Monday, May 29, 2023

1st quarter GDP revision; April’s personal income and outlays, durable goods, and new home sales

The key economic releases of the past week were the second estimate of 1st quarter GDP from the Bureau of Economic Analysis and the April report on Personal Income and Spending, also from the BEA, a report which provides nearly 24% of 2nd quarter GDP....other reports that were released this week included the April advance report on durable goods and the April report on new home sales, both from the Census bureau, and the Chicago Fed National Activity Index (CFNAI) for April, a weighted composite index of 85 different economic metrics, which rose +0.07 in April, up from –0.37 in March, in an index where any positive reading indicates economic activity has been above the historical trend ...despite the April increase, the widely watched 3 month average of the CFNAI slipped to -0.22 in April from -0.12 in March, which thus indicates that national economic activity has been below the historical average over the most recent months...

In addition to that national index, two more regional Fed manufacturing surveys for May were also released this week: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported that its broadest composite index fell to -15 in May from -10 in April, indicating that a larger plurality of Fifth District manufacturing firms reported deteriorating business conditions in May; while the Kansas City Fed manufacturing survey for May, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to -1 in May, up from -10 in April but down from 0 in March, indicating that just the smallest plurality of the region's manufacturing firms still reported an decrease in their activity this month...

1st Quarter GDP Revised to Show Our Economy Grew at a 1.3% Rate

The Second Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.3% rate in the 1st quarter, revised from the 1.1% growth rate reported in the advance estimate last month, as upward revisions to growth of real personal consumption expenditures for services, inventories, exports and to growth of state and local governments more than offset a downward revision to growth of real personal consumption expenditures of durable goods and an upward revision to imports, which subtract from GDP.....in current dollars, our first quarter GDP grew at a 5.44% annual rate, increasing from what would work out to be a $26,138.0 billion a year output rate in the 4th quarter of last year to a $26,486.3 billion annual rate in the 1st quarter of this year, with the headline 1.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 4.0%, aka the GDP deflator, was computed from the price changes of the GDP components and applied to their current dollar changes...

As we review this month's revisions, remember that the GDP press 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 from one 3 month period to the next, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 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 Full Release & Tables for the second estimate of 1st quarter GDP, which is linked to on the BEA's main GDP page...specifically, we’ll be citing data from table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2019; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and the inflation adjusted value in 2012 dollars of each of those components; and table 4, which shows the change in the price indexes for each of the GDP components...the full pdf for the 1st quarter advance estimate, which this estimate revises, is here....

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 3.7% growth rate reported last month to indicate real PCE growth a 3.8% rate with this estimate…that growth rate figure was arrived at by deflating the 8.1% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation grew at a 4.2% annual rate in the 1st quarter, which was unrevised from the PCE inflation rate published a month ago....real consumption of durable goods grew at a 16.4% annual rate, which was revised from the 16.9% growth rate shown in the advance report, and added 1.29 percentage points to GDP, as growth in real consumption of motor vehicles and parts at a 44.3% rate accounted for more than two-thirds of the quarter's growth in durable goods....at the same time, real consumption of nondurable goods by individuals grew at an 0.9% annual rate, unrevised from the 1st estimate, and added 0.12 percentage points to the1st quarter's economic growth, as greater real consumption of gasoline and "other" nondurable goods was partly offset by lower consumption of groceries and clothing…. meanwhile, consumption of services rose at a 2.5% annual rate, revised from the 2.3% growth rate reported last month, and added 1.11 percentage points to the final GDP tally, as real growth of health care at a 7.7% rate accounted for around three-fourths of the quarter's growth in services....

At the same time, seasonally adjusted real gross private domestic investment shrunk at a 11.5% annual rate in the 1st quarter, revised from the 12.5% contraction rate estimate reported last month, as real private fixed investment shrunk at a 0.2% rate, rather than at the 0.4% rate reported in the advance estimate, while inventory shrinkage was somewhat less than had been previously estimated....real investment in non-residential structures was revised from growing at a 11.2% rate to growing at a 11.0% rate, while real investment in equipment was revised to show it shrunk at a 7.0% rate, revised from the 7.3% contraction rate previously reported...at the same time, the first quarter's investment in intellectual property products was revised from real growth at a 3.8% rate to real growth at a 5.2% rate, while the decrease in real residential investment was revised from a 4.2% annual rate to contraction at a 5.4% rate….after those revisions, the increase in investment in non-residential structures added 0.28 percentage points to the 1st quarter's growth rate, while the decrease in investment in equipment subtracted 0.38 percentage points from the quarter's growth rate, and growth in investment in intellectual property added 0.26 percentage points to the growth rate of 1st quarter GDP, while the drop in residential investment subtracted 0.22 percentage points from the growth of GDP.....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3....

Meanwhile, real private inventories were revised from the originally reported $1.6 billion contraction in inflation adjusted dollars to show real inventories grew at an inflation adjusted $6.9 billion rate...however, this came after inventories had grown at an inflation adjusted $136.5 billion rate in the 4th quarter, and hence the $129.6 billion negative change in real inventories from those of the 4th quarter subtracted 2.10 percentage points from the 1st quarter's growth rate, revised from the 2.26 percentage point subtraction due to reduced inventory growth shown in the advance estimate....however, since shrinking inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf” or in a warehouse, that decrease by $129.6 billion meant that real final sales of GDP were actually greater by that much, and therefore the BEA found that real final sales of GDP grew at a 3.4% rate in the 1st quarter, unrevised from the 3.4% growth rate shown in the advance estimate, and were up from the real final sales growth rate of 1.1% in the 4th quarter, when the increase in inventory growth meant that the quarter’s growth in real final sales was smaller than that of the quarter's GDP..

The previously reported increase in real exports was revised higher with this estimate, but the previously reported increase in real imports was revised higher by more, and as a result the previously reported modest GDP boost from our net trade was virtually eliminated...our real exports of goods and services grew at a 5.2% rate in the 1st quarter, revised from the 4.8% growth shown in first estimate, and since exports are an addition to GDP because they are that part of our production that was not previously added to consumption or investment in our country, their increase added 0.58 percentage points to the 1st quarter's growth rate, up from the 0.54 percentage point export addition due to rising exports shown last month...on the other hand, the previously reported 3.7% increase in our real imports was revised to a 4.8% increase, and since imports subtract from GDP because they represent either consumption or investment that was added to GDP with those figures but was not produced in the US, their increase subtracted 0.57 percentage points from 1st quarter GDP, revised from the 0.43 percentage point subtraction shown a month ago....thus, our improving trade balance that accompanied the unwinding of Covid policies had no statistically significant impact on first quarter GDP after rounding, revised from the 0.11 percentage point boost to GDP resulting from an improving foreign trade balance that was indicated in the advance estimate..

Finally, there was also a net upward revision to real government consumption and investment in this 2nd estimate, as the entire government sector is now shown to have grown at a 5.2% rate, revised from the 4.7% growth rate for government indicated by the 1st estimate....however, real federal government consumption and investment is now seen to have grown at a 7.6% rate from that of the 4th quarter in this estimate, which was revised from the 7.8% growth rate shown in the 1st estimate, as real federal outlays for defense grew at a 5.7% rate, revised from the 5.5% growth rate shown previously, and added 0.08 percentage points to 4th quarter GDP, while all other federal consumption and investment grew at a 10.0% rate, revised from the 10.3% growth rate shown previously, and added 0.29 more percentage points to 4th quarter GDP growth....meanwhile, real state and local consumption and investment grew at a 3.8% rate in the quarter, revised from the 2.9% growth shown in the 1st estimate, and added 0.41 percentage points to 1st quarter GDP, which was revised from the 0.31 addition shown in the advance estimate, as state and local investment grew at a 7.0% rate and accounted for the entirety of the upward revision....note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, thereby indicating an increase in the output of those goods or services...

April Personal Income Up 0.4%, Personal Spending Up 0.8%, PCE Prices Up 0.4%, Savings Rate at 4.1%

Friday's release of the April report on Personal Income and Outlays from the Bureau of Economic Analysis included the month's data for our personal consumption expenditures (PCE), which accounts for almost 71% of the month's GDP, and with it the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated...in addition, this release reported our national personal income totals, disposable personal income, which is income after taxes, and our national savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they're reporting seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much income and spending would change over a year if April's change in seasonally adjusted income and spending were extrapolated over an entire year.....

Hence, when the opening line of the news release for this report tell us "Personal income increased $80.1 billion (0.4 percent) in April", that means that the annualized figure for seasonally adjusted national personal income in April, $22,639.1 billion, was $80.1 billion, or a rounded 0.4% more than the annualized personal income figure of $22,559.0 billion extrapolated for March; the actual, unadjusted change in personal income from March to April is not given...at the same time, annualized disposable personal income, which is income after taxes, also rose by 0.4%, from an annual rate of $19,663.2 billion in March to an annual rate of $19,742.6 billion in April....the reasons for the annualized $80.1 billion increase in personal income can be viewed in the Full Release & Tables (PDF) for this release, also as annualized amounts, and primarily reflected a $54.6 billion annual rate of increase in income from wages and salaries and an $34.7 billion annualized increase in interest and dividend income, even as government social benefits to persons fell at a $17 billion annual rate...

For the April personal consumption expenditures (PCE) that will be included in 2nd quarter GDP, the BEA reports that they rose at a $151.7 billion annual rate, or by more than 0.8%, as the annual rate of national PCE increased from $18,116.0 billion in March to $18,267.7 in April....March PCE was revised from $18,104.2 billion annually to $18,116.0 billion, while February PCE was revised from $18,096.0 billion annually to $18,101.5 billion, revisions that were already included in this week’s GDP report....total personal outlays for April, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $156.0 billion to a rate of $18,940.4 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $802.1 billion annual rate in April, down by $76.6 billion from the revised $878.8 billion in annualized personal savings in March...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 4.1% in April, down from a revised 4.5% savings rate in March, and the lowest personal savings rate since January....

As you know, before those personal consumption expenditures can be used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is computed from the components by the BEA and included in Table 9 in the pdf for this report....that index rose from 126.402 in March to 126.862 in April, a month over month inflation rate that's statistically 0.36392%, which BEA reports as an increase of 0.4 percent, following the rounded 0.1% increase in the PCE price index reported for March...applying that 0.364% April inflation adjustment to the ~0.8% nominal change in PCE left real PCE up by 0.47175% in April, which the BEA reports as a 0.5% increase in their press release and in the tables, after being virtually unchanged in March....note that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in those familiar chained 2012 dollars, which are the means that the BEA uses to compare the goods and services produced in one month or one quarter to the real goods and services produced in another....that result is shown in table 7 of the PDF, where we see that April's chained dollar consumption total works out to 14,403.6 billion annually, 0.472% more than March's 14,335.9 billion, again an increase that the BEA reports as +0.5%...

However, to estimate the impact of the change in PCE on the change in GDP, that month over month PCE change doesn't help us much, since GDP is computed & reported quarterly... thus we have to compare April's real PCE to the real PCE of all 3 months of the first quarter....while this release reports PCE for all those amounts on a monthly basis, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 1st quarter was represented by 14,346.6 billion in chained 2012 dollars..(note that's the same as is shown in table 3 of the pdf for the 1st quarter GDP report)....when we compare April's chained dollar PCE of 14,403.6 billion to the 1st quarter real PCE of 14,346.6 billion on an annual basis, we find that April's real PCE has risen at a 1.60% annual rate from that of the 1st quarter....that would mean that even if real PCE does not appreciate during May and June from the April level, growth in real PCE would add 1.13 percentage points to the growth rate of 2nd quarter GDP...

April Durable Goods: New Orders Up 1.1%, Shipments Down 0.7%, Inventories Up 1.0%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for April (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods rose by $3.1 billion or 1.1 percent to $283.0 billion in April, the second increase in four months, after durable goods orders for March were revised to show a 3.3% increase to $279.9 billion, revised from the 3.2% increase to $276.4 billion that was reported a month ago...note that over and above the usual monthly revisions to the underlying data, this month's report also reflects the May 12th re-benchmarking of shipments and inventories data to the 2021 and 2020 Annual Survey of Manufactures data, revised back to 2012, and then the adjustment of the orders data to be consistent with the re-benchmarked data...while this resulted in modest revisions over the span of the data, we will only document the revisions to March....

As is often the case, the volatile monthly change in April's new orders for transportation equipment was responsible this month's headline change, as April transportation equipment orders rose $3.5 billion or 3.7 percent to $97.6 billion, on a 32.7% increase to $7,746 million in new orders for defense aircraft....excluding new orders for transportation equipment, other new orders were down 0.2% in April, while excluding new orders for defense equipment, new orders were down 0.6%....meanwhile, new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment orders, were up 1.4% to $74,038 million...

The seasonally adjusted value of April's shipments of durable goods, which will ultimately be inputs into various components of 2nd quarter GDP after adjusting for changes in prices, fell for the second time in three months, decreasing by $2.0 billion or 0.7 percent to $277.7 billion, after March shipments were revised from an increase of 1.1% to $277.0 billion to an increase of 0.7% to $279.9 billion, after re-benchmarking...lower shipments of transportation equipment led the April decrease, falling $1.6 billion or 1.8 percent to $87.5 billion on a 15.8% decrease in value of shipments of commercial aircraft…excluding that, the value of other shipments of durable goods fell 0.2%, but are still 4.3% higher year to date than a year ago....meanwhile, shipments of nondefense capital goods excluding aircraft, important in figuring equipment investment, rose 0.5% to $73,860 million in April after falling a revised 0.2% in March...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the fourth time in five months, increasing by $5.2 billion or 1.0 percent to $521.9 billion, after the value of end of March inventories was revised from $488.8 billion to $516.7 billion, now shown as a 1.0% decrease from February, after re-benchmarking....a $5.0 billion or 3.2 percent increase to to $164.1 billion in the value of inventories of transportation equipment led the April inventory increase, while excluding inventories of transportation equipment, other inventories were statistically unchanged..

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 fourth time in five months, increasing by $10.5 billion or 0.8 percent to $1,291.5 billion, following a March increase which was revised from the 0.4% increase to $1,160.2 billion reported last month to a 0.4% increase to $1,281.0 billion, obviously after re-benchmarking....a $10.2 billion or 1.3 percent increase to $792.2 billion in unfilled orders for transportation equipment led the April increase, as unfilled orders for defense aircraft rose 4.1% to $70,861 million and unfilled orders for commercial aircraft and parts rose 0.9% to $539,255 million.... compared to a year ago, the unfilled order book for durable goods is now 5.2% higher than the level of last April, with unfilled orders for transportation equipment 8.7% above their year ago level, on a 13.6% increase in the backlog of orders for defense aircraft and a 9.5% increase in the order book for commercial aircraft...

New Home Sales Reported Higher in April on Lower Prices

The Census report on New Residential Sales for April (pdf) estimated that new single family homes were selling at a seasonally adjusted annual pace of 683,000 homes during the month, which was 4.1 percent (±11.8 percent)* above the revised March annual rate of 656,000 new home sales, and 11.8 percent (±15.1 percent)* above the estimated annual rate that new homes were selling at in April of last year... the figures in parenthesis represent the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....

with this report; seasonally adjusted estimates of housing units sold, housing units for sale, and the months' supply of new housing have been revised back to January 2018; and with that, sales of new single family homes in March were revised from the annual rate of 683,000 reported last month to an annual rate of 656,000, and sales in February, initially reported at an annual rate of 640,000 and revised to a 623,000 rate last month, were revised to an annual rate of 631,000, while new home sales in January, initially reported at an annual rate of 670,000 and revised from a 633,000 rate to a 648,000 rate last month, were revised to a 649,000 a year rate with this release...

The annual rates of sales reported here are seasonally adjusted and extrapolated from the rough estimates of canvassing Census field reps, which indicated that approximately 62,000 new single family homes sold in April, down from the estimated 64,000 new homes that sold in March but up from the 58,000 new homes that sold in February....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in April fell to $420,900, down from the median sales price of $455,800 in March and down from the median sales price of $458,200 in April a year ago, while the average new home sales price was at $501,000, down from the $559,200 average sales price in March, and down from the average sales price of $562,400 in April a year ago....a seasonally adjusted estimate of 433,000 new single family houses remained for sale at the end of April, which represents a 7.6 month supply at the April sales rate, down from the revised 7.9 months of new home supply now being reported for March...

For graphs and commentary on this report, see the following posts by Bill McBride at Calculated Risk: New Home Sales at 683,000 Annual Rate in April and New Home Sales at 683,000 Annual Rate in April; Median New Home Price is Down 15.3% from the Peak which links to his detailed Real Estate Newsletter post on the same subject....

 

 

(the above is the synopsis that accompanied my regular sunday morning news 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 of which are picked from the aforementioned GGO posts, contact me…)  

Monday, May 22, 2023

April's retail sales, industrial production, new housing construction, and existing home sales; March business inventories

Regular monthly reports that were released this week included the Retail Sales report for April and the Manufacturing and Trade, Inventories and Sales report for March (pdf), both from the Census Bureau, the April report on Industrial Production and Capacity Utilization from the Fed, the April report on New Residential Construction from the Census Bureau and the Existing Home Sales Report for April from the National Association of Realtors…in addition, the Bureau of Labor Statistics released the Regional and State Employment and Unemployment Summary for April this week, which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of that report provides a useful summary of this data, the serious statistical aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands...

This week also saw first two regional Fed manufacturing surveys for May:the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a NYC suburban county in Connecticut, northern New Jersey, and Puerto Rico, reported their headline general business conditions index tumbled to -31.8, the lowest reading in three years and down from +10.8 in April, suggesting a sharp and sudden slowdown of First District manufacturing... Meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions rose to -10.4 in May, up from -31.3 in April, but still its ninth consecutive negative reading, thus suggesting that the ongoing contraction of that region's manufacturing is less widespread than a month earlier...

Retail Sales Rose 0.4% in April after Annual Revision

Seasonally adjusted retail sales rose 0.4% in April, after retail sales for February and March were revised higher, but after those sales had been revised much lower in an intervening annual revision ...the Advance Retail Sales Report for April (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $686.1 billion during the month, which was up by 0.4 percent (±0.5 percent) from revised March sales of $683.2 billion, and 1.6 percent (± 0.7 percent) above the adjusted sales of April of last year...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated nominal dollar sales fell 2.4%, from $697,209 million in March to $680,508 million in April, while they were up less than 0.2% from the $679,473 million of sales in April a year ago....

Retail sales estimates from the prior months were revised on April 24, based on the results of the 2021 Annual Retail Trade Survey and the Service Annual Survey, and hence the changes in sales indicated in this report reflect the changes from that revision....March sales were originally reported at $691.7 billion, down 1.0% from February; they are now indicated to have fallen 0.7% to $683.2 billion....February adjusted sales were concurrently revised from $698.572 billion to $687.942 billion, and January's sales were revised from $700,052 million to $692,501 million...

The figures used to compute PCE in the first quarter GDP report came from those revised retail sales, which showed adjusted sales in millions at $692,501 in January, $687,432 million in February, and $683,042 in March...this report further revises those revisions to show sales of $687,942 in February and $683,179 in March...the net $647 million upward revision to February and March sales would increase first quarter sales at about a $2.6 billion annual rate and would add about 0.04 percentage points, give or take, to 1st quarter GDP when the 2nd estimate is released on Thursday of next week...

We are again including below the table of monthly and yearly percentage changes in sales by business type, taken from the Census marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from March to April in the first column, and then the year over year percentage change for those businesses since last April in the 2nd column; the second pair of columns gives us the revision of last month’s March advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the February to March change under "Feb 2023 r (revised)" and the revised March 2022 to March 2023 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance March estimates, before the annual revision, is here....

To compute April's real personal consumption of goods data for national accounts from this April retail sales report, the BEA will use the corresponding price changes from the April consumer price index, which we reviewed last week...to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that April retail sales excluding the 0.8% decrease in sales at gas stations were up by 0.5%....then, by subtracting the dollar values representing the 0.2% decrease in grocery & beverage sales and the 0.6% increase in food services sales out from that total, we find that core retail sales were up by more than 0.6% for the month.....since the April CPI report showed that the the composite price index of all goods less food and energy goods was 0.6% higher in April, we can thus figure that real retail sales excluding food and energy would have been little changed from March....however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 0.4%, the April price index for transportation commodities other than fuel was 1.5% higher, which would suggest that real unit sales at auto & parts dealers were likely on the order of 1.1% lower, once price increases are taken into account... similarly, while nominal sales at clothing stores were 0.3% lower in April, the apparel price index was 0.3% higher, which means that real sales of clothing likely fell around.6%...

In addition to figuring those core real retail sales, to make an estimate of the change in real sales, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the April CPI report indicated that the food price index was unchanged in April, as the price index for food purchased for use at home fell 0.2% while the index for food bought away from home was 0.4% higher...thus, while nominal sales at food and beverage stores were 0.2% lower, real sales of food and beverages would have been unchanged in light of 0.2% lower prices…similarly, the 0.6% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants only rose by around 0.2% during the month...and while sales at gas stations were down 0.8%, there was also a 3.0% increase in price of gasoline during the month, which would suggest that real sales of gasoline were actually down on the order of 3.7%, with a caveat that gasoline stations sell more than just gasoline, products which should not be adjusted with gasoline prices, so the actual decrease in real sales at gas stations was likely smaller…reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for April will show that real personal consumption of goods fell by almost 0.4% in April, after falling by 0.2% in March, but after rising by 0.1% in February and rising by 0.6% in January...at the same time, the 0.2% increase in real sales at bars and restaurants would incrementally add to April's real personal consumption of services..

Industrial Production Rose 0.5% in April after March Production was Revised 0.5% Lower

Industrial production increased in April after production for March was revised lower...the Fed's G17 release on Industrial production and Capacity Utilization for April reported that industrial production rose 0.5% in April after being unchanged in both February and March, which left our total output at a level just 0.2% higher than the level of April a year ago....the industrial production index, with the benchmark now set for average 2017 production to equal to 100.0, rose to 103.0 in April, after the March index value was revised down to 102.5 from the 103.0 reported last month, while the February index value was revised from 102.6 to 102.5, and the January index was revised from 102.4 to 102.5, while the December index was unrevised at 101.5 to 101.7....the effect of those revisions was to revise the March change from +0.4% to unchanged…

The manufacturing index, which accounts for more than 77% of the total IP index, rose 1.0% to 99.8 in April, led by a 8.4% increase in the production of automotive products, after the March manufacturing index was revised from 99.5 to 98.8, the February manufacturing index was revised from 100.0 down to 99.7, the January manufacturing index was unrevised at 99.4, the December manufacturing index was revised from 98.0 to 97.9, and the November manufacturing index was revised from 100.1 to 100.0, which left the manufacturing index 0.9% below its level of a year ago....meanwhile, the mining index, which includes oil and gas well drilling, rose 0.6%, from 116.7 in March to 117.4 in April, after the March mining index was revised up from the originally reported 116.6, which left the mining index 5.6% higher than it was a year earlier...finally, the seasonally adjusted utility index, which typically fluctuates due to deviations from normal temperatures, fell by 3.1% from 109.0 in our colder than normal March to 105.6 in our closer to normal April, after the March utility index rose by 8.4% from our warm February...with the April decrease, the utility index is now 0.4% below that of a year ago, partly due to a cooler April last year than this year…

This report also includes April's capacity utilization stats, which are expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 79.7% in April from 79.4% in March, with capacity utilization for March concurrently revised down from 79.8% to 79.4% and capacity utilization for February revised from 79.6% to 79.5%...capacity utilization of NAICS durable goods production facilities rose from a downwardly revised 74.6% in March to 75.6% in April, while capacity utilization for non-durables producers rose from 80.7% to 81.1%...capacity utilization for the mining sector rose to 91.8% in April from 91.2% in March, which was previously reported as 91.1%, while utilities were operating at 72.7% of capacity during April, down from their 75.3% of capacity during March, which was the same utility utilization figure reported a month ago...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..

Business Sales Fell 1.1% in March, Business Inventories Were 0.1% Lower

After the release of the April retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for March (pdf), which incorporates the revised March retail data from that April retail report and the earlier published March wholesale and factory data to give us a complete picture of the business impact on the economy for that month....note that retail sales and inventories were revised on April 24th, which thus revised the figures that were reported a month ago, even before the usual revisions to the prior month’s data that accompany this report...

According to the Census Bureau, total manufacturers' and trade sales were estimated to be valued at a seasonally adjusted $1,790.8 billion in March, down 1.1 percent (±0.2 percent) from February's revised sales, and down 0.3 percent (±0.4 percent)* from March sales of last year...at the same time, total February sales were revised down from the originally reported $1,817.9 billion to $1,810,452 million, and are now a 0.3% decrease from January....manufacturer's sales fell 0.1% to $539,889 million in March; retail trade sales, which exclude restaurant & bar sales from the revised March retail sales reported earlier, fell 0.8% to $595,614 million, and wholesale sales fell 2.1% to $655,299 million..

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,490.0 billion at the end of March, down 0.1% (±0.1%)* from the end of February, but up 6.5 percent (±0.4 percent) from inventories of March a year earlier...the value of end of February inventories was revised from the $2,471.6 billion reported last month to $2,491.5 billion, which is now statistically unchanged from January's inventory valuation....seasonally adjusted inventories of manufacturers were estimated to be valued at $799,379 million, down 0.8% from February, while inventories of retailers were valued at $772,165 million, 0.7% more than those of February, and while inventories of wholesalers were estimated to be valued at $918,501 million at the end of March, statistically unchanged from February...

Two weeks ago, we figured that there would be a 0.03 percentage point downward revision to first quarter GDP based on the inventory change the factory report showed, while last week we figured that 1st quarter GDP was overestimated by around 0.10 percentage points based on what the wholesale inventories report showed......in the advance report on 4th quarter GDP of three weeks ago, retail inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted retail inventories were valued at $773,399 billion at the end of March, up 0.7% from a revised $767,792 billion in February....that's $1.925 billion more than the $772,165 and $767,101 billion for those two months that this report shows, which would mean that the quarterly change in 1st quarter retail inventories was overrestimated at roughly a $7.7 billion annual rate, or by an amount that would subtract about 0.11 percentage points from GDP, depending on how the inflation adjustments shake out...combined with our previous estimates on factory and wholesale inventories, then, this report would suggest that the growth rate of 1sr quarter GDP should be revised downwards by around 0.24 percentage points when the 2nd estimate is released next week....

April Housing Starts Reported 2.2% Higher After March Starts Revised 3.5% Lower

The April report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,402,000 in April, which was 2.2 percent (±11.9 percent)* above the revised March estimated rate of 1,371,000 annually, but was 22.3 percent (±8.7 percent) below last April's rate of 1,803,000 housing starts a year....the figures shown in parenthesis indicate the most likely range of the change indicated; in other words, April housing starts could have been down by 9.7% or up by as much as 14.1% from those of March, with revisions of a greater magnitude in either direction from that range possible...with this report, the annual rate for March housing starts was revised from the 1,420,000 reported last month down to 1,371,000, and February starts, which were first reported at a 1,450,000 annual rate, were revised from last month's initial revised figure of 1,432,000 annually to a 1,436,000 annual rate, while January starts, which were first reported at a 1,309,000 annual rate, and were revised from an annual rate of 1,321,000 to a 1,334,000 annual rate a month ago, were revised up to a 1,340,000 annual rate with this report....

The annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 127,100 housing units were started in April, up from the 113,600 housing units that were started in March, and up from the 103,200 housing units that were started in February...of those housing units started in April, an estimated 78,800 were single family homes and 47,200 were housing units in structures with more than 5 units, up from the revised 70,800 single family starts in March, and up from the 41,000 units started in structures with more than 5 units in March...

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 April, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,416,000, which was 1.5 percent below the revised March rate of 1,437,000, and was 21.1 percent below the rate of building permit issuance in April a year earlier....the annual rate for housing permits issued in March was revised from 1,413,000 to 1,437,000...

Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 117,400 housing units were issued in April, down from the revised estimate of 131,300 new permits issued in March....of April's permits, 74,900 were for single family homes, down from 79.400 in March, while 37,800 were in buildings with 5 or more units, also down from 47,200 in March...

For graphs and commentary on this report, see the following posts by Bill McBride at Calculated Risk:Housing Starts at 1.401 million Annual Rate in April and M April Housing Starts: Near Record Multi-Family Under Construction which in turn links to his detailed Real Estate Newsletter post covering the same subject.

Existing Home Sales Fell 3.4% in April on Higher Prices

The National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell by 3.4% from March to April, projecting that 4.28 million existing homes would sell over an entire year if the April home sales pace were extrapolated over that year, a pace that was also 23.2% below the annual sales rate projected during April of a year ago....March sales, now shown at a 4.43 million annual rate, were revised from the the 4.44 million annual rate originally reported....the NAR also reported that the median sales price for all existing-home types was at $388,800 in April, 1.7% lower than in April a year earlier, which was the third consecutive year over year price drop, following a record streak of 131 consecutive months of year-over-year increases.....the NAR press release, which is titled "Existing-Home Sales Faded 3.4% in April", is in easy to read plain English, so if you're interested in the details on so if you're interested in a regional breakdown, or 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) to see what actually happened during the month...this unadjusted data indicates that roughly 336,000 homes sold in April, down 6.4% from the 359,000 homes that sold in March, and down by 27.4% from the 463,000 homes that sold in April of last year, so we can see the effect of an unusual seasonal adjustment on reported sales, as we would think home sales should increase as spring progresses, & and thus seasonally adjusted sales, as reported, would have been lowered accordingly....also note that same pdf indicates that the median home selling price for all housing types rose by 3.6%, from a revised $375,400 in March to $388,800 in April, with home prices rising month over month in all regions of the country/...to view both seasonally adjusted and unadjusted graphs and additional commentary on this report, again see the following posts from Bill McBride at Calculated Risk:NAR: Existing-Home Sales Decreased to 4.28 million SAAR in April and NAR: Existing-Home Sales Decreased to 4.28 million SAAR in April; Median Prices Declined 1.7% YoY which in turn links to his in-depth newsletter article on this report...

 

 

(the above is the synopsis that accompanied my regular sunday morning news 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 of which are picked from the aforementioned GGO posts, contact me…)  

Monday, May 15, 2023

April's consumer and producer prices; March wholesale sales

Regular monthly reports that were released this week included the April Consumer Price Index, the April Producer Price Index and the April Import-Export Price Index from the Bureau of Labor Statistics, and the Wholesale Trade, Sales and Inventories report for March from the Census Bureau....

Consumer Prices Rose 0.4% in April on Higher Rent, Gasoline, & Used Vehicles

The consumer price index rose 0.4% in April, as higher prices for rent, gasoline, used vehicles, car insurance, fast food and financial services were only partly offset by lower prices for groceries, new cars, utilities, health insurance, airfares, hotels, and major appliances...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the average of seasonally adjusted prices of consumer goods and services were 0.4% higher in April, after rising by 0.1% in March, by 0.4% in February, by 0.5% in January, by 0.1% in December, by 0.2% in November, by 0.5% in October, by 0.4% in September, and by 0.2% in August, after being unchanged in July, but after rising by 1.3% in June, by 1.0% in May, and by 0.3% in April of last year....the unadjusted CPI-U index, which was originally set to have prices of the 1982 to 1984 period equal to 100, rose from 301.836 in March to 303.363 in April, which left it statistically 4.9303% higher than the index reading of 287.504 in April of last year, which is reported as a 4.9% year over year increase, down from the 5.0% year over year increase reported for March, and down from the forty year high year over year increase of 9.1% reported for June 2022....with higher gasoline prices offsetting lower food and utility prices in this month's overall price index, seasonally adjusted core prices, which exclude food and energy, were also up by 0.4% for the month, as the unadjusted core price index rose from 305.476 to 306.899, which left the core index 5.5194% ahead of its year ago reading of 290.846, which is reported as a 5.5% year over year increase, down from the 5.6% year over year core price increase that was reported in March, and well down from the 6.6% annual increase reported for September 2022, which had also been the largest annual increase in core prices in forty years...

The volatile seasonally adjusted energy price index rose 0.6% in April, after falling by 3.5% in March, and by 0.6% in February, while rising by 2.0% in January, falling by 3.1% in December, falling by 1.4% in November, and rising by 1.7% in October, after falling by 1.7% in September, by 3.9% in August and by 4.7% in July, and is now 5.1% lower than in April of a year ago....the price index for energy commodities was 2.7% higher in April, while the price index for energy services was 1.7% lower, after it had fallen by 2.3% in March....the energy commodity index was up 2.7% as a 3.0% increase in the price of gasoline was partly offset by a 4.5% decrease in the price of fuel oil, while the price index for other energy commodities, including propane, kerosene, and firewood, averaged 1.0% higher....within energy services, the price index for utility gas service fell 4.9% after falling 7.1% in March, and is now 2.1% lower than it was a year ago, while the electricity price index fell 0.7% in April falling 0.7% in March... energy commodities are still averaging 12.6% lower than their year ago levels, with gasoline prices averaging 12.2% lower than they were a year ago, while the energy services price index is still up 5.9% from last April, as electricity prices are still averaging 8.4% higher than a year ago…

Meanwhile, the seasonally adjusted food price index was unchanged in April, after being unchanged in March, rising by 0.4% in February, by 0.5% in January, by 0.4% in December, by 0.6% in November, by 0.7% in October, by 0.8% in September, by 0.8% in August, and by 1.1% in July, as the price index for food purchased for use at home was 0.2% lower in April, after falling by 0.3% in March, rising by 0.3% in February, rising by 0.4% in January, and by 0.5% in December, by 0.6% in November, by 0.5% in October, by 0.8% in September, by 0.6% in August, and by 1.3% in July, while the index for food bought to eat away from home was 0.4% higher, as average prices at fast food outlets rose 0.6%, prices at full service restaurants rose 0.1%, food prices at employee sites and schools averaged 0.1% lower, and other food away from home averaged 1.2% higher....

In the food at home categories, the price index for cereals and bakery products was 0.2% higher, even as average bread prices fell 0.3%, as the price index for flour and prepared flour mixes rose 0.5%, the price index for fresh biscuits, rolls, muffins rose 2.5%, and the price index for rice, pasta, and cornmeal rose 0.4%... on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.3% lower, as the price index for pork fell 1.2%, the price index for shelf stable fish and seafood fell 1.7%, and egg prices were 1.5% lower....at the same time, the seasonally adjusted price index for dairy products was 0.7% lower, as milk prices fell 2.0% and the price index for ice cream and related products was 0.7% lower....meanwhile, the fruits and vegetables price index was 0.2% lower, as the price index for fresh fruits fell 0.5%, the price index for canned vegetables fell 1.6%, and the price index for frozen fruits and vegetables was 2.0% lower....meanwhile, the beverages price index was 0.2% lower, even as the price index for carbonated drinks rose 1.8%, as the price index for beverage materials including coffee and tea fell 1.1% and the price index for noncarbonated juices and drinks was 0.5% lower....lastly, the price index for the ‘other foods at home’ category was 0.2% higher, as the price index for peanut butter rose 0.8%, the price index for snacks rose 1.0%, the price index for olives, pickles, and relishes rose 0.5%, the price index for sauces and gravies rose 0.4%, and the price index for baby food and formula was 4.3% higher...

Among the seasonally adjusted core components of the CPI, which rose by 0.4% in April, after rising by 0.4% in March, by 0.5% in February, by 0.4% in January, by 0.4% in December, by 0.3% in November, by 0.3% in October, by 0.6% in September, by 0.6% in August, and by 0.3% last July, the composite price index of all goods less food and energy goods was 0.6% higher in April, while the more heavily weighted composite for all services less energy services was 0.4% higher....

Among the goods components of the core index, which will be used by the Bureau of Economic Analysis to adjust April’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.4% lower, as the price index for furniture other than bedroom, living room, kitchen, and dining room furniture fell 3.6%, the price index for major appliances fell 3.4%, the price index for dishes and flatware fell 2.2%, the price index for nonelectric cookware and tableware fell 1.7%, the price index for window coverings fell 1.9%, the price index for other household linens fell 2.2%, and the price index for indoor plants and flowers fell 1.5%...on the other hand, the apparel price index was 0.3% higher on a 2.2% increase in the price index for men's pants and shorts, a 1.7% increase in the price index for men's suits, sport coats, and outerwear, a 1.7% increase in the price index for women's outerwear, and an 0.8% increase in the price index for boys' and girls' footwear…at the same time, the price index for transportation commodities other than fuel was 1.5% higher, even as average prices for new cars fell 0.3%, as the price index for used cars and trucks rose 4.4%, the price index for motor oil, coolant, and fluids rose 2.6%, and the price index for vehicle parts and equipment other than tires was 1.0% higher…meanwhile, the price index for medical care commodities was 0.5% higher, as nonprescription drug prices rose 0.8% and the price index for medical equipment and supplies was 0.9% higher…at the same time, the recreational commodities index was 0.3% higher, as TV prices rose 0.3%, the price index for other video equipment rose 1.3%. the price index for audio equipment rose 1.1%, the price index for pet food rose 1.4%, the price index for recreational books rose 1.4%, the price index for toys, games, hobbies and playground equipment rose 0.6%, and the price index for sewing machines, fabric and supplies rose 7.2%….on the other hand, the education and communication commodities index was 0.2% lower on a 1.3% decrease in the price index for computers, peripherals, and smart home assistants, a 2.2% decrease in the price index for computer software and accessories, and a 0.5% decrease in the price index for educational books and supplies…lastly, a separate price index for alcoholic beverages was 0.5% higher, while the price index for ‘other goods’ was 0.2% higher on a 0.3% increase in the price index for cosmetics, perfume, bath, nail preparations and implements and an 0.8% increase in the price index for hair, dental, shaving, and miscellaneous personal care products...

Within core services, the price index for shelter was 0.4% higher as rents rose 0.6%, homeowner's equivalent rent was 0.5% higher, but prices for lodging away from home at hotels and motels fell 3.4%, while at the same time the shelter sub-index for water, sewers and trash collection services rose 0.3%, the price index for domestic services rose 6.9%, and the price index for moving, storage, freight expense was 1.0% higher…on the other hand, the price index for medical care services was 0.1% lower, even as the price index for hospital services was 0.5% higher as the price index for health insurance fell 3.8%… at the same time, the transportation services price index was 0.2% lower, as the price index for airline fares fell 2.6% and the price index for car and truck rental fell 3.2%, but the price index for motor vehicle insurance rose 1.7%…meanwhile, the recreation services price index was 0.7 higher, as the price index for video discs and other media rose 2.1%, the price index for veterinary services rose 3.2%, average fees for recreational lessons or instructions rose 5.0%, and the price index for admission to movies, theaters, and concerts rose 1.2%, while the price index for admission to sporting events fell 7.8%…at the same time, the price index for education and communication services was 0.1% higher, as the price index for day care and preschool rose 0.7% and postage rose 0.3%…lastly, the index for other personal services rose 1.5%, as the price index for laundry and dry cleaning services rose 0.5% and the price index for tax return preparation and other accounting fees was 6.4% higher..

Producer Prices Rose 0.2% in April on Higher Gasoline, Trade and Financial Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.2% in April, as average prices for wholesale goods rose 0.2%, and the price index for final demand for services was 0.3% higher....that increase followed an upwardly revised 0.4% decrease in March, when average prices for wholesale goods fell 1.0%, while the price index for final demand for services was 0.1% lower, an unchanged index in February, when average prices for finished wholesale goods fell 0.4% while final demand for services was 0.2% higher, a 0.4% increase in January, when average prices for finished wholesale goods rose 1.2% but final demand for services was unchanged, a 0.3% decrease in December, when average prices for finished wholesale goods fell 1.4%, but final demand for services was 0.2% higher, a 0.4% increase in November, when average prices for finished wholesale goods rose 0.3% and final demand for services was 0.4% higher, and a 0.3% increase in October, when prices for finished wholesale goods rose 0.4%, while final demand for services was 0.2% higher....on an unadjusted basis, producer prices are still 2.3% higher than a year ago, albeit down from the revised 2.7% year over year increase now indicated for March's producer price index, while the core producer price index, which excludes food, energy and trade services, rose by 0.2% for the month, and is 3.4% higher than it was a year ago, down from the reised 3.7% year over year core PPI increase that is now indicated for March...note that the BLS is now revising the PPI going back five months with every release, so the figures we'll cite for those months were revised, whether we note it or not..

As we noted, the producer price index for final demand for goods, which was previously aggregated as 'finished goods', was 0.2% higher in April, after being 1.0% lower in March, 0.4% lower in February, 1.2% higher in January, 1.4% lower in December, 0.3% higher in November, 0.4% higher in October, 0.5% higher in September, 0.8% lower in August, 1.6% lower in July, 2.1% higher in June, 1.4% higher in May, and 1.4% higher in April of last year, and hence is just up by 0.8% from a year ago....the final demand goods price index rose 0.2% in April as the price index for wholesale energy goods was 0.8% higher, after it had fallen by 6.0% in March, and by 0.8% in February, after rising by 5.4% in January and falling by 6.3% in December, while the price index for wholesale foods was 0.5% lower, after rising 0.3% in March but falling by 2.3% in February, by 1.3% in January, and by 0.9% in December, while the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher, after it had risen by 0.2% in March, by 0.3% in February, and by 0.6% in January...

Wholesale energy prices averaged 0.8% higher in April due to an 8.4% increase in wholesale prices for gasoline while all other major components of final demand energy were lower in price, while the final demand food price index was 0.5% lower on a 35.8% decrease in the wholesale price index for eggs for fresh use, an 8.4% decrease in the wholesale price index for pasta products, an 8.3% decrease in the wholesale price index for processed young turkeys, and a 6.7% decrease in the wholesale price index for pork....among core wholesale goods, the wholesale price index for iron and steel scrap increased 3.9%, the wholesale price index for jewelry, platinum and karat gold rose 1.4%, and the wholesale price index for transformers and power regulators rose 1.6%...

Meanwhile, the price index for final demand for services was was 0.3% higher in April, after being 0.1% lower in March, 0.2% higher in February, unchanged in January, but after rising by a revised 0.2% in December, by 0.4% in November, by 0.2% in October, by 0.2% in September, by 0.5% in August, by 0.3% in July, 0.3% in June, and by 0.4% in May, and is now 3.0% higher than a year ago, up from the 2.8% year over year increase shown in March, but down from the record 9.2% year over year increase that was reported for March of 2022....the price index for final demand for trade services rose 0.5%, but the price index for final demand for transportation and warehousing services fell 1.7%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.4% higher....among trade services, seasonally adjusted margins for major household appliance retailers rose 3.3%, margins for flooring and floor coverings retailers rose 3.2%, margins for cleaning supplies and paper products retailers rose 4.2%, and margins for apparel wholesalers rose 4.4%, but margins for professional and commercial equipment wholesalers fell 4.7%....among transportation and warehousing services, average margins for truck transportation of freight fell 1.7% and margins for airline passenger services fell 2.9%....among the components of the core final demand for services index, the price index for portfolio management rose 4.1%, the price index for passenger car rental rose 2.5%, the price index for consumer loans rose 2.3%, and margins for arrangement of cruises and tours rose 2.2%, but the price index for the price index for gaming receipts fell 1.6%...

This report also showed the price index for intermediate processed goods fell 0.4% in April , after falling 0.9% by in March, by 0.5% in February, but after rising by 1.1% in January, after falling by 2.5% in December, by 0.5% in November, by 0.2% in October and by 0.1% in September, after falling by 1.2% in August and by 2.1% in July, but after rising by 1.9% in June, by 2.2% May, and by 2.0% in April of last year....the price index for intermediate energy goods fell 2.3% in April even though refinery prices for gasoline rose 8.4%, as refinery prices for diesel fuel fell 6.5%, refinery prices for jet fuel fell 13.2%, producer prices for liquefied petroleum gas fell 5.9%, producer prices for commercial natural gas fell 6.5%, and producer prices for industrial natural gas fell 7.2%... at the same time, the price index for intermediate processed foods and feeds fell 1.2%, as the producer price index for fats and oils fell 5.2%, the producer price index for meats fell 3.2%, and the producer price index for processed poultry fell 2.2%...however, the core price index for intermediate processed goods less food and energy goods rose 0.3%, as the producer price index for asphalt rose 12.0%, the producer price index for softwood lumber rose 6.2%, the producer price index for fluid power equipment rose 6.6%, the producer price index for steel mill products rose 3.6%, and the producer price index for nitrogenates rose 9.9%....average prices for intermediate processed goods are now 3.2% lower than in April 2022, just the second decrease since 2020, and are way down from their 26.6% year over year increase of November 2021, which had been a 46 year high...

At the same time, the price index for intermediate unprocessed goods fell 5.0% in March, after falling by 4.1% in March, by 4.8% in February and by 4.6% in January. after rising 1.5% in December, after falling by 3.1% in November, by 9.7% in October, and by 3.1% in September...that was as the March price index for crude energy goods rose 5.2%, as unprocessed natural gas prices fell 20.1%, crude oil prices rose 14.2%, and coal prices were 1.3% higher...on the other hand, the price index for unprocessed foodstuffs and feedstuffs was 1.4% lower, led by a 15.3% decrease in producer prices for hay and hayseeds, a 2.7% decrease in producer prices for raw milk, a 2.4% decrease in producer prices for slaughter turkeys, and a 8.0% decrease in producer prices for slaughter hogs....meanwhile, the index for core raw materials other than food and energy materials was 1.8% higher on a 6.7% increase in the price index for recyclable paper and a 3.9% increase in the price index for iron and steel scrap....this raw materials price index is now 19.2% lower than a year ago, just the third negative print after twenty-seven consecutive year over year increases, which came after the annual change on this index had been negative from the beginning of 2019 through October of 2020...

Lastly, the price index for services for intermediate demand was 0.7% higher in April, after being 0.2% lower in March, 0.3% higher in February, 1.0% higher in January, after being unchanged in December, 0.8% higher in November, 0.4% higher in October, 0.5% higher in September, 0.6% higher in August, and 0.3% higher last July….the price index for intermediate trade services rose 1.5%, as margins for paper and plastics products wholesalers rose 2.5%, margins for intermediate food wholesalers rose 4.4%, and margins for metals, minerals, and ores wholesalers rose 1.2%....on the other hand, the index for transportation and warehousing services for intermediate demand was 0.8% lower, as the intermediate price index for arrangement of freight and cargo fell 3.4%, the intermediate price index for transportation of passengers fell 2.9%, and the intermediate price index for truck transportation of freight fell 1.7%....however, the core price index for intermediate services other than trade, transportation, and warehousing services was 0.8% higher, as the intermediate price index for television advertising time sales rose 2.9%, the intermediate price index for business loan services rose 1.8%, the intermediate price index for portfolio management rose 4.1%, and the intermediate price index for nonresidential real estate rents rose 2.4%...over the 12 months ended in April, the year over year price index for services for intermediate demand is 4.5% higher than it was a year ago, the thirtieth consecutive annual increase in this index change after it briefly turned negative year over year at the onset of the pandemic, from April to August of 2020, while it is still lower than the record 9.5% year over year increase indicated for July 2021...

March Wholesale Sales Fell 2.1%, Wholesale Inventories Unchanged

The March report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$ $655.3 billion, down 2.1 percent (±0.5 percent) from the revised February level and ... down 2.9 percent (±0.9 percent) from the revised March 2022 level"... the February preliminary estimate of wholesale sales was revised from the $669.5 billion reported last month to $669.3 billion, which the Census reports as " unrevised from the preliminary estimate of up 0.4 percent (±0.4 percent)*." from January...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold..

On the other hand, the monthly change in private inventories is a major factor in GDP, since additional goods sitting in a warehouse represent goods that were produced but not sold, and this March report estimated that wholesale inventories were valued at "$918.5 billion at the end ofMarch, virtually unchanged (±0.2 percent)* from the revised February level. Total inventories were down 9.1 percent (±0.9 percent) from the revised March 2022 level.", with the February preliminary inventory estimate concurrently revised upward from the originally reported $919.2 billion to $918.8 billion, which meant the change in inventories from January to February was revised from the increase of 0.1 percent (+/-0.2%)* reported last month to virtually unchanged (±0.2 percent)* from January.…

In the advance report on 1st quarter GDP of two weeks ago, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted wholesale inventories were valued at $919.9 billion at the end of March, up from $919.0 billion in February...that's a net $1.6 billion more than the $918.5 billion and $918.8 billion that this report shows, which would imply that the quarterly change in 4th quarter wholesale inventories was overestimated at roughly a $6.4 billion annual rate in the GDP report....assuming there's no distortion caused by reweighting the inflation adjustments to those inventories, that would mean that the growth rate of 1st quarter GDP was overestimated by around 0.10 percentage points based on what this report shows...

 

 

(the above is the synopsis that accompanied my regular sunday morning news 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 of which are picked from the aforementioned GGO posts, contact me…)  

Monday, May 8, 2023

April’s jobs report; March's trade deficit, construction spending, factory inventories and JOLTS

Major economic reports released the past week include the Employment Situation Summary for April and the Job Openings and Labor Turnover Survey (JOLTS) for March, both from the Bureau of Labor Statistics, and three March reports that include metrics which were estimated in last week's advance estimate of 1st quarter GDP: the Commerce Dept report on our international trade in goods and services for March, and the March report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for March, both from the Census Bureau....in addition, the Fed released the Consumer Credit Report for March on Friday of this week, and it showed that overall consumer credit, a measure of non-real estate debt, had grown by a seasonally adjusted $26.5 billion in March, or at a 6.6% annual rate, as non-revolving credit expanded at a 3.0% annual rate to $3,611.1 billion, while revolving credit outstanding grew at a 17.3% rate to $1,239.5 billion..

Privately issued reports released this week included the ADP Employment Report for April and the light vehicle sales report for April from Wards Automotive, which estimated that vehicles sold at a 15.91 million annual rate in April, up from the 14.82 million annual sales rate in March, and up from the 14.29 million annual sales rate in April a year ago, and both of the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the April 2023 Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 47.1% in April, up from 46.3% in March, which suggests that a smaller plurality of purchasing manufacturing managers saw worse conditions during the month, while the April 2021 Services ISM® Report On Business reported their Services Index rose to 51.9% in April, up from 51.2% in March, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in April...

Employers Added 253,000 Jobs in April After 149,000 Downward Revision to Prior Months; Unemployment Rate Matches 53 Year Low

The Employment Situation Summary for April indicated payroll job growth continued at a modest pace, while the unemployment rate fell back to match the 53 year low hit in January…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 253,000 jobs in April, after the previously estimated payroll job increase for March was revised down from 236,000 to 165,000 and the payroll jobs increase for February was revised down from 326,000 to 248,000…including those revisions, this report thus represents a net of just 104,000 more seasonally adjusted payroll jobs than were reported last month, below expectations for an increase of 178,000 jobs in this month's report....the unadjusted data shows that there were actually 892,000 more payroll jobs extant in April than in March, as the usual seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were normalized by the seasonal adjustments…

Seasonally adjusted job increases in March were spread through both the goods producing and the service sectors and government, with no major sector showing a job loss...since the BLS summary of the job gains by sector is clear and more detailed than our usual synopsis, we'll just quote that summary here:

  • In April, employment continued to trend up in professional and business services (+43,000). Over the prior 6 months, the average monthly gain in the industry was 25,000. In April, professional, scientific, and technical services added 45,000 jobs. Employment in temporary help services continued to trend down over the month (-23,000) and is down by 174,000 since its peak in March 2022.
  • Employment in health care increased by 40,000 in April, compared with the average monthly gain of 47,000 over the prior 6 months. Over the month, employment continued to trend up in ambulatory health care services (+24,000), nursing and residential care facilities (+9,000), and hospitals (+7,000).
  • Employment in leisure and hospitality continued to trend up in April (+31,000), largely in food services and drinking places (+25,000). Leisure and hospitality had added an average of 73,000 jobs per month over the prior 6 months. Employment in this industry remains below its pre-pandemic February 2020 level by 402,000, or 2.4 percent.
  • In April, social assistance added 25,000 jobs, in line with the average monthly gain of 21,000 over the prior 6 months. Individual and family services added 21,000 jobs over the month.
  • Employment in financial activities increased by 23,000 in April, with gains in insurance carriers and related activities (+15,000) and in real estate (+9,000). Employment in financial activities changed little in the first 3 months of this year.
  • Government employment continued its upward trend in April (+23,000). Government had added an average of 52,000 jobs per month over the prior 6 months. Overall, employment in government is below its February 2020 level by 301,000, or 1.3 percent.
  • Employment in mining, quarrying, and oil and gas extraction rose by 6,000 in April and has risen by 102,000 since a recent low in February 2021. Nearly all of the April job gain occurred in support activities for mining.
  • Employment was little changed over the month in other major industries, including construction, manufacturing, wholesale trade, retail trade, transportation and warehousing, information, and other services.

The establishment survey also showed that average hourly pay for all employees rose by 16 cents an hour to $33.36 an hour in April, after it had increased by a revised 11 cents an hour in March; at the same time, the average hourly earnings of production and non-supervisory employees increased by 11 cents to $28.62 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in April, after tenth of an hour decreases in February and March, while hours for production and non-supervisory personnel fell by 0.1 hour to 33.8 hours, and is now down from 34.4 hours in January ...the manufacturing workweek also fell by 0.1 hour to 40.2 hours, even as average factory overtime remained unchanged at 2.9 hours...

At the same time, the April household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 139,000 to 161,031,000, while the similarly estimated number of those counted as unemployed fell by 182,000 to 5,657,000; which together meant there was a net 43,000 decrease in the total labor force....since the working age population had grown by 171,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 214,000 to 99,755,000... meanwhile, the decrease of those in the labor force was not large enough, when compared to the civilian noninstitutional population, to change the labor force participation rate, as it remained at 62.6% in April....at the same time, the increase in number employed as a percentage of the increase in the population was also not enough to change the employment to population ratio, which we could think of as an employment rate, and which remained at 60.4% in April....however, the decrease in the number unemployed was large enough to lower the unemployment rate from 3.5% in March to match January’s 53 year low of 3.4% in April....meanwhile, the number who reported they were involuntarily working part time fell by 199,000 to 3,903,000 in April, which was enough to lower the alternative measure of unemployment, U-6, which includes both discouraged workers and those "employed part time for economic reasons", from 6.7% in March to 6.6% in April...

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 alongside the press release to avoid the need to scroll up and down the page..

Job Openings and Job Quitting Fell in March; Layoffs Rose, Hiring was Flat

The Job Openings and Labor Turnover Survey (JOLTS) report for March from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 384,000 to 9,590,000 in March, after February's job openings were revised up to 9,974,000 from the originally reported 9,931,000 ...March's jobs openings were also down 20.3% from the 12,027,000 job openings reported in March a year ago, as the job opening ratio expressed as a percentage of the employed fell to 5.8% in March, down from a revised 6.0% rate in February, and down from the 7.4% rate of March a year ago...since the employment report indicated there were 5,839,000 unemployed during March, that means there were still 1.64 job openings for each person who reported they were unable to find work during the month....the transportation, warehousing, and utilities sector, with a 144,000 job opening decrease to 435,000 openings, saw the largest percentage decrease, while job openings in educational services increased by 28,000 to 212,000..(details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked 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 March, seasonally adjusted new hires totaled 6,149,000, down by 1,000 from the revised 6,150,000 who were hired or rehired in February, as the hiring rate as a percentage of all employed remained unchanged at 4.0% in March, while it was down from the 4.3% the hiring rate in March a year ago (details of hiring by sector since November are in table 2)....meanwhile, total separations rose by 91,000 to 5,932,000 in March, as the separations rate as a percentage of the employed was unchanged at 3.8%, which was down from the separations rate of 4.1% a year ago (see table 3)...subtracting the 5,932,000 total separations from the total hires of 6,149,000 would imply an increase of 217,000 jobs in March, somewhat more than the revised payroll job increase of 165,000 jobs for March reported by the April establishment survey, but still well within the expected +/-130,000 margin of error for these incomplete job samplings....

Breaking down the seasonally adjusted job separations, the BLS found that 3,851,000 of us voluntarily quit our jobs in March, down by 129,000 from the revised 3,980,000 who quit their jobs in February, while the quits rate, widely watched as an indicator of worker confidence, fell to 2.5% in March from 2.6% in February, and was down from the quits rate of 2.9% a year earlier (see details of job quitting by industry in table 4)....in addition to those who quit, another 1,805,000 were either laid off, fired or otherwise discharged in March, up by 248,000 from the revised 1,557,000 who were discharged in February, while the discharges rate rose 0.2% to 1.2% of all those who were employed during the month, which was also up from the discharges rate of 0.9% a year ago (see details of layoffs by industry in table 5)...meanwhile, other separations, which includes retirements and deaths, were at 276,000 in March, down from 304,000 in February, for an 'other separations rate’ of 0.2%, same as in February and in March of last year....both seasonally adjusted and the 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...

US Trade Deficit Fell 9.1% in March on Higher Exports and Lower Imports of Energy Goods

Our trade deficit fell 9.1% in March, as the value of our exports increased while the value of our imports decreased...the Commerce Department's report on our international trade in goods and services for March indicated that our seasonally adjusted goods and services trade deficit fell by $6.4 billion to $64.2 billion in March, from a February deficit that was revised from the originally reported $70.5 billion to $70.6 billion...in rounded totals, the value of our March exports rose by $5.3 billion to $256.2 billion on a $5.2 billion increase to $174.3 billion in our exports of goods and a $0.1 billion increase to $81.8 billion in our exports of services, while the value of our imports fell by $1.1 billion to $320.4 billion, as a $1.2 billion decrease to $260.9 billion in our imports of goods was slightly offset by a $0.1 billion increase to $59.5 billion in our imports of services....export prices averaged 0.3% lower in March, which means the relative real increase in exports for the month was greater than the nominal increase by that percentage and thus likely increased by around 2.4%, while import prices averaged 0.6% lower, meaning the decrease in real imports was largely due to lower prices and that real imports likely rose around 0.3%...

Our exports of goods were $5.2 billion higher in March largely due to greater exports of industrial supplies and materials and of automotive vehicles, parts, and engines, which were partly offset by lower exports of foods and feeds.... referencing the Full Release and Tables for March (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $3,861 million to $64,757 million on a $2,543 million increase in our exports of crude oil, a $1,094 million increase in our exports of fuel oil, a $625 million increase in our exports of natural gas liquids, a $508 million increase in our exports of natural gas, and a $420 million increase in our exports of petroleum products other than fuel oil, which were partly offset by a $978 million decrease in our exports of non-monetary gold, while our exports of automotive vehicles, parts, and engines rose by $659 million to $14,426 million on a $358 million increase in our exports of passenger cars....In addition, our exports of consumer goods rose by $310 million to $22,288 million as a $1,369 million increase in our exports of pharmaceutical preparations was offset by a $550 million decrease in our exports of gem diamonds, our exports of capital goods rose by $173 million to $49,235 million, as a $711 million increase in our exports of civilian aircraft was offset by a $301 million decrease in our exports of industrial machinery not otherwise itemized, and our exports of other goods not categorized by end use rose by $591 million to $7,767 million....partly offsetting the increased exports in those end use categories, our exports of foods, feeds and beverages fell by $550 million to $14,280 million on a $482 million decrease in our exports of soybeans..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of capital goods and industrial supplies and materials were responsible for the March decrease in imports, but that their impact was diminished by greater imports of consumer goods....our imports of capital goods fell by $1,911 million to $71,593 million on a $636 million decrease in our imports of semiconductors, a $594 million decrease in our imports of electric apparatuses, and a $505 million decrease in our imports of excavating machinery, while our imports of industrial supplies and materials fell by $1,428 million to $57,855 million as a $911 million decrease in our imports of petroleum products other than fuel oil, a $571 million decrease in our imports of fuel oil, a $508 million decrease in our imports of organic chemicals, and a $431 million decrease of in our imports of crude oil were offset by a $1269 million increase in our imports of finished metal shapes and a $691 million increase in our imports of copper...at the same time, our imports of automotive vehicles, parts and engines fell by $157 million to $35,190 million and our imports of other goods not categorized by end use fell by $408 million to $10,712 million...offsetting the decreased imports in those end use categories, our imports of consumer goods rose by $2,355 million to $65,860 million on a $763 million increase in our imports of pharmaceutical preparations, a $568 million increase in our imports of textile apparel and household goods other than those of wool or cotton, a $437 million increase in our imports of household appliances, and a $408 million increase in our imports of cotton apparel and household goods, offset by a $1,550 million decrease in our imports of cellphones, while our imports of foods, feeds, and beverages rose by $153 million to $17,090 million on increased imports of fish and shellfish, and wine, beer, and related products..

The press release for this month's report summarizes Exhibit 19 in the full release pdf for March, which gives us surplus and deficit details on our goods trade with selected countries:

The March figures show surpluses, in billions of dollars, with South and Central America ($5.7), Netherlands ($4.0), Belgium ($2.1), Australia ($1.7), Hong Kong ($1.6), United Kingdom ($1.2), and Brazil ($1.1). Deficits were recorded, in billions of dollars, with China ($22.9), European Union ($15.6), Mexico ($11.6), Canada ($7.7), Vietnam ($7.5), Germany ($6.3), Japan ($5.9), Ireland ($5.7), Italy ($4.0), South Korea ($3.6), Taiwan ($3.6), India ($3.1), Malaysia ($2.8), Switzerland ($2.1), France ($0.9), Israel ($0.5), Saudi Arabia ($0.4), and Singapore ($0.2).

  • The deficit with the European Union decreased $2.6 billion to $15.6 billion in March. Exports increased $1.7 billion to $31.8 billion and imports decreased $0.8 billion to $47.3 billion.
  • The deficit with China decreased $2.3 billion to $22.9 billion in March. Exports increased $1.3 billion to $14.4 billion and imports decreased $0.9 billion to $37.3 billion.
  • The deficit with Canada increased $2.0 billion to $7.7 billion in March. Exports decreased $1.1 billion to $28.3 billion and imports increased $0.9 billion to $36.1 billion.

In the advance estimate of 1st quarter GDP published last week, our March trade deficit in goods was estimated based on the sketchy Advance Report on our International Trade in Goods, which was released the day before the GDP release...that report estimated that our seasonally adjusted goods trade deficit was at $84,576 million on a Census basis in March, on goods exports of $172,732 million and goods imports of $257,308 million...in Exhibit 5, this report revises that advance report and shows that our actual Census basis goods trade deficit in March was at $85,548 million, on adjusted goods exports of $172,753 million and adjusted goods imports of $260,902 million...at the same time, the February goods trade deficit was revised from the $91,987 million indicated in that advance report to $92,976 million…combined, those revisions from the previously published figures indicate that the nominal trade in goods deficit used in the first quarter GDP report was $1,961 million too low, which works out to be around $7.9 billion short on an annualized basis...in the advance GDP report, a $7.9 billion nominal change in goods trade worked out to a $11.3 billion change in inflation adjusted goods trade, and hence the revision to our trade in goods indicated by this report would indicate a 0.18 percentage point subtraction from 1st quarter GDP when the 2nd estimate is released at the end of May...

However, for services, the BEA's Key source data and assumptions (xls) for the advance estimate of first quarter GDP provides aggregate exports and imports of services at annual rates on an international-transactions-accounts basis, indicating that the BEA assumed a $6.2 billion decrease in exports of services and a $7.6 billion decrease in imports of services in March on that basis...while there is no comparable annualized metric or adjusted data in this report that we could match that to, this release does show that exports of services rose $0.1 billion in March after February exports of services were revised $0.2 billion lower, and that imports of services also rose $0.1 billion in March after February imports of services were also revised $0.2 billion lower...that suggests that the annual rate for March exports of services used in the GDP report was on the order of $5 billion too low, while the annual rate for March imports of services used in the GDP report was about $6.4 billion too low...revising those annualized figures, and annualizing the monthly services trade revisions for February vis a vis those reported, the annual rate for 1st quarter services exports would be revised about $2.6 billion higher, while the annual rate for 1st quarter services imports would be revised about $4.0 billion higher...the resulting upward revision of ~$1.4 billion to our total services deficit would be enough to subtract about 0.03 percentage points from 1st quarter GDP, with an obvious caveat based on our very crude conversion of monthly figures given in this report to the annualized figure used in national accounts would result in a large margin of error...

Construction Spending Rose 0.3% in March after Prior Months Were Revised Lower

The Census Bureau's report on construction spending for March (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,834.7 billion annually if extrapolated over an entire year, which was 0.3 percent (±0.5%)* above the revised annualized February estimate of $1,829.6 billion, and 3.5 percent (±1.2 percent) above the estimated annualized level of construction spending in March of last year...Census also reports that for the first three months of this year, construction spending has totaled $403.3 billion, 4.3 percent (±1.0 percent) above the $386.7 billion spent during the same three months of 2021... the annualized February construction spending estimate was revised 0.8% lower, from $1,844.1 billion to $1,829.6 billion, while the annual rate of construction spending for January was revised 0.6% lower, from $1,845.4 billion to $1,835.5 billion, which revised the February construction spending decrease from -0.1% to -0.3%..

A further breakdown of the different subsets of construction spending is provided by a Census Bureau summary, which precedes the more detailed spreadsheets, and which we include below:

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,435.1 billion, 0.3 percent (±0.5 percent)* above the revised February estimate of $1,430.8 billion. Residential construction was at a seasonally adjusted annual rate of $827.7 billion in March, 0.2 percent (±1.3 percent)* below the revised February estimate of $829.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $607.4 billion in March, 1.0 percent (±0.5 percent) above the revised February estimate of $601.6 billion.
  • Public Construction: In March, the estimated seasonally adjusted annual rate of public construction spending was $399.6 billion, 0.2 percent (±1.0 percent)* above the revised February estimate of $398.8 billion. Educational construction was at a seasonally adjusted annual rate of $86.9 billion, 0.7 percent (±1.8 percent)* above the revised February estimate of $86.3 billion. Highway construction was at a seasonally adjusted annual rate of $121.7 billion, 0.1 percent (±2.6 percent)* below the revised February estimate of $121.8 billion.

With the large downward revisions to January and February figures, construction spending for all three months of the 1st quarter was lower than was reported by the BEA in their advance estimate of GDP that we covered last week...as we saw above, annualized construction spending for January was revised $9.9 billion lower, and annualized construction spending for February was revised $14.5 billion lower....in reporting 1st quarter GDP, the BEA's key source data and assumptions (xls) indicated that they had estimated March residential construction would be $4.4 billion less (at an annual rate) than that of the previously reported February figure, that March nonresidential construction would be valued $5.0 billion more than that of the reported February figure, and that March public construction would increase by $0.6 billion from previously reported February levels...totaling those figures, the 1st quarter GDP report used figures showing March construction spending to be at an annual rate $1.2 billion higher than previously reported February levels...since this report shows that March construction spending actually rose at an $5.1 billion annual rate from February figures that were revised $14.5 billion lower, that means the total annualized construction figure used for March in the GDP report was $10.6 billion too high....averaging that overstatement with the the overstatements in the annual rates of construction spending used for January and February in the GDP report, we thus find that this report shows that construction spending was overestimated at an $11.7 billion annual rate in the 1st quarter GDP report, implying a downward revision to the related GDP components at a rate that would result in a subtraction of about 0.13 percentage points from first quarter GDP when the 2nd estimate is released on May 25th...we should caution that since our estimate is based on the aggregate change in spending, an imbalance of inflation adjustments among the revised construction components might also have a material impact on the final revision...

Value of Factory Shipments Fell 0.1% in March, Value of Factory Inventories Fell 0.8%

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for March from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $4.9 billion or 0.9 percent to $539.0 billion in March, following a decrease of $6.2 billion or 1.1% to $534.1 billion in February, which was revised from the decrease of $3.9 billion or 0.7 percent to $536.4 billion that was reported for February 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 reliable as revised updates to the March advance report on durable goods which was released last week...on those durable goods orders revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in March, up following two consecutive monthly decreases, increased $4.9 billion or 0.9 percent to $539.0 billion, the U.S. Census Bureau reported today. This followed a 1.1 percent February decrease. Shipments, down four of the last five months, decreased $0.6 billion or 0.1 percent to $539.9 billion. This followed a 0.9 percent February decrease. Unfilled orders, up thirty of the last thirty-one months, increased $4.2 billion or 0.4 percent to $1,159.7 billion. This followed a 0.1 percent February decrease. The unfilled orders-to-shipments ratio was 6.04, down from 6.11 in February. Inventories, down three consecutive months, decreased $6.2 billion or 0.8 percent to $799.4 billion. This followed a 0.2 percent February decrease. The inventories-to-shipments ratio was 1.48, down from 1.49 in February.
  • New orders for manufactured durable goods in March, up following two consecutive monthly decreases, increased $8.5 billion or 3.2 percent to $276.2 billion, unchanged from the previously published increase. This followed a 1.2 percent February decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $8.1 billion or 9.0 percent to $97.3 billion. New orders for manufactured nondurable goods decreased $3.7 billion or 1.4 percent to $262.8 billion. S
  • Shipments of manufactured durable goods in March, up following two consecutive monthly decreases, increased $3.0 billion or 1.1 percent to $277.1 billion, unchanged from the previously published increase. This followed a 0.8 percent February decrease. Transportation equipment, also up following two consecutive monthly decreases, drove the increase, $3.3 billion or 3.7 percent to $93.2 billion. Shipments of manufactured nondurable goods, down four of the last five months, decreased $3.7 billion or 1.4 percent to $262.8 billion. This followed a 1.0 percent February decrease. Petroleum and coal products, also down four of the last five months, drove the decrease, $3.8 billion or 7.1 percent to $50.2 billion.
  • Unfilled orders for manufactured durable goods in March, up thirty of the last thirty-one months, increased $4.2 billion or 0.4 percent to $1,159.7 billion, unchanged from the previously published increase. This followed a 0.1 percent February decrease. Transportation equipment, up twenty-two of the last twenty-three months, led the increase, $4.0 billion or 0.6 percent to $687.8 billion.
  • Inventories of manufactured durable goods in March, down two of the last three months, decreased $4.2 billion or 0.9 percent to $488.8 billion, unchanged from the previously published decrease. This followed a 0.1 percent February increase. Transportation equipment, also down two of the last three months, drove the decrease, $4.3 billion or 2.7 percent to $154.2 billion. Inventories of manufactured nondurable goods, down eight of the last nine months, decreased $2.0 billion or 0.6 percent to $310.5 billion. This followed a 0.6 percent February decrease. Petroleum and coal products, down four of the last five months, drove the decrease, $2.4 billion or 4.8 percent to $46.6 billion. By stage of fabrication, March materials and supplies increased 0.2 percent in durable goods and decreased 1.1 percent in nondurable goods. Work in process decreased 2.4 percent in durable goods and 1.1 percent in nondurable goods. Finished goods decreased 0.2 percent in both durable and nondurable goods.

The BEA's Key source data and assumptions (xls) for the advance estimate of first quarter GDP indicates on line 151 that they had estimated that the value of manufactured nondurable goods inventories would decrease by $1.7 billion on a Census basis (ie, before price adjustments) in March, while this report obviously shows total non-durable goods factory inventories increased by $2.0 billion...the change in the value of February's non durable goods factory inventories was revised from -$1.6 billion to -$1.7 billion...hence, the first quarter's inventory decrease was underestimated by $0.4 billion in the GDP report, which would work out to around $1.6 billion in current dollars on an annualized basis, and somewhat greater than that on an inflation adjusted, 2012 dollar basis...that would suggest that 1st quarter GDP would have to be revised downwards by around 0.03 percentage points to account for what this report shows....

 

 

(the above is the synopsis that accompanied my regular sunday morning news 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 of which are picked from the aforementioned GGO posts, contact me…)