Sunday, June 24, 2018

May's reports on new home construction and existing home sales

the only widely watched reports released over the past week were the May report on New Residential Construction from the Census Bureau and the May report on existing home sales from the National Association of Realtors (NAR)....in addition, this week also saw the release of the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions fell from +34.4 in May to +19.9 in June, still suggesting an ongoing expansion in that region's manufacturing, but at a less robust pace... 

New Housing Construction Increases in May, Permits Lower

the May report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched number of new housing units started was at a seasonally adjusted annual rate of 1,350,000, which was 5.0 percent (±10.2 percent)* above the revised April estimated annual rate of 1,286,000 housing units started, and was 20.3 percent (±14.4 percent) above last May's rate of 1,122,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell from April to May, with the figure in parenthesis the most likely range of the change indicated; in other words, May’s housing starts could have been down by 5.2% or up by as much as 15.2% from those of April, with even larger revisions possible...in this report, the annual rate for April housing starts was revised from the 1,278,000 estimated last month to 1,286,000, while March housing starts, which were first reported at a 1,319,000 annual rate, were revised from last month's initial revised annualized figure of 1,336,000 down to 1,327,000 annually with this report....these annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 124,900 housing units were started in May, up from the 117,600 units started in April and the 107,200 started in March...of those housing units started in May, an estimated 88,300 were single family homes and 35,700 were units in structures with more than 5 units, up from the revised 85,100 single family starts and 30,700 units started in structures with more than 5 units in April...

the monthly data on new building permits, with a smaller margin of error and hence usually smaller revisions, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in May, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,301,000 housing units, which was 4.6 percent (±1.4 percent) below the revised April permit rate of 1,364,000 but 8.0 percent (±1.3 percent) above the rate of permit issuance in May a year earlier….the annual rate for housing permits issued in April was revised from 1,364,000 to 1,352,000...quoting the report on the types of permits:  “Single-family authorizations in May were at a rate of 844,000; this is 2.2 percent (±1.0 percent) below the revised April figure of 863,000. Authorizations of units in buildings with five units or more were at a rate of 421,000 in May...”  again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 124,900 housing units were issued in May, up from the revised estimate of 119,900 new permits issued in April... that included permits for an estimated 84,400 single family units in May, up from 79,100 in April, and permits for 37,300 units in structures with more than 5 units, down from 37,400 in April….for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.350 Million Annual Rate in May and Comments on May Housing Starts...

Existing Home Sales Fell 0.4% in May; Median Price at a Record High

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell by 0.4% from April to May, projecting that 5.43 million homes would sell over an entire year if the May home sales pace were extrapolated over that year, a pace that was also 3.0% slower than the annual sales rate projected in May of a year ago...that came after an annual sales rate of 5.45 million homes in April, which was revised from the originally reported 5.46 million annual sales rate, and an annual home sales rate of 5.60 million in March...the NAR also reported that the median sales price for all existing-home types in May was $264,800, which topped the prior record $263,300 median price set last June, and was 4.9% higher than a year earlier, which they report is "the 75th straight month of year-over-year gains"......the NAR press release, which is titled Existing-Home Sales Backpedal, Decrease 0.4 Percent in May, is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this data indicates that roughly 536,000 homes sold in May, up by 16.5% from the 460,000 homes that sold in April but 3.4% less than the 555,000 homes that sold in May of last year, so we can see the effect of the seasonal adjustment to correct for the typical large springtime increase in home sales...that same pdf indicates that the median home selling price for all housing types rose 2.7%, from a revised $257,900 in April to $264,800 in May, while the average home sales price was $303,500, up 1.9% from the $297,800 average in April, and up 3.1% from the $294,300 average home sales price of May a year ago, with the regional average home sales prices ranging from a low of $238,400 in the Midwest to a high of $411,800 in the West...for additional details and long term graphs on this report, see "NAR: "Existing-Home Sales Backpedal, Decrease 0.4 Percent in May"" and "A Few Comments on May Existing Home Sales" from Bill McBride at Calculated Risk..

 

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

Sunday, June 17, 2018

May’s consumer and producer prices, retail sales, industrial production; April’s business inventories

major reports released during the past week included the May Consumer Price Index, the May Producer Price Index, and the May Import-Export Price Index, all released by the Bureau of Labor Statistics; the reports on Retail Sales for May and Business Sales and Inventories for April, both from the Census bureau; the report on Industrial Production and Capacity Utilization for May from the Fed, and the Regional and State Employment and Unemployment report for May from the BLS...in addition, this week also saw the release of the first regional Fed manufacturing index for June: the Empire State Manufacturing Survey from the New York Fed, which covers New York, northern New Jersey, an adjacent suburban county in Connecticut, and Puerto Rico, saw their headline general business conditions index rise from +20.1 in May to + 25.0 in June, indicating an accelerating pace of growth for First District manufacturing...

Consumer Price Index Up 0.2% in May on Higher Priced Gasoline, Shelter

the consumer price index was 0.2% higher in May, as higher prices for gasoline, shelter and most services more than offset lower priced groceries, cars, and a number of other goods…the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.2% in May after rising 0.2% in April but after falling 0.1% in March, and after it had risen by 0.2% in February, 0.5% in January, 0.1% in December, 0.4% in November, 0.1% in October, 0.5% in September, 0.4% in August, and 0.1% last July....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 250.546 in April to 251.588 in May, which left it statistically 2.801% higher than the 244.733 index reading in May of last year...with higher prices for energy offsetting lower prices for food, seasonally adjusted core prices, which exclude food and energy, also rose by 0.2% for the month, with the unadjusted core price index rising from 257.025 to 257.469, which left the core index 2.237% ahead of its year ago reading of 251.835, which is reported as a 2.2% increase.....

the volatile seasonally adjusted energy price index rose by 0.9% in May, after it had increased by 1.4% in April, fallen by 2.8% in March, risen by 0.1% in February, 3.0% in January, fallen by 0.2% in December, risen by 3.2% in November and by 2.0% in October, and thus is now 11.7% higher than in May a year ago...prices for energy commodities were 1.6% higher in May, while the index for energy services fell by 0.1%, after falling 0.5% in April....the increase in the energy commodity index was driven by a 1.7% increase in the retail price of gasoline, the largest component, while the price of fuel oil fell 0.7%, and prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.2%…as a result, the energy commodities index is now 21.7% above its year ago levels, with gasoline prices averaging 21.8% higher than they were a year ago…within energy services, the index for utility (piped) gas service fell 0.6% after falling by 0.4% in April, which left utility gas priced 0.8% lower than it was a year ago, while the electricity price index was 0.1% higher, after falling 0.6% in April...the energy services price index is now only 0.6% higher than last May, as electricity prices have increased by 1.0% over that period...

the seasonally adjusted food price index was unchanged in May, after rising 0.3% in April, 0.1% in March, being unchanged in February, rising 0.2% in January, 0.2% in December, being unchanged in October and November, rising 0.1% in September, 0.1% in August, 0.2% in July, being unchanged in June, and rising 0.2% last May, as the index for food purchased for use at home was 0.2% lower in May, while prices for food bought to eat away from home were 0.3% higher, as prices at fast food outlets rose 0.3% and prices at full service restaurants rose 0.4%, while food prices at at employee sites and schools were up 0.8%...

in the food at home categories, the price index for cereals and bakery products was unchanged, as prices for bread rose 1.5% while prices for crackers fell 1.7% and prices for rice and flour both fell 0.8%...the price index for the meats, poultry, fish, and eggs group was down 0.7% after rising 0.7% in April, as egg prices fell 3.3% and the beef and veal index was 1.4% lower, while at the same time the index for dairy products was 0.1% lower on a 0.4% decrease in the price of fresh whole milk...in addition, the fruits and vegetables index was 0.3% lower on a 0.8% decrease in the price index for fresh fruits and a 2.4% decrease in prices for frozen fruits and vegetables....on the other hand, the beverages index was 0.2% higher, as coffee prices rose 0.4% and noncarbonated juices and drink prices were priced 0.3% higher...lastly, the index for the ‘other foods at home’ category was down 0.2%, as prices for sweets other than candy and sugar fell 2.0% and prices for prepared salads fell 2.7%.... among food at home line items, only prices for eggs, which are still up 21.6% since last May, have seen price increase greater than 10% over the past year, while just lettuce prices, down 11.2%, are the only food item that has fallen in price by more than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.2% in May after rising by by 0.1% in April, 0.2% in March, 0.2% in February, 0.3% in January, 0.3% in December, 0.1% in November, 0.2% in October, 0.1% in September, 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods was down 0.1% in May, while the more heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust May retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.6%, as the index for window and floor coverings fell 1.3%, the index for tools, hardware, outdoor equipment and supplies fell 1.0%  and the index for bedroom furniture was 0.8% lower...meanwhile, the apparel price index was unchanged, as prices for men's suits, sportcoats and outerwear fell 4.5% while the index for infants apparel was 2.5% higher...prices for transportation commodities other than fuel were down 0.1%, as prices for new cars and trucks rose 0.4% and prices for used cars and trucks fell 0.9%...on the other hand, prices for medical care commodities were 1.3% higher on a a 1.4% increase in prescription drug prices and a 2.5% increase in prices for medical equipment and supplies...but the recreational commodities index fell 0.7% on 1.7% lower prices for TVs and 2.5% lower prices for photographic equipment and supplies, while the education and communication commodities index was 0.7% higher on a 3.3% increase in prices for college textbooks...lastly, a separate price index for alcoholic beverages was down 0.3%, while the price index for ‘other goods’ was unchanged...

within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.3% increase in homeowner's equivalent rent, and a 3.3% increase in costs for lodging away from home at hotels and motels, while the sub-index for water, sewers and trash collection rose 0.4%, and other household operation costs were on average 0.6% higher....on the other hand, the index for medical care services was down 0.1%, as dental services fell 0.5% and eye care services were priced 0.4% lower...the transportation services index was unchanged as car truck rentals fell 3.0% while parking and other auto fees rose 1.1%...meanwhile, the recreation services index rose 0.4% as pet services rose 2,5% and admissions to sporting events rose 2.1%....in addition, the index for education and communication services was also up 0.4%, as internet and electronic information services rose 1.5%...lastly, the index for other personal services was unchanged as laundry and dry cleaning services fell 0.1% while the index for tax return preparation and other accounting fees rose 0.4%...among core line items, prices for televisions, which are now 17.0% cheaper than a year ago, the price index for audio equipment, which has fallen 14.6% over the past year, the index for toys, games, hobbies and playground equipment, which is down by 10.2% from a year ago, and the index for clocks, lamps, and decorator items, which is now 10.6% lower than last May, have all seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude over that span...

May Retail Sales Up 0.8% After April Sales Revised Higher

seasonally adjusted retail sales rose 0.8% in May after retail sales for April were revised higher....the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $502.0 billion for the month, which was an increase of 0.8 percent (±0.5%) from April's revised sales of $497.9 billion and 5.9 percent (±0.5 percent) above the adjusted sales of May of last year...April's seasonally adjusted sales were revised from the $497.6 billion reported last month to $497.9 billion, while March sales were revised but remained statistically unchanged at $496.1 billion, all revisions including an intervening benchmark revision on May 25th which we did not cover....estimated sales before seasonal adjustments, which were extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 9.0%, from $484,492 million in April to $527,943 million in May, while they were up 6.4% from the $496,410 million of sales in May a year ago...

included below is the table of the 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 from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the March to April change under "Mar 2018 r" (revised) and the revised April 2017 to April 2018 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance April estimates, before this month's revision, is here....

May 2018 retail sales table

generally, real retail sales for May, or price-adjusted sale that would be considered as evidence of an increase in the output of goods in the 2nd quarter GDP computation, will be stronger than what appears on the table above, because as we just saw, the composite price index for all goods less food and energy goods was 0.1% lower in May...for example, while sales at vehicle and parts dealer were 0.5% higher in May, prices for transportation commodities other than fuel, which includes automobiles and trucks, were down 0.1%, suggesting real vehicle and parts sales increased an average of 0.6% overall...in a like manner, retailers who saw lower dollar sales, such as the 2.4% decrease in sales at furniture stores, would have their real sales change boosted by the 0.6% decrease in the price index for household furnishings and supplies...an exception of course would be sales at gasoline stations, which rose 2.0% because gasoline prices were 1.7% higher; that would suggest that real gasoline sales only rose 0.3%, with the caveat that gas stations do sell more than just gasoline...on the other hand, dollar sales at grocery stores were statistically unchanged, but prices for food bought to use at home were on average 0.2% lower, so real sales of groceries actually rose on the order of 0.2%....

Industrial Production Down 0.1% in May; Capacity Utilization Down 0.2%

May saw a pullback in durable goods manufacturing, largely because truck assemblies were disrupted by a major fire at a parts supplier, and hence the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production decreased 0.1% in May after rising by a revised 0.9% in April, which left total output 3.5% higher than a year ago, unchanged from last month's YoY figure...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell from 107.4 in April to 107.3 in May, after April's index was revised up from the originally reported 107.3 ...at the same time, the March reading for the index was revised down from 106.5 to 106.4, the February index was revised from 105.7 to 105.9, the January index was revised from 105.3 to 105.4, and the December index was revised from 105.7 to 105.8...despite the May decrease, the average of the April and May production indexes is still almost 1.4% above the average of the indexes for the 1st quarter months, so to the extent that this report plays into GDP, this report suggests average 2nd quarter growth at a 5.6% rate in the GDP components that this report influences...

the manufacturing index, which accounts for more than 77% of the total IP index, decreased by 0.7, from 104.2 in April to 103.5 in May, leaving manufacturing output just 1.7% higher than a year ago, after the manufacturing index for April was revised up from 104.1, the manufacturing index for March unrevised at 103.6, the manufacturing index for February was revised up from 103.6 to 103.7, and the manufacturing index for January was revised up from 102.1 to 102.3.... meanwhile, the mining index, which includes oil and gas well drilling, increased for the 4th consecutive month, rising from 120.0 in April to 122.1 in May, and is now 12.6% higher than it was a year ago....finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 1.1% in May after increasing a revised 3.3% in April and 4.1% in March, as the utility index rose from 105.8 in April to 106.9 in May and is now 4.0% above it's year earlier level...

this report also includes capacity utilization figures, which are expressed as the percentage of our  plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry fell to 77.9% in May from 78.1% in April, with April's figure revised up from 78.0%....capacity utilization for all manufacturing industries fell from an upwardly revised 75.9% in April to 75.3% in May, as utilization of NAICS durable goods production facilities fell from 75.7% in April to 74.8% in May, while capacity utilization for non-durables slipped from 77.0% to 76.9%....capacity utilization for the mining sector rose to 92.4% in May, from 91.1% in April, which was originally published as 90.6%, while utilities were operating at 79.4% of capacity during May, up from the revised 78.8% of capacity during April, which was was originally reported at 79.2% ....for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories.... 

Producer Prices Up 0.5% in May on Higher Wholesale Energy Prices and Trade Margins

the seasonally adjusted Producer Price Index (PPI) for final demand was 0.5% higher in May, as prices for finished wholesale goods increased 1.0%, while margins of final services providers increased by 0.3%...that followed an April report that indicated the PPI rose 0.1%, as prices for finished wholesale goods averaged no change, while margins of final services providers increased by 0.1%, and a March report that indicated the PPI was 0.3% higher, with prices for both finished goods and final demand for services up by 0.3%....on an unadjusted basis, producer prices are now 3.1% higher than a year ago, up from the year over year increase of 2.6% that was indicated in last month's report, and matching their one year rise of the year ending January 2012...meanwhile, the core producer price index, which excludes food, energy and trade services, was up just 0.1% for the month, and is now 2.6% higher than in May a year ago...

as noted, the price index for final demand for goods, aka 'finished goods', was up 1.0% in May, after being unchanged in April, up 0.3% in March, and rising a revised 0.2% in February and 0.5% in January...the price index for wholesale energy was up 4.6% in May after rising 0.1% in April, falling 2.1% in March, and rising a revised 0.1% in February and 2.9% in January, while the price index for wholesale foods rose 0.1%, and the index for final demand for core wholesale goods (ex food and energy) was 0.3% higher....the largest wholesale energy price change was a 10.1% increase in wholesale prices for LP gas, while wholesale prices for gasoline were 9.8% higher...the wholesale food price index saw an increase of 20.0% for fresh and dry vegetables and a decrease of 35.2% in wholesale prices for eggs....among wholesale core goods, prices for cleaning and polishing products increased 3.3%, while the index for computers and computer equipment moved up 1.1%…

at the same time, the index for final demand for services rose 0.3%, after rising 0.1% in April, 0.3% in February and March and 0.5% in January, as the May index for final demand for trade services rose 0.9%, the index for final demand for transportation and warehousing services rose 0.7%, while the index for final demand for services less trade, transportation, and warehousing services was unchanged....among trade services, seasonally adjusted margins for chemicals and allied products wholesalers rose 5.5% and margins for machinery, equipment, parts, and supplies wholesalers rose 1.5%... among transportation and warehousing services, margins for air transportation of freight rose 1.0%...among the components of the core final demand for services index, the index for health and medical insurance rose 2.8% while the index for cellphone and other wireless telecommunication services services fell 1.9%..

this report also showed the price index for intermediate processed goods was 1.5% higher in May, after rising 0.5% in April, falling 0.3% in March, but rising by a revised 0.6% in February, and by a revised 0.8% in January....the price index for intermediate energy goods rose 4.6%, as refinery prices for jet fuel rose 15.8% and prices for diesel fuel rose 6.5%, while prices for intermediate processed foods and feeds rose 0.2%, as the indexes for both processed meats and dairy products both rose 1.7%...meanwhile, the core price index for processed goods for intermediate demand less food and energy was 0.8% higher on a 4.3% increase in the index for steel mill products and a 5.0% increase in prices for aluminum mill shapes....prices for intermediate processed goods are now 6.3% higher than in May a year ago, now the 18th consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods rose 2.5% in May, after rising 0.9% in April, falling 4.8% in March, and rising a revised 2.0% in February, and 1.9% in January....that was as the price index for crude energy goods rose 6.3% as crude oil prices rose 8.4%, while on the other hand the index for unprocessed foodstuffs and feedstuffs fell 0.1%, as prices for alfalfa hay fell 7.2% and prices for oilseeds fell 5.8%...at the same time, the index for core raw materials other than food and energy materials was also 0.1% lower, as prices for corrugated wastepaper fell 6.1% and prices for copper base scrap fell 2.2%...still, this raw materials index is now up by 6.8% from a year ago, up from the year over year increase of 3.2% that we saw in April...

lastly, the price index for services for intermediate demand rose 0.3% in May, after rising 0.3% in April, 0.3% in March and a revised 0.2% in February...the index for trade services for intermediate demand was up 0.9%, as margins for intermediate chemicals and allied products wholesalers rose 5.5% and margins for metals, minerals, and ores wholesalers also rose 5.5%…the index for transportation and warehousing services for intermediate demand rose 0.4%, as the index for water transportation of freight rose 1.8%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.1% higher, as the index for business loans (partial) rose 3.3% while the index for internet advertising space sales by non-print publishers fell 4.9%....over the 12 months ended in May, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 3.3% higher than it was a year ago... 

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

following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April (pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,425.9 billion in April, up 0.4 (±0.1 percent) from March revised sales, and up 6.7 percent (±1.1 percent) from April sales of a year earlier...note that total March sales were revised from the originally reported $1,438.3 billion to $1,420.1 billion as part of annual revisions and rebenchmarking that took place on May 25th....manufacturer's sales were statistically unchanged from March at $492,846 million in April, while retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 0.4% to $439,712 million, and wholesale sales rose 0.8% to $493,298 million..

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,930.0 billion at the end of April, up 0.3 percent (±0.1%) from March, and 4.4 percent (±1.3 percent) higher than in April a year earlier...the value of end of March inventories was revised from the $1,929.6 billion reported last month to $1,923.7 billion with this release, also part of the benchmark revisions...seasonally adjusted inventories of manufacturers were estimated to be valued at $666,867 million, 0.3% higher than in March, inventories of retailers were valued at $632,956 million, 0.5% more than in March, while inventories of wholesalers were estimated to be valued at $630,171 million at the end of April, up 0.1% from March...

 

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

Sunday, June 10, 2018

April’s trade deficit, job openings, factory inventories, and wholesale sales, et al

monthly government issued reports released this week included the Commerce Dept’s report on our International Trade in Goods and Services for April, the Full Report on Manufacturers' Shipments, Inventories and Orders for April and the April report on Wholesale Trade, Sales and Inventories, both from the Census Bureau, the Job Openings and Labor Turnover Survey (JOLTS) for April from the Bureau of Labor Statistics, and the Consumer Credit Report for April from the Fed...the latter showed that overall consumer credit, a measure of non-real estate personal debt, expanded by a seasonally adjusted $9.2 billion, or at a 2.9% annual rate, as non-revolving credit expanded at a 3.0% rate to $2810.4 billion and revolving credit outstanding rose at a 2.6% rate to $1030.7 billion...while April's expansion represented the slowest consumer credit growth in 7 months, it's possible the April seasonal adjustments are out of whack for this report, since last April's credit growth was reported as the slowest in nearly 6 years, and the April before that showed the slowest growth in 2 years...

privately issued reports released this week included the May Non-Manufacturing Report On Business from the Institute for Supply Management (ISM), which saw the NMI (non-manufacturing index) rise to 58.6% in May from 56.8% in April, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in May, and the Mortgage Monitor for April (pdf) from Black Knight Financial Services, which indicated that 3.67% of mortgages were delinquent in April, down from 3.73% delinquent in March, and down from the 4.08% delinquency rate in April 2017, and that 0.61% of mortgages remained in the foreclosure process in April, down from 0.63% of all mortgages in March and down from 0.85% a year ago......

April Trade Deficit Decreases 2.1% on a Big Drop in Cellphone Imports

our trade deficit decreased by 2.1% in April, after our March trade deficit was revised 3.6% lower...the Census report on our international trade in goods and services for April indicated that our seasonally adjusted goods and services trade deficit fell by $1.0 billion to $46.2 billion in April, from a March deficit that was revised from the originally reported $48.96 billion to $47.2 billion, a revision which should result in a upward revision of about 0.15 percentage points to 1st quarter GDP when the third estimate is released at the end of June ...in rounded numbers, the value of our April exports rose by $0.6 billion to $211.2 billion on a $0.3 billion increase to $141.2 billion in our exports of goods and an increase of $0.3 billion to $70.0 billion in our exports of services, while our imports fell by $0.4 billion to $257.4 billion on a $0.7 billion decrease to $209.5 billion in our imports of goods, which was partially offset by a $0.3 billion increase to $47.9 billion in our imports of services...export prices averaged 0.6% higher in April, so the real growth in exports for the month was less than the nominal dollar value by that percentage, while import prices were 0.3% higher, meaning real imports would be reduced from the nominal dollar values reported here by that percentage...

the increase in our April exports of goods came about as a result of higher exports of industrial supplies and foods and feeds, which were partially offset by a decrease in our exports of capital goods...referencing the Full Release and Tables for April (pdf), in Exhibit 7 we find that our exports of our exports of industrial supplies and materials rose by $1,345 million to $45,656 million on a $530 million increase in our exports of fuel oil and a $226 million increase in our exports of other petroleum products, and that our exports of foods, feeds and beverages rose by $653 million to $12,414 million on a $340 million increase in our exports of soybeans and a $310 million increase in our exports of corn...in addition, our exports of consumer goods rose by $70 million to $17,217 million...partially offsetting those increases, our exports of capital goods fell by $1,420 million to $46,126 million as a $2,844 million decrease in our exports of civilian aircraft was offset by increases in exports of other capital goods, while our exports of automotive vehicles, parts, and engines fell by $215 million to $13,919 million on $319 million lower exports of passenger cars, and our exports of other goods not categorized by end use fell by $143 million to $5,293 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of cell phones was the major reason for the April decrease in our imports...our imports of consumer goods fell by $2,786 million to $51,895 million on a $2,195 million decrease in our imports of cellphones; in addition, our imports of automotive vehicles, parts and engines fell by $902 million to $30,003 million on a $961 million decrease in our imports of passenger cars and $246 million lower imports of trucks, buses, and special purpose vehicles, partially offset by a $356 million increase in our imports of parts and accessories of vehicles other than engines, bodies, chassis, and tires…in addition, our imports of foods, feeds, and beverages fell by $58 million to $12,274 million...partially offsetting decreases in those categories, our imports of industrial supplies and materials rose by $1,167 million to $47,901 million, as our imports of crude oil rose by $978 million, our imports of other petroleum products rose by $348 million, and our imports of iron and steel mill products rose by $228 million, while our imports of capital goods rose by $397 million to $56,916 million on a $249 million increase in our imports of electric apparatuses, and our imports of other goods not categorized by end use rose by $1288 million to $8,972 million...

to gauge the impact of April trade on 2nd quarter growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2009 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized here...from that table, we can figure that 1st quarter real exports of goods averaged 146,834.3 million monthly in 2009 dollars, while inflation adjusted April exports were at 150,584 million in that same 2009 dollar quantity index representation... annualizing the change between those two figures, we find that April's real exports were rising at a 10.6% annual rate from those of the 1st quarter, or at a pace that would add about 0.84 percentage points to 2nd quarter GDP if it were continued through May and June.....from that same table, we can figure that our 1st quarter real imports averaged 229,287.3 million monthly in chained 2009 dollars, while inflation adjusted April imports were at 228,057 million in that same 2009 dollar representation...that would indicate that so far in the 2nd quarter, our real imports have decreased at a 2.1% annual rate from those of the 1st quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 2.1% rate would conversely add another 0.27 percentage points to 2nd quarter GDP....hence, if the April trade deficit is maintained at the same level throughout the 2nd quarter, our improving balance of trade in goods would add about 1.11 percentage points to the growth of 2nd quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide handy inflation adjusted data on those, and we don't have easy access to the details on their price changes..

Job Openings at a Record High in April; Hiring and Firing Rise, Job Quitting Slows

the Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 65,000, from 6,633,000 in March to a record high of 6,698,000 job openings in April, after March job openings were revised higher, from 6,550,000 to 6,633,000...April’s jobs openings were also 9.7% higher than the 6,108,000 job openings reported in April a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 4.3% in April, while it was up from 4.0% a year ago...the greatest increase in April job openings was in the professional and business services category, where openings rose by 95,000 to 1,255,000, while job openings in finance and insurance fell by 84,000 to 197,000 ...(details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked to at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in April, seasonally adjusted new hires totaled 5,578,000, up by 92,000 from the revised 5,486,000 who were hired or rehired in March, as the hiring rate as a percentage of all employed rose from 3.7% to 3.8%, which was also up from the 3.6% hiring rate in April a year earlier (details of hiring by industry since December are in table 2)....meanwhile, total separations also rose, by 86,000, from 5,322,000 in March to 5,408,000 in April, as the separations rate as a percentage of the employed remained at 3.6%, but was up from 3.5% in April a year ago (see table 3)...subtracting the 5,408,000 total separations from the total hires of 5,578,000 would imply an increase of 170,000 jobs in April, a bit more than the revised payroll job increase of 159,000 for April reported by the May establishment survey last week, but well within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,351,000 of us voluntarily quit our jobs in April, down by 36,000 from the revised 3,387,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.3% of total employment, which was still up from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,710,000 were either laid off, fired or otherwise discharged in April, up by 163,000 from the revised 1,547,000 who were discharged in March, as the discharges rate jumped from 1.0% to 1.2% of all those who were employed during the month, which took it back up to the 1.2% level of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 347,000 in April, down from 387,000 in March, for an 'other separations' rate of 0.2%, which was down from 0.3% in March, but the same rate as in April a year ago....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

Factory Shipments Flat in April, Factory Inventories Up 0.3%

the April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $4.0 billion or 0.8 percent to $494.4 billion in April, following an increase of 1.7% in March, which was revised from the 1.6% increase to $507.7 billion reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on two weeks ago...on those revisions, the Census Bureau's summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that here:

  • Summary: New orders for manufactured goods in April, down following two consecutive monthly increases, decreased $4.0 billion or 0.8 percent to $494.4 billion, the U.S. Census Bureau reported today. This followed a 1.7 percent March increase. Shipments, up eleven of the last twelve months, increased $0.1 billion or virtually unchanged to $492.8 billion. This followed a 0.7 percent March increase. Unfilled orders, up five of the last six months, increased $5.4 billion or 0.5 percent to $1,153.1 billion. This followed a 0.8 percent March increase. The unfilled orders-to-shipments ratio was 6.73, up from 6.66 in March. Inventories, up eighteen consecutive months, increased $2.2 billion or 0.3 percent to $666.9 billion. This followed a 0.2 percent March increase. The inventories-to-shipments ratio was 1.35, unchanged from March.
  • New orders for manufactured durable goods in April, down following two consecutive monthly increases, decreased $4.1 billion or 1.6 percent to $248.6 billion, up from the previously published 1.7 percent decrease. This followed a 2.7 percent March increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $5.5 billion or 6.0 percent to $87.2 billion. New orders for manufactured nondurable goods increased $0.1 billion or 0.1 percent to $245.8 billion. 
  • Shipments of manufactured durable goods in April, down following eight consecutive monthly increases, decreased less than $0.1 billion or virtually unchanged to $247.0 billion, up from the previously published 0.1 percent decrease. This followed a 0.8 percent March increase. Transportation equipment, down following three consecutive monthly increases, drove the decrease, $1.7 billion or 2.0 percent to $83.0 billion. Shipments of manufactured nondurable goods, up ten of the last eleven months, increased $0.1 billion or 0.1 percent to $245.8 billion. This followed a 0.6 percent March increase. Food products, up five of the last six months, drove the increase, $0.3 billion or 0.5 percent to $68.1 billion.
  • Unfilled orders for manufactured durable goods in April, up five of the last six months, increased $5.4 billion or 0.5 percent to $1,153.1 billion, unchanged from the previously published increase. This followed a 0.8 percent March increase. Transportation equipment, also up five of the last six months, led the increase, $4.2 billion or 0.5 percent to $796.1 billion. 
  • Inventories of manufactured durable goods in April, up seventeen of the last eighteen months, increased $1.3 billion or 0.3 percent to $401.9 billion, unchanged from the previously published increase. This followed a 0.2 percent March increase. Fabricated metal products, up fifteen of the last sixteen months, led the increase, $0.4 billion or 0.8 percent to $52.0 billion. Inventories of manufactured nondurable goods, up ten consecutive months, increased $0.8 billion or 0.3 percent to $265.0 billion. This followed a 0.1 percent March increase. Chemical products, up six of the last seven months, led the increase, $0.4 billion or 0.5 percent to $87.8 billion.

to estimate the effect of those April factory inventories on 2nd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories rose by 0.1% to $233,666 million; the value of work in process inventories rose 0.5% to $206,186 million, and materials and supplies inventories were valued 0.4% higher at $227,015 million...the April producer price index reported that prices for finished goods were on average unchanged, that prices for intermediate processed goods were 0.5% higher, while prices for unprocessed goods were 0.9% higher....assuming similar valuations for like types of inventories, that would suggest that April's real finished goods inventories were about 0.1% higher, that real inventories of intermediate processed goods were roughly unchanged, and real raw material inventory inventories were about 0.5% lower...since real NIPA factory inventories were a bit smaller in the 1st quarter, and this report seems to indicate a similar real decrease in April, it appears that the real change in April factory inventories will have a negligible impact on the growth rate of 2nd quarter GDP...

    April Wholesale Sales Up 0.8%, Wholesale Inventories Up 0.1%

    the April report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $493.3 billion, up 0.8 percent (+/-0.4%) from the revised March level, and up 7.8 percent (±3.3 percent) from wholesale sales of April 2016... the March preliminary estimate was unrevised from the annual benchmark revision undertaken May 25th... April wholesale sales of durable goods were up 0.8 percent from last month and were up 8.0 percent from a year earlier, with wholesale sales of lumber up 3.8% on higher prices, while wholesale sales of nondurable goods were up 0.7% from March and  were up 7.5 percent from last April, with wholesale sales of farm products up 7.7% despite lower prices...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

    on the other hand, the monthly change in private inventories is a major factor in GDP, as any goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this April report estimated that wholesale inventories were valued at a seasonally adjusted $630.2 billion at month end, an increase of 0.1 percent (+/-0.2%)* from the revised March level and 5.8 percent (±3.9 percent) higher than in April a year ago, with the March preliminary estimate revised up about 0.1% from the benchmark revision at the same time....inventories of durable goods were up 0.2% from March, and up 6.2% percent from a year earlier, while the value of wholesale inventories of nondurable goods was statistically unchanged from March but up 5.8 percent from last April, as the value of inventories of raw farm products inventories rose 38.0% over the past year...the upward revision to March wholesale inventories implies an upward revision of about 0.02 percentage points to 1st quarter GDP, while April wholesale inventories, after an adjustment for price changes for each category of wholesale goods as indicated by the components of the April producer price index, appears to indicate a real wholesale inventory decrease heading into the 2nd quarter, a major negative against the $25.8 billion increase in real wholesale inventories that was indicated by the key source data and assumptions (xls) in the second estimate 1st quarter GDP...

     

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

    Sunday, June 3, 2018

    May's job report; Q1 GDP revision, April’s personal income and outlays, & construction spending, et al

    in an oddity of the economic calendar, this week brought us what are arguably the three most important releases we see each month: the Employment Situation Summary for May from the Bureau of Labor Statistics, the second estimate of 1st quarter GDP from the Bureau of Economic Analysis, and the April report on Personal Income and Spending, also from the BEA...in addition, the Census Bureau released the April report on Construction Spending (pdf), and the Dallas Fed released the Texas Manufacturing Outlook Survey, which indicated its general business activity index rose to 26.8, up from 21.8 in April, indicating a fairly robust expansion in the Texas economy....

    privately issued reports released this week included the ADP Employment Report for May and the March Case-Shiller Home Price Index, which is a relative average of January, February & March home prices; the Case Shiller index indicated that home prices nationally for those 3 months averaged 6.5% higher than prices for the same homes that sold during the same 3 month period a year earlier...in addition, the week also saw the release of the light vehicle sales report for May from Wards Automotive, which estimated that vehicles sold at a 16.81 million annual rate in April, down from the 17.07 million annual rate of sales in April, but up from the 16.58 million annual rate in May a year ago, and the April Manufacturing Report On Business from the Institute for Supply Management (ISM), which reported that their manufacturing PMI (Purchasing Managers Index) increased from 57.3% in April to 58.7% in May, which suggests an accelerating expansion among manufacturing firms nationally...

    Employers Add 223,000 Jobs in May, Unemployment Rate Falls to 3.8%

    the Employment Situation Summary for May indicated above average payroll job growth, while the employment rate fell again even as the labor force participation rate ticked lower…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 223,000 jobs in May, after the previously estimated payroll job increase for March was revised up from 135,000 to 155,000, while the payroll jobs increase for April was revised down from 164,000 to 159,000…with those revisions, that means that this report represents 238,000 more seasonally adjusted payroll jobs than were reported last month, somewhat more than the past year's average increase of 197,000 jobs per month...the unadjusted data shows that there were actually 943,000 more payroll jobs extant in May than in April, as typical seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were reduced to a normal level by the seasonal adjustments…

    seasonally adjusted job increases were spread through throughout the private goods producing and service sectors, with only the utility sector showing a 1,100 job decrease....the health care and social assistance sector saw the largest increase, adding 31,700 jobs, with 6,200 of those in hospitals and 4,500 in outpatient care centers...the retail sector added 31,100 jobs, with the addition of 13,400 employees in general merchandise stores...broad professional and business services sector added another 31,000 jobs, as 7,600 found employment in the management of companies and enterprises....seasonally adjusted employment in construction rose by 25,000, with the addition of 14,800 more workers than the normal seasonal additions by nonresidential specialty trade contractors....in addition, the leisure and hospitality sector added 21,000 more jobs than their usual May, with the addition of 17,600 more jobs in bars and restaurants, and the transportation and warehousing sector added 18,700 employees, with the addition of 6,600 truck drivers and 6,600 in warehousing and storage....manufacturing also saw an 18,000 job increase, with the addition of 5,800 workers in the production of machinery....meanwhile, the other major sectors, including mining, wholesale trade, information, financial activities, private education, and government all saw smaller increases in payroll employment over the month…

    the establishment survey also showed that average hourly pay for all employees rose by 8 cents an hour to $26.92 an hour in May, after it had increased by 4 cents an hour in April; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $22.59 an hour....employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in May, while hours for production and non-supervisory personnel was unchanged at 33.8 hours...however, the manufacturing workweek was down by 0.2 hours at 40.8 hours, while average factory overtime decreased by 0.2 hours to 3.5 hours...

    at the same time, the seasonally adjusted extrapolation from the May household survey estimated indicated that the number of those who were employed rose an estimated 293,000 to 155,474,000, while the similarly estimated number of those who were unemployed fell by 281,000 to 6,065,000; which thus meant a net increase of just 12,000 in the total labor force...since the working age population had grown by 182,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 170,000 to a record 95,915,000....meanwhile, that small increase of those in the labor force as a percentage of the increasing working population was enough to cause the labor force participation rate to tick down 0.1% to 62.7%....at the same time, the larger increase in number employed vis a vis the increase in the population was just enough to bump up the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.4%...in addition, the decrease in the number counted as unemployed was also large enough to lower the unemployment rate from 3.9% to 3.8%, the lowest in 18 years....meanwhile, the number who reported they were involuntarily working part time fell by 37,000 to 4,948,000 in May, which was also enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.8% in April to 7.6% in May, the lowest since May 2001....

    like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..  

    1st Quarter GDP Revised to Show Growth at a 2.2% Rate

    the Second Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.2% rate in the 1st quarter, revised from the 2.3% growth rate reported in the advance estimate last month, even as growth of real fixed investment was revised higher, as growth of real personal consumption expenditures, real exports, and especially private inventories were all less than had previously been reported...in current dollars, our first quarter GDP grew at a 4.2% annual rate, increasing from what would work out to be a $19,754.1 billion a year output rate in the 4th quarter of last year to a $19,956.8 billion annual rate in the 1st quarter of this year, with the headline 2.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.9%, aka the GDP deflator, was computed and applied to the current dollar change...

    as we review this month's revisions, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the second estimate of 1st quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we cite the data from table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2014, from table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts....the full pdf for the 1st quarter advance estimate, which this estimate revises, is here...

    growth in real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 1.1% growth rate reported last month to indicate growth a 1.0% rate with this estimate…that growth figure was arrived at by deflating the 3.6% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation grew at a 2.6% annual rate in the 1st quarter, which was revised from the 2.7% PCE inflation rate published a month ago...real consumption of durable goods fell at a 2.6% annual rate, which was revised from the 3.3% drop shown in the advance report, and subtracted 0.20 percentage points from GDP, as a drop in consumption of automobiles at a 11.4% rate more than offset increases in real consumption of furniture, appliances and recreational goods and vehicles, and other durable goods....real consumption of nondurable goods by individuals rose at a 0.4% annual rate, revised from the 0.1% increase reported in the 1st estimate, and added 0.06 percentage points to 1st quarter economic growth, as higher consumption of food and most other non-durables was partially offset by decreases in consumption of clothing and energy….at the same time, consumption of services rose at a 1.8% annual rate, revised from the 2.1% growth rate reported last month, and added 0.84 percentage points to the final GDP tally, as a virtually unchanged growth rate in real consumption of housing and utilities offset greater real growth in other services....

    at the same time, seasonally adjusted real gross private domestic investment grew at a 7.2% annual rate in the 1st quarter, revised from the 7.3% growth estimate reported last month, as real private fixed investment grew at a 5.6% rate, rather than at the 4.6% rate reported in the advance estimate, while inventory growth was somewhat less than had been previously estimated...real investment in non-residential structures was revised from growth at a 12.3% rate to growth at a 14.2% rate, while real investment in equipment was revised to show growth at a 5.5% rate, up from the 4.7% growth rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from real growth at a 3.6% rate to real growth at a 10.9% rate...however, real residential investment was revised lower, from virtually unchanged to shrinking at a 2.0% annual rate…after those revisions, the increase in investment in non-residential structures added 0.39 percentage points to the 1st quarter's growth rate, the increase in investment in equipment added 0.31 percentage points to the quarter's growth, the increase in investment in intellectual property added 0.43 percentage points, while the contraction in residential investment subtracted 0.08 percentage points from the increase in 1st quarter GDP...

    meanwhile, the growth in real private inventories was revised from the originally reported $33.1 billion in inflation adjusted dollars to show inventory grew at an inflation adjusted $20.2 billion rate...this came after inventories had grown at an inflation adjusted $15.6 billion rate in the 4th quarter, and hence the $4.6 billion increase in real inventory growth over that of the 4th quarter added 0.13 percentage points to the 1st quarter's growth rate, revised from the 0.43 percentage point addition from inventory growth shown in the advance estimate....however, since greater growth in inventories indicates that more of the goods produced during the quarter were left "sitting on the shelf” or in a warehouse, that increase by $4.6 billion meant that real final sales of GDP were actually smaller by that much, and therefore the BEA found that real final sales of GDP rose at a 2.0% rate in the 1st quarter, revised from 1.9% real final sales rate shown in the advance estimate...

    the previously reported increase in real exports was revised lower with this estimate, while the previously reported increase in real imports was revised higher, and as a result our net trade was a somewhat smaller addition to GDP rather than was previously reported...our real exports grew at a 4.2% rate, revised from the 4.8% rate shown in first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their increase added 0.51 percentage points to the 1st quarter's growth rate, revised from the 0.59 percentage points shown last month...meanwhile, the previously reported 2.6% increase in our real imports was revised to a 2.8% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced in the US, that increase subtracted 0.43 percentage points from 1st quarter GDP....thus, our improving trade balance only added a net 0.08 percentage points to 1st quarter GDP, reduced from the 0.20 percentage point addition resulting from our improving foreign trade balance that was indicated by the advance estimate..

    finally, there was also a small statistical downward revision to real government consumption and investment in this 2nd estimate, as the entire government sector is now shown growing at a 1.1% rate, revised from the 1.2% growth rate for government indicated by the 1st estimate....however, real federal government consumption and investment was seen to have grown at a 1.7% rate from the 4th quarter in this estimate, which was unrevised from the growth rate shown in the 1st estimate, as real federal outlays for defense grew at a 1.8% rate and added 0.07 percentage points to 1st quarter GDP, and all other federal consumption and investment grew at a 1.6% rate and added 0,04 percentage points to GDP, both of which were unrevised...meanwhile, real state and local consumption and investment grew at a 0.8% rate in the quarter, also the same as was shown in the 1st estimate, and added 0.08 percentage points to 1st quarter GDP, which was revised down from the 0.09 addition shown in the advance estimate, so there was apparently a fractional downward revision to real state and local consumption and investment that isn't apparent in the growth rate..note that 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, thereby indicating an increase in the output of those goods or services...

    April Personal Incomes Up 0.3%, Personal Spending Up 0.6%, PCE Price Index Up 0.2%

    other than the employment report and the GDP report itself, the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is probably the most important economic release we see monthly; as each monthly report on personal consumption expenditures (PCE) accounts for more than 23% of GDP by itself...in addition, this report also includes the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated, monthly personal income data, disposable personal income, which is income after taxes, and our national monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would change over a year if April's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from March to April..

    thus, when the opening line of the press release for the April report tell us "Personal income increased $49.5 billion (0.3 percent) in April", they mean that the annualized figure for seasonally adjusted personal income in April, $16,934.5 billion, was $49.5 billion, or a bit less than 0.3% greater than the annualized personal income figure of $16,885.0 billion extrapolated for March; the actual, unadjusted change in personal income from March to April is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by more than 0.4%, from an annual rate of an annual rate of $14,799.9 billion in March to an annual rate of $14,860.8 billion in April....the contributors to the annualized $49.5 billion increase in personal income can be viewed in the Full Release & Tables (PDF) for this release, also as annualized amounts, and were led by a $31.0 billion increase to $8,665.8 billion in wages and salaries, a $7.3 billion increase to $2,923.4 billion in personal current transfer receipts from benefit programs, and a $6.3 billion increase to $2,508.4 billion in interest and dividend income; again, all annualized figures...

    for the April personal consumption expenditures (PCE) that will be included in 2nd quarter GDP, BEA reports that they increased at a $79.8 billion annual rate, or less than 0.6%, as the annual rate of PCE rose from $13,827.1 billion in March to $13,906.9 in April....March PCE was revised from $13,823.9 billion annually to $13,827.1 billion, while February PCE was revised from $13,762.2 billion annually to $13,753.2 billion, revisions that were already included in last week’s GDP report....the current dollar increase in April spending resulted from a $28.2 billion annualized increase to an annualized $31.5 billion in spending for goods and a $48.2 billion increase to an annualized $9,359.4 billion in spending for services, so the contribution from April retail sales is evident....total personal outlays for April, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $86.9 billion to $14,441.2 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $419.6 billion annual rate in April, down from the revised $445.7 billion in annualized personal savings in March... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 2.8% in April, after the previously reported 3.1% March savings rate was revised to 3.0%...

    as you know, before those personal consumption expenditures are used in the GDP computation, they must first be 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 a chained price index based on 2009 prices = 100, which is computed by the BEA and included in Table 9 in the pdf for this report...that index rose from 114.258 in March to 114.512 in April, a month over month inflation rate that's statistically 0.2223%, which BEA reports as an increase of 0.2 percent, following the statistically unchanged PCE price index reported for March...applying that April inflation adjustment to the nominal changes in PCE left real PCE up 0.4% in April, after the March real PCE increase was revised to an increase of 0.5%...note that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in those familiar chained 2009 dollars, which are the means that the BEA uses to compare the goods and services produced in one month or one quarter to the real goods and services produced in another....that result is shown in table 7 of the PDF, where we see that April's chained dollar consumption total works out to 12,145.1 billion annually, 0.354% more than March's 12,102.3 billion, an increase that the BEA reports as +0.4%...

    however, to estimate the impact of the change in PCE on the change in GDP, that month over month change doesn't help us much, since GDP is computed quarterly...thus we have to compare April's real PCE to the the real PCE of all 3 months of the first quarter....while this release reports PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 1st quarter was represented by 12,065.9 billion in chained 2009 dollars..(note that's the same as is shown in table 3 of the pdf for the 1st quarter GDP report)....when we compare April's adjusted PCE of 12,145.1 billion to the 1st quarter real PCE of 12,065.9 billion on an annual basis, we find that April real PCE has grown at a 2.65% annual rate compared to the 1st quarter....this means that even if April real PCE does not appreciate during May and June, growth in PCE would still add 1.83 percentage points to the growth rate of the 2nd quarter...

    Construction Spending Rose 1.8% in April; Real Construction Down 0.2% from Q1

    the Census Bureau's report on construction spending for April (pdf) estimated that the month's seasonally adjusted construction spending was at a $1,310.4 billion annual rate, 1.8 percent (±1.0 percent) above the revised March annualized rate of $1,286.8 billion, and 7.6 percent (±1.5 percent) above the estimated annualized level of construction spending in April of last year...the annualized March construction spending estimate was revised higher by less than 0.2%, from $1,284.7 billion to $1,286.8 billion, while the annual rate of construction spending for February was also revised 0.2% higher, from $1,306.4 billion to $1,309.2 billion...those revisions together would suggest an upward revision of 0.02 percentage points to 1st quarter GDP when the third estimate is released at the end of June...

    details on different subsets of construction spending are provided by the Census release summary: "Spending on private construction was at a seasonally adjusted annual rate of $1,014.3 billion, 2.8 percent (±0.8 percent) above the revised March estimate of $986.6 billion. Residential construction was at a seasonally adjusted annual rate of $556.3 billion in April, 4.5 percent (±1.3 percent) above the revised March estimate of $532.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $458.0 billion in April, 0.8 percent (±0.8 percent)* above the revised March estimate of $454.2 billion.  In April, the estimated seasonally adjusted annual rate of public construction spending was $296.1 billion, 1.3 percent (±2.0 percent)* below the revised March estimate of $300.1 billion. Educational construction was at a seasonally adjusted annual rate of $74.2 billion, nearly the same as (±2.3 percent)* the revised March estimate of $74.2 billion. Highway construction was at a seasonally adjusted annual rate of $88.0 billion, 1.0 percent (±6.3 percent)* below the revised March estimate of $88.8 billion."

    this construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and as government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of April's construction spending reported in this release on 2nd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...there are many different price indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf) that are used by the BEA to make those inflation adjustments, so in lieu of trying to adjust for all of those types of construction separately, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an estimate...that index showed that aggregate construction costs were up 1.1% from March to April, up 0.2% from February to March and up 0.1% from January to February....

    on that basis, we can estimate that April construction costs were roughly 1.3% greater than those of February and 1.4% greater than those of January, and obviously 1.1% greater than those of March...we then use those percentages to inflate spending for each of those three months, which is arithmetically the same as deflating April construction spending, for comparison purposes...construction spending in millions of dollars for the first quarter is given as 1,286,766 for March, 1,309,205 for February, and 1,294,027 for January...thus to find the difference between April's inflation adjusted construction spending and the adjusted construction spending of the first quarter, our formula becomes: 1,310,404 / ((1,286,766 * 1.011 + 1,309,205 * 1.013 + 1,294,027 * 1.014) / 3) = 0.997949, meaning real construction spending in April was actually down roughly 0.2% vis a vis the 1st quarter, or down at a 0.82% annual rate...to figure the potential effect of that change on 2nd quarter GDP,  we take the annualized difference between the first quarter average inflation adjusted construction spending and April's adjusted spending as a fraction of the real annualized 1st quarter GDP figure, and thus can estimate that real April construction spending was falling at a rate that would subtract 0.07 percentage points from the growth of 2nd quarter GDP…

     

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

    Sunday, May 27, 2018

    April’s durable goods, new home sales, and existing home sales.

    The widely watched reports that were released this week included the April advance report on durable goods and the April report on new home sales, both from the Census bureau, and the Existing Home Sales Report for April from the National Association of Realtors….this week also saw the release of Chicago Fed National Activity Index for March, a weighted composite index of 85 different economic metrics, which rose to +0.34 in April from +0.32 in March, after the March index was revised up from the +0.10 reported last month...as a result, the 3 month average of that index rose to +46 in April, up from +23 in March, which indicates that national economic activity has been above the historical trend over recent months...

    Two more regional Fed manufacturing surveys for May were also released this week: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to +16, following last month's plunge from +15 to -3, indicating a resumption of growth in that region's manufacturing, while the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +26 in May, up from + 17 in April, indicating a somewhat more widespread growth among that region's manufacturers...

    April Durable Goods: New Orders Down 1.7%, Shipments Down 0.1%, Inventories Up 0.3%

    The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for April (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods fell by $4.2 billion or 1.7 percent from March to $248.5 billion in April, their first decrease in three months...durable goods orders for March were revised to show a 2.7% increase to $252.7 billion, revised from the 2.6% increase to $254.9 billion reported a month ago, as there was an intervening benchmark revision on May 17th that revised all previously published factory data back to 2002...as is usually the case, the volatile monthly change in April's new orders for transportation equipment caused this month's headline change, as April transportation equipment orders fell $5.6 billion or 6.1 percent to $87.1 billion, on a 29.0% decrease to $16,228 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were up 0.9% in April, while new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, were up 1.0% to $67,275 million...

    The seasonally adjusted value of April's shipments of durable goods, which will ultimately be inputs into various components of 2nd quarter GDP after adjusting for changes in prices, fell by $0.1 billion or less than 0.1 percent to $246.7 billion, after March shipments were revised from a increase of 0.3% to a increase of 0.7%...again, shipments of transportation equipment were responsible for the change, as they fell $1.8 billion or 2.1 percent to $82.8 billion, as the value of shipments of commercial aircraft fell 27.1% to $10,880 million…excluding that volatile sector, the value of other shipments of durable goods rose 1.0%, and are 7.9% higher year to date than a year ago....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 17th time in 18 months, increasing by $1.2 billion or 0.3 percent to $401.7 billion, after the value of March inventories was revised from $411.0 billion to $400.5 billion, now a 0.2% increase from February...

    Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the fifth time in six months, increasing by $5.5 billion or 0.5 percent to $1,153.4 billion, following a March figure which was revised from the $1,154.0 billion reported last month to $1,147.8 billion, still an 0.8% increase from the revised February figure...a $4.2 billion or 0.5 percent increase to $796.2 billion in unfilled orders for transportation equipment was responsible for more than three-fourths of the aggregate increase, even as unfilled orders excluding transportation equipment rose 0.4% to $357,181 million....compared to a year ago, the unfilled order book for durable goods is 3.7% higher than the level of last April, with unfilled orders for transportation equipment 3.2% above their year ago level, on a 6.2% increase in the backlog of orders for motor vehicles and a 4.1% increase in the backlog of orders for commercial aircraft...

    New Home Sales Fell in April After Prior Month's Sales were Revised Lower

    The Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 662,000 homes annually during the month, which was 1.5 percent (±11.8 percent)* below the revised March annual rate of 672,000 new home sales, but still 11.6 percent (±23.7 percent)* above the estimated annual rate that new homes were selling at in April of last year....the asterisks indicate that based on their small sampling, Census could not tell whether April new home sales rose or fell from those in March or from those in April a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in March were revised from the annual rate of 694,000 reported last month to an annual rate of 672,000, while sales in February, initially reported at an annual rate of 618,000 and revised to a 667,000 rate last month, were revised to an annual rate of 659,000, and while new home sales in January, initially reported at an annual rate of 593,000 and revised from a 622,000 rate to a 644,000 rate last month, were revised to a 633,000 a year rate with this release...

    The annual rates of sales reported here are seasonally adjusted and extrapolated from the estimates of canvassing Census field reps, which indicated that approximately 64,000 new single family homes sold in April, down from the estimated 65,000 new homes that sold in March but up from the 54,000 new homes that sold in February and from the 48,000 that sold in January....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in April was $312,400, down from the median sale price of $335,400 in March but up from the median sales price of $311,100 in April a year ago, while the average new home sales price was at $407,300 , up from the $366,000 average sales price in March, and up from the average sales price of $365,800 in April a year ago....a seasonally adjusted estimate of 300,000 new single family houses remained for sale at the end of April, which represents a 5.4 month supply at the April sales rate, up from the revised 5.3 months of new home supply now reported for March...

    for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 662,000 Annual Rate in April and A few Comments on April New Home Sales...

    Existing Home Sales 2.5% Lower in April, Down 1.4% Year over Year

    The National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell by 2.5% from March to April, projecting that 5.46 million existing homes would sell over an entire year if the April home sales pace were extrapolated over that year, a pace that was also 1.4% below the annual sales rate projected in April of a year ago....the NAR also reported that the median sales price for all existing-home types was $257,900 in April, 5.7% higher than in April a year earlier, which they report as "the 74th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Slide 2.5 Percent in April", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily read about them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

    Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data indicates that roughly 460,000 homes sold in April, up 6.0% from the 434,000 homes that sold in March, and up by 2.9% from the 470,000 homes that sold in April of last year, so we can see that it was only the seasonal adjustment that showed the sales decrease, possibly an aberration due to the unusually cool weather nationally...that same pdf indicates that the median home selling price for all housing types rose by 3.2%, from a revised $236,600 in March to $257,900 in April, while the average home sales price rose 2.6% to $297,300, from the $289,900 average sales price in March, while it was up 3.3% from the $287,800 average April home sales price of a year ago...again, for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Slide 2.5 Percent in April" and A Few Comments on April Existing Home Sales...

     

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