note on the graphs used here

sometime during the third week of March, the St Louis Fed, home to the FRED graphs, changed their graphs to an interactive format, which apparently necessitated eliminating some of the incompatible options which we had used in creating our static graphs, and also left us with less options we had available and used before the upgrade...as a result, many of the FRED graphs we've included on this website previous to that date, all of which were all stored at the FRED site and which we'd always hyperlinked back there, were reformatted, which in many cases changed our bar graphs to line graphs, and some cases rendered them unreadable... however, you can still click the text links we've always used in referring to them to view versions of our graphs as interactive graphs on the FRED site, or in the case where an older graph has gone missing, click on the blank space where it had been in order to view it in the new format....





Sunday, December 14, 2014

November’s retail sales and producer prices, October’s inventories and job openings

the key release this week was on retail sales for November from the Census Bureau; in addition, there were also two Census reports on October wholesale and business inventories, giving us the first look at what impact that the change in inventories might have on fourth quarter GDP...we also saw the Producer Price Index for November and the Job Openings and Labor Turnover Survey (JOLTS) for October, both of which were from the Bureau of Labor Statistics...

Retail Sales Rise 0.7% in November; October Increase Revised to + 0.5%

the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our total seasonally adjusted retail and food services sales were at $449.3 billion in November, which was an increase of 0.7% (±0.5%) from the revised October sales of $446.1 billion, and 5.1% (±0.9%) above sales in November of last year....October's seasonally adjusted sales were originally reported at $444.5 billion, and with that upward revision the percentage change from September October was revised from +0.3 percent (±0.5%)* to +0.5 percent (±0.2%)...thus, for the first two months of the fourth quarter, retail sales have grown by 1.2%, or at a 7.6% annual rate, suggesting a strong contribution from goods to 4th quarter personal consumption expenditures, which account for 23% of GDP....estimated unadjusted sales in November, extrapolated from surveys of a small sampling of retailers, indicated sales rose to $443,832 million in November from $441,814 million in October, and up from the $429,408 million of sales in November a year ago, a 3.36% year over year increase which suggests an aberration in the seasonal adjustment, likely due to the lessening influence of recession data on the basis..

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

November 2014 retail sales table

looking at the details for November sales in the first column above, it's fairly clear that the seasonally adjusted 1.7% increase in motor vehicle and parts sales to $91,929 million was a major reason for the stronger than expected headline increase for the month, but even excluding motor vehicles and parts, retail sales rose 0.5% to $357,353 million...other than automotive products, November's retail sales were stronger than October's for building material and garden supply stores, where sales rose 1.4% to $28,086 million, for clothing stores, where sales rose by 1.2% to $21,458 million; for non-store retailers, where sales rose by 1.0% to $41,256 million, for electronics and appliance stores, where sales rose 0.9% to $9,374 million; for drug stores, where sales rose 0.8% to $25,511 million, for bars and restaurant, where sales rose 0.7% to $49,351 million, for furniture stores, where sales rose 0.5% to $8,551 million, and for general merchandise stores, where sales also rose by 0.5% to $56,050 million...the only business types that saw seasonally adjusted sales fall in November were gas stations, where sales fell 0.8% to $43,578 million, and miscellaneous store retailers, where sales fell 1.7% to $10,032 million...

looking at the revisions to October sales in the table above and comparing them to the table from the advance report for October sales as released last month, we find that a large factor in the revision of October's sales from an increase of 0.3% to an increase of 0.5% was the revision of sales of motor vehicles and parts, from the previously reported increase of 0.5% to an increase of 0.8%, with car dealers specifically seeing a 0.9% increase; but even so, October's sales without automotive sales are still now up 0.5% vs the previously reported 0.3% increase..other retail businesses seeing sizable upward revisions to last months sales included the miscellaneous store category, where October sales were revised from an increase of 0.5% to a 1.3% jump, sales at specialty stores, ie, sporting goods, book and music stores, which have been revised from an increase of 1.2% to an increase of 1.8%; sales at electronic and appliance stores, which were revised from a drop of 1.6% to a decrease of 1.0%, sales at restaurants and bars, who saw sales rise 1.4% rather than the 0.9% first reported, and sales at furniture stores, which were revised from the original 0.2% gain to an increase of 0.7%...meanwhile, sales at drug stores increased by just 0.2%, not the 0.7% first reported, while October sales at non-store retailers were revised down from a 1.9% jump to an increase of 1.6%...

Producer Prices Fall 0.2% in November; Intermediate and Raw Goods Lower on the Year

the November report on the Producer Price Index from the Bureau of Labor Statistics showed that the seasonally adjusted producer price index for final demand fell by 0.2%, after rising 0.2% in September and falling 0.1% in August, reducing the year over year increase in the index to 1.4%, the lowest year over year reading since February...lower prices overall were led by the price index for final demand for goods, aka 'finished goods', which fell by 0.7% after falling 0.4% in October, 0.2% in September and 0.3% in August, as the price index for final demand for energy fell 3.1%, driven by a 6.5% drop in the wholesale price of LP gas and a 6.3% drop in wholesale gasoline prices...the price index for final demand for foods was 0.2% lower, as 11.0% higher prices for wholesale fresh vegetables and 10.6% higher priced oilseeds offset lower prices in other foods, including a 8.7% drop in wholesale pork products...even the index for final demand for core goods fell by 0.1% in November, as prices for industrial chemicals were 3.3% lower...meanwhile, the index for final demand for services rose by 0.1%, even though the index for final demand for transportation and warehousing services fell 0.8%, as the index for final demand for trade services and the index for final demand for services less trade, transportation, and warehousing services both rose 0.1%...

this report also showed the price index for processed goods for intermediate demand fell by 1.0%, the largest decrease since a 1.1% decline in March of 2013, and is now negative for the year, as prices for intermediate processed energy goods fell 3.4%, while prices for intermediate processed foods and feeds fell 0.3% and even core intermediate producer prices were 0.5% lower as intermediate materials used in nondurable manufacturing were priced 2.2% lower....in addition, the price index for intermediate unprocessed goods fell by 1.3% after falling 2.4% in October and is now 1.6% below the level of a year ago, on a 3.7% drop in the index for raw energy materials and a 1.6% drop in prices for unprocessed nonfood materials less energy, while producer prices for for unprocessed foods and feeds rose by 0.9%......finally, the price index for services for intermediate demand rose 0.3% in November, as a 0.3% decrease in the index for  transportation and warehousing services for intermediate demand was offset by a 0.4% decrease in prices for intermediate services less trade, transportation, and warehousing, while prices for trade services for intermediate demand were unchanged...over the 12 months ended in November, the price index for services for intermediate demand rose 1.5%...

October Wholesale Inventories Increase 0.4%; Overall Business Inventories Rise 0.2%

the first release on inventories we saw this week was the Wholesale Trade, Sales and Inventories Report for October from the Census Bureau, which estimated that seasonally adjusted sales of wholesale merchants rose 0.2 percent (+/-0.9)* to $454.6 billion from the revised September estimate of $453.7 billion, and were up 4.3% (+/-1.6%) from October a year earlier...the September preliminary sales estimate was revised down by $0.6 billion or 0.1%, and hence was statistically unchanged from August....October wholesale sales of durable goods were up 0.8 percent (+/-1.2%)* over September and were up 6.0 percent (+/-1.4%)* from October a year ago, as wholesale electrical and electronics sales rose 1.9% while wholesale automotive sales fell 1.1%...seasonally adjusted sales of nondurable goods were down 0.3% (+/-1.1%)* from September but were up 2.8 percent  (+/-2.5%) from last October as wholesale sales of farm products rose 8.0% while wholesale sales of petroleum and petroleum products fell 5.8%...note that the asterisks indicate that Census does not yet have sufficient statistical evidence to determine whether sales actually rose of fell for the periods indicated....this release also reported that seasonally adjusted wholesale inventories were valued at $542.0 billion at the end of October, 0.4% (+/-0.4%)* higher than the revised September level and  6.8% (+/-1.1%) above last October's level, while September's preliminary inventory estimate was revised up by $0.9 billion or 0.2%...wholesale durable goods inventories were up statistically unchanged (+/-0.4%) from September and up 8.5 percent (+/-1.4%) from a year ago, with wholesale inventories of computers, peripherals and software down 3.6% while inventories of hardware and plumbing and heating equipment were up 1.6%....inventories of nondurable goods were up 1.2% (+/-0.7%) from September while they were up 4.2% (+/-1.2%) from last October, as wholesale inventories of drugs and drugstore supplies were up by 3.2% while wholesale inventories of petroleum and petroleum products were down 1.9%... finally, the closely watched inventory to sales ratio of merchant wholesalers was at 1.19, unchanged from September but up from the inventory to sales ratio of 1.16 in October of last year...

then on Thursday, the Census Bureau released the Manufacturing and Trade Inventories and Sales report for October, which is  covered in the media as the business inventories report, and which estimated the combined value of seasonally adjusted distributive trade sales and manufacturers' shipments was at $1,350.9 billion in October, down 0.1% (±0.3%)* from September, while 3.4% (±0.5%) above the total monthly sales level of October of last year...manufacturers sales were estimated at $499,247 million, down 0.8%, while retailer's sales were estimated up 0.4% at $397,048 million and merchant wholesalers, up 0.2%, accounted for $454,587 million of the overall total....meanwhile, total manufacturer's and trade inventories were estimated to have increased 0.2 percent (±0.1%) from September to a seasonally adjusted $1,760.4 billion at the end of October, which was up 4.8 percent (±0.5%) from October a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $655,603 million, inventories of retailers were estimated to be valued at $562,780 million, and inventories of wholesalers were estimated to be valued at $541,985 million at the end of October...the month end total business inventories to total sales ratio, the metric which is watched to determine if inventories are becoming excessive, was at 1.30, unchanged from September but up a bit from 1.29 October a year ago...

October Job Openings and Quits Remain Near Post Recession Highs

the October Job Openings and Labor Turnover Survey (JOLTS) from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 149,000 to 4,834,000 at the end of October, while the estimate for jobs open at the end of September was revised down by 50,000 from the originally reported 4,735,000 openings to 4,685,000....job openings in restaurants and hotels rose by 61,000 to 669,000 and openings in construction rose by 24,000 to 136,000, while openings for state and local government jobs fell by 41,000 to 354,000.....job openings as a percentage of the employed labor force rose to 3.3% from 3.2% in September, up from 2.8% in October a year ago and up from a low of 2.7% in January...based on 8,995,000 officially unemployed in October, there would be 1.9 unemployed who were actually looking for work during October for every job opening; that, of course, does not count those who might have wanted a job but didn't look for work during the month...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which include retirements and deaths.... in October, seasonally adjusted new hires totaled 5,055,000, down 20,000 from the 5,075,000 hired or rehired in September, as the hiring rate as a percentage of all employed remained unchanged at 3.6%, while up from 3.4% in August and up from the 3.4% hiring rate in October a year earlier...while hiring rose by 85,000 to 778,000 in retail, it fell by 89,000 to 1,079,000 in professional and business services.... meanwhile, total separations rose, from 4,809,000 in September to 4,824,000 in October, as the separations rate as a percentage of the employed rose from 3.4% to 3.5%, and up from 3.1% a year earlier...subtracting the 4,824,000 total separations from the total hires of 5,055,000 would imply an increase of 231,000 jobs in October, 12,000 less than the revised payroll job increase of 243,000 jobs for October reported by the BLS establishment survey last week, a difference not unexpected between these two surveys that both have wide confidence intervals...

further breaking down the seasonally adjusted job separations, we find that 2,720,000 quit their jobs in October, 15,000 less than the revised post recession high of 2,735,000 who quit their jobs in September, while the quits rate, an indicator of worker confidence which is being watched by the Fed, fell from 2.0% to 1.9% of total employment.....in addition to those who quit, another 1,618,000 were either laid off, fired or otherwise discharged in October, up 45,000 from the 1,573,000 discharges in September, which nonetheless left the discharges rate unchanged at 1.2% of all those who were employed during the month....meanwhile, other separations, which includes retirement and death, were at 405,000 in October, down from 420,000 in September, for an 'other separations' rate of 0.3%, which was unchanged....our FRED graph for this report below shows job openings in blue in thousands monthly since January 2005, and monthly hires in orange and monthly separations in violet over the same span...note that months when separations in purple were above hires in orange, we were losing jobs...the two major components of separations are also included below, the count of layoffs and firings is tracked in red, while the number of those quitting their jobs monthly is shown in green, slightly down from the post recession high....    

October 2014 JOLTS

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

Sunday, December 7, 2014

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

the key reports this week, the November employment situation summary and the October international trade report, were both released on Friday, which also saw the Full Report on Manufacturers' Shipments, Inventories and Orders (aka Factory Orders) from the Census Bureau and the Fed's G19 on Consumer Credit; while Thursday saw the October Mortgage Monitor from BKFS....releases earlier in the week included the Census report on Construction Spending for October and the Ward's Automotive report on Light vehicle sales for November...the week also saw the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the November Manufacturing Report On Business, which saw its broad composite Purchasing Manager's Index (PMI) slip to 58.7 from October’s reading of 59.0%, indicating a slightly smaller plurality of manufacturing purchasing managers saw growth in various facets of their business in November than did in October, and the November Non-Manufacturing Report On Business, which saw its composite Non-manufacturing Index (MNI) increase to 59.3% from 57.1% In October, its 4th highest reading on record, indicating that somewhat more service industry purchasing managers reported growth in their business in November than did in October...

Employers Add 321,000 Jobs in November in the Best Jobs Year of the Century

the November survey of establishments conducted by the Bureau of Labor Statistics indicated that nonfarm payroll employment increased by a seasonally adjusted 321,000 jobs to 140,045,000 jobs, about 100,000 more than was expected, while October's payroll jobs count was revised up from 214,000 to 243,000 jobs added, and September's count was revised up from 256,000 to 271,000, hence resulting in a reported net addition of 365,000 seasonally adjusted jobs with this release, and 2,650,000 so far this year, the highest year to date job creation count since 1999....the unadjusted establishment data indicates that there were actually 497,000 non-farm payroll jobs added in November, as seasonal retail hiring picked up pace before being normalized by the seasonal adjustment....the FRED bar graph below incorporates the seasonal adjustments and the revisions to the September and October reports and shows the reported payroll job change monthly since the beginning of 2008, with job gains above the zero line and job losses below it...  

November 2014 payroll jobs

seasonally adjusted payroll jobs increased in every major sector in November, led by an increase of 86,000 more jobs in the broad professional and business services category, with 28,400 of those in employment services and another 16,400 in accounting and bookkeeping services...another 50,200 more than the seasonal normal jobs were added in retail, with 11,300 of those in clothing and accessories stores, and 10,500 more added by vehicle and parts dealers...an additional 37,200 workers were added by health care and social assistance employers, with 6,600 of those employed in doctor's offices...there were also 28,000 more jobs in manufacturing, with 17,000 of those broadly spread among a dozen durable goods industries and 7,100 added in plastics and rubber making...the accommodation and food services sector added 27,300 more jobs, as bars and restaurants hired 26,500 more than a normal November....then there were 20,000 more jobs in construction as residential specialty trade contractors added 13,300 workers, and the financial sector also added 20,000 more jobs, with 10,100 of those working for insurance carriers and related companies...16,700 more slots were added in the transportation and warehousing sector, as couriers and messengers added 4,700 more than they normally would in advance of the holidays...other sectors adding jobs include the government sector, where 7,000 jobs were added, including 5,400 more in state level education facilities, 4,000 in information, 2,500 in wholesale trades, and 600 in private education...

November Household Survey Finds Employment Stagnant

in contrast to the jobs data supplied by employers, the personal employment data extrapolated from the November survey of 60,000 households was remarkably weaker, although it's not directly comparable to the establishment data, since it also includes farm workers and the self-employed...the November household summary indicated that the seasonally adjusted count of the employed rose by just 4,000 to 147,287,000, while the number of unemployed rose by 115,000 to 9,110,000, which together with the employed accounted for an increase of 119,000 in the labor force, which now numbers 156,397,000...the relatively small increase in those unemployed, however, was not enough to change the unemployment rate, which is the count of the unemployed as a percentage of the total, as it remained at 5.8%, unchanged from October...however, with an increase of 187,000 in the working age population, the count of those not in the labor force rose by 69,000 to 92,447,000, not enough to change the labor force participation rate, which remained at 62.8%, same as in October...similarly, with the tiny increase in the count of the employed, the employed to population ratio also remained unchanged from October at 59.2%....our FRED graph below shows the employment to population ratio, which we could think of as the employment rate, in blue, and the labor force participation rate in red, back to January 2000... 

November 2014 household survey metrics

of the seasonally adjusted total of 147,287,000 of us who were counted as being employed in October, 119,482,000 reported they were working full time, 150,000 less than in October, while 27,770,000 reported they were working part time, or less than 34 hours in the reference week, an increase of 77,000 part time workers over the October part time count...of those, the count of those working part time who would rather work full time fell by 177,000 to 6,850,000; as a result of that, the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell by 0.1% to 11.4%...meanwhile, the number of us unemployed for more than 27 weeks who were still looking for work fell by 101,000 in October to 2,815,000, while the average duration of unemployment rose nonetheless, from 32.7 weeks to 33.0 weeks, suggesting some have been unemployed for years...among the 92,447,000 of us not officially in the labor force and hence not counted as unemployed in November, 6,227,000 reported that they still wanted a job, up from 6,122,000 in October, and up from 5,437,000 in last November; of those, 2,109,000 were categorized as "marginally attached to the labor force" because they had looked for work sometime during the last year, but not during the 30 day period covered by the November survey...698,000 of those were further characterized as "discouraged workers", because they reported that they haven't looked for work recently because they believe there are no jobs available to them...  

October Trade Deficit Down by $0.2 Billion Because September's was Revised Up by $0.6 Billion

the October report on our International Trade in Goods and Services from the Commerce Department indicated that our seasonally adjusted trade deficit in goods and services was $43.4 billion for the month, down $0.2 billion from the revised trade deficit of $43.6 billion in September, as our exports rose $2.3 billion to $197.5 billion on a $2.0 billion increase to $138.0 billion in our exports of goods and a $0.3 billion increase to $59.5 billion in our exports of services, while our imports rose $2.1 billion to $241.0 billion on a $2.0 billion increase to $200.7 billion in our imports of goods, while our imports of services rose $0.2 billion to $40.3 billion... the September trade deficit was revised up to $43.6 billion from the previously reported $43.0 billion, implying a downward revision of similar magnitude to 3rd quarter GDP...furthmore, considering that import prices were down 1.3% in October, the increased dollar value of our imports means we are buying even more goods on an inflation adjusted basis, and hence will subtract even more than usual from 4th quarter GDP....for the first 10 months of this year, our trade deficit has increased $20.5 billion, or 5.1 percent, from the same period in 2013, as exports increased $57.8 billion and imports increased $78.3 billion...

the increase in October exports was largely driven by a $1,737 million increase to $47,680 million in our exports of capital goods, as our exports of civilian aircraft rose by $996 million, our exports of generators rose by $301 million, our exports of other industrial machines rose by $195 million, and our exports of railway equipment rose by $185 million....other end use categories of exports that rose in October included consumer goods, which rose by $433 million to $17,019 million on a $226 million increase in pharmaceuticals, and exports of automotive vehicles, parts, and engines, which rose by $163 million to $13,651 million...meanwhile, our exports of foods, feeds and beverages fell by $147 million to $11,640 million as a $185 million decrease in our exports of soybeans and a $104 million decrease in our corn exports was partially offset by a $77 million increase in our exports of other animal feeds..our exports of industrial supplies and materials also fell, by $86 million to $42,078 million, as our exports of fuel oil fell by $1,284 million and our exports of other petroleum products fell by $188 million while our exports of non-monetary gold rose by $440 million, our exports of finished metal shapes rose by $173 million, and our exports of steelmaking materials rose by $163 million....in addition, our exports of goods not categorized by end use fell by $136 million to $5,163 million..

an increase of $1,305 million to $28,286 million in our imports of automotive vehicles, parts, and engines and an increase of $1,112 million to $51,029 million in our imports of other capital goods were the primary drivers of our increase in imports from September to October; among capital goods, our imports of computers increased by $773 million, our imports of computer accessories rose by $280 million, our imports of semiconductors rose by $189 million, and our imports of photo finishing machinery increased by $132 million...our imports of industrial supplies and materials also increased, by $277 million to $54,865 million, as we imported $260 million more iron and steel mill products, $235 million more in fuel oil, $123 million more in bauxite and aluminum, and $118 million more in non-monetary gold while we imported $485 million less crude oil, $353 million less organic chemicals, and $123 million less natural gas...our imports of foods, feeds and beverages were also up, increasing by $226 million to $10,910 million, as our imports of meat rose by $58 million and imports of several other categories of foodstuffs increased marginally while our imports of fish and shellfish fell by $49 million...on the other hand, our imports of consumer goods fell by $759 million to $46,942 million as our imports of cell phones fell by $1,053 in October after rising $1,919 million in September on the introduction of the iphone6, our imports of pharmaceuticals fell by $266 million, and our imports of gem diamonds fell by $173 million, while our imports of cotton apparel and household goods rose by $250 million and our imports of artwork antiques and other collectibles rose by 236 million...in addition, our imports of goods not categorized by end use fell by $133 million to $6,597 million...

included below is Bill McBride's graph of our trade deficit from his coverage of this report, which shows the relationship of our net petroleum trade deficit to our deficit overall....reading from the top $0 line down, the black graph line tracks our deficit in petroleum trade as a negative in billions of dollars since 1998; over the same span, the red graph shows our trade deficit for everything else except oil, also as a negative from the $0 line; combined together, those two sum to our total trade deficit, which Bill has graphed in blue...even though our deficit in petroleum & related products increased in October, it's pretty clear that our oil deficit in black has generally been falling (ie, going up towards zero on this chart) over the past few years, while our trade deficit in everything else in red has continued to grow...much of that "everything else" is with China; in October, our deficit with China decreased $1.6 billion to $29.6 billion..

October 2014 trade deficit via McBride

Construction Spending Up 1.1% in September; Unfilled Factory Orders Rise 0.4%

the Census report on Construction Spending for October (pdf) estimated that our seasonally adjusted construction spending for the month would work out to $971.0 billion annually if extrapolated over an entire year, which was 1.1 percent (±1.8%)* above the revised September estimate of spending at a $960.3 billion annual rate and 3.3 percent (±2.0%) above last October's adjusted and annualized level of construction spending....construction spending for September was revised from the originally reported $950.9 billion to $960.3 billion and construction spending for August was revised up from $955.2 billion to $961.0 billion, so construction spending for the third quarter is thus considerably higher than previous estimates, and will likely result in upward revisions of GDP components for residential construction, private structures, and public investment.....private construction spending was at a seasonally adjusted annual rate of $692.4 billion, in October, 0.6 percent (±0.8%)*  higher than the revised September estimate, with residential spending rising 1.3 percent (±1.3%)* above the revised September estimate of $349.1 billion and non-residential construction falling 0.1 percent (±0.8%)*, while public construction spending was estimated at $$278.6 billion, 2.3 percent (±3.1%)* above the revised July estimate; hence, 4th quarter GDP should get an initial boost from residential construction and government investment...

the Census Bureau also released the Full Report on Manufacturers’ Shipments, Inventories, & Orders for October (pdf), which showed new orders for manufactured goods fell by $3.3 billion or 0.7% to $496.6 billion, after falling a revised 0.5% in September and a record $56.0 billion or 10.0% in August, as new orders for non-durable goods fell 1.5% while new orders for defense and commercial aircraft rebounded...this report also showed factory shipments fell by $3.8 billion or 0.8% to $499.2 billion, after a 0.1% increase in September, and that October factory inventories rose by $0.5 billion or 0.1% to a record high $655.6 billion, and unfilled factory orders increased by $4.9 billion or 0.4% to $1,174.2 billion, which was also the highest level value of unfilled orders on record....   

October Consumer Credit Rises at 4.9% Rate; November Vehicle Sales 2nd Highest Since 2006

the Fed's G.19 Release on Consumer Credit for October showed that total seasonally adjusted consumer credit outstanding increased by $13,2 billion to $3,278.9 billion, or at a 4.9% annual rate, the slowest growth in credit in a year... the revolving credit portion of the aggregate, which would mostly be credit card debt, increased by $1.0 billion, or at a 1.3% annual rate, to $882.6 billion, while non-revolving credit, which includes loans for cars and college tuition but not borrowing for real estate, rose at by $12.3 billion to $2,396.3 billion, an annual growth rate of 6.2%....meanwhile, the November report on light vehicle sales from Ward's Automotive estimated vehicle sales were occurring at a 17.08 million annual rate during the month, the second highest total in 8 years, up from the annual rate of 16.35 million reported for October and 5.5% higher than November of last year ... 

Mortgage Delinquencies Fall to 5.44% of October Loans While Average Time In Foreclosure Rises to Record 1024 Days

according to the Mortgage Monitor for October (pdf) from Black Knight Financial Services (BKFS, formerly LPS Data & Analytics), there were 857,824 home mortgages, or 1.69% of all mortgages outstanding, remaining in the foreclosure process at the end of October, which was down from 892,796, or 1.76% of all active loans that were in foreclosure at the end of September, and down from 2.54% of all mortgages that were in foreclosure in October of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and October’s so-called "foreclosure inventory" was the lowest percentage of homes in foreclosure since early 2008... new foreclosure starts fell in to 81,437 in October from 91,038 in September, the lowest since 78,796 foreclosures were started in April and well below the 118,837 foreclosures that were started in October of last year...

in addition to homes in foreclosure, October data showed that 2,759,053 mortgage loans, or 5.44% of all mortgages, were at least one mortgage payment overdue but not in foreclosure, down from 5.67% of homeowners with a mortgage who were more than 30 days behind in September, and down from the delinquency rate of 6.28% a year earlier...of those who were delinquent in October, 1,100,801 home owners were considered seriously delinquent, which means they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month...thus, a total of 7.13% of homeowners with a mortgage were either late in paying or in foreclosure at the end of October, and 3.86% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

as you'll recall, the mortgage monitor is a mostly graphics presentation that covers all aspects of the mortgage servicing business, and today we'll just focus on a few graphs that show the lengthening period of time that those are in foreclosure remain stuck in the process....you might also recall that the pipeline ratio is a mortgage industry metric indicating how many months the average troubled home loan typically remains in the foreclosure process in each state, and it is computed by adding those homes that are seriously delinquent to those already in foreclosure and dividing that sum by the average number of completed foreclosures per month in each state over the previous 6 months....what that results in is the average number of months a problem home loan would be in the "foreclosure pipeline" at the current pace of foreclosure in each state, before the foreclosure process on all seriously delinquent homes would be completed....the first graph below, from page 11 of the Mortgage Monitor, shows the historical pipeline ratio for judicial states, where a court proceeding is necessary to complete a foreclosure, in blue, and the same ratio in non-judicial states, where such a proceeding isn't necessary for the banks to have the the home seized, in red....obviously, early on in the crisis, the process was much longer for judicial states, with their average reaching 118 months and the foreclosure pipeline ratios reaching 50 years for New York and New Jersey, but as we can see on the graph, the difference between the types of states has closed, as judicial states have moved to speed up the process...even so, the pipeline ratio now averages more than 4 years for both types of states; 52 months for judicial states, and 51 months and rising for non-judicial states...the reason for the increase in the foreclosure pipelines recently is not so much delays in court anymore, but procrastination on the part of the mortgage servicers and banks, possibly because of defective titles, but also because they've experienced quite a bit of deterioration in the properties they've already seized, and would rather have them occupied by delinquent homeowners than ravaged by vandals..

October 2014 LPS foreclosure pipeline ratios

the next graphic, from page 12 of the mortgage monitor, shows the average number of months that loans have been delinquent for each type of state and for each stage of foreclosure, again with blue indicating judicial states and red indicating non-judicial states; we can see that foreclosures are typcially initiated after nearly ten months of delinquency for both types of states, but once in the process they remain in the "foreclosure inventory" for over 2 years in non-judicial states and for over three years in judicial states; quite similarly, the length of time that mortgages have been delinquent when the foreclosure sale is finally closed is also over 2 years in non-judicial states and for over three years in judicial states..to clarify that, a foreclosure sale is the legal auction wherein the bank acquires the title after the foreclosure completes; after a foreclosure sale, the home moves into the bank's property inventory, also known as REO inventory (Real Estate Owned - metric definitions are on page 33 of the pdf).

October 2014 LPS foreclosure ages for stages

lastly, we'll again post part of the Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 30 of the pdf....the columns here show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month shown going back to January 2008….in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…notice that although the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has remained fairly steady and is now at 490 days, the average time for those who’ve been in foreclosure without a resolution has lengthened to a record average 1024 days… 

October 2014 LPS FC & delinquent loan count table

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

Sunday, November 30, 2014

3rd Qtr GDP revision, October’s income & outlays, new home sales, and durable goods, September’s Case-Shiller, et al

the key releases of the past week were the 2nd estimate of 3rd quarter GDP from the BEA on Tuesday, and the BEA report on personal Incomes and spending for October, released on Wednesday, which gives us the largest component of 4th quarter GDP for the month....other widely watched releases included the September Case-Shiller house price indexes, released on Tuesday, and the Census reports on October new home sales and on orders, shipments, and inventories of durable goods, both released on Wednesday....other reports included the Chicago Fed National Activity Index for October (pdf), a weighted composite index of 85 different economic metrics grouped into four broad categories of data, which slipped to +0.14 in October from a revised +0.29 in September, with the positive number still indicating growth above the historical trend....49 of the 85 Chicago Fed indicators made positive contributions to the index in October, as production related indicators added 0.01 to the index, employment-related indicators added 0.16, sales, orders, and inventories added 0.11, while the the consumption and housing category subtracted 0.12 from the overall reading for October....the index’s three-month moving average declined to -.01 in October from +0.12 in September as the September monthly index was revised to +0.29 from an initial estimate of +47, and the August monthly index was revised to -.46 from last month’s estimate of -0.25...this week also saw two regional Fed manufacturing surveys: the November Texas area manufacturing survey from the Dallas Fed saw its general business activity index hold steady at 10.5 for the 3rd month in a row while their production index fell from 13.7 to 6.0, indicating output grew but at a slightly slower pace than in October, and the Richmond Fed November Survey of Manufacturing Activity, covering the 5th Fed District that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported flattening new orders and shipments as their manufacturing composite index fell to 4, from a reading of 20 in October...the short holiday week also saw the Chicago Purchasing Managers Index (PMI) for November from the ISM-Chicago (pdf), which reported their Chicago Business Barometer fell 5.4 points to to 60.8 in November, indicating a smaller plurality of Midwest manufacturers reported expansion than in October, as reported new orders and production indicators slipped...

GDP Revised Estimate Shows Growth at a 3.9% Rate in 3rd Quarter

the Second Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 3.9% rate in the second quarter, revised from the 3.5% growth rate reported in the advance estimate last month, as personal consumption expenditures and the change in private inventories were revised upward while imports were revised upward and exports were revised lower...in current dollars, our 3rd quarter GDP would extrapolate to $17,555.2 billion annually, up 1.31%, or at a 5.34% annual rate from the $17,328.2 billion annualized figure of the 2nd quarter...however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage calculations in this report are based....the resulting inflation adjustment used in the third quarter, aka the "GDP deflator", implies annual inflation at a 1.4% rate, revised from the 1.3% deflator reported a month ago and up from the 2.1% annualized inflation factor reported for the second quarter...while we cover the details below, recall that all quarter over quarter percentage changes reported in this release are given at an annual rate, which means that they're expressed as a change a bit over 4 times the change that actually occurred over the 3 month period... 

real personal consumption expenditures, the largest component of GDP, were revised to show growth at a 2.2% annual rate rather than the 1.8% growth rate reported last month, and hence contributed 1.51% to the quarter's growth rate, not the 1.23% previously estimated...real consumption of durable goods grew at a 8.7% rate, revised from the 7.2% growth rate reported in the advance estimate, and added .63% to the final GDP figure; major contributors to that were a 15.1% real growth rate in consumption of recreational goods and vehicles and a 10.5% real growth rate in motor vehicle and parts consumption, while real consumption of furnishings and durable household equipment rose slightly and consumption of other durable goods fell, even as all durables consumption benefited from a negative 2.0% deflator...meanwhile, real personal consumption of non-durable goods rose at a 2.2% rate and added 0.33% to GDP, revised from the previous estimate of a 1.1% growth rate, even though inflation adjusted outlays for food and beverages, clothing, and energy goods were flat....in addition, real consumption of services grew at an 1.2% rate and added 0.53% to the quarter's growth, revised from the 1.1% growth rate and 0.52% addition reported in the advance estimate last month, as real consumption of financial services and insurance grew at a 5.6% annual rate, real consumption of food and lodging services grew at a 4.6% rate, and real outlays for health care services rose at a 1.9% rate, offsetting small decreases in real outlays for housing and utilities and recreation while outlays for other services were flat..

seasonally adjusted real gross private domestic investment grew at a 5.1% annual rate in the 3rd quarter, revised from the 1.0% growth that was first estimated, as inventories were revised sharply upward and the growth rate of private fixed investment was revised to 6.2% from the 4.7% estimate of last month and thus added .97% to the 3rd quarter's growth rate...real non-residential fixed investment grew at a 7.1% rate, rather than the 5.5% previously estimated, even though investment in non-residential structures was revised down from growth at a 3.8% rate to growth at a 1.1% rate, as investment in equipment grew at a 10.7% rate, not the 7.2% rate previously reported, and the quarter's investment in intellectual property products was revised from a growth rate of 4.2% to a 6.4% growth rate, while growth in residential investment was revised from 1.8% to 2.7%…after these revisions, investment in non-residential structures added 0.3% to the quarter's growth rate, investment in equipment added 0.61%, investment in intellectual property added 0.24%, while growth in residential investment added 0.9% to 3rd quarter GDP...

meanwhile, the real (inflation adjusted) change in private inventories was revised from $62.8 billion greater to $79.1 billion greater than the 2nd quarter, when inventories grew by $84.8 billion over the 1st quarter; hence the $5.7 billion negative change in inventory growth was much smaller than the originally reported $22.0 billion decrease, and thus it only subtracted 0.12% from 3rd quarter growth rather than the .57% subtraction applied in the advance estimate last month....

  the change in our real 3rd quarter net trade figures were revised as well, although not as seriously as the estimates we noted in reporting on the September trade report, which was released a week after the advance estimate....the BEA originally estimated that our 2nd quarter exports had increased at an inflation adjusted 7.8% annual rate while imports fell at a 1.7% rate, for a decrease in the trade deficit over the 2nd quarter deficit that added 1.32% to the 1st estimate of  3rd quarter GDP...with the revision now including the correct September data, we now find that real 3rd quarter exports have increased at just a 4.9% rate, while real imports only fell at a 0.7% rate...as you should recall, exports add to gross domestic product because they represent that part of our production that was not consumed or added to investment in our country, while imports subtract from GDP because they represent either consumption or investment that was not produced here...thus the smaller increase in real exports added just 0.65% to 2nd quarter growth, while the smaller decrease in real imports subtracted just 0.12% from the 3rd quarters's GDP...  

finally, there were also some minor revisions to real government consumption and investment in this 2nd estimate...real federal government consumption and investment grew at a 9.9% rate vis a vis the 2nd quarter, revised from a 10.0% growth rate, as real federal spending for defense grew at a 16.0% rate and added 0.66% to GDP, which was unchanged from last month's estimate, while.all other federal consumption and investment grew at a 0.4% rate, revised from 0.5% growth, and which added 0.01% to GDP...real state and local outlays rose at a seasonally adjusted 0.8% rate and added 0.09% to GDP, rather than the 1.3% rate of increase previously reported, as real state and local investment rose at a 11.1% rate and added 0.20% to GDP while state and local consumption expenditures rose at a 1.3% rate and added 0.12% to 2nd quarter growth, as state and local consumption spending rose at a 0.9% rate

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

3rd qtr 2014 2nd estimte GDP 

Personal Income and Spending Both Rise 0.2% in October

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

in October, total personal income increased at a seasonally adjusted and annualized $32.9 billion rate, to what would be a gross national personal income of $14,868.3 billion annually, which was 0.2% higher than in September, when personal income increased by 0.2% over August...disposable personal income (DPI), which is total income after taxes, increased at an annualized rate of $23.4 billion to $13,109.3 billion annually, which was also a 0.2% increase over September , while September's DPI was up just 0.1% over August...increases in private wages and salaries accounted for $18.8 billion of the annualized October personal income gains in contrast to just $13.9 billion in September, as service industry payrolls increased at a $11.6 billion rate and goods producing industry payrolls rose at a $7.2 billion clip....increases in supplements to wages and salaries, such as employer contributions to pension plans, accounted for another $3.8 billion of October's annualized increase, while employee contributions for government social insurance, which is subtracted from the personal income figure, increased at a $2.4 billion rate...meanwhile, proprietors' income decreased at a $7.4 billion rate in September, as farm owners incomes fell at a $1.2 billion rate while incomes of individual proprietors of other types of business were up $8.6 billion....other sources of the October personal  income changes included rental income of individuals, which increased at a $2.5 billion rate in October, personal interest and dividend income, which grew at a $3.1 billion rate, and personal transfer payments from government programs, which increased at a $4.8 billion rate..   

meanwhile, seasonally adjusted personal consumption expenditures (PCE) in October, which will be included in the change in real PCE in 4th quarter GDP, rose at a $27.3 billion annual rate to a level of $12,024.1 billion in consumer spending annually, 0.2% higher than in September, which itself was revised 0.2% higher to a level statistically unchanged from August....the current dollar increase in October spending was driven by a $24.7 billion annualized increase to an annualized $8,019.5 billion spending for services and a $4.8 billion increase to $2,688.2 billion in annualized spending for non-durable goods, while outlays for durable goods fell at an annualized $2.1 billion rate to an annualized $1,316.5 billion ...total personal outlays for October, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $26.3 billion to $12,458.2 billion, which left personal savings, which is disposable personal income less total outlays, at $651.2 billion in October, down from the revised $654.0 billion in personal savings in September, which was originally reported at $732.2 billion... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, was at 5.0%, now unchanged from September's revised savings rate, which was originally reported at 5.6%..

while our personal consumption expenditures accounted for 68.2% of our third quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption...that's done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2009 prices = 100....that index rose to 109.225 in October from 109.165 in September, giving us a month over month inflation rate of 0.055%, which BEA reports as +0.1%, and a year over year PCE price index increase of 1.44%, while core prices rose 1.55%...because of the small monthly increase, the inflation adjusted or real personal consumption expenditures were up 0.2% in October, statistically the same as the unadjusted increase, after being unchanged in September, when the PCE price index was also up fractionally...however, using the same PCE price index, disposable personal income was deflated to show that real disposable personal income, or the purchasing power of disposable income, rose by just 0.1% in October, after increasing by 0.1% in September...

our FRED graph below shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the annualized scale in chained 2009 dollars for both shown in the current data box and on the left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right...the spike in income and savings at the end of 2012 was a result of bonuses and income manipulation before the year end fiscal cliff; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush….although it may appear from the graph that real disposable income has been accelerating over the past 14 years, real DPI below is not adjusted for increases in the population; on a per capita basis, real DPI per capita is up just 20.8% over the span of this graph, an increase which can largely be attributed to the non-wage components of personal income…  

October 2014 income and outlays

Durable Goods Order Backlog at Record $1,174.0 Billion in October, 12.4% Higher than Year Ago

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for October (pdf) from the Census Bureau estimated that new orders for manufactured durable goods rose by a seasonally  adjusted $1.0 billion or 0.4% to $243.8 billion, following the revised September new orders decrease of $2.2 billion or 0.9%....new orders for transportation equipment rose 3.4% to $76,255 million after falling 3.3% in September and 42.4% in August as new orders for defense aircraft rose 45.6% to $5,355 million, while new orders excluding transport equipment orders fell 0.9% in October to $167,551 million, as the important new orders for non-defense capital goods less aircraft, a measure of business investment, fell 1.3% to $71,212 million...seasonally adjusted shipments of durable goods were also weak, rising only $0.3 billion or 0.1% to $246.5 billion after a revised 0.3% increase in September, with shipments of motor vehicles and parts, up 0.6% to $47,633 million, driving the increase; without such transportation equipment, shipments were down 0.1%...meanwhile, seasonally adjusted inventories of durable goods, which have been up 18 out of the last 19 months, rose $2.0 billion or 0.5% to a new record at $406.8 billion, as inventories of  transportation equipment, up 0.7% to $131,694 million, was a major factor in the October increase....finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, increased by $5.0 billion or 0.4% to a record $1,174.0 billion....all categories of durables except machinery and automotive equipment saw their order backlog increase, with unfilled orders for computer equipment, up 2.0% to $4,133 million, and for electrical equipment and appliances, up 1.4% to 25,768 million, seeing the largest percentage increases...at month end, unfilled orders for durable goods were 12.4% ahead of last October's backlog...

New Home Sales Unchanged at a 450,000 a Year Pace

according to the Census bureau report on New Residential Sales for October (pdf), new single family homes sold at a seasonally adjusted annual rate of 458,000, which was 0.7 percent (±16.5%)* above the revised September sales rate of 455,000 homes a year, and 1.8 percent (±17.4%)* above the 450,000 a year pace that new homes were selling at in October of last year...furthermore, this report showed that September's sale rate was revised down from 467,000 annually to 455,000, and August's sales rate was revised down from the previously reported 466,000 to 453,000 annually....the asterisks indicate that based on their small sampling, Census could not be certain whether October's new home sales rose or fell from those of September or even from those of a year ago, but they're 90% confident that October home sales rose less than 17.2% or fell less than 15.8% from those of September, and that new homes could have sold as many as 19.2% more than last October or as few as 15.6% less than last October, a range of uncertainty to be expected in this report which has the largest margin of error of any census construction series....

the unadjusted data from Census field reps estimated that 37,000 homes sold in October, the same as they now estimate for September, which was revised from the original estimate of 38,000, and the same as for August, which was also estimated at 38,000 last month...new home sales for the year through October were estimated to be at 373,000, up 1.9% from the 366,000 estimated for the same ten months of 2013....of the 37,000 homes sold in October, 12,000 were completed, 14,000 were under construction, and 11,000 had not yet been started...the median new home sales price was $305,000 in October, up from $261,700 in September; while the average sales price was $401,100, up from September's $314,200 average, as the number of homes that sold for over $750,000 tripled...the Census estimated that a seasonally adjusted 212,000 new homes remained unsold at the end of October, which was a 5.6 month supply at the October sales pace, up from a 5.5 month supply in September...the FRED graph below show the historical data from this Census report, with the monthly sales reported as an annualized figure…note that new home sales have generally been stuck in a monthly range that would result in between 400,000 and 450,000 homes being sold annually since the end of 2012...

October 2014 new homes sold

Case-Shiller Home Price Indices See Small Decrease in September

according to the S&P Case-Shiller Home Price Index for September, there was a broad based slowdown in home prices during the month, as the National and both metropolitan Composite Indexes showed small price declines vis a vis the prior report....in the month over month comparison, which takes the current 3 month average of July, August and September repeat home sales prices and compares it to last month's 3 month average of June, July and August prices (and hence is simply a comparison of September prices to June's), both the 10 city and 20 city indexes were negative but statistically unchanged, while the Case-Shiller National Index was down 0.1%...on a unadjusted basis, Charlotte and Miami saw the largest monthly home increases at 0.6%, followed by Las Vegas, where the metropolitan area price index rose 0.4%....cities showing lower prices in this August release compared to last months include Washington, where area home prices fell 0.4%, and Atlanta, where the home price index was down 0.3%....meanwhile, the 10-City Composite was 4.8% higher than a year ago while the 20-City Composite Index was 4.9% higher, which were both down from the 5.6% annual home price increases reported for both in August...in the comparison to last September's indexes, home sales prices in Miami were 10.3% higher, followed by 9.1% higher prices in Las Vegas and 7.9% higher prices in San Francisco...Cleveland home prices, up 0.8%, saw the smallest one year increase, followed by Washington at 2.1% and Chicago with prices 2.6% higher than last year... 

included below are the pair of interactive FRED graphs we have created to show the historical track of home price indexes for each of the cities in the 20 city index, which are all based on 2000 home prices equal to 100.0... in our first FRED graph, we show the tracks of home price indexes for Atlanta in bright blue, Boston in bright red, Charlotte in dark green, Chicago in orange, Cleveland in purple, Dallas in grey, Detroit in mauve, Denver in mustard, Las Vegas in dull blue, and Los Angeles in beet red... for the larger interactive view of this graph at FRED, click here; there you can move your cursor across the graph and view the monthly price history of the changes in the price indices for all 10 cities shown below, just as we have included the home price index values for each of them for the September report in our screenshot… 

September 2014 Case Shiller A-L

our second FRED graph of the Case-Shiller city indices shows the the historical price track of the metro home price indexes for Miami in bright blue, Minneapolis in bright red, New York in dark green, Phoenix in orange, Portland in violet, San Diego in grey, San Francisco in mauve, Seattle in mustard, Tampa in dull blue and Washington DC in beet red; in addition, this second chart includes the track of the Case-Shiller Composite 20 shown as a heavier black line…the S&P Case-Shiller index is not seasonally adjusted, but you will notice that the seasonal home price swings have become more pronounced since the housing bust…again, you can click here for the larger 1000 pixel interactive version of this graph at the St Louis Fed web site, where all the lines can be easily traced and the index values for each viewed over time with their interactive tool… 

September 2014 Case Shiller M-Z

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

Sunday, November 23, 2014

October’s consumer & producer prices, industrial production, new housing starts, old housing sales, and state jobs report, et al

the important economic reports of the past week were the October G17 release on Industrial Production from the Fed and the Consumer Price Index for October from the Bureau of Labor Statistics....the BLS also released its report on the October producer price index, which in addition to wholesale prices for goods now also includes changes in the margins received by service industries, its report on Regional and State Employment for October, and its report on real average hourly earnings for October, which indicated an inflation adjusted average 0.1% increase in earnings for all employees...for housing, we saw the October report on new home construction and the National Association of Realtor's report on October sales of existing homes...in addition, this week also saw the first three regional manufacturing surveys for November from Fed district banks: the New York Fed reported that its November Empire State Manufacturing Survey, covering a district that includes New York and northern New Jersey, showed its composite general business conditions index at 10.2, up from 6.2 in October, in a diffusion index where values over zero indicate growth....then the Philadelphia Fed's November Manufacturing Business Outlook Survey reported that its broadest measure of manufacturing conditions, the diffusion index of current activity, increased from 20.7 in October to 40.8, its highest reading since December 1993, as 49% of the firms in the district covering Pennsylvania, southern New Jersey, and Delaware reported expansion...lastly, the November Kansas City Fed manufacturing survey (pdf), covering a region that includes western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported that their broadest composite index rose from 4 in October to 7 in November, indicating ongoing manufacturing growth at a slightly faster pace...

CPI Unchanged in October on Higher Priced Services, Cheaper Gas

overall consumer prices were flat in October after inching up in September as considerably lower energy prices offset modest price increases in food, shelter and a number of other index components...the Consumer Price Index for All Urban Consumers (CPI-U) for October from the Bureau of Labor Statistics indicated that seasonally adjusted prices were unchanged after rising 0.1% in September and falling 0.2% in August, while they were 1.7% higher than a year earlier ...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell to 237.433 in October from 238.031 in September, while it still remained 1.66% higher than the 233.546 reading from October of last year...as the drop in energy prices energy prices was the major drag on the index in October, core prices, which exclude food and energy, rose by 0.2%, as the unadjusted core index rose from 238.841 in September to 239.413 in October, while that index was 1.81% ahead of its year ago level of 235.162...

the seasonally adjusted energy price index fell by 1.9% in October after falling a total of 3.3% over the prior two months as prices for energy commodities were 3.0% lower while the index for energy services fell 0.2%...energy commodity prices decreased on a 3.0% drop in the price of gasoline, the largest component, and a 4.0% drop in fuel oil prices, while prices for other fuels, including propane, kerosene and firewood, averaged a 0.5% decrease…within energy services, the index for utility gas service fell by 2.7%, the fourth decrease in five months, while the electricity price index rose 0.5% after falling 0.7% in September...energy commodities are now priced 4.9% below their year ago levels, with gasoline down 5.0%, while the energy services price index is 3.2% higher than last October...

the seasonally adjusted food index rose by 0.1% in October, after rising 0.3% in September, and it is now 3.1% higher than October a year ago....prices for food away from home rose by 0.2% as prices for meals at full service restaurants rose by 0.2% and prices at fast food restaurants were 0.3% higher, while prices for food at schools rose by 1.4%, and prices for food from vending machines and other food away from home fell by 0.1%....meanwhile, the price index for food at home just rose 0.1% as lower prices for meats partially offset higher prices for the other major food groups....the index for cereals and bakery products was 0.3% higher than in September as a 1.5% increase in prices for breakfast cereals and 0.6% higher priced cakes and cupcakes more than offset a 1.3% drop in bread prices...dairy products prices were 0.5% higher in October as cheese prices rose 0.7% while milk prices fell 0.5%....prices for fruits and vegetables rose 0.9% as prices for tomatoes rose 4.6%, prices for citrus fruit rose 3.8%, prices for potatoes rose 3.4%, and prices for canned vegetables rose 1.8% while frozen fruit and vegetable prices fell 1.1%...prices for nonalcoholic beverages and beverage materials were also 0.6% higher in October than September as prices for frozen juices and drinks rose 2.6% and prices for fresh juices and non-carbonated drinks rose 1.1% while coffee prices fell 0.5%...meanwhile, prices for the meats, poultry, fish, and eggs group fell by 0.4% as poultry prices fell 1.2% on 1.8% lower chicken prices, seafood prices fell 0.8% on prices for fresh fish that were 1.9% lower, pork prices fell 0.7% on 2.5% cheaper bacon, while beef prices rose 0.3% on 1.0% higher ground beef...even with some lower prices this month, prices for the various cuts of beef remain between 15.6% and 20.7% higher than a year earlier, while pork chops were up 13.7% on the year and ham prices were 12.6% more than last October...lastly, prices for other foods at home also fell by 0.4% as prices for sugar and artificial sweeteners fell 2.2%, prices for soups fell 1.6%, prices for olives, pickles, and relishes and for salt and other seasonings and spices fell 1.5%, and prices for frozen and freeze dried prepared foods fell 1.2% while butter prices rose 5.1%...for the year, butter prices have now risen 29.8%, which was the largest line item annual increase in the index...

within the seasonally adjusted core components of the CPI, which rose by 0.2% in October, we find that the composite of all commodities less food and energy commodities was statistically unchanged, while the composite for all services less energy services rose by 0.3%....the index for shelter, which is almost 32% of the CPI, rose by 0.2%, with rents rising 0.3% and homeowner's equivalent rent rising 0.2%, while prices for lodging away from home rose by 0.7%, water & sewer bills rose 0.8%, as did the cost of household operations, with lawn care services rising 1.6%....meanwhile, prices for household furnishings and supplies, the commodity component of housing, rose by 0.4%, with a 1.4% jump in prices for living room, kitchen and dining room furniture and an 0.8% increase in prices for decor items offsetting a 1.2% decrease in the price of floor coverings...the price index for apparel fell 0.2% in October as a 4.0% decrease in prices for men's suits, coats, and outerwear, a 2.0% cut in the price of jewelry and 1.8% drop in prices for women's outerwear was offset by increases of 4.3% in the prices of women's dresses and 2.8% in the price of children's footwear ..the aggregate index for medical care, meanwhile, rose 0.2% in October as the medical care services index rose 0.2% on a 0.6% increase in services from medical professionals other than doctors and dentists and a 0.3% increase in outpatient hospital services, while the medical care commodity index was unchanged after rising 0.5% in September as a 2.1% decrease in non-prescription drug prices offset a 0.7% increase in prescription medicines….then, while the transportation composite index showed a 0.7% decrease, that index includes gasoline, which you'll recall fell in price by 3.0%; prices for transportation commodities less fuel prices, however, fell just 0.1%, as prices for new cars and trucks rose 0.2% and prices for oil & other automotive fluids rose 0.7% while prices for used cars & trucks fell 0.9% and parts and equipment prices averaged 0.1% less….at the same time, the transportation services index rose 0.8% on 2.9% higher car and truck rentals, a 2.6% increase in train fares, and a 2.4% increase in airline fares....meanwhile, the recreation price index rose 0.2% as recreation commodities were unchanged as a 1.8% increase in prices for newspapers and magazines and a 0.7% increase in prices for pets and pet supplies was offset by a 1.2% drop in prices for televisions, a similar drop in prices for photographic equipment and supplies and 1.0% lower prices for audio discs and other media, while prices for recreation services rose 0.4% on 2.0% higher rental of video discs and other media, 0.8% higher priced cable and satellite television and radio services and 0.6% higher admissions to sporting events....lastly, the aggregate education and communication price index fell 0.2% as education and communication commodities fell 0.1% as a 1.1% drop in prices for telephones and other consumer information hardware more than offset a 0.7% increase in prices for college textbooks, while education and communication services fell 0.2% as a 1.9% decrease in charges for wireless phone services was partially offset by a 0.7% increase in college tuitions and fees and 0.5% higher postage...other than the aforementioned increases in meat and butter prices, the only other line item among CPI components that showed an annual price change greater than 10% was televisions, which are now 14.1% cheaper than they were a year earlier... 

our FRED graph below shows the overall change in each of the major component indexes of the CPI since January 2000, with all the indexes reset to 100 as of that month for an apples to apples comparison of the price changes in each since...in blue, we show  the relative track of the price index for food and beverages; in bright green, we show the reset price index for all housing components, which includes rent, homeowners equivalent rent, utilities, insurance & household maintenance; in red, we have the price changes for apparel, the only index to show a net price decline over the previous decade; while the relative change in the price index for medical care shown in violet has obviously seen the greatest price increase over the period…next, the transportation price index is in orange, and shows the impact of volatile fuel prices on the cost of transportation, while the price change for education and communication over the period is tracked in brown, and in dark green is the relative strength of the index for recreation prices...finally, we’ve added the track of the overall CPI-U in black, which tends to track close to the large housing component, which makes up 41.5% of the total index…this graph can also be viewed as an interactive, wherein you can track the monthly changes in all of these relative price indexes by dragging your cursor across the graph…  

October 2014 CPI components

Producer Prices Rose 0.2% October on Greater Demand for Trade Services

the October report on the Producer Price Index from the Bureau of Labor Statistics indicated that the seasonally adjusted producer price index for final demand rose by 0.2% from September, when producer prices fell 0.1% after they were unchanged in August, leaving the year over year  increase in the index at 1.5%...the index for final demand for services rose by 0.5%, predominately because the index for final demand for trade services, a measure of the change in margins received by wholesalers and retailers, rose by 1.5%, the biggest jump on record for this relatively new index, while the index for final demand for transportation and warehousing services fell 0.1% and  prices for final demand for services less trade, transportation, and warehousing services rose 0.1%...meanwhile, the price index for final demand for goods, aka 'finished goods', fell 0.4% after falling 0.2% in September and 0.3% in August...the price index for final demand for foods was up 1.0% as wholesale fresh vegetable prices rose 8.6% & and wholesale pork prices rose 8.1% while wholesale oilseeds were 3.6% lower priced than in September; however, that wholesale food price increase was more than offset by the 3.0% decrease in the price index for final demand for energy, which was driven by an 11.4% drop in the wholesale price of LP gas and a 7.1% drop in the price of home heating oil, while wholesale gasoline prices also fell 5.8%...meanwhile, the index for final demand for core goods was up 0.1%, as a 1.7% increase in wholesale prices for metal forming machine tools and a 1.1% increase in wholesale mining machinery and equipment prices was mostly offset by a 1.6% increase in the wholesale price for alcoholic beverages and a 1.2% increase in wholesale prices for tires...

meanwhile, this report also showed the price index for processed goods for intermediate demand fell 0.9%, the largest decrease since a 1.1% decline in March of 2013, as prices for intermediate processed foods and feeds fell 1.8% while prices for intermediate processed energy goods fell 3.2%, and even core intermediate producer prices were 0.2% lower....in addition, the price index for intermediate unprocessed goods fell 2.4% after rising 0.6% in September and is now 1.9% below the level of a year ago, on a 5.5% drop in the index for raw energy materials and a 2.9% drop in prices for unprocessed nonfood materials less energy, while producer prices for for unprocessed foods and feeds rose 1.0%......finally, the price index for services for intermediate demand rose 0.1% in October, as a 0.8% increase in the index for intermediate trade services and offset a 0.1% decrease in prices for intermediate services less trade, transportation, and warehousing, while prices for transportation and warehousing services for intermediate demand were unchanged...over the 12 months ended in October, the price index for services for intermediate demand rose 1.6%...

Industrial Production Falls 0.1% in October on Pullback in Gas and Oil, Utilities

the Fed's G17 release on Industrial production and Capacity Utilization for October indicated that industrial production fell 0.1% from a September reading which was revised down from an increase of 1.0% to a increase of 0.8% ...the industrial production index, which is benchmarked to 2007 production being equal to 100.0, fell to 104.9 from the previously issued reading of 105.1 for September, which was revised to 104.0, while the industrial production index for August was revised from 104.0 to 104.1 as the July index was revised from 104.2 to 104.3...the manufacturing index, which accounts for roughly 70% of the industrial composite, rose 0.2% in October to 100.6, while the manufacturing index for September was revised down from 100.5 to 100.4 after the July and August manufacturing indices were both revised up 0.2, to 100.7 and 100.2 respectively; as a result, the October manufacturing index is now 3.4% higher than the level of October 2013..... meanwhile the seasonally adjusted utility index, seeing 3.4% lower natural gas usage because of above normal October temperatures, fell 0.7% to 100.5, a reading which is now 1.3% below the level of last October... in addition, the mining index, which includes oil & gas production, fell 0.9% to 132.1 in October, after increasing by 1.6% in September, showing that the lower oil prices is finally having an impact of higher cost extraction processes, even as the index remains 9.9% higher than a year ago...

in addition to the breakdown of industrial production into the three major industry groups, this release also reports indexes for industrial production by market group...for output of final products and nonindustrial supplies, which was unchanged in October, seasonally adjusted production of consumer goods fell 0.2% after increasing a revised 0.4% in September...production of durable goods fell by 0.8% as the heavily weighted automotive products sector fell 1.7% and  production of consumer electronics fell 1.3%...meanwhile, production of non-durable goods was unchanged as output of consumer energy products fell 0.5% while output of non-energy non-durables rose 0.2%, as a 1.0% increase in the output of chemical products and a 0.5% increase in clothing production was offset by a 1.3% decrease in paper products production and unchanged food and tobacco output...over the preceding year, production of durable goods increased by 3.5%, led by 7.0% growth in output of appliances, furniture, and carpeting, and 6.9% increased output of consumer electronics, while annual production of non-durable goods grew by 0.8% as a 2.2% decrease in output of consumer energy products and a 4.4% decrease in production of paper products offset 5.1% growth of chemical products output and modest increases in output of other non-durables..

seasonally adjusted production of business equipment rose 0.6% in October after falling by a revised 0.4% in September as production of industrial equipment rose 1.3% and production of information processing equipment rose 0.8%, while production of transit equipment was fell 0.9%...over the past year, output of business equipment rose by 4.6%, as production of industrial  equipment rose by 5.7%, production of transit equipment rose by 4.4%, and output of information processing equipment rose by 1.3% ....meanwhile, production of defense and space equipment fell by 0.5% in October and grew by 0.8% over the year ending October...in addition, production of supplies for use in construction increased by 0.2% for the month and by 3.7% rate for the year, while production of business supplies fell 0.1% in October and grew 2.4% for the year...meanwhile, production of raw and intermediate materials that would input into other production processes fell by 0.2% in October while growing 5.7% over the year, with the output of energy materials up by 8.0% and the output of consumer parts up 7.2%, while raw and intermediate paper production fell 1.9% over the year ending October...

in the associated report on capacity utilization, which is the percentage of our plant and equipment that was in use during the month, the Fed found that the utilization rate for total industry fell 0.3% in October to 78.9%, which was still up from 78.2% in October last year....77.2% of our total manufacturing capacity was in use during October, down from 77.3% in September while up 1.0% from the factory operating rate of 76.2% in October of last year...the operating rate for NAICS classified durable goods manufacturers was at 77.3%, down from 77.4% in September, with capacity utilization ranging from 83.9% for manufacturers of electrical equipment, appliances, and components to a low of 64.4% for manufacturers of non-metallic mineral products, while the October operating rate for NAICS classified manufacturers of non-durables was at 78.9%, up from 78.7% in October, with the oil and coal products industry operating at 84.8% of capacity while textile mills were operating at a 72.9% rate.... meanwhile, capacity utilization by the 'mining' industry fell 1.5% from a revised 89.9% to 88.3%, reflecting a pullback in drilling by the oil and gas industry due to lower oil prices, while the operating rate for utilities fell from 79.1% to 78.5%, reflecting below normal consumption due to above normal temperatures....

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

October 2014 industrial production

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

according to the Census report on New Residential Construction for October (pdf) starts on new housing units were estimated to be at a seasonally adjusted annual rate of 1,009,000 in October, which was 2.8 percent (±10.0%)* below the revised estimated pace of 1,038,000 homes hypothetically being started annually in September, and 7.8 percent (±8.7%)* above the annual rate of 936,000 housing starts estimated for October a year ago...the asterisks indicate that the Census, based on their survey of a small percentage of permit offices visited by Census field agents, does not have sufficient data to determine whether housing starts rose or fell for the month or even for the year, while the numbers in parenthesis indicates their 90% confidence range, ie housing units started in October were likely at a seasonally adjusted annual rate ranging between 12.8% less and 7.2% greater than those in September.....the unadjusted estimates from which those annual rates were extrapolated indicated an estimated 84,000 total housing units were started in October, down from 95,500 in September, which was revised up from 93,200, with 57,200 of those single family dwellings, while construction was started on 26,100 apartment units in buildings with 5 or more units...

the monthly data on new building permits have a much narrower margin of error than new housing starts and hence are probably a better monthly indicator of new construction trends than the volatile and often dramatically revised starts data... in October, Census estimated new permits were issued at a seasonally adjusted annual rate of 1,080,000, a six year high which was 4.8 percent (±1.3%) above the revised September annual rate of 1,031,000 and 1.2 percent (±1.2%) above the 1,067,000 annual rate estimated for new permit issuance in October of last year...those estimates were extrapolated from the unadjusted estimate of 95,000 new permits issued in October, which was up from the estimated 90,700 new permits issued in September...of those units permitted in October, 56,100 (±1.3%) were for single family homes, and 35,700 (±3.6%) represented permits for housing units in building with 5 or more units...our FRED graph on this report below, which can also be viewed as an interactive at the FRED site, shows the seasonally adjusted annual rate of housing units started in thousands monthly in blue, and the annual rate of housing units authorized by building permits monthly in red since 2000…note that the number in thousands shown monthly for both metrics is an extrapolated estimate of how many units would be permitted or started over an entire year if that month’s pace were continued over 12 months…  

October 2014 new home construction

Existing Home Sales Increased by 1.5% in October

according to the National Association of Realtors (NAR), seasonally adjusted existing home sales rose 1.5% in October to an annual rate of 5.26 million completed transactions, from a revised annual rate of 5.18 million home sales in September, and were 2.5% above the annual sales rate of 5.13 million units that the NAR reported in October of last year....before the seasonal adjustment and conversion to an annualized figure, an estimated 444,000 homes sold in October, up 4.7% from the 436,000 homes that sold in September, and up 1.8% from the estimated 424,000 homes that sold in October a year ago...seasonally adjusted data (pdf) indicates that homes sales were up in every region of the country except the West, where they were down 5.0%, while the unadjusted data shows that sales rose in every region except the Midwest, where they were down 1.0%....

the preliminary median home selling price for all housing types was $208,300 in October, down a bit from $209,100 in September, but 5.5% higher than the $197,500 median sales price in October of last year, in home price data that is not seasonally adjusted...the average home sales price was $254,800, not much changed from the $255,000 average in September, while it was up 4.0% from the $245,000 average sales price in October a year ago, with regional average home prices ranging from a high of $339,000 in the West to the average of $197,300 for homes sold in the Midwest....foreclosed homes, which sold for an average of 15% below the price of similar homes in their market, accounted for 7% of October's sales, while short sales, at 2% of all sales, were discounted by an average of 10%...the median time on the market for all homes was 63 days in October, up from 56 days in September, and up from a median of 54 days on the market in October a year ago.…those who bought houses with cash accounted for 27% of transactions in October, up from 24% in September but down from 31% all cash sales a year earlier, while those identified as investors accounted for 15% of all transactions, up from 14% in September but down from the 19% of all home sales to investors in October a year ago....30 year mortgage rates averaged 4.04% in October, down from 4.16% in September, and the lowest 30 year mortgage rate since June 2013; even so, the share of first time home buyers remained unchanged at 29% for the 4th consecutive month, still well below the historical average of 40%....2.22 million existing homes remained available for sale at the end of October, which would be a 5.1 month supply of unsold homes at the October sales pace, down from 5.3 months of unsold housing inventory in September but up 5.2% from the 4.9 month supply of 2.11 million existing homes available for sale a year earlier...

State and Regional Employment for October

this week also saw the release of the Regional and State Employment and Unemployment Summary for October, a report which further expands on the national employment situation summary we covered two weeks ago by breaking down the state and regional details...although we're told in opening that 34 states and the District of Columbia had their unemployment rate decrease in October while 5 states saw a jobless rate increase and 11 states had no change, we know that the unemployment rate data comes from the household survey with its large margin of error, and they make that point later in the report when they tell us only 17 of those states had statistically significant monthly unemployment rate decreases, led by Kentucky, where the jobless rate fell from 6.7% in September to 6.2% in October, followed by four states that saw employment rates by drop by 0.4%: Colorado to 4.3%, Idaho to 4.1%, Missouri to 5.9%, and North Carolina to 6.3%…meanwhile, Washington, where the unemployment rate rose from 5.7% to 6.0%, was the only state that saw a statistically significant increase in unemployment....the BLS table with the seasonally adjusted count of the unemployed and the unemployment rate for each state is here...

as with the national report, the sections of this report that correspond to the establishment survey are more informative, in that they show the number & types of jobs added or lost in each state, ranging from the increase of 41,500 jobs in California, 35,200 jobs in Texas and 34,400 jobs added in Florida, to the net decreases of 7,300 jobs in Nevada, 2,800 in Montana and 2,600 in Rhode Island...for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment since last September, see the following two BLS tables accompanying this release: Table 5. Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted and Table 6. Employees on nonfarm payrolls by state and selected industry sector, not seasonally adjusted ...

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