile, other separations, which includes retirement and death, were at 388,000 in September, down from 402,000 in August, 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 months when separations in purple were above hires in orange, we were losing jobs...the two major components of separations are also included below, the count of layoffs and firings is tracked in red, while the number of those quitting their jobs monthly is shown in green, clearly visible as a post recession high....    

September 2014 JOLTS

3rd Quarter Mortgage Delinquency and Foreclosure Rates Lowest Since 2007

this week also saw the release of the Mortgage Bankers Association's (MBA) National Delinquency Survey for the 3rd Quarter, which, like the September Mortgage Monitor we reviewed last week, gives us a snapshot of mortgages that are in trouble as of the end of September, except that the MBA seasonally adjusts mortgage delinquencies and foreclosures, and since historically the 3rd quarter has been a bit higher for mortgage delinquencies & foreclosures, MBA's 3rd quarter numbers have been adjusted downward a bit...in addition, the MBA has historically reported a higher rate of delinquencies and foreclosures, presumably from the same mortgage data...with those caveats, the MBA reported that 2.39% of all mortgages were in the foreclosure process at the end of the quarter, down from 2.49% at the end of the 2nd quarter and down from 3.08% that were in foreclosure a year earlier; the MBA also reported an additional 5.85% of home owners with a mortgage were at least one month overdue on their payments but not in foreclosure at the end of the quarter, down from a delinquency rate of 6.04% at the end of the 2nd quarter and down from 6.41% who were delinquent on their mortgages at the end of the 3rd quarter last year...the seriously delinquent rate, which is the percentage of mortgages that are more than 90 days overdue or in the process of foreclosure, was at 4.65%, down from 4.80% last quarter and down from 5.65% who were seriously delinquent a year ago...in contrast to this MBA report, last week the BKFS Mortgage Monitor reported an unadjusted foreclosure inventory rate of 1.76% of all mortgages, a delinquency rate of 5.90%, and a serious delinquency rate of 3.97%...the MBA also reports that foreclosures were started on 0.40% of mortgages in the 3rd quarter, which would not be directly comparable to the 91,038 new foreclosures the Mortgage Monitor indicated for the single month of September. but the three month total of foreclosure starts would be roughly 0.51% of the active loan count at the end of September...the bar graph below, taken from Bill McBride's coverage of this MBA report, is a color coded representation of the percentage of mortgages in foreclosure and delinquent since the 1st quarter of 2005....each bar shows the portion of 30 day delinquencies reported by the MBA for each quarter in violet, the percentage of 60 to 90 day delinquent mortgages for each quarter in the blue portion of each bar, the percentage of mortgages more than 90 days late in yellow, and the percentage of homes in foreclosure in each quarter in red...we can see that the percentage of mortgages in trouble peaked at 14.7% in the first quarter of 2010 and has been trending downward since, although it's still well above the levels of the pre-crisis year of 2005, especially with regards to 90 day delinquencies and homes stuck in foreclosure...

3rd qtr 2014 MBA delinquency survey via McBride

(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, November 9, 2014

October jobs report, September’s trade, construction spending, factory orders, consumer credit and Mortgage Monitor, et al

  as is typical, there were several economic releases in this, the first week of the month, including the employment summary for October on Friday...the week also saw the release of trade data for September from the Commerce Dept, and the September Census reports on construction spending and factory orders, and the Fed report on September consumer credit...we also saw the Mortgage Monitor for September from Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division), the large graphic monthly report which we'll again review this week...in addition, this week also saw the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the October Manufacturing Report On Business, which saw its broad composite Purchasing Manager's Index (PMI) rise to 59.0% from September’s reading of 56.6%, on a 5.8% increase in the new orders index to 65.8%, indicating a larger plurality of manufacturing purchasing managers saw growth in October than did in September, and the October Non-Manufacturing Report On Business, which saw its composite Non-manufacturing Index slip to 57.1% from 58.6% in September, indicating that slightly fewer service industry purchasing managers reported growth in their business in October than did in September...

Employers Add 214,000 Payroll Jobs in October; August and September Revised Up

the October survey of establishments conducted by the Bureau of Labor Statistics indicated that nonfarm payroll employment increased by a seasonally adjusted 214,000 jobs to 139,680,000 jobs, slightly less than was expected, while August's payroll jobs count was revised up from 180,000 to 203,000, and September's count was revised up from 248,000 to 256,000, hence resulting in a reported net addition of 245,000 seasonally adjusted jobs with this release, and the highest year to date job creation count since 1999....the unadjusted establishment data indicates that there were actually 1,064,000 non-farm payroll jobs added in October, as seasonal retail hiring began and more jobs were regained in local and state education before the seasonal adjustment, so the seasonal adjustment was a major factor this month...the FRED bar graph below incorporates the seasonal adjustments and the revisions to the August & September reports and shows the reported payroll job change monthly since the beginning of 2008, with job gains above the zero line and job losses below it...  

October 2014 payroll jobs

seasonally adjusted payroll jobs increased in most major sectors in October, led by an increase of 52,000 additional jobs in the leisure and hospitality sector, with 41,800 of those working in bars and restaurants....an additional 37,000 slots were added in the broad professional and business services category, with 24,000 of those in employment services and another 6,800 in computer systems design and related services....there were also 27,100 more jobs added in retail, with 11,900 of those working in general merchandise stores...employment also increased with the addition of 27,200 jobs in health care and social assistance, with the addition of 18,500 in ambulatory health care services, 7.400 of which were in home health care services...there were also 15,000 more jobs in manufacturing, with 14,000 of those added by durable goods manufacturers; in addtion, 13,700 were added in educational services, there were 13,300 more jobs in transportation and warehousing, and 12,000 added in construction, 10,300 of which were working for specialty trade contractors....job additions by other sectors included 8,500 in the wholesale trades, 5,000 in government, 4,000 in financial services and 1,000 in resource extraction...the information sector, with 4,000 less payroll jobs than in September, was the only sector to show a decrease in seasonally adjusted employment...

the average workweek for all payroll employees rose to 34.6 hours in October after 6 months at 34.5 hours, with longer workweeks in construction, resource extraction and utilities and generally stable workweeks in the services sector...the manufacturing workweek unchanged at 40.8 hours and factory overtime fell by 0.1 hour to 3.4 hours....the average workweek for production and nonsupervisory employees, also rose by 0.1 hour to 33.8 hours, as the largest nonsupervisory workweek increases of 0.3 hours were again seen in construction and resource extraction...the average hourly pay for all workers rose by 3 cents an hour to $24.57 an hour, with their year over year increase at 48 cents, or less than 2%, while the average pay for nonsupervisory workers rose by 4 cents to $20.70, while their year over year average hourly pay rose 45 cents, a 2.2% average increase in hourly pay over the past year…

Households Estimate 5.8% Unemployment; Labor Force Participation and Employment Rate Rises In October

the personal employment data extrapolated from the October survey of 60,000 households reversed the record weakness reported in September, with the wide swing likely reflecting the small sampling and the resultant +/- 300,000 margin of error in the number unemployed herein...the October household summary indicated that the seasonally adjusted count of the employed rose by 683,000 to 147,283,000, a number not directly comparable to the establishment data, since it also includes farm workers and the self-employed... meanwhile, the count of the unemployed fell by 267,000 to 8,995,000, which together with the employed means the number of us who were counted in the labor force rose by 416,000 to 156,278,000, leaving the unemployment rate, or those counted as unemployed as a percentage of the total, at 5.8%, down from 5.9% in September...so, with an increase of 211,000 in the working age population, the count of those not in the labor force fell 206,000 from its September record to 92,378,000, and as a result the labor force participation rate rose by 0.1% from its 36 year low of 62.7% in September to 62.8% in October...with the large increase in the count of the employed, the employed to population ratio rose by 0.2%, from 59.0% in September to 59.2% in October....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...

October 2014 household survey metrics

of the seasonally adjusted total of 147,283,000 of us counted as being employed in October, 119,632,000 reported they were working full time, 345,000 more than in September, while 27,693,000 reported they were working part time, or less than 34 hours in the reference week, an increase of 334,000 part time workers over the September part time count...of those, the count of those working part time who would rather work full time fell by 76,000 to 7,027,000; as a result of that the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell by 0.3% to 11.5%...meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work fell by 38,000 in October to 2,916,000, while the median duration of unemployment rose nonetheless, from 13.3 weeks to 13.7 weeks...among the 92,584,000 of us not officially in the labor force and hence not counted as unemployed, 6,122,000 reported that they still wanted a job, up from 6,007,000 in September, and up from 5,683,000 in last October; of those, 2,192,000 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 October survey...770,000 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...  

September Trade Deficit Jumps $3.0 Billion on Record Goods Deficit with China

the September 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 $43.0 billion for the month, up from the revised trade deficit of $40.0 billion in August, as our exports fell $3.0 billion to $195.6 billion on a $2.6 billion decrease to $136.1 billion in our goods exports and a $0.4 billion decrease to $59.5 billion in our exports of services, while our imports rose $0.1 billion to $238.6 billion on a $0.1 billion decrease to $198.7 billion in our imports of goods, while our imports of services rose $0.2 billion to $39.9 billion....the August trade deficit was revised down from the previously reported $40.1 billion, giving us a third quarter trade deficit of $123.3 billion, down from the 2nd quarter deficit of $130.2 billion...when computing GDP for the 3rd quarter, the BEA assumed that exports would increase and imports would decrease in September, so they were wrong on both counts, leading economists to mark down their estimates on third quarter growth by as much as 0.7%...since last September, our overall trade deficit has increased by $0.8 billion, on an $5.3 billion increase in exports and a $6.1 billion increase in imports...

the end use categories of exports that fell in September included industrial supplies and materials, exports of which fell by a seasonally adjusted $2,045 million to $42,187 million, as we exported $216 million less crude oil, $651 million less fuel oil, $960 million less of other petroleum products and $253 million less finished metal shapes.....exports of capital goods fell by $1,167 million to $45,945 million on $360 million less civilian aircraft exports, $240 million less exports of civilian aircraft parts, a $216 million drop in exports of computer accessories, $188 million less exports of industrial engines, and $182 million less exports of telecommunications equipment...in addition, our September exports of consumer goods fell by $687 million to $16,586 million on $429 million less exports of jewelry and $360 million less exports of pharmaceuticals, our exports of automotive vehicles, parts, and engines fell by $104 million to $13,488 million, and our exports of goods not categorized by end use fell by $131 million to $5,351 million...meanwhile, our exports of foods, feeds and beverages rose $1295 million to $11,812 million on a $1,746 million increase in soybean exports, which were partially offset by $123 million less exports of wheat, $99 million less exports of corn, and $98 million less exports of dairy products and eggs...

the August to September decrease in imports of goods included a $1,104 million drop to $54,530 in our imports of industrial supplies and materials, on decreases of $462 million in imports of non-monetary gold, $429 million less imports of crude oil, $321 million less imports of fuel oil, and $279 million less imports of organic chemicals and fertilizers...our $49,941 million in imports of capital goods was $940 million less than in August, as we imported $785 million less worth of civilian aircraft while we imported $238 million more in civilian aircraft engines; our imports of automotive vehicles, parts, and engines also fell by $515 million to $27,013 million...meanwhile, we imported $47,698 million in consumer goods, $1,910 million more than in August, as we imported $1,919 million more in cell-phones with the release of the iphone6; in addition, our imports of foods, feeds & beverages increased by $98 million to $10,639 million with $114 million more imports of fish and shellfish and $112 million more imports of meat products, and our imports of our imports of goods not categorized by end use rose by $304 million to $6,727 million...

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 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 few years, our trade deficit in everything else in red has continued to grow...in September, 80% of that deficit in "everything else" was with China, as our imports from China alone rose to a record $44.9 billion on the surge in buying of cell phones with the release of the iphone6...

September 2014 trade deficit via McBride

Construction Spending Falls 0.4% in September; Unfilled Factory Orders Rise 0.3%

the Census report on Construction Spending for September (pdf) estimated that our seasonally adjusted construction spending for the month would work out to an annual rate of $950.9 billion of spending overall, 0.4 percent (±2.0%)* below the revised August estimate of spending at a $955.2 billion annual rate but 2.9 percent (±2.1%) above last September's adjusted and annualized level of construction spending....construction spending for August was revised from the originally reported $961.0 billion to $955.2 billion and construction spending for July was revised down from $968.8 billion to $960.0 billion, so construction spending for the entire third quarter is considerably lower than previous estimates, and will likely result in downward revisions of GDP components for residential construction, private structures, and public investment.....private construction spending was at a seasonally adjusted annual rate of $680.0 billion in September, 0.1 percent (±1.0%)*  lower than the revised August estimate, with residential spending rising 0.4 percent (±1.3%)* above the revised August estimate of $347.7 billion and non-residential construction falling 0.6 percent (±1.0%)*, while public construction spending was estimated at $275.9 billion, 30.9 percent (±2.8%)* below the revised July estimate...

the Census Bureau also released the Full Report on Manufacturers’ Shipments, Inventories, & Orders for September (pdf), which showed new orders for manufactured goods fell by $2.8 billion or 0.6% to $502.0 billion, after falling a record $56.0.billion or 10.0% in August, as new orders for commercial aircraft weakened further...this report also showed factory shipments increased by $0.7 billion or 0.1% to $503.4 billion, after falling 1.0% in August, and that September factory inventories rose by $1.5 billion or 0.2% to a record high $655.2%, and unfilled factory orders rose by $3.7 billion or 0.3% to $1,168.7, which was also the highest level value of unfilled orders on record....    

September Consumer Credit Rises at 5.9% Rate; October Vehicle Sales Flat

the Fed's G.19 Release on Consumer Credit for September indicated that total seasonally adjusted consumer credit outstanding increased by $15.9 billion to $3,267.0 billion, or at a 5.9% annual rate... the revolving credit portion of the aggregate, which would mostly be credit card debt, increased by $1.5 billion, or at a 2.0% annual rate, to $881.8 billion, while non-revolving credit, which includes loans for cars and college tuition but not borrowing for real estate, rose at by $14.5 billion to $2,385.2 billion, an annual growth rate of 7.3%....for the third quarter, consumer credit outstanding rose at a 6.6 annual rate, with revolving credit increasing at a 3.0% rate and non-revolving credit rising at 7.9% rate...looking ahead at a market where credit is often used, the report on October light vehicle sales from Ward's Automotive estimated vehicle sales were occurring at a 16.35 million annual rate during the month, up a hair from the annual rate of 16.34 million reported for September and 6% higher than last October, with year to date sales now running 5.4% ahead of 2013...

September Foreclosure Starts Rise 11.55% as Average Time In Foreclosure Rises to Record 1014 Days

according to the Mortgage Monitor for September (pdf) from Black Knight Financial Services (BKFS, formerly the LPS Data & Analytics division), there were 892,796 home mortgages, or 1.76% of all mortgages outstanding, remaining in the foreclosure process at the end of September, which was down from 935,460, or 1.80% of all active loans that were in foreclosure at the end of August, and down from 2.63% of all mortgages that were in foreclosure in September of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and September's so-called "foreclosure inventory" was the lowest percentage of homes in foreclosure since early 2008... new foreclosure starts, however, rose in to 91,038 in September from 81,612 in August and have now risen four out of the last five months, while they still remain well below the 108,953 foreclosures started in September of last year...

in addition to homes in foreclosure, September data showed that 2,877,977 mortgage loans, or 5.67% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down from 5.90% of homeowners with a mortgage who were more than 30 days behind in August, and down from the delinquency rate of 6.46% a year earlier...of those who were delinquent in August, 1,117,525 home owners were considered seriously delinquent, which means they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month...thus, a total of 7.43% of homeowners with a mortgage were either late in paying or in foreclosure at the end of August, and 3.97% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end... 

the graph below, from page 6 of the Mortgage Monitor pdf, is a graphic representation of the number of mortgages that were in trouble in each month since the beginning of 2005; the height of each bar corresponds with the total delinquent and in foreclosure mortgage loans for that given month, and within each of those bars the purple color indicates the number of homes in foreclosure, the green indicates the number of mortgages that were more than 90 days delinquent but not yet in foreclosure, the red indicates the number of mortgages that were between 60 and 90 days past due, and the blue indicates the number of mortgages that had just missed one monthly payment...

September 2014 LPS loan count buckets bar graph

the next graph below, taken from page 5 of the Mortgage Monitor, is a graphic representation of the prior status of the new foreclosure starts as they occurred in each month since the beginning of 2008; each bar represents a month and within each bar we have foreclosure starts on mortgages that have never been in trouble previously in blue, and foreclosure starts on mortgages that had been in foreclosure at least once before, presumably cured their previous foreclosure by either catching up on payments or through a modification of their loan, only to fall behind on payments again and end up in foreclosure another time...the green line then shows these repeat foreclosures as a percentage of total foreclosure starts for the month, and as they note, for the past 6 months more than half of new foreclosures are such repeaters...(they also try to suggest that the 11.55% increase in September foreclosure starts was a result of an abnormally low number of foreclosure starts in August, but since April foreclosures were almost 5% lower than August, that seems like spin from here)

September 2014 LPS new and repeat foreclosures

a major focus of this month's report was to spotlight the large percentage of outstanding second lien home equity lines of credit (HELOCs) that originated between originated between 2005 and 2007, most of which have draw periods of ten years, and hence will either owe a balloon payment or begin amortizing over the next three years...the bar graph below, from page 19 of the pdf, shows in each bar the percentage of such HELOCs that end their draw period in each of the years from 2005 to 2024, with the percentage of them that have negative equity in green, barely positive (0-10%) equity in red, and more than 10% equity in blue shown within each bar...as the callouts within the graphic note, less than 8% of HELOCs have reached the end of their draw to date, and it's clear the majority of them will be coming due over the next three years, incurring an average $262 per month increase in monthly payments each...BKFS also notes that of those that end their draw over the next five years, 17% have negative equity, and 12% have less than 10% equity...this is a concern because previous studies have indicated that those with little or negative equity are more likely to default on their mortgages and hence end up in foreclosure than those with a large equity stake...

September 2014 LPS HELOCs amortization dates

once again, we'll include the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 28 of the pdf....the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month shown going back to January 2008….in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…notice that although the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has remained nearly steady and is now at 492 days, the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 1014 days… 

September 2014 LPS FC & delinquent loan count table 2

(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, November 2, 2014

3rd quarter GDP; September’s personal income and outlays, and durable goods; August’s Case-Shiller, et al

the key reports of this past week were the Advance Estimate of 3rd quarter GDP from the Bureau of Economic Analysis, and the September report on Incomes and Outlays, also from the BEA, which breaks down the month's national data on personal income, personal consumption expenditures, personal savings and the personal savings rate, as well as the price index for PCE, which is the inflation gauge the Fed targets...in addition, this week saw the release of the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau, the August S&P/Case-Shiller House Price Indices, and 3 manufacturing diffusion indexes, including 2 from Fed district banks...first, in indexes where positive values indicate expansion, the October Texas area manufacturing survey from the Dallas Fed saw its general business activity index hold steady at 10.5 while their production index fell from 17.6 to 13.7, indicating output grew but at a slightly slower pace than in September; the Richmond Fed October Survey of Manufacturing Activity, covering the 5th Fed District that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported improvement in new orders and shipments as their manufacturing composite index rose to 20, up from a reading of 14 in September; and the Chicago Purchasing Managers Index (PMI) for October from the ISM-Chicago (pdf), which reported their Chicago Business Barometer rose 5.7 points to a one year high of 66.2 in October, indicating a larger plurality of Midwest manufacturers reported expansion than in September...

3rd Quarter GDP Up at 3.5% Rate on Higher Defense Spending and Lower Trade Deficit

the Advance Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis indicated that the real output of goods and services produced in the US grew at a 3.5% annual rate this summer over the output of the 2nd quarter of this year, when output grew at a 4.6% real rate...the third quarter saw a smaller trade deficit and greater defense outlays than the second, while growth in personal consumption and investment spending slowed ....after the first quarter contraction of 2.1%, our year to date growth for the nine months of 2014 works out to 1.5%, or at a little less than a 2.0% annual rate...in current dollars, our 2nd quarter GDP would extrapolate to $17,535.4 billion of economic output annually, up at an annualized 4.9% from the $17,328.2 billion annualized figure extrapolated by the BEA for the 2nd 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 inflation adjustment used in the third quarter, aka the "GDP deflator" would suggest annual inflation at a 1.3% rate, down from the 2.0% deflator applied in the 2nd quarter...as is always the case with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have now averaged +/-0.6% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate is released, which will be two months from now...also note that September trade and inventory data have yet to be reported, and that BEA assumed an increase in exports and a decrease in imports, and that wholesale and retail inventories and nondurable manufacturing inventories had decreased in September...while we cover the details below, remember all quarter over quarter percentage changes reported here are given at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period...

real personal consumption expenditures, the largest component of GDP,  grew at a 1.8% seasonally adjusted annual rate in the 3rd quarter, compared with growth at a 2.5% rate in 2nd quarter...real consumption of goods was up at a 3.1% annual rate, with consumer purchases of durable goods units growing at a 7.2% rate and adding 0.53% to 3rd quarter GDP on the strength of 1.9% negative deflator and a 12.1% real growth rate in consumption of recreational goods and vehicles and a 9.9% real growth rate in motor vehicle and parts consumption, while real consumption of furnishings and durable household equipment other durable goods was flat....real consumption of non-durable goods, reduced by a 1.3% deflator, was up at a 1.1% rate and added 0.18% to the GDP growth rate, as reduced real outlays for food and beverages and gasoline partially offset real growth in consumption of clothing and footwear and other non-durable goods...meanwhile, real growth in consumption of services increased to a 1.1% annual rate and added 0.52% to GDP as real consumption of financial services and insurance grew at a 5.4% annual rate, real consumption of food and lodging services grew at a 4.1% rate, and real outlays for health care services rose at a 1.8% rate, offsetting small decreases in real outlays for housing and utilities, recreation and other services...

real gross private domestic investment, which had grown at a 19.1% annual rate in the 2nd quarter, stalled in the 3rd quarter and only grew at a 1.0% annual rate, adding just 0.17% to the the quarter's GDP growth rate, in contrast to the 2.87% that investment growth added in the 2nd quarter...real gross private fixed investment grew at a 4.7% rate as real nonresidential fixed investment grew at a 5.5% rate on a 7.2% increase in real outlays for equipment, with a 24.9% growth rate in outlays for industrial equipment leading that increase, while investment in non-residential structures grew at a 3.8% annual rate and investment in intellectual property products grew at a 4.2% rate, on modest growth in software, R&D, and artistic originals....for the quarter, non-residential fixed investment added to GDP at a 0.68% annual rate, with investment in equipment adding 0.41%, investment in structures adding 0.11%, and investment in intellectual property adding 0.16%, while real residential investment grew at a 1.8% annual rate in contrast to 2nd quarter growth at a 8.8% rate and hence added just 0.06% to the quarter's growth rate...meanwhile, real private inventories grew by an inflation adjusted $62.8 billion in the third quarter after growth of $84.8 billion in the 2nd quarter, and hence the $22.0 billion slower inventory growth subtracted 0.57% from the quarter's growth rate, in contrast to the $49.2 billion increase in inventory growth in the 2nd quarter that added 1.42% to that quarter's GDP...since lower inventories indicate that more of the goods produced goods have either been shipped or sold, their decrease by $22.0 billion means real final sales of GDP were that much higher, increasing at a 4.2% annual rate in the 3rd quarter compared to the real final sales increase at a 3.2% rate in the 2nd quarter, when the change in inventories grew…

real exports, which had grown at a 11.1% rate in the second quarter, grew at a 7.8% rate in the 3rd quarter, but imports fell at a 1.7% rate, in contrast to the 2nd quarter increase in imports at a 11.3% rate, so our net trade added to growth for the quarter...remember that 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, and that it's the quarter over quarter change in each that affects the quarterly change in GDP.... so the 7.8% increase in our real exports of goods and services resulted in an addition of 1.03% to the third quarter's growth rate, while the 1.7% decrease in our real imports of goods and services also added another 0.29% to third quarter growth, a sharp contrast from the 1.77% that the increase in imports subtracted from GDP in the 2nd quarter...

finally, real consumption and investment by governments increased at a 4.6% annual rate, as federal government consumption and investment rose at a 10.0% rate over the 2nd quarter, while state and local consumption and investment grew at a 1.3% rate....federal spending for defense grew at a 16.0% rate and added 0.66% to GDP, while non-defense federal consumption and investment grew at a 0.5% rate and added 0.01% to GDP...note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in output of goods or services...meanwhile, state and local government investment and consumption expenditures, which grew at a 1.3% annual rate, added 0.15% to the quarter's growth rate, as state and local consumption spending rose at a 0.9% rate while state and local investment grew at a 3.4% rate...

in our FRED bar graph below, 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, the quarterly changes in real (ie, inflation adjusted) personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, while the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...you can see the major contributions to GDP in the 3rd quarter came from personal consumption, exports, and Federal spending & investment, while the smaller increase in inventories was the only component that subtracted from growth...

3rd qtr 2014 advance GDP

September Incomes Increase by 0.2%, Personal Consumption Expenditures Fall by 0.2%

along with the release of the 3rd quarter GDP report, the BEA also released the September report on Personal Income and Outlays, which is where they get the September data on our personal consumption expenditures (PCE), which as we just saw was weaker than expected, largely because of the pullback indicated in this September report.....like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are used within the report as if they refer to the annualized amounts, often confusing reporters...

in September,  total personal income increased at a seasonally adjusted and annualized $22.7 billion rate, to what would be a gross national personal income of $14,892.6 billion annually, which was 0.2% higher than in August, when personal income increased by 0.3% over July...disposable personal income (DPI), which is total income after taxes, increased at an annualized rate of $15.7 billion to $13,134.1 billion annualized, which was just a 0.1% increase over August, while August's DPI was up 0.3% over July...increases in private wages and salaries accounted for just $12.6 billion of the annualized September personal income gains, with service industry payrolls increasing by $11.9 billion and goods producing industry payrolls rising $0.7 billion....increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $3.5 billion of September's annualized increase, while employee contributions for government social insurance, which is subtracted from the personal income figure, increased at a $1.8 billion rate...meanwhile, proprietors' income decreased at a $0.8 billion rate in September, mostly due to a $9.2 billion decrease in farm owners incomes, as incomes of individual proprietors of other types of business were up $8.4 billion....other sources of the September personal  income changes included rental income of individuals, which increased at a $1.5 billion rate in September, personal interest and dividend income, which fell at a $1.1 billion rate, and personal transfer payments from government programs, which increased at a $7.5 billion rate..  

meanwhile, seasonally adjusted personal consumption expenditures (PCE), which are the basis for the change in real PCE in the GDP data we reviewed earlier, fell at a $19.0 billion annual rate in September to a level of $11,966.7 billion in consumer spending annually, 0.2% lower than August, when PCE increased by 0.5% over July...the current dollar drop in September spending was driven by a $26.4 billion annualized decrease to $1,306.5 billion in outlays for durable goods and a $8.1  billion decrease to $2,673.3 billion in annualized spending for non-durable goods, while spending for services rose at an annualized $18.4 billion rate to an annualized $7,986.8 billion ...total personal outlays for March, which includes interest payments, and personal transfer payments in addition to PCE, fell by an annualized $14.5 billion to $12,401.9 billion, which left personal savings, which is disposable personal income less total outlays, at $732.2 billion in September, up from the $702.0 billion in personal savings in August... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose from 5.4% in August to 5.6% in September..

while personal consumption expenditures accounted for 68.2% of our third quarter GDP, before they were included in measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption...that's done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2009 prices = 100....that index rose to 109.152 in September from 109.070 in August, giving us a month over month inflation rate of 0.075% and a year over year PCE price index increase of 1.48%; because of the small monthly increase, the inflation adjusted or real personal consumption expenditures were down 0.2% in September, statistically the same as the unadjusted decrease, after rising 0.5% in August, when the PCE price index was down fractionally...however, using the same PCE price index, disposable personal income was deflated to show that real disposable personal income, or the purchasing power of disposable income, rose by just 0.1% in September, after increasing by 0.3% in August...

our FRED graph below shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the annualized scale in chained 2009 dollars for both shown in the current data 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 14 years, real DPI below is not adjusted for increases in the population; on a per capita basis, real DPI  per capita is up just 21.2% over the span of this graph… 

September 2014 income and outlays

Durable Goods Order Backlog at Record $1,168.7 Billion in September, 12.4% Higher than Year Ago

the widely watched new orders for durable goods unexpectedly fell for the second month in a row in October as widespread weakness was compounded by another big drop in the the volatile big-ticket orders for commercial aircraft....the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau estimated that new orders for manufactured durable goods fell by a seasonally adjusted $3.2 billion or 1.3% to $241.6 billion, following the revised August orders decrease of $55.0 billion or 18.3%, a record drop that effectively reversed the $55.1 billion or 22.5% increase in July....new orders for transportation equipment fell 3.7% to $73,447 million after falling 42.4% in August as new orders for non-defense aircraft fell 16.0% to $15,264, while new orders excluding transport equipment orders fell 0.2% in September to $168,186 million, as the important new orders for non-defense capital goods less aircraft, an indicator of business investment, fell 1.7% to $71,824 million...seasonally adjusted shipments of durable goods were also weak, rising only $0.1 billion or less than 0.1% to $245.6 billion after falling 1.8% in August, with shipments of fabricated metal products, up 0.6% to $30,458 million, and transportation equipment, up 0.3% to $72,471 million, the major September increases...meanwhile, seasonally adjusted inventories of durable goods, which have been up 17 out of the last 18 months, rose $1.8 billion or 0.4% to a new record at $404.8 billion, as inventories of  transportation equipment, up 0.8% to $130,926 million, accounted for more than half of the September 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 $3.8 billion or 0.3% to a record  $1,168.7 billion....all categories of durables except communications equipment and defense capital goods saw their order backlog increase, with unfilled orders for automotive equipment, up 1.2% to $17,408 million, and for civilian aircraft with their long lead times, up 0.3% to $572,178, being a large part of this aggregate increase...at month end, unfilled orders for durable goods were 12.4% ahead of last September's backlog...

Year Over Year Home Prices Increases Fall in August for Eighth Month in a Row

according to the S&P Case-Shiller Home Price Index for August, year over year home price increases continued to decelerate, as the 10-City Composite was 5.5% higher than a year ago while the 20-City Composite Index was 5.6% higher, which were both down from the 6.7% annual home price increases reported for both in July...the month over month change,  which compares their current 3 month average of June, July and August selling prices to last month's 3 month average of May June, and July prices (and hence is simply a comparison of August's prices to May's), both the 10 city and 20 city indexes saw an unseasonably small increase of 0.2%, as did the Case-Shiller National Index...on a similar unadjusted basis, Detroit, where homes sold for 0.8% more, saw the largest monthly increase, followed by Dallas, Denver and Las Vegas, where the metropolitan area price indexes rose 0.5%....cities showing lower prices in this August release compared to last months include San Francisco, where area home prices fell 0.4%, and Charlotte and San Diego, where the home price indices were down 0.1%....in the comparison to last August, home sales prices in Miami were 10.5% higher, followed by 10.1% higher prices in Las Vegas and 9.0% higher prices in San Francisco...Cleveland home prices, up 0.8%, saw the smallest one year increase, followed by Charlotte at 2.5% and Chicago 2.9% higher than last year...

included below are the pair of interactive FRED graphs we have 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 August report in our screenshot… 

August 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 you will 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… 

August 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…)

Sunday, October 26, 2014

September’s consumer prices, new and existing home sales, states’ jobs report, et al

the key release of the past week was that of the consumer price index from the BLS, which in addition to giving us itemized price changes for roughly 200 categories of consumer expenditures for the recent three months and for the year, is also used in the case of this September report to set the annual change to the cost of living adjustments (COLA) for Social Security and several other programs; based on the change in the CPI from the third quarter of 2013 to the third quarter of 2014, the annual  increase to Social Security stipends from the COLA will be 1.7%....other reports we saw this week included the Census report on new home sales and the National Association of Realtor's report on sales of existing homes, both for September...this week also saw the release of the October Kansas City Fed manufacturing survey (pdf), covering an region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, and reporting that their broadest composite index fell from 6 in September to 4 in October, indicating continuing manufacturing growth at a slow pace...in addition, this week also saw the release of the Chicago Fed National Activity Index for September (pdf), a weighted composite index of 85 different economic metrics grouped into four broad categories of data, which rose to +0.47 in September from –0.25 in August, with the positive number indicating growth above the historical trend....58 of the 85 individual indicators made positive contributions to the index in September, as production related indicators added 0.30 to the index, employment-related indicators added 0.22, sales, orders, and inventories added 0.08, while the the consumption and housing category subtracted 0.13 from the overall reading for September...the index’s three-month moving average increased to +0.25 in September from +0.16 in August as the August monthly index was revised to –0.25 from an initial estimate of –0.21, and the July monthly index was revised to +0.52 from last month’s estimate of +0.26...

September CPI Up 0.1% on Higher Rent and Food Prices

consumer prices inched up in September after falling in August as increased costs for food and shelter offset lower prices for energy and commodities other than drugs....the Consumer Price Index for All Urban Consumers (CPI-U) for September from the Bureau of Labor Statistics showed that seasonally adjusted prices rose by 0.1% after falling 0.2% in August and increasing 0.1% in July, meaning that overall prices were virtually unchanged in the 3rd quarter...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 238.031 in September from 237.852 in August, and still remained 1.7% higher than the 234.149 reading from September of last year...as food price increases were almost enough to offset a drop in energy prices, core prices, which exclude those volatile components, also rose by 0.1%, as the unadjusted core index rose from 238.296 in August to 238.841 in September, while that index was also 1.7% ahead of its year ago level of 234.782...

the seasonally adjusted energy price index fell by 0.7% in September as prices for energy commodities were 1.1% lower while the index for energy services fell 0.2%...energy commodity prices decreased on a 1.0% drop in the price of gasoline, the largest component, and a 2.1% drop in fuel oil prices, while prices for other fuels, including propane, kerosene and firewood, averaged a 0.5% decrease…within energy services, the index for utility gas service rose by 1.6%, the first increase in four months, as it had fallen 3.5% over the summer months, while the electricity price index fell 0.7% after rising 0.1% in August...energy commodities are now priced 3.3% below their year ago levels, while the energy services price index is 3.5% lower...

the seasonally adjusted food index rose by 0.3% in September, after rising 0.2% in August, and it is now 3.0% higher than September a year ago....prices for food away from home rose by 0.3% as prices for meals at full service restaurants rose by 0.2% and prices at fast food restaurants were 0.4% higher, while prices for food at schools rose by 0.5%, and prices for other food away from home rose by 0.2%....in addition, the price index for food at home also rose 0.3% as higher prices for meats and dairy products were partially offset by lower prices for cereal and bakery products....the latter food group averaged 0.4% lower than in August as every item in the group was priced lower except for frozen pastries; flour fell by 1.2%, as did breakfast cereals, while rice, pasta and cornmeal were down 0.9% and bread prices fell by 0.3%....however, prices in the meats, poultry, fish, and eggs group rose by another 0.7% and are now 9.4% higher than last year as beef and veal prices were 2.0% higher and ham prices rose 1.4%, while egg prices fell 2.8% and poultry prices were unchanged...for the year ending with this report, beef prices have risen 17.8%, with a 16.8% increase in steak prices the smallest line item increase in the group, while pork prices have risen 11.4%, led by a 20.0% increase in prices for picnics and roasts.....in addition, dairy products prices were 0.5% higher in September than in August as milk prices increased by 0.7% and ice cream was priced 1.8% higher, while cheese prices fell by 0.7%....meanwhile, the fruit and vegetable price index was just 0.1% higher as fresh fruit prices rose 1.3% despite a 3.2% drop in apple prices, fresh vegetables fell 1.1% and canned fruits and vegetables fell 1.8% while prices for dried beans, peas, and lentils rose 1.0%...in addition, prices for the beverage group rose by 0.2% as prices for roast coffee and frozen noncarbonated juices and drinks were both up by 0.5%, and lastly prices for other foods at home rose by 0.5% as prices for olives, pickles, and relishes rose 5.4%, butter prices rose 2.3%, candy and gum prices rose 2.1% and prepared salads rose 1.4% while soup prices fell 1.4%...for the year, butter prices have now risen 23.7%, which was the largest line item annual increase in the index...

for the seasonally adjusted core components of the CPI, which rose by 0.1% in September, we find that the composite of all commodities less food and energy commodities was statistically unchanged, while the composite for services less energy services rose by 0.2%....the index for shelter, which is almost 32% of the CPI, rose by 0.3%, with rent of shelter rising 0.3% and homeowner's equivalent rent rising 0.2%, while prices for lodging away from home rose by 0.5%, water & sewer bills rose 0.4%, and the cost of household operations fell 0.1%....meanwhile, prices for household furnishings and supplies, the commodity component of housing, fell by 0.1%, with a 0.7% drop in prices for living room, kitchen and dining room furniture and 0.5% lower prices for decor items offsetting a 2.0% price increase in laundry appliances....the price index for apparel was unchanged in September after falling 0.2% in August as a 3.2% increase in prices for men's suits, coats, and outerwear and a 1.6% increase in prices for girl's apparel was offset by a 4.2% drop in prices for women's outerwear ..the aggregate index for medical care, meanwhile, rose 0.2% in September as the medical care commodity index rose 0.5% after falling 0.1% in August on a 1.5% increase in non-prescription drug prices, while the medical care services index rose 0.1% on 0.4% increases in both outpatient hospital services and nursing homes and adult day services, while prices for health insurance fell another 0.1% and were down 2.0% for the year....then, while the transportation composite index showed a 0.3% decrease, that index includes gasoline, which you'll recall fell in price by 1.0%; prices for transportation commodities less fuel prices, however, were unchanged, as prices for new cars and trucks were unchanged, prices for used cars & trucks fell 0.1%, the price of tires fell 0.4% while the price of parts and accessories rose 0.2%...meanwhile, the transportation services index rose 0.1% as 0.8% higher priced car repairs, 0.6% higher intracity transit fees, and 0.4% higher vehicle insurance were partially offset by 3.2% lower car and truck rentals and 1.6% lower state motor vehicle registration and license fees....at the same time, the recreation price index was unchanged as recreation commodities rose 0.2% on a 1.2% increase in prices for pets and pet products and a 0.7% increase in photography equipment, which was only partially offset by an 0.8% drop in prices for televisions, while prices for recreation services were unchanged as 0.6% higher film processing and 0.3% higher costs for cable and satellite television service were offset by 0.6% lower rentals of video and audio discs and other media and 0.6% lower admissions to movies, theaters, and concerts.....lastly, the aggregate education and communication price index was also unchanged as education and communication commodities fell 0.7% as a 1.0% decline in prices for personal computers and peripheral equipment, a 1.2% decrease in prices for software, and a 2.2% drop in prices for telephones and other consumer information hardware offset a 1.0% increase in prices for college textbooks, while education and communication services were unchanged as a 0.4% increase in elementary and high school tuition and fees was offset by a 0.1% decrease in college tuitions and fees and a 0.1% downtick in charges for wireless phone services....other than the aforementioned increases in meat and butter prices, the only other line item among CPI components that showed an annual price increase greater than 10% was women's outerwear, which was 11.3% higher priced than in September 2013, while video discs and similar media have fallen in price by 10.8%, and televisions are now 13.8% 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 the indexes reset to 100 as of that month for an apples to apples comparison of the price changes in each since...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… 

September 2014 CPI components

Existing-Home Sales increased 2.4% in September

according to the National Association of Realtors (NAR), seasonally adjusted existing home sales rose by 2.4% in September to an annual rate of 5.17 million completed transactions, from an annual rate of 5.05 million home sales in August, while home sales still remained 1.7% below the annual sales rate of 5.26 million units that the NAR reported in September of last year....before the seasonal adjustment and conversion to an annualized figure, an estimated 435,000 homes sold in September, down 9.2% from the 479,000 homes that sold in August, and down 1.9% from the estimated 427,000 homes that sold in September a year ago...while seasonally adjusted data (pdf) indicates that homes sales were up in every region of the country except the Midwest, where they were down 5.6%, the unadjusted data shows that sales fell in every region, with sales in the Northeast off 14.7% and sales in the Midwest down 13.8%....

the preliminary median home selling price for all housing types was $209,700 in September, down 4.0% from $218,400 in August, but 4.8% higher than the $209,700 median sales price in September of last year, in home price data that is not seasonally adjusted...the average home sales price was $255,500, down from $263,800 in August, while it was up 3.4% from the $246,300 average sales price in September a year ago, with regional average home prices ranging from a high of $336,500 in the West to the average of $197,300 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 7% of September's sales, while short sales, at 3% of all sales, were also discounted by an average of 14%...the median time on the market for all homes was 56 days in September, up from 53 days in August, and up from a median of 50 days on the market in September a year ago.…those who bought houses with cash accounted for 24% of transactions in September, up from 23% in August but down from 33% of all cash sales a year earlier, while those identified as investors accounted for 14% of all transactions, up from 12% in August but down from the 19% of all home sales to investors in September a year agp....30 year mortgage rates averaged 4.16% in September, up from 4.12% in July, while the share of first time home buyers remained unchanged at 29%, still well below the historical average of 40%....2.30 million existing homes remained available for sale at the end of September, which would be a 5.3 month supply of unsold homes at the September sales pace, down from 5.5 months in August but up 6.0% from the 5.0 month supply of 2.17 million existing homes available for sale a year earlier...

New Home Sales Nearly Unchanged in September and Year to Date

like existing homes sales, sales of new homes also inched up in September, but only by virtue of a 7.5% downward revision of the new homes sales reported in August... the Census bureau report on New Residential Sales for September estimated that new single family homes were sold at a seasonally adjusted annual rate of 467,000 in September, which was 0.2 percent (±15.7%)* above the revised August rate of 466,000 at an annual rate and was 17.0 percent (±20.6%)* above the annualized new homes sales pace in September of last year....the August annualized sales rate was revised down from the 504,000 annually reported a month ago to 466,000, while July's sales rate was revised down from 419,000 annually to 404,000...the asterisks indicate that based on their small sampling, Census could not be certain whether September's new home sales rose or fell from those of August or even from those of a year ago, but there’s a 90% likelihood that September home sales were in a range between 15.5% less than and 15.9% more than those of August, and that new homes sold could have been as many as 37.6% more than last September or as few as 3.6% less than last September, 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 39,000 homes sold in September, unchanged from August, which was revised from the original estimate of 41,000 in sales to 38,000 with this report...new home sales for the year through September were 338,000, up 2.4% from 330,000 during the same nine months of 2013...of the 38,000 homes sold in September, 12,000 were completed, 13,000 were under construction, and 12,000 had not yet been started...the median new home sales price was $259,000 in September, down from $286,800 in August, while the average sales price was $313,200, down from August's $349,300 average, as there were 7,000 less homes over $400,000 in the sales mix... the Census estimated that a seasonally adjusted 207,000 new homes remained unsold at the end of September, which was a 5.3 month supply at the September sales pace, unchanged from the 5.3 month supply of unsold new homes in August...

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..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...

September 2014 new and existing home sales

September State and Regional Employment

this week also saw the release of the Regional and State Employment and Unemployment Summary for September, a report which further expands on the national employment situation summary of three weeks ago by breaking down the state and regional details...so while they tell us in opening that 31 states had their unemployment rate decrease in September while 8 states saw a jobless rate increase 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 seven states had statistically significant monthly unemployment rate decreases, led by Colorado, where the jobless rate fell from 5.1% in August to 4.7% in September, and Kentucky, where the unemployment rate dropped to 6.7% from August's 7.1%, and that only Vermont and Massachusetts had statistically significant increases in unemployment....the BLS 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 36,400 jobs in Texas and 19,300 jobs added in Illinois, to the net decreases  of 9,800 jobs in California and 9,600 in Pennsylvania...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment since last September, 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…)

Friday, October 24, 2014

Methane Hot Spots and Global Warming

(contributed by Emma Seddon)

Recent reports by the Intergovernmental Panel on Climate Change (IPCC) have concentrated more on the effects of rising greenhouse gases and how we can mitigate their impact and adapt to changing conditions rather than on the problem itself, the reasons for these increases. It acknowledges the large contribution to global mean temperatures made by methane, which has a radiative flux (RF) factor 34 times greater than carbon dioxide, i.e. as a greenhouse gas it is extremely efficient at trapping heat within the atmosphere. The conclusion has to be that although carbon dioxide persists in the atmosphere for thousands of years compared to methane’s average lifetime of 12 years, if you take into account methane’s global warming potential of around 25 times that of carbon dioxide over the timescale of a century, and 72 times its potency over 20 years, tackling the methane problem has to be a good short-term aim.

Emission hot spots

Although most of the methane present in the atmosphere is due to natural causes such as emissions from wetlands and ruminative animals, human activity has played a large part in the increased levels seen during recent decades. There is no easy solution to the problem of trying to reduce these emissions. On the one hand, much of the methane we release into the atmosphere comes from our vast herds of livestock, and without a mass movement towards vegetarianism there is no real likelihood that these can be reduced in the near future.

On the other hand, various “hot spots” of methane emissions have been observed, and it is not always clear why these are occurring and why there has been a dramatic rise in methane levels during the past year following a general slow reduction of levels over the past 20 years. These emissions are made up of a mix of natural sources and the results of human activity, the most visible being the natural release of methane cause by the warming arctic waters off the Siberian coast thawing methane hydrates on the ocean floor, and the leakages from natural gas production, particular as a result of the booming fracking industry. In Utah alone, it has been estimated that up to 12% of natural gas produced by fracking is released into the atmosphere, although this is probably a worst-case scenario: other fracking sites such as those in Colorado are somewhat cleaner, with only 4% leakage measured in one Denver field. This in itself is no small figure, which has caused concern amongst the industry’s critics. A solution to the spiraling level of emissions caused by human activity is already present in the drive towards a greater reliance on eco-friendly methods of energy production, but this can only happen if there is strong political backing that provides the energy industry with incentives for change.

One methane hot spot discovered in the US Southwest that was so large it was initially put down as an erroneous instrument reading. Another even larger hot spot has been detected by satellite covering an area of about 2,500 square miles where the borders of Colorado, Arizona, Utah and New Mexico meet, the Four Corners Region, which has produced the largest concentration of natural methane emissions ever discovered in the US. This is over three times the volume for any other emission hot spot. Several theories were put forward to explain the anomaly, one of which attempted to blame methane produced by coal mining and the release of natural subterranean pockets of gas. However, the Four Corners Region is close to the San Juan Basin, which one of the areas of the country with the most intensive fracking activity and which still holds huge quantities of methane despite having been the site of oil and gas extraction by drilling since the 1920s.

If fracking is to blame, other major fracking sites such as Jonah Field and Powder River Basin in Wyoming, and Piceance Basin and Weld County in Colorado, should show the same levels of methane emissions. This is not the case. The picture is further confused: Weld County also has a high concentration of cattle feedlots, which are known to produce high levels of methane, yet in an apparent contradiction to this, the largest beef producer in California at Harris Ranch is also one of the largest hot spots. The answer appears to be both good and bad. It’s most probable that poor management of the various processes is to blame, producing leaks that are avoidable. We should be able to remedy the problem, but the continued high levels of methane being released into the atmosphere from the collective fossil fuel industries suggests that this may not happen very soon.

The Siberia leakage

The undersea leakage of methane in the East Siberian Sea was originally observed by a team of Russian and Swedish scientists as small columns of bubbles rising to the surface; these have recently been seen to have grown considerably, with hundreds of them in one small area described as “powerful and impressive seeping structures more than 1,000 meters in diameter.” The suggestion was that there were probably many thousands of these all around the Siberian coast.

On August 12, 2014, peak methane levels of 2441 ppb were recorded in the area at 19,820 ft, and these eruptions pushed the mean global methane levels up to 1832 ppb. One member of the observation team, Örjan Gustafsson, from the Department of Geological Sciences at Stockholm University, described methane levels in the seawater as being ten times the background level. The most reasonable current hypothesis is based around observation of the changing Gulf Stream in recent years: a tongue of warm Atlantic water at a core depth of between 200-600 meters has moved north and east along the Siberian continental shelf, destabilizing the methane hydrates along the upper edge of the submerged slope of the shelf and producing the high levels of methane released into the sea.

Negative arctic oscillation

These increased natural sources of methane pose a more difficult problem than that produced by fracking and other industrial processes, although they are undoubtedly caused, at least in part, by the warming seas and atmosphere, which is affected by the entire range of human activity that produces greenhouse gases. For many years, the arctic has borne the brunt of these changes. Arctic weather systems are becoming erratic, and this has produced some unusual effects known as negative arctic oscillation, or the polar vortex, the reversal of the usual temperature gradients towards the pole produced by the changing path of the jetstream—for example, last year Lake Erie froze before Hudson Bay, which is about 500 miles farther north, and Greenland’s ice melt season was extended by fifty days. The Pan-Arctic Ice Ocean Modeling and Assimilation System (PIOMAS) at the University of Washington’s Polar Science Center has observed that the arctic ice sheets are thinning as well as receding, and this has been confirmed by the European Space Agency’s CryoSat-2 probe. The result is a reduction in arctic ice volume, which is now only one fifth the minimum recorded in 1980.

Sources:

http://www.ipcc.ch/report/ar5/wg2/

http://motherboard.vice.com/blog/atmospheric-methane-has-hit-record-levels-and-its-not-totally-clear-why

http://www.nature.com/news/methane-leaks-erode-green-credentials-of-natural-gas-1.12123

http://arctic-news.blogspot.co.uk/2014/08/horrific-methane-eruptions-in-east-siberian-sea.html

http://www.hcn.org/articles/nasa-finds-methane-hot-spot-over-four-corners

http://gnightearth.com/2014/10/12/largest-methane-hotspot-in-the-us-found-in-the-four-corners-fracking-not-to-blame/

http://extension.psu.edu/animals/dairy/news/2014/livestock-methane-emissions-in-the-united-states