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, January 25, 2015

December’s new housing starts and existing home sales, et al

the only widely watched releases of the past week were both housing related; New Residential Construction for December (pdf) from the Census Bureau, and Existing Home Sales for December from the National Association of Realtors (NAR); the week also saw the release of the Kansas City Fed manufacturing survey for January, which covers a region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, and which indicated a weaker expansion as energy related manufacturing contracted; in addition, the Philadelphia Fed released it's relatively new Nonmanufacturing Business Outlook Survey for January, which like the manufacturing survey from the same New Jersey, Delaware, and Pennsylvania region, saw its broadest diffusion index fall from a highly expansionary reading of 47.5 in December to 8.8 in January, also probably indicating a slowdown in businesses serving the energy industry....then on Friday, we saw the release of the December Chicago Fed National Activity Index, a weighted composite index of 85 different economic metrics, which fell to -0.05 in December from +0.92 in November, indicating growth slightly below the historical trend...

New Housing Permits and Starts Continue at a Million a year Pace

as you should all know by now, the Census reports on new housing are based on a survey of a small percentage of permit offices visited by Census field agents and have such a wide margin of error that they're useless for any analysis other than looking at the long term trend, but we still feel the need to point that out, as blog & media coverage still quotes the data as gospel, omitting any mention of a margin of error...the Census report on New Residential Construction for December (pdf) estimated that new housing starts were at a seasonally adjusted annual rate of 1,089,000 in December, which was 4.4 percent (±11.7%)* above the revised November estimate of 1,043,000 and 5.3 percent (±12.7%)* above the December 2013 rate of 1,034,000...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts rose or fell for the month or even for the year...and of course, the annual rates are just extrapolations from the field agent survey, which which estimated 73,300 housing units were started in December, down from 78,400 in November, which was revised up from 77,500, with 48,000 of those December starts being single family dwellings, while construction was started on 23,800 apartment units in buildings with 5 or more units... adding those unadjusted monthly estimates for the 12 months of the past year, Census reports an estimated 1,005,800 housing units were started in 2014, 8.8 percent (±2.9%) above the 2013 total of 924,900...

similarly, the monthly estimates of new building permits are extrapolated into an annual rate, albeit with a narrower margin of error than new housing starts; for December, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,032,000, which was 1.9 percent (±1.3%) below the revised November rate of 1,052,000, but was 1.0 percent (±1.1%)* above the December 2013 estimate of 1,022,000....those estimates were extrapolated from the unadjusted estimate of 80,600 new permits issued in December, which was up from the estimated 71,300 new permits issued in November...of those units permitted in December, 45,900 (±1.0%) were for single family homes, and 32,500 (±1.0%) represented permits for housing units in building with 5 or more units...for the year, an estimated 1,032,900 housing units were authorized by building permits, 4.2 percent (±0.9%) above the 2013 total...

Existing Home Sales Up 2.4% on Mild December

like the Census data, the National Association of Realtors (NAR) reports existing home sales at a seasonally adjusted annual rate, which means they're projecting how many homes would sell over a year if the seasonally adjusted sales of the given month were extrapolated over an entire year; in December, that results in a report which gives not only the seasonally adjusted annual rate for the current and recent month, but also the actual number of homes that sold over the past year....thus the NAR reported that existing home sales rose 2.4% to a seasonally adjusted annual rate of 5.04 million in December, from a downwardly-revised 4.92 million in November, while they also report that a total of 4.93 million homes actually sold in 2014, down 3.1% from the 5.09 million homes that sold during 2013...the actual unadjusted sales for December rose by 17.4%, from 351,000 in November to 412,000 in December, with all regions of the country seeing an actual increase of over 10% in home sales vs November, an increase probably facilitated at least in part by milder than normal December over most of the country...

for a more complete summary, the NAR press release, which is titled Existing-Home Sales Rebound in December, 2014 Total Sales Finish 3 Percent Below 2013, is written in plain English that's accessible to the typical reporter, so it should be easy reading for anyone who's attempted to read my summaries here...getting to the actual data on which this report is based is much more difficult...to start with, it's a four step navigation to the page where the links to the data are located (research and statistics > housing statistics > existing home sales > data summary page); then the links on the data page itself are mislabeled, and don't lead to what one would think they'd lead to based on their text; the only way to show that is to explain what each one actually is:

so, by viewing either of the last two above, we can see that the median home selling price for all housing types was $209,500 in December, up 1.1% from $207,200 in November, and 6.0% higher than the $197,700 median home sales price in December of last year, while the average home sales price was $255,800, up 0.8% from the $253,700 average in November, and up 3.7% from the $246,700 average sales price of December a year ago...for complete coverage of this report, Bill McBride has two posts, both with multiple graphs: Existing Home Sales in December: 5.04 million SAAR, Inventory down slightly Year-over-year and A Few Comments on December Existing Home Sales...similarly, he has two posts on the housing starts for December release from the Census, again with several of his very readable graphs: Housing Starts increased to 1.089 Million Annual Rate in December and Comments on December Housing Starts...also, remember that several paragraphs from all the reports of the past week, including the pdfs, can be viewed on one regular html webpage at the Research Economics page at OneWall.com

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

Sunday, January 18, 2015

December’s retail sales, price indexes, industrial production; November’s business inventories and Mortgage Monitor

there was a full schedule of economic releases this week, including the Job Openings and Labor Turnover Survey for November from the Bureau of Labor Statistics (BLS), the Advance Retail sales report for December (pdf), and the Manufacturing and Trade Inventories and Sales report for November (pdf, aka "business inventories"),  both from the Census Bureau, the Import Export Price Indexes for December, the Producer Price Index for December and the Consumer Price Index for All Urban Consumers (CPI-U) for December, all from the BLS, and the December G17 release on Industrial Production and Capacity Utilization from the Fed...we also saw the releases of the first two Fed regional manufacturing surveys, the Empire State Manufacturing Survey (pdf) of New York and northern New Jersey from the New York Fed, and the Philadelphia Fed's December Manufacturing Business Outlook Survey of Pennsylvania, southern New Jersey, and Delaware, which was particularly noteworthy because their broadest composite index has now fallen over 2 months from a 21 year record high reading of 40.8 in November to 6.3 in January, its lowest in a year...undoubtedly, this is indicative of the quick change in business sentiment in the Pennsylvania area in the face of lower prices for natural gas, which have fallen by 35% over the past few months...similarly, with oil prices down by over 50% over the past six months, we should not be surprised to see regional recessions develop in the oil dependent states, like North Dakota, Alaska, Oklahoma and Texas, while other parts of the country see an ongoing recovery stimulated by lower energy costs...

December Retail Sales Fell 0.9%

the December retail sales report was one of the more surprising reports of this past year, as it indicated a seasonally adjusted sales drop of 0.9%, while November's sales were revised from down from up 0.7% to up just 0.4%...a drop of 6.5% in gasoline sales, due to lower prices, was a mitigating factor, but even taking sales at gas stations out of the picture, December's seasonally adjusted  retail sales were still down 0.4%...remember also that December's seasonal adjustment is the year's largest: estimated unadjusted sales in December, extrapolated from surveys of a small sampling of retailers, indicated sales rose to $505,251 million in December from $442,348 million in November, and up from the $483,162 million of sales in December a year ago.. since those sales were adjusted down by more than 12% to $442,931 million, it's evident that the seasonal adjustment could have been a factor in this report...in addition, the CPI report showed prices for goods less energy were 0.3% lower in December, so real retail sales of those goods were higher by that amount...nonetheless, the downward revision of November's sales, combined with seasonally adjusted December sales that were even lower than that, still means that our estimate of the real PCE contribution to 4th quarter GDP was way off the mark, and will probably closer to half the 4.2% growth we had guessed at..

since you're all familiar with the table from this report showing retail sales by business type that we've been including in this space for at least two years, we'll again post a copy of it here...to once again explain what it shows,  the first double column shows us the percentage change in sales for each kind of business from the November revised figure to this month's December "advance" report in the first sub-column, and then the year over year percentage sales change since last December in the 2nd column; the second double column pair below gives us the revision of the November advance estimates (now called "preliminary") as of this report, with the new October to November percentage change under "Oct 2014 r" (revised) and the November 2013 to November 2014 percentage change as revised in the 2nd column of the pair....then, the third pair of columns shows the percentage change of the last 3 months of this year's sales (October, November and December) from the preceding three months (July thru September) and from the same three months of a year ago....with an estimate for the change in sales of the 3 months of the 4th quarter vs the 3rd quarter now in place, combined with the consumer price data, we're able to estimate the contribution of retail sales to 4th quarter GDP...  

December 2014 retail sales

in the first column above, you can see which business types other than gas stations that contributed to lower December sales, most notably building and garden supply dealers and electronic and appliance stores, and see the few that had an increase, in particular furniture stores, and bars and restaurants, both of which saw sales rise 0.8%...for the best coverage of this report, Robert Oak at the Economic Populist includes 7 FRED graphs and three proprietary graphs that show the monthly percentage change as above as a bar graph, the dollar value of each as a bar graph, and a pie graph that shows the relative contribution of each business type to total sales...no one, however, covers the revisions to November, so we'll note a few of the more significant changes here...

so you all can follow along, here is a copy of the table from the advance report for November, as reported last month; the newly revised November sales are shown in middle two columns above...the first thing we note is that automotive sales weren't revised much; originally reported as increasing by 1.7%, they're still indicated 1.6% higher...hence, retail sales ex auto took a larger hit, revised from up 0.5% to up just 0.1%...by far the largest factor in that was a revision of November's gas station sales, which were originally reported down 0.8%, and now are seen to have decreased by 3.0%...other business types seeing notable downward revisions include clothing stores, sales of which were reported up 2.2% and are now revised to a 1.2% increase, sales at electronic and appliance stores, which were reported up 0.9% and are now shown as up just 0.1%, November sales at drug stores, originally reported up 0.8%, now revised to a 0.4% increase, and sales at bars and restaurants, which were reported as increasing 0.7% and have now been revised to show a 0.3% increase...in addition, both furniture stores and non-store retailers sales were revised 0.3% lower, while November sales at miscellaneous stores were revised up, from an originally reported decrease of 1.7% to a decrease of just 0.8%...

December Prices and their Impact on GDP

the three releases on December prices are also noteworthy, because the headline numbers on all of them indicate prices are falling...import prices fell 2.5% in December, export prices fell 1.2%, producer prices fell 0.3%, and consumer prices fell 0.4%, the largest drop in six years...lower energy prices accounted for much of the declines in those indexes, but even stripping out energy, only producer prices eked out an increase...what's important to realize about a falling price environment is that it changes the way we have to think about most of the other reports that we review, because any downturn they indicate may be just due to lower prices....for instance, last week we reported that November wholesale sales fell by 0.3%, while wholesale inventories rose by 0.8%; that was in part because wholesale petroleum sales fell by 2.1%, and despite the fact that wholesale petroleum inventories fell by 3.7%....but since wholesale crude oil prices were down 3.2% in November, that means actual sales of barrels of petroleum rose about 1.1%, while inventories, in barrels of oil, just fell 0.5%...with crude oil prices down 18.9% in December, it's almost a certainty that wholesale sales and inventories of non-durable goods, denominated in dollars, will fall when that report is released three weeks from now...but even so, such a report would indicate a positive contribution to GDP if the actual quantity of goods produced and sold or inventoried increases, irregardless of the headline change...in fact, even if GDP falls in dollars in a given quarter, it's still possible that quarter's GDP will be recorded as an increase if the deflator is negative...

the Consumer Price Index Summary from the BLS is written as a press release so it's a very readable overview.  note that a 9.4% drop in gasoline prices dragged down the energy index, which in turn pulled down overall prices, but even without food and energy, core prices were still unchanged...also note that "commodities less food and energy commodities" are now down 0.8% year over year, most of which came over the last two months...this means the average of all items bought at retail are dropping in price, and hence retail sales must be evaluated accordingly...at the end of the release are links to 7 tables, and an html version of the entire release...in reporting on this, we've focused on these three tables from that list:

Table 1 is just a brief summary, useful if you want to see the big picture; it includes the actual index value for each item listed, indexes which are based on prices of 1982 to 1984 equal to 100...thus, when we see that the gasoline index is now at 282.773, that means gasoline prices have gone up 282.8% over the past 30 years...table 1 also reports the unadjusted price change for each index, monthly and annually, and the seasonally adjusted percentage price change for each of the last three months...the "relative importance" column shows the percentage that each index contributes to the overall CPI...then Table 2 breaks those indexes down to show the monthly adjusted and unadjusted prices changes for roughly 200 line items; the first column shows the year over year price change, while the column on the far right is this month's change; clearly, many cuts of meat are still up around 20% on the year, while many energy commodities are down by a similar percentage...other than food and energy, only televisions, which have fallen in price by 16.5%, personal computers and peripheral equipment, which are 10.5% lower, and film and photographic supplies, which have risen by 23.4%, have seen price changes greater than 10% over the past year...finally, Table 3 gives us composite price indexes for broad areas of consumer spending, such as the housing index, which includes rent, utilities, furniture and appliances, sewer and water bills and the like, or the transportation index, which includes everything from airfare to tires as well as gasoline car prices, and also special indexes such as "services less rent of shelter"...if you need your data a bit more predigested, Doug Short and Steve Hansen at the Global Economic Intersection have a good recap of the December report, complete with historical charts and graphics, and Robert Oak covers it with 11 FRED graphs...

while the CPI release is very accessible, the new Producer Price Index News Release is nearly inscrutable, and hence no one covers this entire release in detail anymore...once thought of as just covering raw, intermediate and finished wholesale goods, a year ago the BLS added producer price indexes for services and several different classes of construction, and started describing their indexes in terms which might be technically correct but which almost no one understands...thus, within producer prices for services, we get price indices such as "producer prices for final demand services less trade, transportation, and warehousing"...it seems that the BLS wanted to create a core producer price index for services, so they isolated indices for trade, and for transportation and warehousing, into separate indices, leaving that monstrosity as their "core"...but unlike volatile food and energy indexes for goods, the separate indices for services are no more volatile than the overall index, and monthly price changes in producer prices for services might be driven by volatility in any sub-index..

in the producer price index release we have text describing the price changes, and tables showing them...i find it easier to read the tables, and the first one, "Table A. Monthly and 12-month percent changes in selected final demand price indexes, seasonally adjusted" shows the headline producer price index for each of the last 13 months under "total final demand", and the rest of the table shows the goods and services components of that, except for the last column, which shows the year over year change...hence we can see the 0.3% drop in producer prices in December was driven by a 1.2% drop in prices for goods, which in turn included a 0.4% drop in wholesale food prices and a 6.6% drop in wholesale energy prices...we can also note that wholesale food prices have been down 5 out of the last 13 months, and note the ongoing monthly drop in energy prices, whereas producer prices for services, which is a measure in the change in the middleman's margin, have been generally increasing slowly in all categories over the same period...

like all of the BLS press releases, the real details behind these producer price changes can be accessed through the tables at the bottom of the release...the first two, Table 1. Producer price indexes for final demand and Table 2. Producer price indexes for intermediate demand by commodity type are summary indices; but for those interesting in actual wholesale price changes, Table 4. Producer price indexes for selected commodity groupings by final demand category and Table 5. Producer price indexes for selected commodity groupings of intermediate demand by commodity, which also includes what were once called "raw goods", are most useful...in Table 4, for instance, we can immediately spot a 40.3% increase in wholesale eggs in the far right "November to December" seasonally adjusted price change column, and note a 49.0% one month unadjusted increase in wholesale egg prices a few columns to the left...also note that for services listed here, the increases or decreases are not changes in the price of, for example, internet access service or consumer loans, but that they represent the change in the margin that the provider of such services had received during the period....

while we've rarely mentioned import and export prices, they are becoming increasingly important as they drop, because these drops create the appearance that imports and exports are falling when the trade report is released, when in fact they are not...once again, the press release on the Import Export Price Indexes for December is very readable, so there's no point in my writing about it in my incomprehensible prose...just note that import prices were down by 2.5% in December, the 6th monthly drop in a row, largely because imported energy prices were down 15.1%; even so, non-fuel imports still fell in price by a small fraction for the 4th consecutive month...similarly, note that export prices fell 1.2% in December and are down 3.2% for the year, with agricultural export prices down 0.7% in December and 4.9% for the year...again, there are 8 tables at the bottom of the release with detailed price changes….these are important because each one of them is used in computing the deflator (or inflator) for imports and exports when computing GDP...thus, even though our imports and exports appear to be lower, once they're adjusted for these price changes, we find out that both have risen..

December Industrial Production Falls 0.1% on Good Weather

the Fed's G17 release on Industrial production and Capacity Utilization for December indicated that industrial production slipped 0.1% from a November reading which was 1.3% higher than October, which has been revised from 0.1% higher than September to now read unchanged...all the weakness was due to a warmer than normal December, which reduced utility production by a seasonally adjusted 7.3%; excluding utilities, all other industrial production was up by more than 0.6%, with manufacturing up 0.3% and mining, which includes oil & gas, up by 2.2%....remember, this report gives us no dollars values or units of production, rather all the data within this report is based on indexes, all of which were set to have their production of 2007 equal to 100...hence, the only way to report on it is to note the percentage change between the monthly, quarterly or annual index values....the landing page of the release, therefore, has a series of summary tables showing the monthly and annual index values and the percentage change between them; following that is a summary of percentage changes for industry groups, market groups, and capacity utilization data for both...at the end there are links to 3 charts and 14 more tables, which break the report down into detail...generally, in covering this report, we have accessed the following two of those: 

Table 1 gives the annual, quarterly, monthly, and year over year change in production for the three industry groups and dozens of market groups...it's difficult to read because as you scroll down the page, the column headings scroll off the top, but most of the time all you'll want to see are the two columns at the extreme right, which show the current month’s change and the year over year change...for December, however, we'd also want to peruse the quarterly figures, which will input into 4th quarter GDP...the easiest way to pick those columns out without a heading is by noting the magnitude of the numbers; the quarterly changes are expressed as growth at an annual rate, so the percentage increases for them are roughly 12 times the size of the monthly percentage change columns adjacent to them...thus, under "annual rate, 2014, Q4", we see that output of final products and supplies grew at a 5.9% annual rate in the 4th quarter, with growth in consumer goods production at a 5.8% rate, as production of consumer durables grew at a 1.2% rate, production of non-energy consumer nondurables grew at a 5.0% rate, and production of consumer energy goods grew at a 13.9% rate in the 4th quarter...all other 4th quarter growth rates are in that same column, and they're typically much larger numbers than the column to the right of them...

Table 7 shows the capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and a handful of other special catagories...this is the the percentage of our plant and equipment in each category that was in use during the month...the table shows the historical averages, the highs and the lows, but the amount of industrial capacity we have had at any given point in time has been skewed by investment tax incentives, so comparing today to a previous period is not very meaningful unless one knows all the factors that went into decisions to build plant or increase equipment over time..thus the current and recent capacity utilization figures are those we'd look at for each industry listed...

November Business Sales Down 0.2%, Inventories Up 0.2%

the Manufacturing and Trade Inventories and Sales report for November (pdf), most often referred to as the business inventories report, showed a 0.2 percent (±0.2%)* decrease in sales and a 0.2 percent (±0.1%)* increase in inventories...sales fell 0.6% for manufacturers, leaving them only 0.2% above the year ago sales...as earlier reported, sales for retailers were 0.4% higher, and sales for wholesalers were down 0.3%..factory inventories  were up 0.1%, retailer inventories fell 0.3%, while inventories at wholesalers rose 0.8%...again, all these figures must be adjusted for inflation or deflation as the case might be before they are included in national product accounts..

Mortgage Delinquencies Rise 11.8% in November

we're also going to take a quick look at the the Mortgage Monitor for November (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics) this week, because it indicated a spike in mortgage delinquencies for the month, and also because it's seldom covered by the blogs or media...BKFS reported that 3,088,462 mortgage loans, or 6.08% of all mortgages, were at least one mortgage payment overdue, but not in foreclosure at month end, up 11.8% from 2,759,053, or 5.44% of homeowners with a mortgage who were more than 30 days behind for October, but still down 5.7% from the delinquency rate of 6.45% a year earlier...of those who were delinquent in November, 1,162,841 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, while 1,422,073 were behind by only one payment...this was the largest month-over-month increase in mortgage delinquencies for any month since November 2008, which BKFS oddly attributes to two federal holidays and a month ending on a Sunday, reducing the number of payment processing days for the month...but as we've noted many times in the past, there is normally an increase in mortgage delinquencies in November and December, as homeowners defer mortgage payments while shopping for the holidays, and then get caught up on their bill paying in the first three months of the new year..

BKFS also reported there were 828,682 home mortgages, or 1.63% of all mortgages outstanding, remaining in the foreclosure process at the end of November, which was down from 857,824, or 1.69% of all active loans that were in foreclosure at the end of October, and down from 2.50% of all mortgages that were in foreclosure in November of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and November's so-called "foreclosure inventory" was the lowest percentage of homes in foreclosure since early 2008... new foreclosure starts fell to 81,437 in October from 91,038 in October, the lowest number of new foreclosures since 2006 and well below the 104,939 foreclosures that were started in November of last year....adding foreclosures to delinquencies, we find that 7.71% of all homeowners with a mortgage were either late in paying or in foreclosure at the end of November, and also note that 3.86% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

the graph below shows the number of mortgages that were farther behind in their mortgage payments in each month since 2005 than they were in the prior month, divided into 4 types of mortgage delinquencies; those that were current in the prior month but became delinquent in the reporting month are shown in blue; those that transitioned from one month late to two months late are shown in red; while those that transitioned from two months late to 3 months late are shown in green...finally, of those who were more than 90 days delinquent in the prior month who were foreclosed on in each month is shown in purple... note the callout within the graph from BKFS indicating that November saw the most new 30 day delinquencies since June of 2013...

November 2014 LPS delinquency status

since we have not recently shown the table of non-current mortgages by state, we'll include the current update to that table here as well...shown below for each state and the District of Columbia are the percentage of home loans that were delinquent (Del%) in November, the percentage of mortgages that were in the foreclosure process (FC%), the total percentage of mortgages that weren't current with their payments (NonCurr%) and the year over year change in the number of non-current mortgages...note that states that have a judicial foreclosure process, where the bank must prove their right to foreclose on a homeowner in court, are marked by a red asterisk, claimed by servicers as the reason that foreclosures have been taking so long....there are now only 4 states that still have more than 3% of their mortgaged homes in the foreclosure process, and all are judicial states: New Jersey with 5.4%, New York with 4.3%, Florida with 3.8%, and Hawaii with 3.7% of their homes with mortgages in foreclosure...

November 2014 LPS state non current table

for more on the November Mortgage Monitor, including several more graphs on all aspects of November's mortgage servicing, see the "Closer Look at Delinquency Surge and Much More -Mortgage Monitor" from Mortgage News Daily; this is viewable in a browser window..


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

Sunday, January 11, 2015

December employment and the week’s other economic reports; a Keystone XL update

the December Employment Situation Summary - essentially delayed a week due to the New Years holiday - was released on Friday; the establishment survey indicated an addition of 252,000 jobs in December, and a upward revision of 50,000 more jobs to the count of jobs previously reported for October and November...as a result, 2014 will go into the record books as seeing the greatest job creation since 1999, and the greatest private job creation since 1997...furthermore, there were less layoffs in 2014 than in any year since 1997, and there were fewer first time claims for unemployment rations per capita in the fourth quarter than in any quarter in US history...add to that the fact that the 3rd quarter saw the fastest economic growth since 2003, and that without an inventory buildup, and it looks like we're at the top of the economic cycle; believe it or not, it doesn't get any better than this...the standard of living for the masses may improve slightly if lower energy prices persist, but it's hard to imagine job creation or the economy getting any stronger than it is now, so we've essentially slipped down into an economy that's creating a lot more crappy jobs than it was before the recession...the upside for those still looking for work is that job creation tends to continue well after the economy has peaked..

the BLS press release itself is very readable, so you can get the basic details on the employment report from there...excellent summary charts are provided in the two posts covering the report from Bill McBride, here and here; Robert Oak includes 24 FRED charts in his post on the household survey alone....and as usual, selections from the blog posts offering the most detailed coverage of this report will be included at the beginning of our main section of links below....at the bottom of the press release there are links to roughly 30 tables which give us the statistical data behind what's covered in the two surveys; with these two tables summarizing the lot: 

the 16 " A" tables that follow are household data tables, while the 9 "B" tables are developed from the establishment survey...there's a summary in the press release with a basic outline of the types of jobs created; that's broken down into well over 100 job categories here: Table B-1. Employees on nonfarm payrolls by industry sector and selected industry detail, a table which we've often summarized...we've also often covered the weekly hours and weekly pay by industry, which are enumerated in detail in the tables here: Table B-2, Table B-3., Table B-7 and Table B-8; what appeared to be decent wage gains in November were reversed in December...the household survey showed that the unemployment rate fell from 5.8% to 5.6%; however, most of that was due to an increase of 456,000 to a total of 92,898,000 of us not counted in the labor force, a new record high, while the labor force participation rate dropped to a 38 year low at 62.7%...

other than the employment summary, the other key reports this week included the November report on our International Trade in Goods and Services from the Commerce Department and the Full November Report on Manufacturers’ Shipments, Inventories, & Orders (pdf, aka Factory Orders) from the Census Bureau...the International Trade report was notable in that both exports and imports fell (on a seasonally adjusted basis), with the imports dropping more, partially due to lower oil prices, resulting in a $3.2 billion improvement in the trade deficit to $39.0 billion....the international trade news release itself is very readable, while Robert Oak at the Economic Populist covers it in detail with several graphs here: Trade Deficit Declines 7.7% on Crude Oil Imports...for more details, the Full Release & Tables (PDF) linked on the sidebar, is very useful; Exhibit 7 and Exhibit 8 on pages 12 through 15 of the pdf provide a itemized breakdown of the dollar value of several hundred goods categories traded in October, November and for the year...

the 'Factory Orders' report includes 4 tables, for shipments, new orders, unfilled orders and inventories, with each listing dollar amounts for up to 50 different types of factories, over the last 3 months and annually, both seasonally adjusted and adjusted...i know of no blog or media site other than possibly trade publications that covers this report in detail; instead, the focus is almost always on the nearly meaningless monthly new orders, which can be extremely volatile (for instance, they fell by more than 10% in August after rising the same amount in July on the rollout of a new Boeing jet), but it's the other figures that count; as both shipments and inventories are included in GDP; shipments of course indicating goods that have been manufactured, sold and shipped, and inventories representing completed products still in the warehouse...and as we've pointed out repeatedly, the most important indicator of the health of the manufacturing sector in this report is the unfilled orders data; if that's rising, as it rose 0.4% in November, and as it has risen for 18 out of the last 19 months, that means the current factory operating rate is not keeping up with the new orders coming in, irregardless of whether the new orders fell from the prior month or not...

other reports released this week included the Monthly Wholesale Trade: Sales and Inventories report for November from the Census Bureau and the report on Consumer Credit for November from the Fed...the wholesale trade report surprised in that wholesale sales fell by 0.3%, while wholesale inventories rose by 0.8%; the weakness in sales was mostly in non-durable goods, which fell 0.8%, while inventories of both durable goods and non durable wholesale goods rose equally...the 2nd page of the wholesale trade pdf provides an itemized table of both sales and inventories, both seasonally adjusted and unadjusted...meanwhile, the consumer credit report showed a slowing expansion of credit, with overall credit up at a 5.1% rate in November, with non revolving credit (ie, for cars and student loans) up at a 7.5% annual rate, while revolving credit fell at a 1.3% rate...remember that the main paragraphs from all these reports, including the pdfs, and a number of other reports we dont cover can be viewed on one regular webpage at the Research Economics page at OneWall.com

it now seems certain that Congress will pass a bill mandating approval of the Keystone XL pipeline, and that Obama will veto it...the house passed just such a bill on Friday by a vote of 266-153, and indications are that at least nine Democrats will join the Senate Republican majority in passing the same bill and sending it to Obama next week...communiqu├ęs from the White House have indicated that a veto will be forthcoming; all that remains to be seen now is if those favoring construction of the pipeline can get enough support to override the veto; one tally counts at least 64 votes in favor of the pipeline in the new Senate...also clearing the way for construction, the Nebraska Supreme Court reversed a lower court’s decision that blocked the pipeline route through the state, once again giving the pipeline a legal go ahead...however, even if Obama's veto is overridden, it's not certain or even likely that the pipeline would be built anymore...as we pointed out in November, the Canadian Energy Research Institute estimated that oil-sands projects need a price of $85 a barrel to be profitable in the current cheapest (in situ) method, and that new mines will require $105 a barrel oil to be profitable; other estimates of costs for tar sand extraction are similar...terminal prices for West Canada Select (heavy) crude oil prices have been below $35 per barrel all week, and Canadian projects are shutting down even faster than those in the US, and some of that started even before prices fell; Norwegian oil giant Statoil pulled out of their tar sands project in September...in the past year, Shell, the French oil giant Total, and SunCor of Canada all cancelled their tar sands projects...even China's CNPC International pulled out of the oil sands and withdrew its support for Enbridge's Gateway project to deliver tar sands oil to the west coast...and with current tar sands production already flowing into the US through the Alberta Clipper pipeline to Wisconsin and the Flanigan South pipeline through Illinois & points south, there may not be enough additional tar sands output to justify construction of another redundant pipeline...so if approval from the US is forthcoming, and there is no tar sands oil to be shipped, it now seems quite likely that TransCanada would either delay or cancel the Keystone XL project altogether...

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

Monday, January 5, 2015

on posting here, and on the week ended Jan 3rd

it wasn't a bad week to dispense with our full economic coverage, as there were few reports of note...probably the most widely watched of those was the S&P/Case-Shiller Home Price Indices for October, the home page of which links to this pdf with the detailed report and tables...the best coverage of Case-Shiller on the web was from Bill McBride, with the following two posts, which include several graphs: Case-Shiller: National House Price Index increased 4.6% year-over-year in October, followed by his analysis in House Prices: Better Seasonal Adjustment; Real Prices and Price-to-Rent Ratio in October….for a quick summary of the 20 city price index changes, the WSJ has an interactive table included here: A Look at Case-Shiller by Metro Area...the other hard data release was the Census report on Construction Spending for November (pdf) which estimated construction spending fell by 0.3%; that was after a 1.1% increase in October, so 4th quarter construction spending is still growing at a 5.9% annual rate vis-a-vis the 3rd quarter...this pdf report includes tables listing types and amounts of various public and private construction...

there were also three diffusion indexes released this week: the December Texas area manufacturing survey from the Dallas FedChicago Purchasing Managers Index (PMI) for December from the ISM-Chicago (pdf), and the December Manufacturing Report On Business and national PMI from the Institute for Supply Management (ISM)...diffusion indexes are calculated from surveys of business management wherein responses indicating business growth add 1 to the index or subindex, and responses indicating contraction either subtract from the index or aren't counted, such that indexes over zero or fifty mean a plurality of those surveyed indicated growth, while lower or negative numbers indicate a majority of responses were negative...

our elimination of the full coverage of weekly economic reports does not preclude the possibility that a report will be surprising or unusual enough to take at detailed look at here; i just want to dispense with the weekly regurgitating of every number that appears in a government or other widely watched release...for those who still need their weekly economic data fix, we would suggest the Research Economics page at OneWall.com; although there's no accompanying commentary, this page includes several paragraphs from each of the above reports, as well as a few reports we've rarely noted, such as a the weekly ICSC Chan Store Sales report and this week's Pending Home Salas index from the National Association of Realtors, all updated daily....for visualization of most of that, Doug Short has graphs of most of the important reports, but since his RSS feed hasn't been working regularly over the past few weeks, we'll point you to catch his latest updates on each report on his advisor's perspectives index page: http://www.advisorperspectives.com/dshort/updates/index.php ... 

i'm not sure what will fill this space yet but it seems likely that i'll at least in part revert to commenting on any economic policy charges that appear newsworthy; to that end we'll be watching the first actions of the new Republican congress, which apparently will being by replacing Doug Elmendorf, the current Republican director of the Congressional Budget Office, because he believes in arithmetic...you see, one job of the Congressional budget office is to "score" each bill that Congress proposes, or determine how much it will cost and how they'll pay for it...normally, the annual deficit predicted by the CBO is computed by estimating government spending and subtracting the expected revenues from taxes, and hence what normally happens when Congress cuts taxes is that the CBO would expect that the deficit would increase because revenues would fall...the incoming Republicans intend to install a Budget Office chief who'll initiate "dynamic scoring" of proposed tax cuts; what that means is that instead of government revenues falling when taxes are cut, the new CBO will assume that tax cuts will generate so much economic activity (ie, from the rich buying yachts with the largess and hence employing yacht builders who'll pay taxes) that revenues would actually increase, and hence the deficit would shrink...so, we'll try to keep track of this funny arithmetic and let you know how it works out...

as i mentioned in last week’s email, i am also writing about US and world gas & oil production & the oil price war that was started by OPEC in late November as it relates to US horizontal fracturing, ie, fracking, and also including some news on the movement opposing fracking, and posting that on a blog i started early December: Focus on Fracking....like what i've written here, that posting starts out as a Sunday morning newsletter that is emailed to my county's no-fracking google group, as well as to a few environmental journalists, wherein my synopsis precedes one of several unedited link collections that i'm now sending out on Sunday mornings...although i will be posting those newsletters online at Focus on Fracking each Sunday evening, it would be easy enough for me to include a BCC mailing list to my morning mailing of that collection, which is usually emailed within an hour or two after i mail these selected links...so if anyone wants to receive that "fracking" newsletter via email on Sunday mornings, write me at my gmail address, where you can also write me with any questions on any of the economic reports that i've covered here in the past, ask me to remove you from this mailing, or just about anything else...

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

Sunday, December 28, 2014

3rd estimate 3rd quarter GDP, November income and outlays, durable goods, new and existing home sales, et al

even though it was a short week with the holiday, we saw a packed schedule of economic releases over the first two days, including the 3rd estimate of 3rd quarter GDP and the November report on personal Incomes and spending, both released by the the Bureau of Economic Analysis on Tuesday...Tuesday also saw the release of the advance report on November orders, shipments, and inventories of durable goods, and the report on November's new home sales, both from the Census Bureau, while Monday saw the release of the report on Existing Home Sales for November from the National Association of Realtors (NAR), and the Chicago Fed National Activity Index for November, a weighted composite index of 85 different economic metrics grouped into four broad categories of data, which saw the headline index rise to +0.73 in November, up from +0.31 in October, where positive numbers indicate growth above the historical trend....54 of the 85 Chicago Fed indicators made positive contributions to the index in November, as production related indicators added 0.64 to the index, employment-related indicators added 0.17, sales, orders, and inventories added 0.02, while the the consumption and housing category subtracted 0.10 from the overall reading for November....the index’s three-month moving average rose to +0.48 in November from +0.09 in October, the highest reading since May 2010...there was also one Fed regional manufacturing survey for December released on Tuesday, as the Richmond Fed December Survey of Manufacturing Activity, covering the 5th Fed District, which includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported increases in new orders and shipments as their manufacturing composite index rose to 7 from 4 in November...

3rd Quarter GDP Grows at 5.0% Rate, Most Since 2003

the Third Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 5.0% rate in the third quarter, revised from the 3.9% growth rate reported in the second estimate last month, and up from the first estimate of 3.5%, as personal consumption expenditures, especially for health care, and non-residential fixed investment were revised upward...in current dollars, our 3rd quarter GDP would extrapolate to $17,599.8 billion annually, up 1.56%, or at a 6.42% annual rate from the $17,328.2 billion annualized figure of 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 resulting inflation adjustment used in the third quarter, aka the "GDP deflator", implies overall annual inflation at a 1.4% rate, unchanged from the 3rd quarter deflator reported a month ago, but up from the 2.1% annualized inflation factor reported for the second quarter...while we cover the details below, recall that all quarter over quarter percentage changes reported in this release are given at an annual rate, which means that they're expressed as a change a bit over 4 times the change that actually occurred over the 3 month period...  

real personal consumption expenditures, the largest component of GDP, were revised to show growth at a 3.2% annual rate rather than the 2.2% growth rate reported last month, and hence they contributed 2.21% to the quarter's growth rate, not the 1.51% previously estimated...real consumption of durable goods grew at a 9.2% rate, revised from the 8.7% growth rate reported in the second estimate, and added .67% to the final GDP figure; major contributors to that were a 15.7% real growth rate in consumption of recreational goods and vehicles and a 11.2% real growth rate in motor vehicle and parts consumption, while real consumption of furnishings and durable household equipment rose slightly and consumption of other durable goods fell, even as all durables consumption benefited from a negative 2.1% deflator...meanwhile, real personal consumption of non-durable goods rose at a 2.5% rate and added 0.39% to GDP, revised from the previous estimate of a 2.2% growth rate, even though inflation adjusted outlays for food and beverages, clothing, and energy goods were virtually unchanged from the 2nd quarter....in addition, real consumption of services grew at an 2.5% rate and added 1.15% to the quarter's growth, revised from the 1.2% growth rate and 0.53% addition reported in the second estimate last month, as real consumption of financial services and insurance grew at a 7.0% annual rate, real consumption of food and lodging services grew at a 4.9% rate, and real outlays for health care services rose at a 4.6% rate, offsetting a small decrease in real outlays for housing and utilities, while outlays for recreation and other services were flat..

seasonally adjusted real gross private domestic investment grew at a 7.2% annual rate in the 3rd quarter, revised from the 5.1% estimate of last month and the 1.0% growth that was first estimated, as the growth rate of private fixed investment was revised to 7.7% from the 6.2% estimate of last month and thus added 1.21% to the 3rd quarter's growth rate...real non-residential fixed investment grew at a 8.9% rate, rather than the 7.1% previously estimated, as investment in non-residential structures was revised up from growth at a 1.1% rate to growth at a 4.8% rate, investment in equipment grew at a 11.0% rate, not the 10.7% rate previously reported, and the quarter's investment in intellectual property products was revised from a growth rate of 6.4% to a 8.8% growth rate, while growth in residential investment was revised from 2.7% to 3.2%…after these revisions, investment in non-residential structures added 0.14% to the GDP's growth rate, investment in equipment added 0.63%, investment in intellectual property added 0.34%, while growth in residential investment added 0.10% to 3rd quarter GDP...
meanwhile, the real (inflation adjusted) change in private inventories was revised from $79.1 billion greater to $82.2 billion greater than the 2nd quarter, when inventories grew by $84.8 billion over the 1st quarter; hence the $2.6 billion negative change in inventory growth was smaller than negative $5.7 billion change reported last month or the originally reported $22.0 billion decrease, and thus it only subtracted 0.03% from 3rd quarter growth rather than the .14% subtraction applied in the second estimate last month....

there were also small revisions to our third quarter trade data...3rd quarter exports increased by $23.3 billion, or at a 4.5% annual rate, revised from the increase at a 4.9% rate reported last month, while imports decreased by $5.8 billion, or at a 0.9% rate, revised from the decrease at a 0.7% rate reported in the 2nd estimate...as you should recall, exports add to gross domestic product because they represent that part of our production that was not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here...thus the smaller increase in real exports added 0.61% to 3rd quarter growth, revised from a 0.65% addition, while the smaller decrease in real imports added 0.16% from the 3rd quarter's GDP, rather than the 0.12% addition, an thus the overall impact of net trade on GDP was essentially unchanged from the 2nd estimate...  

finally, there were only minor revisions to real government consumption and investment in this 3rd estimate...real federal government consumption and investment grew at a 9.9% rate vis a vis the 2nd quarter, which was unrevised, as real federal spending for defense grew at a 16.0% rate and added 0.66% to GDP, also unchanged from last month's estimate, while all other federal consumption and investment grew at a 0.4% rate and added just 0.01% to GDP growth...real state and local outlays rose at a seasonally adjusted 1.1% rate and added 0.13% to GDP growth, rather than the 0.8% rate of increase previously reported, as real state and local investment rose at a 2.1% rate and added 0.08% to GDP while state and local consumption spending rose at a 0.9% rate and added 0.04% to the quarter's growth…

our FRED bar graph below, which can also be viewed as an interactive, has been updated with these latest GDP revisions…each color coded bar shows the change, in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph below, the quarterly changes in real personal consumption expenditures are shown in blue, the quarterly changes in real fixed private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is shown in yellow, the real change in exports are shown in purple, while the change in real imports is shown in green ..then the change in state and local government spending and  investment is shown in pink, while the change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they did in the 2nd quarter, they'll appear below the zero line....  

3rd qtr 2014 3rd estimte GDP

Disposable Incomes Rise 0.3% in November; Spending Rises 0.6%, PCE Prices Fall 0.2%

on the same day as the GDP release, the Bureau of Economic Analysis also released their report on Personal Income and Outlays for November, which in addition to the important personal income data, also reports the monthly data on our personal consumption expenditures (PCE), which as we just saw is the major component of GDP...from that data, the BEA also computes personal savings and the national savings rate, as well as a price index for PCE, the inflation gauge the Fed targets, and which is used in this report to adjust both personal income and consumption expenditures for inflation to arrive at 'real' change figures.. ..like the GDP reports, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts... however, the percentage changes are expressed as a month over month change and are confusingly used within the report as if they refer to the annualized amounts, making for a difficult report to unpack and report on correctly...

in November, total personal income increased at a seasonally adjusted $54.4 billion annual rate, to what would be a gross national personal income of $14,930.0 billion annually, which was 0.4% higher than in October, when personal income increased by 0.3% over September... disposable personal income (DPI), which is total income after taxes, increased at an annualized rate of $42.4 billion to $13,155.9 billion annually, which was a 0.3% increase over October, while October's DPI was revised up to 0.3% over September...increases in private wages and salaries, which account for half of gross personal income, accounted for $38.7 billion of the annualized November personal income gains, up from $24.9 billion in October, as service industry payrolls increased at a $31.5 billion annual rate and goods producing industry payrolls rose at a $7.3 billion clip....increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $5.4 billion of November's annualized increase, while employee contributions for government social insurance, which are subtracted from the personal income figure, increased at a $5.3 billion rate...meanwhile, proprietors' income increased at a $7.6 billion rate in November, as farm owner's incomes rose at a $3.2 billion rate while incomes of individual proprietors of other types of business were up at a $4.4 billion rate....other sources of the November personal income changes included rental income of individuals, which increased at a $0.5 billion rate, personal interest and dividend income, which grew at a $5.6 billion rate, and personal transfer payments from government programs, which fell at a $0.1 billion rate..   

meanwhile, November's seasonally adjusted personal consumption expenditures (PCE), which will be included in the change in real PCE in 4th quarter GDP, rose at a $67.9 billion annual rate to a level of $12,143.8 billion in consumer spending annually, 0.6% higher than in October, which itself was revised up 0.1% to 0.3% higher than September....the current dollar increase in November spending was driven by a $45.4 billion annualized increase to an annualized $8,112.5 billion in spending for services and a $21.7 billion increase to $1,347.5 billion annualized in spending for durable goods, while outlays for non durable goods rose at a $0.8 billion rate to an annualized $2,683.8 billion ...total personal outlays for November, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $67.7 billion to $12,579.4 billion, which left total personal savings, which is disposable personal income less total outlays, at $576.5 billion in November, down from the revised $601.7 billion in personal savings in October, which was originally reported at $651.2 billion... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 4.4% from October's revised savings rate of 4.6%, which was originally reported at 5.0%..

while our personal consumption expenditures accounted for 68.2% of our third quarter GDP, before they were included in the 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 fell to 109.015 in November from 109.203 in October, giving us a negative month over month inflation rate of 0.017%, which BEA reports as -0.2%, and a year over year PCE price index increase of 1.17%, while core prices rose 1.41%, well below the Fed's target of 2.5% inflation articulated in their December 2012 FOMC meeting...because of the decrease in prices, the inflation adjusted or real personal consumption expenditures actually increased 0.7% in November, after rising 0.2% in October, when the PCE price index was reported as unchanged by was actually up fractionally...together, these October and November adjustments imply an annualized increase of approximately 4.2% in 4th quarter PCE, even if December PCE is unchanged ...using the same PCE price index, disposable personal income was inflated to show that real disposable personal income, or the purchasing power of disposable income, rose by  0.5% in November, after increasing by 0.3% in October...

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 lower 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 mostly the result of 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…. 

November 2014 real income and expenditures

Durable Goods Order Backlog at Record $1,174.0 Billion in October, 11.8% Higher than Year Ago

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for November (pdf) from the Census Bureau estimated that new orders for manufactured durable goods fell by a seasonally adjusted $1.7 billion, or 0.7%, to $242.3 billion, following the revised October new orders increase of $730 million or 0.3%; year to date, new orders are 6.7% ahead of 2013....new orders for transportation equipment fell 1.2% to $75,500 million as new orders for defense aircraft fell 7.8% to $4,876 million after rising 43.5% in October, while new orders excluding transport equipment orders still fell 0.4% to $167,551 million...the widely watched new orders for non-defense capital goods less aircraft, a measure of business investment, were statistically unchanged at $70,942 million...

November's seasonally adjusted shipments of durable goods were also weak, falling $0.9 billion or 0.4 percent to $245.3 billion, after a revised 0.1% increase in October, with shipments of commercial aircraft and parts, down 4.4%% to $12,550 million, driving a 1.0% decrease in transport equipment shipments; without the drop in transportation equipment, other shipments were down just 0.1%...meanwhile, seasonally adjusted inventories of durable goods, which have been up 19 out of the last 20 months, rose another $1.7 billion or 0.4% to a new record at $408.2 billion, as inventories of  transportation equipment, up 0.9% to $133.2 billion, were a major factor in the November 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 $4.4 billion or 0.4% to a record $1,178.9 billion....all categories of durables except machinery and defense capital goods, which both slipped 0.2%, saw their order backlog increase, with unfilled orders for computer equipment, up 2.2% to $4,228 million, and for communications equipment, up 1.1% to $38,829 million, seeing the largest percentage increases...at month end, unfilled orders for durable goods were 11.8% ahead of last November's backlog... 

Existing Home Sales Fall 6.1% in November

according to the National Association of Realtors (NAR), seasonally adjusted existing home sales fell by 6.1% in November to an annual rate of 4.93 million completed transactions, from a downwardly revised annual rate of 5.25 million home sales in October, while they were still 2.1% above the annual sales rate of 4.83 million units that the NAR reported in November of last year....before the seasonal adjustment and conversion to an annualized figure, an estimated 352,000 homes sold in November, down 20.5% from the 443,000 homes that sold in October, and down 2.8% from the estimated 362,000 homes that sold in November a year ago...both seasonally adjusted data (pdf) and unadjusted data indicates that homes sales were down in every region of the country, with the West showing the largest seasonally adjusted decrease, down 9.6%, while the unadjusted data showed that home sales actually fell by between 17.7% in the West and 24.0% in the Midwest...

the preliminary median home selling price for all housing types was $205,300 in November, down 1.0% from $207,500 in October, but still 5.0% higher than the $195,500 median sales price in November of last year, in home price data that is not seasonally adjusted...the average home sales price was $252,200, down 0.7% from the $254,100 average in October, while it was up 3.5% from the $243,600 average sales price in November a year ago, with regional average home prices ranging from a high of $334,800 in the West to the average of $193,300 for homes sold in the Midwest....foreclosed homes, which sold for an average of 17% below the price of similar homes in their market, accounted for 6% of November's sales, while short sales, at 3% of all sales, were discounted by an average of 13%...the median time on the market for all homes was 65 days in November, up from 63 days in October, and up from a median of 56 days on the market in November a year ago.…those who bought houses with cash accounted for 25% of transactions in November, down from 27% in October and down from 32% all cash sales a year earlier, while those identified as investors accounted for 15% of all transactions, unchanged from the October percentage but down from the 19% of all home sales to investors in November a year ago....30 year mortgage rates averaged 4.00% in November, down from 4.04% in October, and the lowest 30 year mortgage rate since May 2013; that may be the reason the share of first time home buyers rose to 31%, after remaining unchanged at 29% over the four previous months....2.09 million existing homes remained available for sale at the end of November, which would be a 5.1 month supply of unsold homes at the November sales pace, unchanged from October but up 2.0% from the 2.05 million existing homes available for sale a year earlier...

November New Home Sales Continue Below a 440,000 a Year Pace

like existing homes sales, sales of new homes also fell in November, but previously reported sales were revised downward for the 6th month in a row as well... the Census bureau report on New Residential Sales for November estimated that new single family homes were sold at a seasonally adjusted annual rate of 438,000 in November, which was is 1.6 percent (±12.3%)* below the revised October rate of 445,000 and was also 1.6 percent (±17.8%)* below the annualized new homes sales pace in November of last year...October's annualized sales rate was revised down from the 458,000 annually reported a month ago to 438,000, while September's sales rate unrevised from the downward revision to 455,000 annually reported last month...the asterisks after the reported figures indicate that based on their small sampling, Census could not be certain whether November's new home sales rose or fell from those of October or even from those of a year ago, but there’s a 90% likelihood that November home sales were in a range between 13.9% less than and 10.7% more than those of October, and that new homes sold could have been as many as 16.2% more than last November or as few as 19.4% less than last November, 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 31,000 homes sold in November, down from 36,000 in October, which was revised from the original estimate of 37,000...new home sales for the year through November were 402,000, up 1.0% from the 398,000 sold during the first eleven months of 2013...of the roughly 31,000 homes sold in November, 10,000 were completed, 11,000 were under construction, and 9,000 had not yet been started...the median new home sales price was $280,900 in November, down from $290,100 in October, while the average sales price was $321,800, down from October's $375,200 average price, as there were 2,000 less homes sold for over $750,000 in the sales mix... the Census estimated that a seasonally adjusted 213,000 new homes remained unsold at the end of November, which was a 5.8 month supply at the November 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 NAR monthly over the same time period in blue...note that the number indicated monthly for both represents an extrapolated estimate of how many homes would be sold over an entire year if that month’s pace were continued over 12 months, and that the actual sales for each month are closer to the unadjusted data we cited...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... 

November 2014 new and existing home sales

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

Sunday, December 21, 2014

November’s consumer prices, industrial production, new housing starts, and states jobs report, et al

the key reports released this week were the Consumer Price Index for November from the Bureau of Labor Statistics and the November G17 release on Industrial Production and Capacity Utilization from the Fed...we also saw the release of the November report on new home construction (pdf) by the Census Bureau, and the Regional and State Employment Report for November from the BLS...and this week also saw the first three regional manufacturing surveys for December from Fed district banks: the New York Fed reported that its December Empire State Manufacturing Survey, covering a district that includes New York and northern New Jersey, revealed that its composite general business conditions fell nearly fourteen points to -3.6, its first negative reading in nearly two years, in a diffusion index where values below  zero indicate contraction....then the Philadelphia Fed's December Manufacturing Business Outlook Survey covering Pennsylvania, southern New Jersey, and Delaware, reported that its broadest measure of manufacturing conditions, the diffusion index of current activity, fell more than 16 points, from a record reading of 40.8 in November to 24.5 in December, still a solidly positive number which indicates ongoing growth for a large plurality of the District's manufacturers...lastly, the December Kansas City Fed manufacturing survey (pdf), covering a region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported that their broadest composite index rose from 7 in November to 8 in December, indicating ongoing manufacturing growth at a slightly faster pace...

Consumer Prices Fall In November on Cheaper Energy

November consumer prices saw their largest drop in one month since 2008 as considerably lower prices for fuel offset modest price increases in food, shelter and a number of other services....the Consumer Price Index for All Urban Consumers (CPI-U) for November from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell 0.3% after being unchanged in October and rising 0.1% in September, and are now just 1.3% higher than a year ago ...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, fell to 236.151 in November from 237.433 in October, a reading 1.32% higher than the 233.069 reading from November of last year...since the drop in energy prices was the major drag on the index in November, core prices, which exclude food and energy, rose by 0.1%, as the unadjusted core index actually fell from 239.413 in October to 239.248 in November, while that index still remained 1.70% ahead of its year ago level of 235.243... 

the seasonally adjusted energy price index fell by 3.8% in November after falling a total of 5.2% over the prior three months and hence energy prices are 4.8% lower than they were in November a year ago...prices for energy commodities were 6.4% lower while the index for energy services fell 0.3%...energy commodity prices decreased on a 6.6% drop in the price of gasoline, the largest component, and a 3.5% drop in fuel oil prices, while prices for other fuels, including propane, kerosene and firewood, averaged a 1.8% decrease…within energy services, the index for utility gas service fell by 1.7%, the fifth decrease in six months, while the electricity price index rose 0.1% after falling 0.2% over October and September...energy commodities are now priced 10.2% below their year ago levels, with gasoline down 10.5%, while the energy services price index is still 2.9% higher than last November...  

the seasonally adjusted food index rose by 0.2% in November, after rising 0.1% in October and 0.3% in September, and it is now 3.2% higher than November a year ago....prices for food away from home rose by 0.4%, their largest increase since January 2012, as prices for meals at full service restaurants rose by 0.3% and prices at fast food restaurants were 0.5% higher, while prices for food at workplaces and schools rose by 0.2%, and prices for food from vending machines were up 0.7%....meanwhile, the price index for food at home just rose 0.1% as lower prices for fruits and vegetables and grain and dairy products partially offset higher prices for meat, beverages, and other food at home....the index for cereals and bakery products was 0.2% lower than in October as a 1.7% drop in the price index for rice, pasta and cornmeal and 0.2% lower priced cakes and cupcakes more than offset a 0.7% increase in bread prices...dairy products prices were also 0.2% lower in November as milk prices fell 0.4% while cheese prices rose 0.5%....prices for fruits and vegetables fell 0.7% as prices for prices for citrus fruit fell 2.1%, prices for potatoes fell 1.8%, frozen vegetables also fell 1.8%, and prices for canned fruits and vegetables fell 1.3% while tomato prices rose 10.4% and lettuce prices rose 5.5%....meanwhile, prices for the meats, poultry, fish, and eggs group rose by 0.6% as poultry prices rose 1.7% on 1.8% higher turkey prices and 1.6% higher chicken prices, beef prices rose 0.8% on 1.4% higher ground beef, seafood prices rose 03% on 0.9% higher frozen fish, while pork prices fell 0.3% as 1.1% lower pork chops and 1.6% lower pork roasts more than offset 1.3% higher ham prices...as of November, prices for the various cuts of beef were between 15.3% and 23.2% higher than a year earlier, while ham prices were 13.8% higher, pork roasts were 14.9% higher, pork chops were up 11.8% on the year, and sausage prices were 11.6% more than last November.....prices for nonalcoholic beverages and beverage materials were also 0.5% higher in November than in October as prices for fresh juices and non-carbonated drinks rose 1.3% while coffee prices rose 0.2%...lastly, prices for other foods at home rose by 0.4% as prices for salt and other seasonings rose 2.3%, prices for frozen and freeze dried prepared foods rose 1.2%, prices for soups rose 1.2%, and prices for sugar and artificial sweeteners rose 0.6%, while prices for olives, pickles, and relishes fell 2.2%, salad dressings were 1.8%, and butter prices fell 1.7%; even so, butter prices are still 27.2% higher than a year ago and still represent the largest line item annual increase in the index... 

for the seasonally adjusted core components of the CPI, which rose by 0.1% in November, we find that the composite of all commodities less food and energy commodities fell by 0.4%, while the composite for all services less energy services rose by 0.2%....the index for shelter, which is almost 32% of the CPI, rose by 0.3%, with rents rising 0.2% and homeowner's equivalent rent rising 0.2%, while water & sewer bills rose 0.9%, and the cost of household operations was unchanged....meanwhile, prices for household furnishings and supplies, the commodity component of housing, fell by 0.5%, with a 4.4% drop in prices for laundry appliances, a 1.9% decrease in prices for linens, 1.8% lower prices for decor items and 1.2% lower cookware and tableware more than offsetting a 3.4% increase in the price of window coverings...the price index for apparel fell 1.1% in November as a 3.7% drop in prices for women's outerwear, a 3.4% drop in prices for girls apparel, a 2.4% drop in prices for women's suits, 1.7% lower priced boys' and girls' footwear, and 1.2% lower prices for men's suits, coats, and outerwear, more than offset a 1.7% increase in the prices of men's pants and shorts. ...meanwhile, the aggregate index for medical care rose 0.4% in November as the medical care services index rose 0.4% on a 0.9% increase in services from medical professionals other than doctors and dentists and a 0.5% increase in costs for physicians' services, while the medical care commodity index rose 0.6% on a 0.6% increase in prescription drug prices….then, while the transportation composite index showed a 2.0% decrease, that index includes gasoline, which you'll recall fell in price by 6.6%; prices for transportation commodities less fuel prices, however, still fell 0.4%, as prices for new cars and trucks fell 0.1%, prices for used cars & trucks fell 1.2%, tire prices fell 0.4% and prices for oil & other automotive fluids fell by 0.5%; at the same time, the transportation services index rose 0.3% on 2.8% higher car and truck rentals, a 3.1% increase in intercity train fares, a 2.2% increase in ship fares and a 1.1% increase in airline fares, while motor vehicle repairs fell 0.4%...meanwhile, the recreation price index fell  0.2% as recreation commodities fell 0.6% as television prices fell 3.2%, prices for other video equipment fell 2.7%, prices for audio equipment fell 1.2%, and prices for both toys and photography equipment fell 0.9%, while prices for recreational services were unchanged as 0.4% higher veterinary fees and 0.2% higher pet services were offset by a 1.3% drop in photographer fees and 0.9% lower rental of video discs and other media...lastly, the aggregate education and communication price index fell 0.1% as education and communication commodities fell 0.9% on a 2.9% drop in prices for telephones and other consumer information hardware and 1.5% lower prices for personal computers and similar gear, while the education and communication services index was unchanged, as a 0.6% decrease in charges for wireless phone services was offset by a 0.4% increase in college tuitions and fees and 0.5% higher postage...in November, 3 line items among the CPI core components showed a annual price drops of greater than 10%: televisions, which have fallen in price by 16.2%, telephone hardware, which is now priced 10.6% less, and laundry appliances, which are now 10.2% cheaper than they were a year ago...  

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…   

November 2014 CPI components

November Industrial Production Up 1.3% to a Record High

the Fed's G17 release on Industrial production and Capacity Utilization for November indicated that industrial production rose 1.3% from a October reading which itself was revised from a decrease of 0.1% to a increase of 0.1% ...the industrial production index, which is benchmarked to 2007 production being equal to 100.0, rose to a record 106.7 from the previously issued reading of 104.9 in October, which has been revised to 105.3 with this report, while the industrial production index for September was revised from 105.0 to 105.5 and the August index was revised from 104.1 to 104.3...the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 1.1% in November to 102.2, while the manufacturing index for October was revised up from 100.6 to 101.1, after the September manufacturing index was revised up from 100.4 to 100.7 and the August index was revised up from 100.2 to 100.3...after these revisions and this month's gain, the November manufacturing index is now 4.8% higher than the level of November 2013....in addition, the seasonally adjusted utility index rose 5.1% to 105.6 as electricity production rose 4.8% and natural gas output increased by 6.9% due to the abnormally cold November; even so, the utility index is still only 1.8% above last November's reading...meanwhile, the mining index, which includes oil & gas production, fell 0.1% to 132.6 in November, after falling by 1.0% in October, as lower oil prices are slowing the higher cost extraction processes, even as the index remains 9.3% higher than a year ago...

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group...the seasonally adjusted production of final products and nonindustrial supplies, which accounts for 52.7% of total production, rose by 1.7% in November as production of consumer goods rose 2.5% after slipping 0.1% in October....production of durable goods rose by 3.0% as the heavily weighted automotive products sector rose 5.0% and production of consumer electronics rose 2.6%... in addition, production of non-durable goods rose by 2.3% as output of consumer energy products rose 5.7% while output of non-energy non-durables rose 1.2%, as clothing production rose by 2.5%, the output of food and tobacco rose 1.5%, chemical products production rose 0.8%, and paper products production rose 0.3%....over the preceding year, production of durable goods increased by 5.4%, led by 7.8% growth in output of appliances, furniture, and carpeting, and a 7.4% increase in production of automotive products, while annual production of non-durable goods grew by 3.6% as a 1.6% decrease in output of paper products partially offset 5.7% growth of chemical products output and over 3% increases in output of energy and other non-durables..

seasonally adjusted production of business equipment rose 1,2% in November after rising by an upwardly revised 1.0% in October as production of production of transit equipment rose 1.7% and production of industrial equipment rose 1.4% while production of information processing equipment slipped 0.1%...over the past year, output of business equipment rose by 5.8%, as production of industrial equipment rose by 8.3%, production of transit equipment rose by 5,8%, and output of information processing equipment rose by 2.5% ....meanwhile, production of defense and space equipment rose by 0.3% in November and grew by 2.1% over the year ending November ...in addition, production of supplies for use in construction increased by 0.5% for the month and by 4.7% for the year, while production of business supplies rose 1.2% in November and grew 3.7% for the year...meanwhile, production of raw and intermediate materials that would input into other production processes increased by 0.8% in November while growing 6.0% over the year, with the output of energy materials and the output of consumer parts both up 7.4%, while raw and intermediate paper production fell 0.8% over the year ending November....

for capacity utilization, which is the percentage of our plant and equipment that was in use during the month, the Fed found that the utilization rate for total industry rose from a revised 79.3% in October to 80.1% in November, which was also up from a utilization rate of 78.5% in November last year....78.4% of our total manufacturing capacity was in use during November, up  from a revised 77.6% in October and up 0.9% from the factory operating rate of 77.5% in November of last year...the operating rate for NAICS classified durable goods manufacturers was at 78.4%, up from 77.8% in October, with capacity utilization ranging from 84.4% for manufacturers of electrical equipment, appliances, and components to a low of 64.8% for manufacturers of non-metallic mineral products, while the November operating rate for NAICS classified manufacturers of non-durables was at 80.0%, up from 79.1% in October, with the oil and coal products industry now operating at 86.3% of capacity while the printing industry was operating at just 73.1% of capacity... meanwhile, capacity utilization by the 'mining' industry fell 1.5% from 88.7% to 87.9%, reflecting a pullback in drilling by the oil and gas industry due to lower oil prices, while the operating rate for utilities rose from 78.5% to 82.4%, reflecting above normal consumption due to below normal temperatures.... 

our FRED graph for this report below shows the percentage of capacity in use for all industries monthly since 2007 in pink, while it shows the the seasonally adjusted industrial production index values for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red from the beginning of the index year of 2007, at which time they were all benchmarked to equal 100.0…the recent downturn mining and upturn in utility production are both fairly evident:

November 2014 industrial production

New Housing Construction Continues at a Million Units a Year Pace in November

according to the Census report on New Residential Construction for November (pdf) starts on new housing units were estimated to be at a seasonally adjusted annual rate of 1,028,000 in November, which was 1.6 percent (±8.1%)*  below the revised estimated pace of 1,045,000 homes hypothetically being started annually in October, and 7.0 percent (±10.2%)* below the annual rate of 1,105,000 housing starts estimated for November a year ago...the asterisks indicate that the Census, based on their survey of a small percentage of permit offices visited by Census field agents, does not have sufficient data to determine whether housing starts rose or fell for the month or even for the year, while the numbers in parenthesis indicates their 90% confidence range – ie, housing units started in November were likely at a seasonally adjusted annual rate ranging between 9.7% less and 6.5% greater than those in October.....the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 77,500 housing units were started in November, down from 87,600 in October, which was revised up from 84,000, with 47,700 of those November starts being single family dwellings, while construction was started on 28,800 apartment units in buildings with 5 or more units...

the monthly data on new building permits have a much narrower margin of error than new housing starts and hence are probably a better monthly indicator of new construction trends than the volatile and often dramatically revised starts data... in November, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,035,000, which was 5.2 percent (±1.4%) below the revised October annual rate of 1,092,000 and 0.2 percent (±1.8%)* below the 1,037,000.annual rate estimated for new permit issuance in November of last year...those estimates were extrapolated from the unadjusted estimate of 69,800 new permits issued in November, which was down from the estimated 96,400 new permits issued in October...of those units permitted in November, 59,600 (±1.1%) were for single family homes, and 36,500 (±1.0%) represented permits for housing units in building with 5 or more units...our FRED graph on this report below, which can also be viewed as an interactive at the FRED site, shows the seasonally adjusted annual rate of housing units started in thousands monthly in blue, and the annual rate of housing units authorized by building permits monthly in red since 2000…note that the number in thousands shown monthly for both metrics represents an extrapolated estimate of how many units would be permitted or started over an entire year if that month’s pace were continued over 12 months; actual starts and permits each month are closer to the unadjusted data we cited…   

November 2014 new home construction

State and Regional Employment for November

this week also saw the release of the Regional and State Employment and Unemployment Summary for November, a report which further expands on the national employment situation summary we covered two weeks ago by breaking down the state and regional details...although we're told in opening that 41 states and the District of Columbia saw their unemployment rate decrease in November while 3 states saw a jobless rate increase and 6 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 only 22 of those states had statistically significant monthly unemployment rate decreases, led by North Carolina, where the unemployment rate fell from 6.3% to 5.8%, followed by four states that saw employment rates by drop by 0.4%: Delaware, where the jobless rate fell from 6.4% to 6.0%; Georgia, where it fell from 7.6% to 7.2%; Maryland, where it fell from 6.0% to 5.6%; and Michigan, where the unemployment rate fell from 7.1% to 6.7%..…meanwhile, there were no states that saw a statistically significant increase 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 90,100 jobs in California, 41,900 jobs in Florida, and 34,600 jobs added in Texas to the net decreases of 5,200 jobs in West Virginia and 4,500 jobs in Mississippi...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment since last November, 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…)