July’s retail sales, industrial production, and new home construction; June’s business inventories

the past week's key reports were the Retail Sales for July and Business Sales and Inventories for June, both from the Census bureau, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau...other reports released this week included Regional and State Employment and Unemployment for July from the BLS, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +9.8 in July to +25.2 in August, its highest reading in three years, suggesting a broad based expansion of First District manufacturing, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions slipped from +19.5 in July to +18.9 in August, also still suggesting ongoing growth of that region's manufacturing industries...

July Retail Sales Up 0.6% After May and June Sales Revised Higher

seasonally adjusted retail sales were 0.6% higher in July after retail sales for May and June were revised higher....the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $478.9 billion during  the month, which was 0.6 percent (± 0.5 percent) than June's revised sales of $476.0 billion and 4.2 percent (± 0.9 percent) above the adjusted sales in July of last year...June's seasonally adjusted sales were revised from the $473.5 billion originally reported to $476.0 billion, while May sales were revised from $474.2 billion to $474.76 billion with this release....estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually fell 0.8%, from $463,844 million in June to $479,912 million in July, while they were up 3.6% from the $463,245 million of sales in July a year ago...revisions to May and June indicate that 2nd quarter sales were roughly $3.1 billion higher than previously reported, which would add about $12.3 billion to the BEA's calculation of personal consumption expenditures at an annual rate, which should be enough to lift 2nd quarter GDP by 0.07 percentage points when the 2nd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the May to June change under "May 17 (r)evised" and the revised June 2016 to June 2017 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance June sale estimates, before this month's revision, is here....

clearly, July's retail sales were boosted by the 1.2% increase to $100,076 million in seasonally adjusted sales at vehicle and parts dealers, but even without that increase, other retail sales still rose 0.5%...and that too is stronger than it appears, because prices for all goods less food and energy goods were down 0.1% in July, which means that these dollar sales bought 0.1% more merchandise, which thus means that much more merchandise was produced or imported...particularly noteworthy is the boost that 3rd quarter GDP will get from automobile sales, as prices for new cars fell 0.7% and prices for used cars and trucks fell 0.5%, which means real PCE of vehicles was up by nearly 2.0% in July, which will work out to an 8% annual rate for GDP purposes even if vehicle sales remain flat for the rest of the quarter...

Industrial Production Up 0.2% in July After Prior Months Revised Modestly Higher

the Fed's G17 release on Industrial production and Capacity Utilization for July indicated that industrial production rose by 0.2% in July after rising by 0.4% in June and being unchanged in May...industrial production is now up 2.2% from a year ago, as compared to last month's year over year increase of 2.0%...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 105.5 in July from 105.3 in June, which was revised from the 105.2 reported for June a month ago...at the same time, the May reading for the index was revised up from 104.8 to 104.9, the April reading for the index was revised up 104.7 to 104.9, and the March index reading was revised from 103.8 to 103.9...

the manufacturing index, which accounts for more than 77% of the total IP index, was unchanged at 103.4 in July, after June's manufacturing index was revised up from 103.3, May's manufacturing index was revised from 103.1 to 103.2, April's manufacturing index was revised from 103.5 to 103.8, and the manufacturing index March was revised up from 102.5 to 102.6.... meanwhile, the mining index, which includes oil and gas well drilling, rose from 110.4 in June to 111.0 in July, after the June mining index was revised down from the previously reported 111.0...nonetheless, the mining index still remains 10.2% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 1.6% to 104.7 in July after falling a revised 1.2% in June, and still remains 0.6% below its year ago reading of 104.1..

this report also includes capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry was unchanged at 76.7% in July, after capacity utilization for June was revised from 76.6% to 76.7%, and after capacity utilization of each of the three prior months was revised up by 0.1% from previously reported levels....capacity utilization by NAICS durable goods production facilities, however, fell from 74.6 in June to 74.4 in July, as capacity utilization of motor vehicles and parts manufacturers fell from 80.7% to 77.8%, while capacity utilization for non-durables producers rose from 77.4% to 77.7% at the same time....capacity utilization for the mining sector rose to 84.6% in July, up from 84.4% in June, which was originally reported as 84.8%, while utilities were operating at 78.1% of capacity during July, up from their 76.9% of capacity during June, a figure that was originally reported at 74.6%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

June Business Inventories Up 0.5%, More than Estimated by the BEA

following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June (pdf), which incorporates the revised June retail data from that July retail report and the earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,356.8 billion in June, up 0.3 percent (±0.2%) from May revised sales, and up 4.3 percent (±0.4 percent) from June sales of a year earlier...note that total May sales were revised from the originally reported $1,350.2 billion to $1,353.3 billion, now up 0.1% from April....manufacturer's sales were down 0.2% to $471,535 million in June, while retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, rose 0.3% to $419,438 million, and wholesale sales rose 0.7% to $465,800 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,869.3 billion at the end of June, up 0.5 percent (±0.1%) from May, and 2.8 percent (±0.2%)* higher than in June a year earlier...the value of end of May inventories was revised up slightly from the $1,859.7 billion reported last month to $1,860.4 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $649,086 million, 0.2% higher than those of May, inventories of retailers were valued at $620,809 million, 0.6% more than in May, while inventories of wholesalers were estimated to be valued at $599,389 million at the end of June, up 0.7% from May...

New Housing Starts, Permits, Reportedly Lower in July

the July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,155,000, which was 4.8 percent (±10.2 percent)* below the revised June estimated annual rate of 1,213,000 housing units started, and was also 5.6 percent (±8.5 percent)* below last July's pace of 1,223,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, July's housing starts could have been up by 5.4% or down by as much as 16.0% from those of June, with even larger revisions possible...in this report, the annual rate for June housing starts was revised from the 1,215,000 reported last month to 1,213,000, while May starts, which were first reported at a 1,092,000 annual rate, were revised up from last month's initial revised figure of 1,122,000 annually to an annual rate of 1,129,000 with this report....those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 109,000 housing units were started in July, down from the 116,300 units started in June...of those housing units started in July, an estimated  81,100 were single family homes and 26,700 were units in structures with more than 5 units, down from the revised 84,100 single family starts in June, and down from the 31,600 units started in structures with more than 5 units in June...

as we've pointed out previously, the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in July, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,223,000 housing units per year, which was 4.1 percent (±0.9 percent) below the revised June rate of 1,275,000 permits, but was 4.1 percent (±1.8 percent) above the rate of building permit issuance in July a year earlier...the annual rate for housing permits issued in June was revised from 1,254,000 to 1,275,000 ....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 100,400 housing units were issued in July, down from the revised estimate of 127,900 new permits issued in June...the July permits included 61,800 permits for single family homes, down from 74,700 single family permits in June, and 28,500 permits for housing units in apartment buildings with 5 or more units, down from 42,500 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.155 Million Annual Rate in July and Comments on July Housing Starts...

 

(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…)

July’s consumer and producer prices, June’s job openings and labor turnover

government agency reports released this past week included the July Consumer Price Index, the July Producer Price Index, and the July Import-Export Price Index, all from the Bureau of Labor Statistics, and the June report on Wholesale Trade, Sales and Inventories from the Census Bureau...the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for June, while the Fed released the Consumer Credit Report for June, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.4 billion, or at a 3.9% annual rate, as non-revolving credit expanded at a 3.5% rate to $2,834.1 billion and revolving credit outstanding rose at a 4.9% rate to $1,021.7 billion....in addition, the privately issued Mortgage Monitor for June (pdf) released by Black Knight Financial Services indicated that 3.80% of all mortgages nationally were delinquent in June, up from 3.79% in May but down from 4.31% in June a year ago, and that 0.81% of all mortgages remained in the foreclosure process, down from 0.83% in May and down from 1.10% in foreclosure a year ago...

Consumer Prices Up 0.1% in July on Higher Food, Clothing and Medical Care

the consumer price index rose 0.1% in July, as higher prices for food, clothing and medical care were only partially offset by lower prices for energy and automobiles ...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.1% in July after being unchanged in June and  falling 0.1% in May, but after rising 0.2% in April....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 244.955 in June to 244.786 in July, which left it statistically 1.728% higher than the 240.628 index reading in July of last year...with prices for energy lower and prices for food higher, seasonally adjusted core prices, which exclude food and energy, also rose by 0.1% for the month, even as the unadjusted core index fell from 252.014 to 251.936, which left the core index 1.692% ahead of its year ago reading of 247.744...

the normally volatile seasonally adjusted energy price index decreased by just 0.1% in July, after it had dropped 1.6% in June and 2.7% in May, but rose by 1.1% in April, fell by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% in September....thus, energy prices are still averaging 3.4% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were unchanged in July, while the index for energy services fell by 0.2%, after falling 0.5% in June.. the energy commodity index was unchanged despite a 2.0% decrease in the index for fuel oils because the price of gasoline, the largest component, was unchanged, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.5% higher...within energy services, the index for utility gas service fell by 2.3% after falling by 0.2% in June but after rising by 1.9% in May and by 2.2% in April, and hence utility gas is still priced 7.5% higher than it was a year ago, while the electricity price index was up 0.4%, after it fell 0.6% in June....energy commodities are now 3.1% higher than their year ago levels, with gasoline prices averaging 3.0% higher than they were a year ago, while the energy services price index is 3.6% higher than last July, as electricity prices have also increased by 2.6% over that period…

the seasonally adjusted food price index was up 0.2% in July, after being unchanged in June, rising 0.2% in May, 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as prices for food purchased for use at home rose 0.2% in July, while prices for food bought to eat away from home was also 0.2% higher, as prices at fast food outlets rose 0.3% while full service restaurant prices rose 0.1%...in the food at home categories, the price index for cereals and bakery products decreased by 0.4% as bread prices were 1.4% lower...however, the price index for the meats, poultry, fish, and eggs group was up 0.7% as beef and veal prices rose 1.2% and ham prices rose 3.1%, while the index for dairy products was 0.3% higher on 1.5% increase in the price of ice cream....the fruits and vegetables index was 0.5% higher on a 1.2% increase in prices for fresh fruits as apple prices rose 1.8%...meanwhile, the beverages index was 0.3% lower as coffee prices were down 0.8% and carbonated drink prices fell 1.1%....lastly, prices in the ‘other foods at home’ category were on average unchanged, as salad dressing prices rose 2.1% while snack prices were 0.7% lower....as of July, no food line item has seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.1% in each of the last 4 months after falling by 0.1% in March, the composite of all goods less food and energy goods was down 0.1% in July, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust July retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.5%, as prices for laundry appliances fell 2.2% and non-core furniture prices fell 1.9%...the apparel price index, meanwhile, was 0.3% higher, as prices for women's outerwear rose 2.6% and prices for women's dresses rose 3.3%....prices for transportation commodities other than fuel were down 0.4%, as prices for new cars fell 0.7% and prices for used cars and trucks fell 0.5%...on the other hand, prices for medical care commodities were 1.0% higher on a 1.3% increase in prices for prescription drugs...meanwhile, the recreational commodities index fell 0.4% on 1.4% lower prices for audio equipment and 2.3% lower priced toys...however, the education and communication commodities index was 0.9% higher on a 1.6% increase in prices for computer software and accessories and 1.3% higher college textbooks...lastly, a separate price index for alcoholic beverages was down 0.2%, while the price index for ‘other goods’ was unchanged as a 0.6% increase in the index for tobacco products other than cigarettes was offset by a 0.4% decrease in the index for infants' equipment...

within core services, the price index for shelter rose 0.1% as a 0.1% increase in rents and a 0.3% increase in homeowner's equivalent rent were offset by a 4.9% decrease in prices for other lodging away from home including hotels and motels...the index for medical care services was up 0.3% as hospital prices rose 0.5%, while the transportation services index was 0.2% higher on a 0.5% increase in car and truck rental and a 1.0% increase in parking fees and tolls...at the same time, the recreation services price index was up 0.6% as admissions to sporting events rose 1.7%, while the index for education and communication services down 0.1% as providers of internet services and electronic information cut prices 1.1%...lastly, the index for other personal services was 0.3% higher as tax return preparation and other accounting services were 1.3% higher...among core prices, only the index for clocks, lamps, and decorator items, which is now 10.2% lower than a year ago, and prices for wireless phone services, which have now dropped 13.3% from a year ago, have seen prices drop by more than 10% over the past year, while no line item has seen prices rise by a double digit magnitude in that span..   

Producer Prices Down 0.1% in July, Largely on Lower Margins for Services

the seasonally adjusted Producer Price Index (PPI) for final demand was down 0.1% in July, as prices for finished wholesale goods decreased 0.1%, while margins of final services providers decreased by 0.2%...this followed a June report that indicated the PPI was up 0.1%, with prices for finished wholesale goods up 0.1%, and margins of final services providers up 0.2%, and a May report that indicated the PPI was unchanged, with prices for finished wholesale goods down 0.5%, while margins of final services providers increased by 0.3%....on an unadjusted basis, producer prices are now 1.9% higher than a year earlier, down from the 2.0% YoY increase indicated a month ago, and the 2.5% YoY increase seen in April, which had been the largest year over year increase in the PPI since February 2012...

as we noted, the price index for final demand for goods, aka 'finished goods', slipped 0.1% in July, after rising by 0.1% in June, falling by 0.5% in May, rising by 0.5% in April, falling by 0.2% in March, and rising by 0.4% in February, and by 1.0% in January... the index for wholesale energy prices fell 0.3%, while the price index for wholesale foods was unchanged and the index for final demand for core wholesale goods (ex food and energy) was 0.1% lower...the largest wholesale energy price change was a 9.8% increase in the wholesale price diesel fuel, but wholesale gasoline prices were down 1.4% and pulled the overall index down....meanwhile, a 17.1% increase in the wholesale price of grains was offset by a 12.0% increase in the wholesale price for beef and veal and left the wholesale food price index unchanged....among wholesale core goods, the index for sanitary paper products was up 1.4%, while wholesale prices for industrial chemicals were 2.7% lower…

at the same time, the index for final demand for services fell by 0.2% in July, after rising by 0.2% in June, 0.3% in May, and a revised 0.6% in April and 0.2% in March, as the July index for final demand for trade services was down 0.5% and the index for final demand for transportation and warehousing services fell 0.8%, while the index for final demand for services less trade, transportation, and warehousing services was 0.2% higher....among trade services, seasonally adjusted margins for chemicals and chemical products wholesalers decreased 5.8% while margins for TV, video, and photographic equipment retailers rose 8.1%...among transportation and warehousing services, margins for airline passenger services were 2.7% lower...in the core final demand for services index, margins for portfolio management and for passenger car rental both fell 3.2%..

this report also showed the price index for processed goods for intermediate demand was 0.1% lower, after falling 0.2% in June, rising 0.1% in May and 0.5% in April, but falling by a revised 0.3% in March....the price index for intermediate energy goods rose 0.8%, while prices for intermediate processed foods and feeds fell 0.5%, and the core price index for processed goods for intermediate demand less food and energy was 0.3% lower, as prices for primary basic organic chemicals fell 3.3%...prices for intermediate processed goods are still 3.5% higher than in July a year ago, now the ninth consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods fell 0.4% in July, after rising 1.5% in June, falling 3.0% in May, and rising a revised 2.6% in April....the index for crude energy goods fell 5.1%, as crude oil prices fell 8.1%, while the price index for unprocessed foodstuffs and feedstuffs rose 2.4%, as unprocessed grain prices rose 17.1%, led by a 24.6% increase in prices for unprocessed wheat...in addition, the index for core raw materials other than food and energy materials rose 1.2%, as prices for nonferrous metal ores rose 0.9% and wholesale prices for paper scrap rose 4.9% ...this raw materials index is now up just 5.2% from a year ago, in contrast to the year over year increase of 19.3% that we saw in February, just 5 months ago..

lastly, the price index for services for intermediate demand fell 0.3% in June, in its first decrease since September... the index for trade services for intermediate demand was 0.3% lower, as margins for intermediate chemicals and chemical products wholesalers fell 5.8 percent…the index for transportation and warehousing services for intermediate demand was down 0.4%, as intermediate prices for air transportation of passengers (partial) fell 2.6% while the intermediate warehousing and storage price index fell 1.6%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.2% lower, as margins for intermediate services related portfolio management fell 3.2%...however, over the 12 months ended in June, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 2.2% higher than it was a year ago...   

Job Openings at a Record High in June, Hiring and Job Quitting Down

the Job Openings and Labor Turnover Survey (JOLTS) report for June from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 461,000, from 5,702,000 in May to a record high of 6,163,000 in June, after May job openings were revised higher, from 5,666,000 to 5,702,000...June jobs openings were also 11.3% higher than the 5,535,000 job openings reported in June a year ago, as the job opening ratio expressed as a percentage of the employed rose from 3.8% in May to 4.0% in June, which was also up from 3.7% a year ago...job openings increased in several sectors, with the 179,000 job opening increase to 1,208,000 openings in professional and business services the largest increase for the month (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in June, seasonally adjusted new hires totaled 5,356,000, down by 123,000 from the revised 5,459,000 who were hired or rehired in May, even as the hiring rate as a percentage of all employed was unchanged at 3.7%, and up from 3.6% in June a year earlier (details of hiring by industry since January are in table 2)....meanwhile, total separations fell by 21,000, from 5,245,000 in May to 5,224,000 in June, while the separations rate as a percentage of the employed was unchanged at 3.6%, which was up from the 3.4% separations rate of June a year ago (see table 3)...subtracting the 5,224,000 total separations from the total hires of 5,356,000 would imply an increase of 132,000 jobs in June, somewhat less than the revised payroll job increase of 231,000 for June reported by the July establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,134,000 of us voluntarily quit their jobs in June, down from the revised 3,206,000 who quit their jobs in May, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.2% to 2.1% of total employment, which was the same quits rate as a year earlier (see details in table 4)....in addition to those who quit, another 1,701,000 were either laid off, fired or otherwise discharged in June, up by 28,000 from the revised 1,673,000 who were discharged in May, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, which was also up from a discharges rate of 1.1% a year earlier (see table 5)...meanwhile, other separations, which includes retirements and deaths, were at 389,000 in June, up from 365,000 in May, for an 'other separations rate’ of 0.3%, which was up from 0.2% in May and also up from 0.2% in June last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

 

(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…)

July jobs report; June income and outlays, trade deficit, construction spending and factory inventories

the major economic releases from the past week included the Employment Situation Summary for July from the Bureau of Labor Statistics and four June reports that included metrics which were either estimated or included in last week's release of 2nd quarter GDP:  the June report on Personal Income and Spending from the Bureau of Economic Analysis, the BEA report on our International Trade for June, and the June report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for June, both from the Census Bureau...the week’s privately issued reports included the ADP Employment Report for July, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 16.69 million annual rate in July, up 1.7% from the 16.41 million annual rate in June, but down 6.1% from the 17.77 million annual rate in July a year ago, and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the July Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 56.3% in July, down from 57.8% in June, suggesting a somewhat slower expansion in manufacturing firms nationally, and the July Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 53.9% in July, from 57.4% in June, indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in July...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally... 

Employers Add 209,000 Jobs in July, Unemployment Rate Down 0.1% on Employment Increase

the Employment Situation Summary for July from the Bureau of Labor Statistics indicated near average payroll job growth, while the employment rate and the labor force participation rate rose and the unemployment rate fell…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 209,000 jobs in July, after the payroll job increase for May was revised down from 152,000 jobs to 145,000 while the June job increase was revised up from 222,000 jobs to 231,000, and hence the combined number of jobs created over those two months was 2,000 more than was previously reported....the unadjusted data shows that there were actually 1,039,000 fewer payroll jobs extant in July than in June, as the large seasonal job cutbacks associated with the end of the school year were normalized by the seasonal adjustments…

seasonally adjusted job increases were spread through throughout government and the private goods producing and service sectors, with only the transportation and warehousing sector seeing a loss of 900 jobs...the leisure and hospitality sector added a seasonally adjusted 62,000 jobs, with the addition of 53,100 more jobs in bars and restaurants.....the broad professional and business services category added 49,000 jobs, as 15,500 more workers found work with employment services and 7,000 were added by management and technical consulting services...employment in health care and social assistance rose by 45,000, with the addition of 11,300 jobs in home health care services and 6,800 jobs in doctor's offices....employment in manufacturing increased by 16,000, mostly in the manufacture of durable goods, with 5,000 of those jobs in fabricated metal products factories...meanwhile, the other major sectors, including construction, wholesale and retail sales, utilities, financial activities, information, private education and government, all saw smaller increases in payroll employment over the month, while the mining and logging sector saw no net change…

the establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $26.36 an hour, after it had increased by a revised 5 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 6 cents to $22.10 an hour...employers also reported that the average workweek for all private payroll employees increased was unchanged at 34.5 hours, while hours for production and non-supervisory personnel remained at 33.7 hours for the fourth consecutive month....meanwhile, the average manufacturing workweek was unchanged at 40.9 hours, while factory overtime was also unchanged at 3.3 hours..

meanwhile, the seasonally adjusted extrapolation from the July household survey estimated that the number of those employed rose by an estimated 345,000 to 153,513,000, while the similarly estimated number of those unemployed rose by 4,000 to 6,981,000; which together meant that July saw a net increase of 349,000 in the total labor force...since the working age population had grown by 194,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 156,000 (rounded) to 94,657,000....the 349,000 increase of those in the labor force was enough to raise the labor force participation rate 0.1% to 62.9%....at the same time, the increase in number employed vis-a-vis the increase in the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.2%...in addition, the increase in the total labor force combined with little change in those unemployed was enough to lower the unemployment rate from 4.4% to 4.3%, a sixteen year low first hit in May....meanwhile, the number who reported they were involuntarily working part time fell by 44,000 to 5,282,000 in June, which wasn't enough to change the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", and which remained at 8.6% in July...

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

June Personal Income and Personal Spending Both Flat

like the GDP report last week, the June Income and Outlays report also went through an annual revision with revisions back to 2014 for all of the metrics it reports, including personal consumption expenditures (PCE), the personal income and disposable personal income data, our savings and savings rate, and the PCE price index, the inflation gauge the Fed targets...Zero Hedge has a review of some of those revisions, if you can get past their usual hyperbole....since all the revisions made to personal consumption expenditures had already been incorporated into the GDP revisions that we looked at last week, today we'll only consider those revisions from recent months that are relevant to putting the June change in perspective...

also like the GDP report, all the dollar values reported in this report are seasonally adjusted and at an annual rate, ie, they tell us what income, spending and saving would be for an entire year if June's adjusted income and spending were extrapolated over a whole year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from  May to June....thus, when the opening line of the press release for this report tell us "Personal income decreased $3.5 billion (less than -0.1 percent) in June ..", they mean that the annualized figure for all types of personal income in June, $16,377.6 billion, was $3.5 billion less than the $16,381.1 billion annualized personal income figure for May; the actual increase in personal income in June over May is not given....similarly, disposable personal income, which is income after taxes, was also little changed, falling from an annual rate of $14,368.9 billion in May to an annual rate of $14,364.7 billion in June...with the annual revision, the annualized figure for May personal income was revised down from $16,487.9 billion to $16,381.1 billion, and disposable personal income was revised from the originally reported $14,490.1 billion annually to $14,368.9 billion...

meanwhile, seasonally adjusted personal consumption expenditures (PCE) for June, which were included in the change in real PCE in 2nd quarter GDP, rose at a $8.1 billion annual rate to a level of $13,304.7 billion in consumer spending annually, an increase of less than 0.1% from May, which itself was revised from the originally reported annual rate of $13,214.0 billion to $13,296.6 billion....total personal outlays for June, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $14.1 billion to $13,818.3 billion, which left personal savings, which is disposable personal income less total outlays, at a $546.4 billion annual rate in June, down from the revised $564.7 billion in personal savings in May...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 3.8%, from 3.9% in May, which itself was originally reported at 5.1%..

while our personal consumption expenditures accounted for 69.1% of our second 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....from Table 9 in the pdf for the June release, we find that that index rose from 112.257 in May to 112.283 in June, giving us a month over month inflation rate of 0.02316%, which BEA reports as an increase of +0.0%; at the same time, Table 11 gives us a year over year PCE price index increase of 1.4%, and a core price increase, excluding food and energy, of 1.5% for the past year, both still below the Fed's inflation target....applying the June inflation adjustment to the change in June PCE shows that real PCE was up 0.03775%, which BEA reports as a 0.0% change in their rounded tables...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2009 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another’s....those results are shown in tables 7 and 8 of the PDF, where the quarterly figures given are identical to those shown in table 3B in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP..

June Trade Deficit Down 5.9% on Rising Exports, Lower Imports of Oil, Cellphones

our trade deficit decreased by 5.9% in June as the value of our exports increased and the value of our imports decreased....the Census report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit fell by $2.7 billion (rounded) to $43.6 billion in June from a revised May deficit of $46.4 billion, which had previously been reported as $46.5 billion...the value of our June exports rose by $2.4 billion to $194.4 billion on a $1.7 billion increase to $129.0 billion in our exports of goods and a $0.6 billion increase to $65.4 billion in our exports of services, while our imports fell $0.4 billion to $238.0 billion on a $0.4 billion decrease to $194.3 billion in our imports of goods while our imports of services were statistically unchanged at $43.8 billion...export prices were on average 0.2% lower in June, so the relative real amount of June exports would be higher than the nominal amount by that percentage, while import prices were also 0.2% lower, meaning real imports were on average greater than the nominal dollar values reported here by that percentage....

the increase in our June exports resulted from higher exports of capital goods, foods, feeds and beverages, automotive vehicles, parts, and engines, and industrial supplies and materials....referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of capital goods rose by $826 million to $43,941 million on increases of $285 million in exports of computer accessories, $230 million in our exports of electric apparatuses, $220 million in our exports of civilian aircraft engines, and $220 million in our exports of industrial machines other than those itemized separately.....our exports of foods, feeds and beverages rose by $664 million to $11,837 million on a $591 million increase in our exports of soybeans, our exports of automotive vehicles, parts, and engines rose by $386 million to $13,564 million on a $195 million increase in our exports of new and  used passenger cars, our exports of industrial supplies and materials rose by $192million to $37,602 million on a $355 million increase in our exports of petroleum products other than fuel oil, and our exports of other goods not categorized by end use rose by $205 million to $5,399 million...offsetting those increases, our exports of consumer goods fell by $325 million to $16,416 million on a $407 million decrease in our exports of pharmaceuticals...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of crude oil and consumer goods were the major reasons for the June decrease in our imports and trade deficit... our imports of industrial supplies and materials fell by $1,059 million to $41,182 million, as our imports of crude oil fell by $1,407 million, while our imports of consumer goods fell by $719 million to $48,753 million on a $925 million decrease in our imports of cellphones and a $217 million decrease in our imports of jewelry...partially offsetting the decreases in those two categories, our imports of automotive vehicles, parts and engines rose by $1013 million to $30,184 million on a $1,253 million increase in our imports of new and used passenger cars, our imports of capital goods rose by $84 million to $52,885 million, our imports of foods, feeds, and beverages rose by $72 million to $11,457 million, and our imports of other goods not categorized by end use rose by $281 million to $8,303 million....

in the advance report on 2nd quarter GDP, our June trade deficit was estimated based on the Advance Report on our International Trade in Goods which was released last week, before the GDP release...that report estimated that our June goods trade deficit was at $63,864 million on a Census basis, down from the $66,325 million goods deficit in May...this report revises that and shows that our actual goods trade deficit in June was $65,245 million on a balance of payments basis, and $64,005 million on a Census basis...in addition, the May goods deficit was revised to $66,282 million on a Census basis...together, those revisions from the previously published data mean that the 2nd quarter goods trade deficit was roughly $98 million more than was included in last week's GDP report, or roughly $0.4 billion more annually, which would indicate a negligible downward revision of 0.01 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August...

Construction Spending Fell 1.3% in June after Prior Months Were Revised Lower

the Census Bureau report on construction spending for June (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,205.8 billion annually if extrapolated over an entire year, which was 1.3 percent (±1.5 percent)* below the revised annualized estimate of $1,221.6 billion of construction spending in May but still 1.6 percent (±1.8 percent)* above the estimated annualized level of construction spending in June of last year...the May construction spending estimate was revised 0.7% lower, from $1,230.1 billion to $1,221.6 billion, while the annual rate of construction spending for April was revised more than 1.0% lower, from $1,230.4 billion to $1,217.66 billion....

the Census release gives us the following breakdown: "Spending on private construction was at a seasonally adjusted annual rate of $940.7 billion, 0.1 percent (± 1.2 percent)* below the revised May estimate of $941.3 billion. Residential construction was at a seasonally adjusted annual rate of $502.9 billion in June, 0.2 percent (±1.3 percent)* below the revised May estimate of $504.0 billion. Nonresidential construction was at a seasonally adjusted annual rate of $437.8 billion in June, 0.1 percent (± 1.2 percent)* above the revised May estimate of $437.3 billion.  In June, the estimated seasonally adjusted annual rate of public construction spending was $265.1 billion, 5.4 percent (±2.6 percent) below the revised May estimate of $280.3 billion. Educational construction was at a seasonally adjusted annual rate of $67.5 billion, 5.5 percent (±3.9 percent) below the revised May estimate of $71.4 billion. Highway construction was at a seasonally adjusted annual rate of $82.4 billion, 6.6 percent (±6.7 percent)* below the revised May estimate of $88.2 billion.."

construction spending for all three months of the 2nd quarter was lower than what was reported by the BEA in the advance report for 2nd quarter GDP last week...as we saw above, annualized construction spending for April was revised $12.7 billion lower, and annualized construction spending for May was revised $8.5 billion lower...in reporting 2nd quarter GDP, the Excel file with key source data and assumptions.accompanying the BEA's 2nd quarter technical note indicated that they had estimated that the value of June residential construction would be $3.5 billion greater than that of the previously reported May figure, that June nonresidential construction would be $1.5 billion greater than that of the reported May figure, and that the value of June public construction would be $2.2 billion lower than the previously published May figure...hence, the figures used by the BEA for total June construction were $2.8 billion greater than the previously published May figure, meaning that they had overestimated June construction spending by $11.3 billion...thus, the revised annualized figure for 2nd quarter construction spending would thus be $10.8 billion less than the figure used by the BEA when computing 2nd quarter GDP, implying a .27 percentage point reduction to 2nd quarter GDP when the 2nd estimate is released at the end of August..

Factory Shipments Down 0.2% in June, Factory Inventories Up 0.2%

the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods jumped by $14.0 billion or 3.0 percent to $481.1 billion in June, following an decrease of 0.3% to $467.05 billion in May, which was revised from the 0.8 percent decrease to $464.9 billion increase reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the advance report on durable goods we reported on last week...this report showed that new orders for manufactured durable goods rose by $14.8 billion or 6.4 percent to $245.8 billion, revised from the previously published 6.5% increase to $245.6 billion...

this report also indicated that the seasonally adjusted value of June factory shipments fell for the first time in 3 months, decreasing by $0.9 billion or 0.2 percent to $471.5 billion, following a 0.3% increase in May...shipments of durable goods were down by an insignificant $0.1 billion to $236.2 billion, virtually unchanged from what was published last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods fell by $0.8 billion or 0.3 percent to $235.3 billion, as a $1.1 billion, 2.7% increase in the value of shipments of coal and petroleum products accounted for the decrease...

meanwhile, the aggregate value of June factory inventories rose for the 7th time in the past eight months, increasing by $1.0 billion or 0.2 percent to $649.1 billion, following a May decrease of 0.2% that was virtually unrevised from the previously published figure....June inventories of durable goods decreased in value by $1.0 billion or 0.3 percent to $381.3 billion, revised from the 0.2% decrease that was reported in the advance report last week....the value of non-durable goods' inventories decreased by $0.8 billion or 0.3 percent to $251.7 billion, following a decrease of 0.7% in May, as a $1.2 billion, 3.4% decrease in the value ofcoal and petroleum products inventories accounted for the decrease...

 

(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…)

2nd quarter GDP and annual revision; June’s durable goods, new home sales, existing home sales

the key economic release of the past week was the 1st, or advance estimate of 2nd quarter GDP from the Bureau of Economic Analysis, which was accompanied by an annual revision to national accounts data over the prior three years....the other widely watched releases of the past week included the June advance report on durable goods and the June report on new home sales, both from the Census bureau, the June report on existing home sales from the National Association of Realtors (NAR), and the Case-Shiller house price indexes for May from S&P Case-Shiller, which saw their national home price index remain 5.6% higher than the same month's report a year ago...in addition, this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for June, a weighted composite index of 85 different economic metrics, which rose from a downwardly revised -0.30 in May to +0.13 in June...that boosted the 3 month average of the index to +0.06 in June, up from -0.04 in May, still indicating national economic activity has been near the historical trend during the 2nd quarter... this week also saw the release of two more regional Fed manufacturing surveys for July: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported its broadest composite index rose to +14 in July from +11  in June, suggesting an ongoing expansion in that region's manufacturing; and the Kansas City Fed manufacturing survey for July, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to +10 in July, down from +11 in June but up from +8 in May, also suggesting an ongoing expansion in the 10th District's manufacturing...

Advance Estimate of 2nd Quarter GDP & Revisions From 2014 to Present

the Advance Estimate of 2nd Quarter GDP from the Bureau of Economic Analysis released on Friday included an annual revision to the past 3 years of GDP releases, revising previously published data from the first quarter of 2014 through the first quarter of 2017, which on net indicated that economic growth over the period from 2014 to 2016 was at a 2.3% annual rate, revised from the 2.2% composite annual growth previously published for that period of the current expansion....in addition to the recent quarters of 2017, this report showed that the GDP growth rate for 2014 was revised from 2.4% to 2.6%; that the growth rate for 2015 was revised from 2.6% to 2.9%, and that the GDP growth rate for 2016 was revised from 1.6% to 1.5%...

the first quarter of 2017, which had been revised up to a growth rate of 1.4% when we reviewed it a month ago, has now been revised back down to show growth at a 1.2% rate…major first quarter components that were revised lower included nonresidential fixed investment, which was revised from growth at a 11.0% rate to growth at a 8.1% rate, growth in real private inventory investment, which was revised from growth at a inflation adjusted $4.3 billion rate to growth at $1.2 billion rate, residential fixed investment, which was revised from 13.0% growth to 11.1% growth, and to federal government spending, which was revised from shrinking at a 2.0% rate to shrinking at a 2.4% rate...in addition, growth in first quarter imports, which subtract from GDP, was revised from a 4.0% growth rate to a 4.3% rate....those negative revisions were partially offset by an upward revision to personal consumption expenditures (PCE), from a 1.1% growth rate to growth at a 1.9% rate, an upward revision to growth in exports, from a 7.0% rate to a 7.3% rate, and an upward revision to state and local government spending, from shrinking at a 0.2% rate to growth at a 0.5% rate...thus the estimates for the 1st quarter of 2017 GDP have gone from the initial estimate of growth at a 0.7% rate, to an 1.2% growth rate in the 2nd estimate, to a 1.4% rate of growth in the 3rd estimate, and finally back to growth at a 1.2% rate in this annual revision...

all of those revisions should leave you with the sense to take this initial advance estimate of 2nd quarter growth, which was released on Friday with some June data still not reported, with a grain of salt...the Advance Estimate of 2nd Quarter GDP indicated that the real output of goods and services produced in the US grew at a 2.6% annual rate over the output of the 1st quarter of this year, which we have just seen was revised to show growth at a 1.2% rate...the BEA cautions that the source data is incomplete and also subject to revisions, which have now averaged +/-0.6% in either direction from the advance to the third estimate, and +/- 1.2% from the advance estimate to the final reading...note that June construction and inventory data have yet to be reported, and that information on the assumptions used for those reports and unavailable source data for this advance estimate is provided in a technical note that is posted with the news release, and references an Excel file with key source data and assumptions...

while we cover the details on the 2nd quarter below, remember that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 1st estimate of 2nd quarter GDP, which is linked to on the sidebar of the BEA press release, which also offer links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since 2013, table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years, table 3a, which shows the current dollar value of each of the GDP components, table 3b, which shows the inflation adjusted value of each of those components, table 4, which shows the change in the price indexes for each of the components; and to table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts....the intervening tables in this release (ie, 1a, 1b, 2a, 2b,etc) give us the previously published data for each of those metrics going back to the 3rd quarter of 2013, should anyone be interested in the finer details of the annual revision..

personal consumption expenditures (PCE), which accounts for nearly 69% of GDP, grew at a 3.1% rate in current dollars in the 2nd quarter, actually down from the first quarter’s spending increase at a revised 4.1% rate, but once the inflation adjustments were made with the PCE price indices for each quarter, real PCE rose 2.8% in the 2nd quarter after rising 1.9% in the first...consumer spending for durable goods rose at a 2.9% rate, mostly on a jump in spending for recreational goods and vehicles, but since weighted prices for those durable goods fell at a 3.4% rate, real output of durable goods represented by that spending increased at a 6.3% rate...in a like manner, consumer spending for non durables rose at less than a 0.2% rate, but the PCE price index for non-durables was down more than 3.6%, mostly on lower energy prices, meaning real growth in consumption of non durables was at a 3.8% rate...meanwhile, the 4% growth in personal spending for services was reduced by a +2.1% deflator to show real 2nd quarter growth in services was at a 1.9% rate...thus, with real growth in all components of personal consumption expenditures, real growth in output of consumer durable goods added 0.47 percentage points to the change in GDP, real growth in non-durable goods output for consumers added 0.55 percentage points to 2nd quarter GDP growth, and real growth in services provided to consumers added 0.91 percentage points to the change in 2nd quarter GDP...

just as personal consumption expenditures are adjusted for inflation using the PCE price indices to arrive at real PCE, the other current dollar components of GDP are also adjusted for inflation with the quantity indexes shown in table 5 of the GDP pdf to yield the real change in the output of goods or services.....hence, real gross private domestic investment, which had risen at a 8.2% annual rate in the 1st quarter as investment in residential and non-residential structures soared, rose at a 2.2% annual rate in the 2nd quarter, as investment in residential property fell...real non residential fixed investment rose at a 5.2% annual rate as real investment in non-residential structures rose at a 4.9% rate, real investment in equipment rose at a 8.2% rate, and investment in intellectual property grew at 1.4% rate...as a result, investment in real non residential fixed investment added 0.62 percentage points to the change in 2nd quarter GDP as real investment in non-residential structures added 0.14 percentage points, real investment in equipment added 0.44 percentage points to the change in GDP, and investment in intellectual property added 0.06 percentage points to the change in GDP...however, residential investment fell at a 6.8% rate and hence subtracted 0.27 percentage points from the 2nd quarter's GDP, leaving the total fixed investment contribution at 0.36 percentage points...for an easy to read table as to what's included in each of those investment categories, see the NIPA Handbook, Chapter 6, page 3...

meanwhile, in the first real drop since the 3rd quarter of 2011, investment in real private inventories fell by an inflation adjusted $0.3 billion in the 2nd quarter, after they had grown by an adjusted $1.2 billion in the 1st quarter, and as a result the $1.5 billion downward swing in inventory growth subtracted 0.02 percentage points from the 2nd quarter's growth rate, after an inflation adjusted $61.9 billion decrease in inventory growth in the 1st quarter had subtracted 1.46 percentage points from that quarter's GDP growth...however, smaller inventories indicate that less of the goods produced during the quarter were being left "sitting on the shelf”, so their quarter over quarter decrease by $1.5 billion meant that real final sales of GDP were relatively greater by that much, which was still not enough to significantly boost real final sales of GDP, which increased at a 2.6% rate in the 2nd quarter...that's compared to the real final sales growth at a 2.7% rate in 1st quarter, when the change in the decrease in inventory growth was much greater..

after adjustment for higher export and import prices, both real exports and real imports increased in the 2nd quarter, as our real exports of goods and services rose at a 4.1% rate in the second quarter, after rising at a 7.3% rate in the 1st quarter, while our real imports rose at a 2.1% rate in the 2nd quarter after rising at a 4.3% rate in the 1st quarter...as you'll recall, increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted in GDP elsewhere), while increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been because it was not produced here....thus the 2nd quarter increase in real exports added 0.48 percentage points to 2nd quarter GDP, after adding 0.85 percentage points to first quarter GDP...on the other hand, since imports subtract from GDP, their increase at a 2.1% rate subtracted 0.31 percentage points from 2nd quarter GDP, after first quarter imports had subtracted 0.63 percentage points from that quarter's growth...as a result, our improving trade balance added a total of 0.18 percentage points to 2nd quarter GDP, after a revised improved trade deficit added 0.22  percentage points in the first quarter..

finally, real consumption and investment by branches of government rose at a 0.7% annual rate in the 2nd quarter, after decreasing at a 0.6% rate in the first quarter, as federal government consumption and investment grew at a 2.3% rate and state and local consumption and investment fell at a 0.2% rate...inflation adjusted federal spending for defense rose at a 5.2% rate and that added 0.20 percentage points to 2nd quarter GDP growth, while real non-defense federal consumption and investment fell at a 1.9% rate and subtracted 0.05 percentage points from GDP...note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services....meanwhile, state and local government investment and consumption expenditures, which fell at a 0.2% annual rate, subtracted 0.02 percentage points from the quarter's growth rate, as a decrease in real state and local investment at a 5.9% rate accounted for the decrease...

our FRED bar graph below has been updated to include 2nd quarter GDP as well as the revisions to each of the GDP components from prior years resulting from this week's annual revision...each color coded bar below shows the real change, in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2013...in each quarterly grouping of seven bars on this graph, the quarterly changes in real (ie, inflation adjusted) personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, as they did in the recent quarter, they will appear above the line as an addition to GDP, and when they increase, they'll appear below the zero line...it’s fairly clear that our personal consumption expenditures has underpinned GDP growth over this period, while increasing imports, and more recently falling inventory investment, have been the major negatives…in the 2nd quarter, on the far right, we see that the major reason for the decent growth in the 2nd quarter was that there were no major negatives except for the increase in imports, which itself was offset by the increase in exports…generally, the quarters with the poorest GDP growth are those where one or more of the major GDP components substantially contracts, subtracting from the growth added by the others..

June Durable Goods: New Orders Up 5.6%, Shipments Unchanged, Inventories Up 0.4%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for June (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $14.9 billion or 6.5 percent to $245.6 billion, following a revised drop of 0.1% in May new orders, which had been originally reported as a 1.1% decrease...year to date new orders are now 5.0% higher than  those of 2016, vs the 2.8% year over year change we saw in this report last month...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the June headline change, as those transportation equipment orders rose $14.6 billion or 19.0 percent to $91.6 billion, on a 131.2% increase to $25,328 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were up 0.2% in June, even as the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, were down 0.1% to $63,416 million...

the seasonally adjusted value of June's shipments of durable goods, which were inputs into various components of 2nd quarter GDP after adjusting for changes in prices, were little changed at $236.0 billion, after May shipments were revised from an increase of 0.8% to $234.9 billion to a 1.2% increase to $235.9 billion....a 0.6% decrease in shipments of transportation equipment was the cause of weakness, as the value of shipments of motor vehicles fell 0.7% to $54,181 million...excluding that volatile sector, the value of other shipments of durable goods rose 0.2%, as new orders for nondefense capital goods excluding aircraft were up 0.2% to $63,049 million, a figure which was reflected in the 2nd quarter GDP equipment investment figures....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 11th time in 12 months, increasing by $1.6 billion or 0.4 percent to $397.0 billion, after the change in May's inventories was revised from a 0.2% increase to a 0.1% increase...increased inventories of machinery was a major factor in the June inventory increase, as they rose $0.8 billion or 1.2 percent to $68.3 billion...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the third time in four months, rising by $14.2 billion or 1.3 percent to $1,135.6 billion, following a May decrease that was revised from 0.2% to 0.1%...unsurprisingly, a $12.8 billion or 1.7 percent increase to $776.8 billion in unfilled orders for transportation equipment was responsible for most of the increase, but unfilled orders excluding transportation equipment were also up 0.4% to $358,829 million....compared to a year earlier, the unfilled order book for durable goods is now 0.7% above the level of last June, with unfilled orders for transportation equipment 3.6% above their year ago level, largely on a 5.7% increase in the backlog of orders for defense aircraft...  

New Home Sales Little Changed in June

the Census report on New Residential Sales for June (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 610,000 new homes annually, which was 0.8 percent (±12.1 percent)*  above the revised May rate of 605,000 new single family home sales annually and 9.1 percent (±14.4 percent)* above the estimated annual rate that new homes were selling at in May of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether June new home sales rose or fell from those of May or even from those in June a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales new single family homes in May were revised from the annual rate of 610,000 reported last month to a 605,000 a year rate, April's annualized home sale rate, initially reported at 569,000, were revised from last months upward revision of 593,000 back down to 577,000, while the annual rate of March's sales, initially reported at 621,000 revised from 642,000 to an annual rate of 644,000 last month, were now revised lower, to an annual rate of 638,000...

the annual rates of sales reported here are extrapolated from the estimates of canvassing Census field reps, which indicated  that approximately 55,000 new single family homes sold in June, down from the 57,000 new homes that sold in May but virtually the same as the 55,000 new homes that sold in April....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in June was $310,800, down from the median sale price of $324,300 in May, and down from the median price of $321,600 in June of last year, while the average June new home sales price was $379,500 , down from $381,400 average in May, but up from the average sales price of $364,300 in June a year ago....a seasonally adjusted estimate of 272,000 new single family houses remained for sale at the end of June, which represents a 5.4 month supply at the June sales rate, up from the reported 5.3 month supply in May....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales increase to 610,000 Annual Rate in June and A few Comments on June New Home Sales...

Existing Home Sales Down 1.8% in June

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell by 1.8% from May to June, projecting that 5.52 million homes would sell over an entire year if the June home sales pace were extrapolated over that year, a pace that was still 0.7% greater than the annual sales rate projected in June of a year ago...that came after an annual sales rate of 5.62 million homes in May, and an annual home sales rate of 5.56 million in April...the NAR also reported that the median sales price for all existing-home types in June was $263,800 in June, up from $252,500 in May and 6.5% higher than in June a year earlier, which they report as "the 64th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Retreat 1.8 Percent in June", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process..

since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 601,000 homes sold in June, up by 8.3% from the 555,000 homes that sold in May, and 3.3% more than the 572,000 homes that sold in June of last year, so we can see there was again a seasonal adjustment of over 10% in the annualized published figures to correct for the typical early summer increase in home sales...that same pdf indicates that the median home selling price for all housing types rose 4.5%, from a revised $252,500 in May to $263,800 in June, while the average home sales price was $303,900, up 3.3% from the $294,300 average in May, and up 4.9% from the $289,800 average home sales price of June a year ago, with the regional average home sales prices ranging from a low of $243,800 in the Midwest to a high of $396,100 in the West...for additional coverage with long term graphs on this report, see "NAR: "Existing-Home Sales Retreat 1.8 Percent in June"" and "A Few Comments on June Existing Home Sales" from Bill McBride at Calculated Risk...

 

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

June New Housing Construction, etal

the June report on New Residential Construction from the Census Bureau was the only major monthly economic release of this week...the week also saw the release of the Regional and State Employment and Unemployment for June from the Bureau of Labor Statistics and the first two regional Fed manufacturing indexes for July: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index fall from + 19.8 in June to +9.8 in July, suggesting somewhat slower expansion of First District manufacturing, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions fell from +27.6 in June to +19.5 in July, still suggesting an ongoing strong expansion of that region's manufacturing...

New Housing Construction, Permits Reportedly Up in June

the June report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in June was at a seasonally adjusted annual rate of 1,215,000, which was 8.3 percent (±15.8 percent)* above the revised May estimated annual rate of 1,122,000 units started, and 2.1 percent (±14.0 percent)* above last June's pace of 1,213,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, June's housing starts could have been down by 7.5% or up by as much as 23.1% from those of May, with even larger revisions possible...in this report, the annual rate for May housing starts was revised from the 1,092,000 reported last month up to 1,122,000, while April starts, which were first reported at a 1,172,000 annual rate, were revised down from last month's initial revised figure of 1,056,000 annually to 1,154,000 annually with this report....those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 116,800 housing units were started in June, up from the 105,100 units started in May and 105,200 starts in April...of those housing units started in June, an estimated 83,100 were single family homes and 33,100 were units in structures with more than 5 units, up from the revised 77,300 single family starts but down from the 26,700 units started in structures with more than 5 units in May...

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and broadly revised housing starts data...in June, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,254,000 housing units, which was 7.4 percent (±1.1 percent) above the revised May rate of 1,168,000 permits, and 5.1 percent (±1.4 percent) above the rate of building permit issuance in June a year earlier...the "revised" annual rate for housing permits issued in May was the same as was reported last month....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 125,400 housing units were issued in June, up from the revised estimate of 113,000 new permits issued in May...the June permits included 81,700 permits for single family homes, up from 78.300 in May, and 40,200 permits for housing units in apartment buildings with 5 or more units, up from 31,300 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.215 Million Annual Rate in June and Comments on June Housing Starts...

 

(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…)

June’s retail sales, consumer & producer prices, & industrial production; May’s wholesale & business inventories, & JOLTS

most of the past week's important reports were released on Friday, including Retail Sales for June and Business Sales and Inventories for May, both from the Census bureau, the June Consumer Price Index from the Bureau of Labor Statistics, and the report on Industrial Production and Capacity Utilization for June from the Fed...before those, Thursday saw the June Producer Price Index from the BLS, while earlier in the week the BLS also released the June Import-Export Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for May, while the Census Bureau released the May report on Wholesale Trade, Sales and Inventories leading up to the composite business inventories report of Friday...the week also saw the Consumer Credit Report for May from the Fed, which indicated that overall credit expanded by a seasonally adjusted $18.4 billion, or at a 5.8% annual rate, as non-revolving credit expanded at a 4.7% rate to $2,824.1 billion and revolving credit outstanding grew at a 8.7% rate to $1,018.5 billion, and the Mortgage Monitor for May (pdf) from Black Knight Financial Services, which indicated that 3.79% of all mortgages nationally were delinquent in May, down from 4.08% in April and down from 4.25% in May a year ago, and that 0.83% of all mortgages remained in the foreclosure process, down from 0.85% in April and down from 1.13% in foreclosure a year ago...

Consumer Prices Unchanged in June as Lower Energy Costs Pulls Down Index

the consumer price index was unchanged in June, as lower prices for energy offset modestly higher priced housing and medical care...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices were statistically unchanged in June, after falling 0.1% in May but after rising 0.2% in April....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 244.733 in May to 244.955 in June, which left it statistically 1.633% higher than the 241.018 index reading in June of last year...with lower prices for energy a major reason for the decrease in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 251.835 to 252.014, which left the core index 1.703% ahead of its year ago reading of 247.794...

the volatile seasonally adjusted energy price index decreased by 1.6% in June, after it had dropped 2.7% in May, risen 1.1% in April, fell by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% in September...thus, energy prices are still averaging 2.3% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were 2.7% lower in June, while the index for energy services fell by 0.5%, after rising 0.7% in May....the decrease in the energy commodity index included a 2.8% drop in the price of gasoline, the largest component, and a 3.7% seasonally adjusted decrease in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.6% lower...within energy services, the index for utility gas service fell by 0.2% after rising by 1.9% in May and by 2.2% in April, and hence utility gas is still priced 12.8% higher than it was a year ago, while the electricity price index was down 0.6%, after it rose 0.3% in May....energy commodities are now unchanged from their year ago levels, with gasoline prices averaging 0.4% lower than they were a year ago, while the energy services price index is 4.6% higher than last June, as electricity prices have also increased by 2.5% over that period…

the seasonally adjusted food price index was unchanged in June, after rising 0.2% in May, 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as prices for food purchased for use at home fell 0.1% in June while prices for food bought to eat away from home was unchanged, despite 0.2% higher prices at fast food outlets, as food prices at elementary and secondary schools fell 3.6%...in the food at home categories, the price index for cereals and bakery products decreased by 0.1% as prices for flour and mixes were 1.4% higher...the price index for the meats, poultry, fish, and eggs group was up 0.6% as beef and veal prices rose 2.9%, and fresh fish and seafood prices rose 1.1%, while the index for dairy products was 0.5% lower on 1.7% decrease in the price of ice cream....the fruits and vegetables index was 0.1% lower as a 1.1% increase in prices for fresh fruits was offset by a 1.6% decrease in prices for fresh vegetables, with lettuce down 8.2%...the beverages index was 0.6% lower as coffee was down 1.2% and carbonated drink prices fell 0.7%....lastly, prices in the ‘other foods at home’ category were on average 0.3% lower, even as sugar prices rose 1.1%, as soup prices were 1.3% lower.....among food at home line items, only eggs, which are still priced 10.0% lower than a year ago, have seen price changes greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.1% in June and in May and in April after falling by 0.1% in March, the composite of all goods less food and energy goods was down 0.1% in June, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust June retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.2%, as the index for window and floor coverings fell 1.5%...the apparel price index was 0.1% lower, as prices for boy's apparel fell 4.4%....prices for transportation commodities other than fuel were down 0.4%, as prices for new vehicles fell 0.3% and prices for used cars and trucks fell 0.7%...on the other hand, prices for medical care commodities were 0.7% higher on a 1.0% increase in prices for prescription drugs...but the recreational commodities index fell 0.2% on 1.5% lower prices for audio equipment and 1.1% lower priced toys...however, the education and communication commodities index was 0.6% higher on 0.7% increases in prices personal computers and peripheral equipment and for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.2%, while the price index for ‘other goods’ was unchanged as a 0.3% increase in the index for personal care products was offset by a 0.4% decrease in the index for tobacco and smoking products...

within core services, the price index for shelter rose 0.2% as a 0.3% increase in rents and a 0.3% increase in homeowner's equivalent rent were offset by a 0.1% decrease in the household operations services index....the index for medical care services was up 0.3% as hospital prices rose 0.9% and nursing home prices rose 1.1%, while the transportation services index was 0.2% higher on a 9.9% increase in car and truck rental....meanwhile, the recreation services price index was unchanged as the index for rentals of video discs and other media fell 2.1%, and the index for education and communication services was also unchanged as college tuition and fees rose 0.4% while wireless telephone services services were 0.8% lower...lastly, the index for other personal services was 0.3% higher as legal services were 1.2% higher...among core prices, only televisions, which are still 11.4% cheaper than a year ago, and wireless phone services, which have now dropped 13.2% from a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude..  

June Retail Sales Down 0.2% After May Sales Revised Higher

seasonally adjusted retail sales fell 0.2% in June after retail sales in May fell 0.1%, revised from the 0.3% drop reported a month ago....the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $473.5 billion for the month, which was a decrease of 0.2 percent (±0.5%)* from May's revised sales of $474.2 billion, but still 2.8 percent (± 0.9 percent) above the adjusted sales of June of last year...May's seasonally adjusted sales were revised from the $473.8 billion originally reported to $474.2 billion, while April sales were revised lower, from $474.9 billion, to $474.55 billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 3.2%, from $496,904 million in May to $481,015 million in June, while they were up 3.2% from the $465,901 million of sales in June a year ago...

included below is the table of the monthly and yearly percentage changes in sales by business type taken from the Census pdf....the first pair of columns below gives us the seasonally adjusted percentage change in sales for each type of retail business from May to June and the year over year percentage change for those businesses since last June; the second pair of columns gives us the revised figures for May's report, with April to May and the May 2016 to May 2017 change shown; for your reference, our copy of this table as it appeared in the May report, before this month's revisions, is here....lastly, the third pair of columns shows the percentage change of the recent 3 months of sales (April, May and June) from the preceding three months (January, February and March) and from the same three months of a year ago....

as we saw in our review of the consumer price index, the composite price index for all goods less food and energy goods was down 0.1% in May, which suggests that real retail sales will be down by about 0.1% month over month...the 2.8% drop in the price of gasoline more than accounts for the 1.3% decrease in sales at gas stations, but both of the food sales categories are problematic; note that sales at grocery stores were down 0.5% and sales at bars and restaurants were down 0.6%; with the overall food price index unchanged, as prices for food purchased for use at home slipped 0.1% and prices for food at full services restaurants were up by 0.1% and prices for fast food were up 0.2%, there will be real decreases in personal consumption expenditures for both of those major food sales categories... meanwhile, the upward revision to May retail sales was almost completely offset by the downward revision to April sales, so the revisions, on net, will have a negligible effect on previously published 2nd quarter personal consumption expenditures covering those months...

Industrial Production Up 0.4% in June After Prior Months Revised Lower

the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.4% in June after rising by a revised 0.1% in May and 0.8% in April...industrial production is now up 2.0% from a year ago, as it rose at a 4.7% annual rate in the 2nd quarter, the 3rd consecutive quarterly increase...to the extent that this report plays into GDP, that quarterly increase suggests a net addition to GDP of that magnitude in the components that this report influences...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 105.2 in June from 104.8 in May, which was originally reported at 105.0...at the same time, the April reading for the index was revised down from 105.0 to 104.7, and the index for March was revised from 103.9 to 103.8...

the manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.2%, from 103.1 in May to 103.3 in June, after the May index was revised from 103.3 to 103.1, the April manufacturing index was revised from 103.7 to 103.5, the March manufacturing index was revised from 102.6 to 102.5, and the February manufacturing index was revised from 103.4 to 103.3....meanwhile, the mining index, which includes oil and gas well drilling, increased for the 4th time in 5 months, rising from 109.2 in May to 111.0 in June, and is now 9.9% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, was unchanged at 102.5 in June, after rising a revised 0.8% in May, while it still remains 2.2% below its year earlier reading...

this report also includes capacity utilization figures, which are expressed as the percentage of our  plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 76.6% in June from 76.4% in May, which had originally been reported at 76.6%....capacity utilization by NAICS durable goods production facilities rose from 74.6% in May to 74.8 in June, while capacity utilization for non-durables was unchanged at 77.1%....capacity utilization for the mining sector rose to 84.8% in June, up from 83.7% in May, which was originally reported as 84.3%, while utilities were operating at 74.6% of capacity during June, unchanged from the revised May figure, which was originally published as 76.6%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....   

Producer Prices Up 0.1% in June as Higher Margins for Core Services Offset Lower Wholesale Energy Prices

the seasonally adjusted Producer Price Index (PPI) for final demand was up 0.1 in June, as prices for finished wholesale goods increased 0.1%, while margins of final services providers increased by 0.2%...this followed a May report that indicated the PPI was unchanged, with prices for finished wholesale goods down 0.5%, while margins of final services providers increased by 0.3%, and an April report that indicated the PPI was 0.5% higher, with prices for finished wholesale goods up 0.5%, while margins of final services providers increased by 0.4%....on an unadjusted basis, producer prices are now 2.0% higher than a year earlier, down from the 2.4% YoY increase indicated a month ago, and the 2.5% YoY increase seen in April, which had been the largest year over year increase in the PPI since February 2012...

as noted, the price index for final demand for goods, aka 'finished goods', rose by 0.1% in June, after falling by 0.5% in May, rising by 0.5% in April, falling by 0.2% in March, and rising by 0.4% in February, and 1.0% in January... the index for wholesale energy prices fell 0.5%, while the price index for wholesale foods rose 0.6% and the index for final demand for core wholesale goods (ex food and energy) rose 0.1%...the largest wholesale energy price change was a 5.9% decrease in the wholesale price of LP gas, while the wholesale food price index moved up on increases of 7.0% for beef and veal and of 5.1% for pork....among wholesale core goods, the index for pharmaceutical preparations was up 0.9%, while wholesale prices for industrial chemicals were 2.8% lower…

at the same time, the index for final demand for services rose by 0.2% in June, after rising by 0.3% in May, 0.4% in April, 0.4% in March but after after falling by a revised 0.3% in February, as the June index for final demand for trade services was down 0.2%, while the index for final demand for transportation and warehousing services rose 0.1%, and the index for final demand for services less trade, transportation, and warehousing services was 0.3% higher....among trade services, seasonally adjusted margins for TV, video, and photographic equipment retailers decreased 7.1% while margins for RVs, trailers, and campers retailers rose 3.4%...among transportation and warehousing services, margins for air transportation of freight were 2.6% higher...in the core final demand for services index, margins for securities brokerage, dealing, investment advice, and related services rose 4.0% and margins for arrangement of vehicle rentals and lodging fell 4.0%..

this report also showed the price index for processed goods for intermediate demand was 0.2% lower, after rising 0.1% in May, 0.5% in April, 0.1% but falling by a revised 0.3% in March....the price index for intermediate energy goods fell 0.6%, while prices for intermediate processed foods and feeds rose 1.2%, and the core price index for processed goods for intermediate demand less food and energy was 0.2% lower, as prices for primary basic organic chemicals fell 2.3%...prices for intermediate processed goods are still 3.8% higher than in May a year ago, now the eighth consecutive year over year increase, after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods rose 1.5% in June, after falling 3.0% in May, rising 3.3% in April, falling 4.2% in March and 0.2% in February, but after rising 4.0% in January and 7.3% in December...the index for crude energy goods rose 3.6%, as crude oil prices rose 8.9%, while the price index for unprocessed foodstuffs and feedstuffs rose 0.3%, as unprocessed wheat prices rose 10.3% and the index for slaughtered hogs rose 6.5%...in addition, the index for core raw materials other than food and energy materials rose 0.5%, as the index for logs, bolts, timber, pulpwood, and woodchips rose 1.1% and wholesale prices for paper scrap rose 8.0% ... however, this raw materials index is now up just 6.3% from a year ago, in contrast to the year over year increase of 19.3% that we saw in February, just 4 months ago..

lastly, the price index for services for intermediate demand rose 0.6% in June, after being unchanged in May, 0.9% higher in April, 0.2% lower in March, and a revised 0.4% higher in February and in January.. the index for trade services for intermediate demand was 0.3% higher, as margins for metals, minerals, and ores wholesalers rose 3.3 percent…the index for transportation and warehousing services for intermediate demand was unchanged, as intermediate prices for air transportation of freight rose 2.6% while the intermediate warehousing and storage index fell 1.6%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.8% higher, as margins for intermediate services related to securities brokerage and dealing rose 4.0%...over the 12 months ended in June, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.9% higher than it was a year ago...  

May Wholesale Sales Down 0.5%, Wholesale Inventories Up 0.4%

in advance of the composite business inventories release on Friday, the Census released their report on Wholesale Trade, Sales and Inventories for May (pdf) on Tuesday, which indicated that seasonally adjusted sales of wholesale merchants fell 0.5 percent (+/-0.5%)* to $460.8 billion from the revised April estimate of $463.1 billion, but were still up 6.2 percent (±1.1 percent) from sales in May a year earlier...April's preliminary wholesale sales estimate was revised upward $0.8 billion or more than 0.1 percent, which caused the March to April percent change to be revised from down 0.4 percent (±0.5 percent)* to down 0.3 percent (±0.5 percent)*...at the same time, this release reported that seasonally adjusted wholesale inventories were valued at $593.9 billion at the end of May, 0.4% (+/-0.4%)* higher than the revised April level and 1.9 percent (+/-0.7%)* above last May's level...at the same time, April's preliminary inventory estimate was revised upward $0.6 billion or 0.1% to $591.6 billion, now 0.4% lower than March...

May Business Sales Down 0.2%, Business Inventories Up 0.3%

on Friday, following the release of the June retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for May (pdf), which incorporates the revised May retail data from that June report and the earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,350.2 billion in May, down 0.2 percent (±0.2%)* from April revised sales, but up 5.1 percent (±0.4 percent) from May sales of a year earlier...note that total April sales were revised from the originally reported $1,352.0 billion to $1,350.2 billion...manufacturer's sales were up 0.1% from April at $471,513 million in May, while retail trade sales, which exclude restaurant & bar sales from the revised May retail sales reported earlier, fell 0.1% to $417,911 million, and wholesale sales fell 0.5% to $460,776 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,859.7 billion at the end of May, up 0.3 percent (±0.1%) from April, and 2.4 percent (±0.3%) higher than in May a year earlier...the value of end of April inventories was revised up from the $1,854.2 billion reported last month to $1,854.65 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $648,904 million, 0.1% lower than in April, while inventories of retailers were valued at $616,938 million, 0.5% more than in April, and inventories of wholesalers were estimated to be valued at $593,874 million at the end of May, up 0.4% from April...

all categories of business inventories are adjusted for price changes for national accounts data using item appropriate price indexes from the producer price index....the May producer price index indicated that prices for finished goods decreased 0.5%, prices for intermediate processed goods were 0.1% higher, while prices for unprocessed goods were 3.0% lower, which together generally indicate that real inventories will be higher than the nominal amounts by those percentages...since 1st quarter business inventories were virtually unchanged and a large drag on GDP, any inventory increases in the 2nd quarter will boost 2nd quarter GDP almost in their entirety...

Job Openings Down, Hiring and Firing Up in May

the Job Openings and Labor Turnover Survey (JOLTS) report for May from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 301,000, from 5,967,000 in April to 5,666,000 in May, after April job openings were revised lower, from 6,044,000 to 5,967,000...May jobs openings were still 1.5% higher than the 5,582,000 job openings reported in May a year ago, as the job opening ratio expressed as a percentage of the employed fell from 3.9% in April to 3.7% in May, while it was unchanged from a year ago...the greatest drop in job openings was in finance, where openings fell by 66,000 to 332,000, while job openings in retail rose by 72,000 to 638,000 (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in May, seasonally adjusted new hires totaled 5,472,000, up by 429,000 from the revised 5,043,000 who were hired or rehired in April, as the hiring rate as a percentage of all employed was rose from 3.5% to 3.7%, and was also up from the hiring rate of 3.6% in May a year earlier (details of hiring by industry since January are in table 2)....meanwhile, total separations also rose, by 251,000, from 5,008,000 in April to 5,259,000 in May, while the separations rate as a percentage of the employed rose from 3.4% to 3.6%, which was was also up from the separations rate of 3.5% in May a year ago (see table 3)...subtracting the 5,259,000 total separations from the total hires of 5,472,000 would imply an increase of 213,000 jobs in May, somewhat more than the revised payroll job increase of 152,000 for May reported by the June establishment survey last week, but still not an unusual difference and within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,221,000 of us voluntarily quit their jobs in May, up by 187,000 from the revised 3,044,000 who quit their jobs in April, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.1% to 2.2% of total employment, which was also up from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,661,000 were either laid off, fired or otherwise discharged in May, up by 56,000 from the revised 1,605,000 who were discharged in April, as the discharges rate remained at 1.1% of all those who were employed during the month, down from 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 377,000 in May, down from 359,000 in April, for an 'other separations' rate of 0.3%, which was up from 0.2% in April and in May a year ago....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

 

(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…)