Sunday, June 30, 2013

1st quarter GDP revision, income and outlays for May, April Case-Shiller indices, and May new home sales

the economic surprise of the week was that the economy grew a whole lot slower in first quarter of this year than previously reported, and it looks even uglier on closer examination of the factors that contributed to that "growth"...based on more complete source data than was earlier available, the Bureau of Economic Analysis revised the GDP for the 1st quarter of this year to show that the national output of goods and services grew at a seasonally adjusted annual rate of 1.8%, which is to say that if the pace of economy continued at the rate it grew during the first quarter, it would achieve an expansion of only 1.8% in 2013 over the level of 2012...this new figure revises the 2.4% growth rate reported a month earlier, and the 2.5% rate reported by the 1st estimate in April, and would now work out to an annual GDP of $15,984 trillion, or $13,725.7 in chained 2005 dollars, the inflation adjustment benchmark used for GDP...be aware that all quarterly GDP data is reported at an annual rate, so the actual amounts for the quarter are approximately one-fourth of those reported..

  lower than initially reported personal consumption expenditures (PCE) accounted for most of the change; the annual rate of growth in PCE, reported at a 3.4% increase last month, was revised down to 2.6% annualized; as seasonally adjusted expenditures rose from an annual rate of $11,249.6 billion in the 4th quarter to $11,350.3 billion in the 1st quarter...since PCE is roughly 70% of GDP, this changed it's contribution to the final GDP figure from 2.40% to 1.83%; which means that without consumer spending, 1st quarter GDP would be slightly negative...of the 1.83% contribution from PCE, .58% was from an increase in durable goods purchases, which were 7.6% higher in the quarter, .45% was from a 2.8% increase on purchases of non-durable goods, and .80% resulted from a 1.7% increase in expenditures for services...

  the revised overall contribution to GDP from $2,144.4 billion of gross private investment was down a bit from last month's report, and there was some shifting of the component's weighting; residential investment increased at a 14.0% annual rate rather than the 12.1% previously reported and added .34% to GDP, while investment in non-residential structures declined 8.3% from Q4 2012 to Q1 2013, well more than the 3.5% decline reported last month, which subtracted .26% from the annual rate of GDP increase...investment in equipment and software was up 4.1% over the quarter, and added .31% to reported GDP...meanwhile, private inventories increased by $36.7 billion of chained dollars in the first quarter and added .55% to the annualized change... the change in business inventories from $34.8 billion in the 4th quarter to $26.8 in the first quarter subtracted .26% from reported GDP, but that was more than offset by the increase in farm inventories, from a subtraction of $15.2 billion in Q4 2012 to a seasonally adjusted increase of $8.0 billion in Q1, which by itself added .83% to first quarter GDP...in other words, were it not for increase in winter farm inventories, at least some of which appears to have been a seasonally adjusted reversal of the drought's effects (which devastated normal summer farm inventories to the tune of $19.2 billion and fall inventories by 15.2 billion), 1st quarter GDP would have increased by less than a 1.0% annual rate...to put that +.83% first quarter impact from farm inventories in perspective, the total impact of the change in farm inventories on GDP over the three preceding years was minus 0.04% in 2010, plus 0.02% in 2011; and minus 0.06% in 2012...this strongly suggests that farm inventories will be a drag on GDP for the remainder of the year, as that 1st quarter seasonal adjustment aberration reverses itself and inventories return to normal..

the impact of net exports (ie, exports minus imports) on GDP in the first quarter was negative and hence subtracted $387.7 billion from gross GDP, an impact from trade deficits that's been negative since the 70s...however, GDP as reported measures the change from quarter to quarter, so in those quarters when our trade deficit is shrinking, that smaller negative increases GDP relative to the previous quarter, such as the 4th quarter of 2012, when the change in negative net exports added .33% to GDP, mostly due to much lower imports...in the 1st quarter, exports decreased 1.1% vis-a-vis the the 4th; that reduced GDP by .15%; however, imports are now also reported to have decreased by 0.4% in the first quarter, and since they're a negative in the GDP equation, they were less negative compared to the previous quarter, and hence added 0.06% to 1st quarter GDP, which left the net influence of the changes in international trade on GDP at negative .09 for the quarter..

  reduced government spending and investment continued to be a drag on GDP; federal government outlays of $1,177.4 billion decreased from the 4th quarter at an annual rate of 8.7% in the first quarter, after being down 14.2% in the fourth quarter...most of this was due to lower defense spending, which fell at a rate of 12.0% in the quarter after falling at a rate of 22.1% in the last quarter of last year; by itself, this reduced GDP by .63%; meanwhile, non-defense federal spending fell 2.1% after increasing 1.7% in the 4th quarter and knocked another 0.06% off the quarter's growth...note that this does not yet reflect the full impact of the sequester, which started March 1st and will further reduce federal contributions in the next 2 quarters, as defense department furloughs kick in...also note that government transfer payments, ie, social security, medicare, unemployment comp, etc. are not included in these figures, but rather appear as part of personal consumption expenditures...state and local spending and investment continued to fall as well, down 2.1% to $1,848.0 billion from Q4, and subtracted .25% from 1st quarter GDP...

the zero hedge bar graph included above shows the impact of each of the major components on the final estimate of GDP for every quarter back to the 4th quarter of 2010, with additions to quarterly GDP above the dashed line and subtractions from it below it... the same data is also shown in the pink shaded box for all three estimates of the 1st quarter of this year, and the black line tracks the resultant quarterly changes to GDP (at an annual rate)...it's obvious that PCE (consumer spending) in dark blue has been the most consistent positive influence to GDP over the period, and despite being over estimated in the earlier 1st quarter estimates, still accounts for the entirely of the 1st quarter change by itself...the contribution of fixed investment is shown in red has also been regularly positive throughout the recovery, save for the .14 subtraction during the retrenchment in the 1st quarter of 2011...inventories are shown in green, and since they represent unused inputs or unsold goods, they have variable impact on GDP, since what's stocked in one quarter may be used in the next or vice versa...in purple we have exports; when they increase, it adds to GDP and appears above the line, while when they decrease, the purple is below the line & subtracts from the quarter to quarter change; imports in teal blue are just the opposite; when they increase, they subtract and are below the line, and when we import less than the previous quarter, that's a net plus for GDP; if you click to enlarge, you'll see that this week's revision now shows that slight decrease above the line as a QoQ increase in GDP...lastly, we have government spending and investment in orange, which except for the 3rd quarter of 2011, has been a drag on the entire recovery; and remember, each of these changes is from the previous quarter, showing that shrinkage of the government sector is cumulative throughout...

The most important monthly release of the past week was on Personal Income and Outlays for May from the BEA, which gives gives us several important metrics, including PCE (personal consumption expenditures), which as we've noted accounts for 70% of US economic activity, and the PCE price index, targeted by the Fed in recent rounds of quantitative easing...the BEA reported that personal income rose $69.4 billion, or 0.5%, from a seasonally adjusted annual rate of $13,695.0 billion in April to $13,764.4 billion in May; moreover, the reported 0.1% decline in income in April was revised to show a 0.1% increase... however, May's level is still below the annual income rate of $14,104.1 billion in December of last year, when incomes were boosted by accelerated bonus and special dividend payments and other manipulation of salaries to avoid the year end upper income tax hikes...May disposable personal income (DPI), or income after taxes, also increased by 0.5%, from a seasonally adjusted annual rate of $12,059.6 billion to $12,116.6 billion in May; which is also lower than the $12,539.1 billion DPI figure logged in December, before the payroll income tax cuts expired...note that just like for GDP, BEA extrapolates the monthly figure into an annual rate, and that the actual monthly totals herein are roughly one-twelve of those reported; as BEA notes this in a footnote on the press release, this is often misreported...

FRED Graph

  among sources of income gains in May was a $19.7 billion increase rate in wages and salaries, up from $6.5 billion last month; employer contributions to insurance and pensions increased at an annual rate of $3.4 billion, up from $2.5 billion in April; business proprietor's incomes increased 5.4 billion and farmers saw their incomes fall at a $6.7 billion annual rate, the same they fell in April...personal rental income decreased at a $0.7 rate billion in May, while interest and dividend income increased $31.2 billion; meanwhile, transfer payments from government programs increased by $19.4 billion, the largest of which was an $11.8 billion increase in social security benefits, reversing the $9.6 billion decline in April..

  May data for personal consumption expenditures (PCE) showed a 0.3% monthly increase, from an adjusted annual rate of $11,351.0 billion in April to $11,380.0 billion in May, reversing the 0.3% spending decrease in April...spending for durable goods rose $11.3 billion to $1,279.8 billion, spending for non-durables rose $7.3 billion to $2,573.7 billion and spending for services rose $10.5 billion to a $7,526.5 billion seasonally adjusted annual rate...total personal outlays, which includes interest and transfer payments in addition to PCE, rose $28.5 billion to a $12,116.6 billion annual rate...personal savings, which is disposable personal income minus total outlays, was at $387.6 billion in May, the highest yet this year...the personal savings rate, which is savings as a percentage of disposable personal income, was at 3.2% in May, also the highest savings rate this year...you can see that uptick in the savings rate in green on our adjacent FRED graph, with the scale for the saving rate on the right...

  BEA also generates a price index for PCE with this report, which as we’ve noted, is the Fed's preferred inflation gauge...in contrast to a 0.3% decrease in that price index in April, it showed less than a 0.1% increase in prices paid for goods and services in May, as the index based on 2005=100 rose from 116.467 to 116.563; the core PCE price index, which excludes food and energy, was also up 1.0% for the month and now shows a year over year increase of 1.06%, barely higher than the all time low of 1.05% core PCE inflation set in April...the overall PCE price index shows a 1.02% inflation rate, which is up from the 0.73 year over year inflation shown in the April report...

  it is common practice to adjust both PCE and DPI for inflation using the PCE price index as a deflator...by that metric, real disposable personal income increased by 0.4% in May and 0.3% in April,  while real personal consumption expenditures increased 0.2% in May after decreasing 0.1% in April; it is those inflation adjusted metrics that are charted on our FRED graph to the right above; real disposable income in 2005 dollars is in blue, while monthly real spending in 2005 dollars is tracked in red, with the scale for both on the left of the graph (btw, the income spike you see in 2008 was the Bush tax rebate).. on our FRED graph to the left below, we have a close up of nominal disposable personal income per capita since 2007 in blue, which has now reached a level of $38,317 per person; on the same chart in brown we also have inflation adjusted disposable income per capita in chained 2005 dollars, which gives us a truer picture of how incomes have risen (or not) for the average individual since the recession...in the chained 2005 dollars used by the BEA, per capita income has barely budged since 2007 and is now at $32,875, up just 0.43% over a year earlier and just 14.8% since the turn of the century...

FRED Graph

  as it was the last Tuesday of the month, the popular Case-Shiller home price indexes for April (pdf) were released this week, with the results showing the success of the Fed's attempt to reinflate the housing bubble...both the 10 city and 20 city April indexes, which are averages of repeat home sales prices that sold over February through April period, scored the highest one month gains in the history of the S&P/Case-Shiller Home Price Indices, with the 10 city index up 4.24, or 2.63%, to 165.63, and the Composite 20 up 3.75, or 2.52%, to 152.37; both composites, the national index, and each city index was set to equal to 100 in January 2000...metro areas showing the largest one month prices increases include San Francisco, where prices rose 4.9%, Atlanta, where prices were up 3.8% since the previous report, San Diego, which saw a home prices increase 3.7%, and Los Angeles, where home prices rose 3.4% in April...laggards for the month included Tampa and Phoenix, which saw home prices rise 1.7%, New York, where prices rose 1.1%, and metro Detroit, where April home prices were unchanged...

both Composite indices registered double digit year over year prices increases in April; average home prices over the 10 original cities increased 11.6% since last April's report, while the Composite 20 was up 12.1% in the year ending April...these are the largest price index jumps in 7 years, and all 20 cities saw year over year home price gains for each month so far this year...metro areas which saw the largest year over year home price gains included San Francisco, where prices rose 23.9%, Las Vegas, which saw home prices 22.3% higher, Phoenix, where prices rose 21.5% and Atlanta, where home prices were up 20.8%...those metro areas showing the least annual price appreciation were New York, where prices rose 3.2%, Cleveland, where prices rose 4.8%, Washington DC, which saw home prices 7.2% higher, and Charlotte, where prices rose 7.3% in the year ending April...

Real House Prices just to put this all into perspective, we're going to again look at Bill McBride's chart wherein he adjusts these price indexes for inflation, using the CPI less shelter...in the chart to the right, the monthly Case-Shiller Composite 20 prices adjusted for inflation are shown in red, the inflation-adjusted Case-Shiller National index is shown in yellow, and the real prices indicated by the national CoreLogic Index are shown in blue; even with the large home price run-up of the past year, we have just recovered to the price levels of September 2001 for the Case Shiller 20 in today’s inflation adjusted dollars; by the same metric, the National index is back to prices levels of the 2nd quarter of 2000, and the CoreLogic index back to October 2001 prices…as we’ve pointed out before, homes are not an appreciating asset any more than a car or other durable is, & they are no more like to "recover" to their former high prices than tulip bulbs are going to recover to the prices they sold for in 1637...houses deteriorate over time & eventually are torn down, just as automobiles deteriorate & are eventually junked...originally, the reason houses seemed to appreciate in value was the inflation of the 70s; because money depreciated faster than houses, houses went up in price...if inflation was 100% per year, cars would appear to go up in price every year too; you could then buy a car & drive it three years & sell it for more than you bought it for...with disposable personal income stagnant, core inflation at record lows, and inflation expectations falling below 2% on the possibility of QE withdrawal, there is no reason for homes to go up in price...

in two FRED graphs below, we have the track of all twenty cities in the Case-Shiller Composite 20 since the origination of the 20 city index in January 2000 (FRED has a limit of 12 lines per graph)…in the first FRED graph, we have the tracks of home price indexes Atlanta, Boston, Charlotte, Chicago, Cleveland, Dallas, Detroit, Denver, Las Vegas, and Los Angeles; in the 2nd FRED graph, we show the Case-Shiller metro indexes for Miami, Minneapolis, New York, Phoenix, Portland, San Diego, San Francisco, Seattle, Tampa and Washington DC, along with the Case-Shiller Composite 20 shown as a heavier black line…to view the exact track of any or several cities in these busy graphs, click on the graph or graphs with the metro area you want to view, and it will expand to a 1000 pixel graph at the St Louis Fed web site….each metro area will be represented by a line under it’s graph as follows: Line 1: Home Price Index for Atlanta, Georgia (ATXRNSA); click on the line or lines of the cities you want a better view of, change the Line Width in the drop down box, and click "Redraw Graph"; for example, in the 2nd graph below, the Composite 20 line width is three, while all other lines are one px wide; a line wide of 3 or 4 is adequate to have your chosen city's line stand out from the rest; to compare two metro areas that are on different graphs, go to the bottom of the list and click on "Add Data Series"; a search box will open, in which you will type the FRED code for the city you want to add to that graph (for instance, ATXRNSA for Atlanta), hit enter, and the line will appear on the graph...for some cities, you'll also have to adjust the Observation Date Range to read 2000-01-01...play with it; you cant screw up, if you want to start over, refresh the page, and the graphs will revert back to those below....
FRED Graph
FRED Graph

on the same day that the Case-Shiller index was released, the Census Bureau released its report on New Home Sales for May (pdf); as you should all know by now, these census housing reports, with just a small sample of data collected in person by census field reps, have such a large margin of error as to render the monthly results useless for any serious analysis, and this one is the worst, being subject to larger revisions than other census residential series; however, as long as economists and the media continue to give these reports credence and report them as exact, we'll continue to explain what they really reflect...

FRED Graph

  reporting on single family homes only, Census estimates new home sales in May were at a seasonally adjusted annual rate of 476,000 homes, which was "2.1 percent (±16.6%)* above the revised April rate of 466,000" and "29.0 percent (±17.5%) above the May 2012 estimate of 369,000"; translating that, ±16.6% means that, were the estimated pace of new home sales in May extrapolated throughout a year, Census is 90% confident that somewhere between 398,430 and 553,142 homes would be sold...the asterisk in the text directs us to a footnote which relates "the change is not statistically significant; that is, it is uncertain whether there was an increase or decrease" in new homes sold....furthermore, the 90% confidence interval for the number of new homes sold in May over those sold a year ago is between 11.5% and 46.5%...checking table 3 in the release, we see the actual estimate of homes sold in May from field rep data was 45,000, of which 15,000 were under construction, 14,000 were completed, and 16,000 we not yet started...April's sales have been revised to show 46,000 homes sold; the original estimate for April was 45,000, and April's sales were originally estimated at 454,000 annual rate...  

  an estimated 161,000 new homes remained up for sale at the end of May; by Census calculations, that's a supply of 4.1 months at the current sales pace...from their sample, Census finds that the median price of a new home sold in May was $263,900, that's down from $271,600 last month, and the average May sales price was $307,800; down from $330,800 reported in April, when their sample included 4,000 homes sold for over $750,000; that April figure has now been revised to 2000 new homes sold for over $750,000 in April, and just 1000 over that price sold in May...our FRED graph shows the median monthly new homes sales prices in green, and the monthly track of average sales prices in red; the dollar scale for both is on the right margin; it also shows the monthly track of new homes reported sold at a seasonally adjusted annual rate since 2000 in blue, with the scale in thousands on the left of the graph...

(the above is my weekly commentary that accompanied my 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 getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Thursday, June 27, 2013

SEEDS of DEATH: Changing Nature to Accommodate Industry Model


   Every single independent study conducted on the impact of genetically modified food shows that it damages organs, it causes infertility, it causes immune system failure, it causes holes in the GI tract, and it causes multiple organ system failure.
   The whole concept of genetically modified organisms is throwing a monkey wrench in the life on this planet.
   The reason why they have 170 million acres of genetically engineered corn, soybeans, cotton, canola oil and sugar beets in the United States is because it doesn’t have to be labeled. The first genetically modified animal, the salmon, may soon be approved for human consumption and there has not been sufficient animal health testing, human health testing, or environmental impact testing of these new transgenic fish.
   Basically, they take agriculture and build an industrial model which doesn’t fit nature. So instead of changing our agricultural model to accommodate what is natural, they’re changing nature to accommodate the industrial model.
   If you have an organic corn crop that sits next to a genetically engineered corn field and it happens to tassel at the same time and happens to be downwind, you’re going to get your crop contaminated. If the rest of the food supply is contaminated, then the genie’s out of the bottle and it’s maybe physically impossible to turn the situation around. In the genetic engineering revolution, these seeds are now patented property of one corporation, called Monsanto.
   We are heading downhill at a rapid rate of speed toward our own extinction. The use of GM in agriculture is a risk that is simply not worth taking. Any scientist that looks into the research or the lack of research, on the safety of genetically engineered food comes to the conclusion that these foods should not be on the market. They need another decade or two of research.
Monsanto is the company that told us that PCBs were safe. They were convicted of actually poisoning people in their town next to the PCB factory, and fined $700 million. They told us that Agent Orange was safe. They told us that DDT was safe, and now they’re in charge of telling us if their own genetically modified foods are safe because the FDA doesn’t require a single safety study. They leave it to Monsanto.
   Monsanto’s job is to make money for the investor. Unfortunately, that becomes the highest priority thought in their minds. Make money, make money, make money. They’re not actually making products to make health, they’re making money, so they tend to overlook the health consequences. That is a ridiculous approach to the problem.
   There should be some responsibility being assumed by the producer, that when they’re producing food, they have a really good assurance that it’s a good quality product. That should be the highest priority thing. Then if they can make money with that, fine and dandy. Unfortunately, it’s usually the other way around.
   People in this sort of business are looking for opportunities to make money first priority, and then in this case maybe letting somebody else worry about the health consequences. Maybe even the public. We have it upside down.

****************

62 countries around the globe have labeled or outlawed the use of GMO seeds.

Monsanto donated 475 tons of GMO seeds for hybrid corn and vegetables to Haiti. What did they do with it? The farmers burnt them because they believed the seeds would harm their citizens and contaminate other crops.

These countries (and more) have banned the use of GMO seeds: Australia, Japan, New Zealand, Germany, Ireland, Austria, Hungary, Greece, Bulgaria, Luxembourg, France, Madeira, Switzerland, India and Thailand. Additional countries have required labeling of products that include GMOs.

Bhutan is the first country to go 100% organic. No GMOs anywhere!
What can I do to get GMOs labeled or outlawed?
  1.  Call your Senator and House of Representatives
  2. Support non-profit organizations like The Non-GMO Project 
  3. March against Monsanto on May 25, 2013
  4. Start your own online petition on Change.org to increase awareness
  5. Stop eating GMO products. Stop eating processed foods. Avoid high fructose corn syrup. Look at labels that state Non-GMO Verified, Organic, USDA-certified.
  6. Support companies voluntarily offering NON-GMO products in The NON-GMO Shopping Guide conveniently available in book, app or website.
  7. Follow Non-GMO Project on Facebook.
  8. Encourage your favorite restaurants and grocers to offer sustainable, organic and local options without GMO products. Also, enjoy neighborhood farmers markets. Example: SOLdining in San Diego
  9. Read “The China Study” and other books on health, safety and sustainability
  10. Watch Food, Inc. and Forks Over Knives NOW!
  11. When you have a chance to cast your vote, vote to ban or label GMOs.

FOR THE FOOD FIGHT OF YOUR LIFE:

Sunday, June 23, 2013

Fedspook; May reports on consumer prices, new home construction, existing home sales, and state employment

   the financial news of the week came as a result of the two day meeting of the Fed's Open Market Committee, which really produced no news on its own; the statement barely changed from the statement issued after the last meeting, and Bernanke's responses to questions at his press conference after the meeting (pdf transcript) were pretty much a reiteration of his statements in testimony before the Joint Economic Committee of Congress roughly 4 weeks earlier, ie, that the economy was improving and they would soon be starting to taper off the from the $85 billion a month they've been injecting into the financial system, mostly by buying mortgage backed securities and reinvesting the interest proceeds of the Treasury bonds and MBS that they already hold on their balance sheet...however, market players must have not believed the first iterations, because as soon as the statement was released and Bernanke began to confirm what he's already said previously, financial markets started heading south, and by the time the planet had spun once on its axis, prices in every market around the world & for most every asset class were down by 2% or more; at its worst on Thursday, the Dow was off 570 points to 14,750 and Japan's Nikkei 225 was off 725 points to 12,800...

for those who arent refinancing their mortgages and without financial investments, it's hard to say what the Fed has accomplished; their earlier stated targets were 6.5% unemployment, which we know is a poor measure, and to allow short term inflation to reach 2.5% to stimulate growth; now, however, since employment hasnt improved since 2009, they say they'll be satisfied with 7% unemployment, and despite inflation fears accompanying the quadrupling of the Fed's balance sheet, core PCE inflation was at a record low in April…from here, it seems they just want to get out before everyone realizes what an abject failure their policy has been..

while monetary policy as conducted by the Fed focuses on the price index for PCE (personal consumption expenditures) from the BEA's income and outlays report, the Consumer Price Index from the Bureau of Labor Statistics is probably the inflation measure that affects more Americans, as it's used to determine cost of living increases for social security, federal retirees, private pension plans and food stamps; in addition, the principal of the Treasury's Inflation Protected Securities (TIPS) is tied to the CPI...it's also used as a deflator for other economic series, such as retail sales and weekly earnings, and to adjust the IRS tax brackets to keep tax rates from increasing due to inflation...on Tuesday, the BLS released the Consumer Price Index for May, which showed that the Consumer Price Index for All Urban Consumers (CPI-U) rose 0.414 from 232.531 in April to 232.945 in May, a seasonally adjusted increase of 0.1%; this was the first increase in prices since February, following a 0.4% fall in prices in April and a 0.2% decline in March....a year earlier, the index, which is based on prices 1982-84 = 100, registered 229.815, which gives us a year over year inflation rate of 1.34, which BLS rounds to 1.4% for the news release..the core CPI, which tracks all items except for food and energy, was up 0.226 to 233.462 over the month of May, which BLS rounds and seasonally adjusts to an increase of 0.2%...the one year gain of 3.860 in the core index works out to a annual increase rate of 1.68% which BLS rounds to 1.7%...

one main factor in May core consumer inflation was a seasonally adjusted 0.3% increase in the cost of shelter, which accounts for nearly a third of the overall CPI; the largest component of that, home owner's equivalent rent, was up 0.2% for the month; but rent of one's primary residence was up 0.3% and lodging away from home was up 1.4% in May, driving the shelter price increase...other factors contributing to the May rise in prices were increases in the index for transportation services, which up 0.4% in May, mostly due to a 2.2% increase in airline fares, the recreation services index, which was up 0.3% as an 0.8% increase in prices for movies, theaters, and concerts and a 1.4% increase in admission to sporting events more than offset a 1.4% decrease in the cost of video discs and a 0.6% decrease in prices for pet services, and the apparel index, which was up 0.2%, as May prices for men's and boy's clothing was 0.6% higher than April's, while prices for women's and girls clothes fell 0.2% and footwear prices rose 0.4%...price indexes which decreased In May included medical care commodities, which fell 0.5%, as prescription drugs were 0.6% cheaper and prices medical equipment and supplies slipped 0.5% overall, and new cars, which were priced 0.2% lower; meanwhile, new trucks sold for 0.3% more, while used cars and trucks fell 0.1% in price...

  on an annual basis, rent increases averaged 2.8%, homeowner's equivalent rent was up 2.1%, transportation services rose 2.6% as car insurance was up 4.1%, recreation services, led by a 2.8% average increase in cable & satellite TV, were up 2.0%, education and communication services increased 1.7%, with postage up 6.1% and college tuition & fees increasing by 4.5%; the cost of medical care rose 2.2% as prices for medical care services rose 2.9% and hospital services rose 3.8%. while the cost of medical care commodities remained unchanged as prescription drug prices fell 0.1%; in addition, apparel prices rose 0.2% as prices for men's and boys clothing rose 2.2% while prices for women's and girls clothes fell 2.1%...

     the energy index was up 0.4% for the month, as a 0.8% increase in the cost of electricity and a 2.4% increase in the price of natural gas more than offset the 2.9% decline in prices for fuel oil as gasoline was unchanged; on a year over year basis, the energy index was down 1.0%, with gasoline prices 4.1% lower than last May, fuel oil prices 5.8% lower, and other fuels. including propane, kerosene, and firewood, down 5.4%...meanwhile average costs for electricity rose 1.7% over the year and natural gas was 14.2% higher....the food index slipped 0.1% as the food at home index fell 0.3% and the food away from home index rose .0.2%...contributing to the decline in prices for food at home were an 0.8% decrease in dairy product prices, as whole milk and ice cream were both 1.7% cheaper while cheese products prices rose 0.5%, and a 1.1% decrease in prices for non alcoholic beverages...over the year, the food index was up 1.4% matching overall prices trends; prices for food away from home rose 2.3%, while prices for food at home rose 0.8%, as prices for cereals and baked goods rose 0.9%, prices for meat, poultry and fish rose 1.7%, prices for dairy products rose 0.1%, prices for fruits and vegetables rose 2.1% as apples rose 12.4% and tomatoes rose 11.4%, and prices for beverages fell 1.0%...an itemized list of monthly and annual prices changes for each separate food item is here...

   the pie graph from Doug Short to the above right shows the relative size of the major component indexes of the CPI; from the top, the pea green wedge represents the food and beverages index, about 15.3% of the CPI; the large turquoise section is housing, which is over 41% of the CPI; it includes shelter, utilities, furniture and appliances, and services; the orange wedge is the relative size of the apparel index, 3.6% of overall index; next, in green, we have the transportation index at 16.8% of the CPI; it includes prices for new and used cars, repairs & fuel, and transportation services...the red wedge is medical care, 7.2% of the CPI, which includes drugs, hospital & doctors costs, and insurance; the light green wedge is the recreation index, at almost 6.0% of the CPI; this includes everything from TVs to books and newspapers, admissions to events, toys & sporting goods, and pet expenses, while the purple slice is the education and communication component, which includes tuition, child care, IT and phones, while the light blue wedge covers items not included in an other index; at 3.4% of the CPI, this includes prices for everything from tobacco and haircuts to legal fees and financial services...

our FRED graph below shows the price change of each of those major CPI components; although the CPI and most of it's components are set to have price indices over the 1982 to 1984 period equal 100, there has been some rejiggering of the components along the way, so to make for an apples to apples comparison, we have reset the the prices indexes to 100 in the chart below...in blue, we have the track of the price index for food and beverages; in red, we have the price index for housing, which you'll note doesn't reflect the volatility of home prices, but rather the more stable homeowners equivalent rent; in violet, we have the index for apparel, which is obviously the only index to show a net price decline over the decade, the transportation index, in brown, is showing the impact of volatile gas prices on the cost of transportation, while the index for medical care in orange has obviously risen the most over the period, although you should note a retreat in prices over the recent months, the education and communication prices are tracked in dark green, and our last price index, in bright green, is for recreation...

FRED Graph

for those of you interested in seeing how these FRED graphs are created, start by clicking on the above graph, which will take you to the FRED page where that graph is archived; below the graph you’ll see there are 7 lines, each of which describes one of the data sets on the graph…at the bottom, you can click on “add data series”, and we’ll show you how to add another line to that for the overall CPI-U index…in the search bar, type the FRED code for the Consumer Price Index for All Urban Consumers: All Items, which is CPIAUCSL, and click enter, at which time the entire CPI history from 1947 will appear…then we set the Observation Date Range to January 2000 by typing in 01-01-2000; Units should already be set to “Index: Scale to 100 for chosen period” from the drop down menu; and the date there should also be 01-01-2000 to match the other graph lines, but if you were starting a new graph, you’d have to set those metrics yourself…last, pick a color that’s different than those already on the graph (ie, black), set the line width to 2, and hit the “redraw graph” button; you should have a new graph of the above with CPI-U added in black…if you want to experiment some more, here are 91 pages of BLS consumer price index data sets to keep you busy; you can either type each description out or add the FRED code to add lines to the above, or start your own graph and add lines to it…

FRED Graph

there were two major housing reports released this week; the first, from the Census Bureau, was on New Residential Construction during May, which estimates the numbers of new building permits, new home starts and completions during the month...as we've mentioned before, this report is usually watched and widely covered for details on new housing starts, but the data has such a large margin of error due to the small sample it's taken from as to render the monthly reports useless for any serious analysis...to collect data for this estimate, census selects a sample of building permits from a random sample of approximately 900 permit offices nationally, to be tracked monthly in person by field representatives, and further has field representatives conduct a road canvass in a sample of roughly 70 land areas not covered by building permits, to identify the start of new residential buildings...as inexact as that is, we'll cover what census reported & untangle it anyway, so noone can be snookered by media reports...

according to the Census, May housing starts were estimated at a seasonally adjusted annual rate of 914,000, 6.8 percent (±10.1%)* above the revised April estimate of 856,000 and  28.6 percent (±14.4%) above the May 2012 rate of 711,000; April's figure was revised from 853,000, a five month low...the asterisk leads one to a census footnote which says "it is uncertain whether there was an increase or decrease" of housing starts in May...what the numbers mean is that census took their rough estimate from field reps of 86,200 homes started in May, a figure which has a relative standard error of ±4,000, and extrapolated that into an annual estimate based on the normal relationship of May starts to annual starts...taking the margin of error into account, what that means is that Census is 90% confident that May's housing starts, were they continued at the same pace over the year, would result in somewhere between 883,838 and 1,068,466 million homes being started over the course of a year, which is not a figure that can be reported with any accuracy...the year over year change, 28.6% (±14.4%), has an even wider margin of error, but at least we can reasonably say that housing starts have increased by a decent number since last year...

  the data on building permits is the section of this report that is more useful, to the extent that the margin of error is small enough one can get an idea of the actual activity for permits, since about half of the permit-issuing places in the US are surveyed monthly...for May, census reports that building permits issued in May were at a seasonally adjusted annual rate of 974,000, which was 3.1 percent (±0.9%) below the revised April rate of 1,005,000 and 20.8 percent (±1.3%) above the estimate of 806,000 from last May...the annualized number was extrapolated for the May estimate of 93,400 permits and included 62,300 permits for single family homes, 2,300 permits for residences with 2 to 4 units, and 28,700 units in buildings with five units or more...9,800 permits were issued in the Northeast, of which 5,400 were for single family homes; in the Midwest, there were 15,700 new permits, of which 11,000 were for single family homes; 46,100 permits were issued in the South, which included 32,100 single family homes, and 21,800 building permits were issued in the West, of which 13,800 were single family structures...since 98% of housing built int the US is in areas where a permit is required, this metric gives us a reasonable idea how much housing construction is intended...of course, applying for and getting a building permit does not guarantee that construction will start...our FRED graph above shows monthly housing starts in blue and building permits in red as reported on an annualized basis; while individual monthly figures may not be dependable, there is clearly a rising trend for both housing starts and building permits issued...

Existing Home Sales NSA  the other housing report was on Existing-Home Sales for May from the National Association of Realtors (NAR); they report a 4.2% increase in seasonally adjusted existing home resales, up from an annual rate of 4.97 million in April to an annual rate of 5.18 million in May, which this was the highest sales rate since the first time home buyer tax credit boosted sales in November 2009....like the Census report, these are annualized figures extrapolated from the preliminary figure of 516,000 homes sales reported by realtors in May (pdf), and NAR reports they represent an annualized increase rate 12.9% over May last year, despite the fact that YoY actual sales have grown 15.1% from the 448,000 May total of a year ago...single family homes sold at a seasonally adjusted annual rate of 4.60 million in May, up 5.0% from the 4.38 million rate in April, while condominium and co-op sales fell 1.7% to an annualized rate of 580,000 units in May...

  home selling prices continued to increase as well; the national median price for all housing types was $208,000 in May, up 15.4% from a year ago, while the average sales price came in at 255,300, up 11.2% from last May...that median price jump was the largest annual increase since a 16.6% year-over-year increase in October 2005, and culminated the longest string of YoY price increases since the 15 month run between March 2005 and May 2006, at the height of the housing bubble...there was quite a wide variance in regional home prices; the median price in the Northeast was $269,600, up 12.3% from last May, while the median price in the Midwest was $159,800, up 8.2% from a year ago; the median price in the South was $183,300, up 15% YoY, and the median price in the West was $276,400, up 19.9% from a year earlier...the NAR continues to blame the rising prices on a limited supply of housing, showing the number of homes on the market up 3.3% from April to 2.22 million, which would be a 5.1 month supply at the current annual sales pace; since these transactions were completed in May, those prices also benefited from the then low interest rates, which Freddie Mac had at 3.54% for a 30 year fixed mortgage...however, 30 year mortgage rates rose as high as 4.24% after the Fed's meeting, which translates into decrease of about 8.9% in mortgage purchasing power, which should start to impact home prices going forward..

  of May's total home sales, 11% were of foreclosures, which realtors reported sold for 15% below market value, and 7% were forced short sales, which were reportedly discounted 12%..at 18% of the total, such distressed sales were down from 25% a year ago and remained at the lowest share of homes sold since the NAR started tracking this metric in October 2008...however, the percentage of all cash buyers continued to increase, hitting 33% of sales in May, up from 32% in April and 28% a year ago, while the percentage of first time home buyers continued to decrease, accounting for just 28% of transactions in May, down from 29% in April and 34% a year ago...in a normal housing market, first time buyers make up 40% to 45% of all homes bought....the bar graph to the above right from Bill McBride shows actual monthly home sales (not annualized or seasonally adjusted) for every month since January 2005; you can see the elevated home sales in the boom years of 2005, 2006, & 2007 in purple, blue and light green, then follow monthly sales through the five years of housing bust as colored coded above the bars (click to enlarge)...this year's monthly sales, in red, seem to indicate that the worst of the sales slump is behind us...

State Unemployment one more report we'll take a quick look at is the May Regional and State Employment and Unemployment Summary from the BLS; this report in effect echoes the two surveys from the monthly national employment summary on the first Friday of each month by further breaking each of them down by state and region...although most media coverage focuses on crude state unemployment rates, we'll start by looking at the state by state equivalent of the establishment survey to see what states benefited from the seasonally adjusted 175,000 new jobs reportedly added in May...states with the largest job gains as a percentage of the population included Ohio, where 32,100 jobs were added, 3,900 of which were in construction and 7,300 were in professional & business services, Michigan, where 18,100 new jobs were created, 9,100 of which were in professional & business services, New Jersey, where of 14,300 new jobs 5,500 were in professional & business services and 4,200 were in trade, transportation, and utilities, Wisconsin, where 10,400 jobs were added, 4,000 of which were again in professional & business services and Nebraska, where there were 5,900 new jobs, including 1,500 in education and health and 1,700 in government...states with the largest payroll job losses were South Carolina, where there were 7,700 less jobs, Arkansas,, where a net 5,900 payroll jobs vanished, and Alaska,  which lost 4,200 jobs...in May, payroll employment increased in 33 states and the District of Columbia and decreased in 17 states...

in the crude unemployment percentages derived from the household survey, half the states saw their seasonally adjusted unemployment rates fall, 17 states saw increases in their jobless rates, and 8 states and the District of Columbia saw no change...states with the largest percentage changes included Tennessee, where the jobless rate increased from 8.0% in April to 8.3% in May, California, where the jobless rate fell from 9.0% to 8.6%, West Virginia, where the unemployment rate decreased 0.4% to 6.2%, Hawaii, where the jobless rate fell from 4.9% to 4.7% and New York, where the rate fell from 7.8% to 7.6%...Nevada continued to have the highest jobless rate nationally at 9.5%, followed byIllinois and Mississippi, with unemployment rates of 9.1% each; the Dakotas and Nebraska had the lowest unemployment rates, with North Dakota seeing just 3.2% jobless, Nebraska with a unemployment rate of 3.8%, and South Dakota with an jobless rate of 4.0%...the Wall Street Journal has an interactive graphic whereby you can make your own graph comparing the unemployment rate trajectories of up to five states at once over the course of the recession...the bar graph we're including here is from Bill McBride and it shows the current unemployment rate by state in red, from the highest on the left to the lowest on the right, and the peak rate each state hit during this ongoing recession in blue…click to view full sized..

(the above is my weekly commentary that accompanied my 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 getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Saturday, June 22, 2013

BOPE - THE BRAZILIAN ELITE SQUAD

BOPE ELITE SQUAD BLOG


From OpenDemocracy:  The arena of dispute was quickly occupied by three clear, distinct positions. Taken together, in the way that they work to polarize opinion rather than to build consensus on the urgent social issues that Brazil faces, they well represent how politics in Brazil is currently being conducted.
The first position praises Bope as the country's finest. This elite really is an elite. The film contrasts the professional standards of Bope's officers from (for example) Rio's military police, depicted as lazy, fat, corrupt and inefficient, whose commanders would dump bodies in each other's zones of responsibility to avoid the bureaucratic headache of having dead people in your territory.
The second position condemns Bope's moral corruption and blames the film for eulogizing (by means of a "fascist" [Arnaldo Bloch] or at least "irresponsible" aesthetic) a violent and deviant institution.
The third position blames the Brazilian people, who have been morally corrupted after decades of rule by amoral institutions such as Bope. It is pointless to blame Bope or the film: Tropa de elite is an artistic depiction of a true reality.   

Contributing Factor:
Brazil's Booming Economy Is Creating 19 'Millionaires' Every Day  
Another factor accounting for the rising tide of millionaires are high executive and banker salaries, which Morales said often beat those paid in the US. He noted it’s common for Brazilian investment bankers to make a $539,000 ($1m reais) annual bonus these days while CEOs can make an average of $75,000 a year.
According to other bankers, Brazil’s booming real-estate industry has also generated huge wealth as property values have doubled in recent years and are poised to increase further, especially in Rio de Janerio, as the city girds up to host the 2014 World Cup and the 2016 Olympics.
Individuals with a net worth ranging from $539,000 – $2.7 million ($1m-$5m reais) make up the bulk of the new millionaires, Morales said, adding that most private banks tend to individuals whose net worth falls below $5.4 million ($10m reais).
“I think that this trend will continue for the next three years but I don’t see it lasting forever. After all, there is a limit to everything,” Morales noted.
Brazil’s economy has been growing at an annual average of 5% in recent years and is predicted to maintain that pace in the medium term. However, some economists have warned that the country’s economy could overheat as inflation rises to unsustainable levels.

Updated 4/2013 Last year Sao Paulo was home to 1,880 individuals with net assets of $30 million or more according to Wealth Report 2013 published by Wealth-X, a Singapore-based wealth intelligence firm. The report adds that by the year 2022 the number will jump to 4,556 that is also a reflection of resource-rich Brazil’s soaring prosperity.

Sunday, June 16, 2013

debt ceiling delayed, May’s retail sales and industrial production, April’s job openings & turnover

just so you don't forget, we still have an inane debt ceiling hanging over our heads. whereby the Treasury is prohibited from issuing additional Treasury script to pay for the programs that congress has already mandated, until such time as congress votes to raise that artificial limit...you may recall that Congress had suspended that ceiling for three months earlier this year, only to have it reinstated on May 18th, at which time estimates were that the Treasury would run out of accounting tricks by August or September, necessitating some kind of grand bargain between the president & those in the House holding the country hostage before the fiscal year ended on September 30th...however, this week the Congressional Budget Office issued a report enumerating the higher than originally expected receipts, the accounting legerdemain that the Treasury had available to it, and the schedules of regular cash outflows from the Treasury, and determined that the extraordinary measures taken by the Treasury could postpone the day of reckoning until sometime in October or November, which would push the debt ceiling encounter beyond the September 30th cutoff date of the stop gap continuing resolution passed in late March, in a deal that also allowed the sequester to go into effect...what this now means is that the possibility of a complete government shutdown on Oct. 1st will likely come before the threat of a Treasury default when the ceiling is hit...as of yet, there hasnt been any indication of progress in resolving either; the latest we've seen was a threat from Obama last week to veto any bill that would shift spending unless both parties agreed on a broader budget plan, a threat Boehner said would only lead to a government shutdown...

the Senate did finally move on the 2012 farm bill, and on Monday passed a $955 billion, 5 year bill that would curtail direct payments to farmers regardless of prices or crop yields; their bill would also cut food stamps by $4.1 billion over the next ten years; the bill now moves to the House, where $20.5 billion in food stamp cuts are being proposed, an apparent compromise with Paul Ryan’s 2013 budget which called for $135 billion in food stamp cuts...even the smaller amount will remove 2 million Americans, including children, from Supplemental Nutrition Assistance Program (SNAP) eligibility...on another issue, little progress has been made in coming to an agreement to avert the automatic July 1st increase in subsidized student loan rates from 3.4 percent to 6.8 percent...Elizabeth Warren's bill to reduce student loans to the same rate banks borrow from the Fed was blocked by senate republicans, and with the government raking in $50 billion a year on this scheme, House members are likely to insist on offsetting cuts to other programs to make up the difference...

there were two important economic releases for May this past week; retail sales from the Census Bureau and Industrial Production from the Fed; together with GDP, employment and real income, they are followed by the NBER Business Cycle Dating Committee, official arbiters of recessions, in determining turning points in the economy...while neither was negative this month, industrial production has been weak year to date, with a negative reading in April, and retail sales fell in March, so they both bear watching...

May 13 retail the Advance Retail and Food Services Sales Report for May (pdf) from the Census Bureau showed that seasonally adjusted retail sales were at $421.147 billion in May, 0.6% higher than April's $418.840 billion and 4.3% higher than year ago sales of $403.728 billion, in figures that are not adjusted for inflation; actual sales for May, from which the headline number was derived, were at $444.122 billion, up from actual April sales of $414.705 billion, as purchases of most items, even food, typically increases seasonally from May to April...these aggregate sales numbers are derived from questionnaires mailed or faxed to a probability sample of less than 5000 firms selected from the universe of 3 million retail and food services firms; and had a margin of error of ±0.5% for May's figures; which means that Census is 90% confident that the seasonally adjusted change in sales from April to May was between 0.1% and 1.1%, so keep that in mind as we examine these apparently exact sales numbers....the overall increase in sales from April to May was led by a 1.8% increase in sales at car dealers, from a seasonally adjusted $77.675 billion in April to $79.083 billion in May, a total 8.5% higher than the $72.886 billion sales of a year ago; without those car sales, retail sales were only up 0.3% for the month...other major monthly percentage gains were registered by building material & garden supply stores, whose seasonally adjusted sales rose nine-tenths of a percent, from $26.158 billion in April to $26.387 billion in May, food & beverage stores, where sales rose 0.7% from $47.822 billion in April to $48.173 billion, non store retailers (mostly online), where May sales were 0.7% higher at $37.330 billion, and miscellaneous store retailers, whose sales total of $10.601 billion was 1.2% higher than April's...retailers who saw sales decline in May included furniture stores, where seasonally adjusted May sales of $8.131 billion were 0.8% less than April's $8.197 billion, restaurants and bars, where May sales declined 0.4% to $45.928 billion, electronic and appliance stores, where Mays sales of $8.380 billion were also off 0.4% from April's $8.412 billion, and department stores, where May sales were off 0.2% to $14.713 billion...seasonally adjusted month over month percentage gains for these and all types of retailers can be seen on the adjacent table from the report, which also shows the sales percentage gain from May of last year; as you can see, only nonstore, online retailers, who saw sales increase 11.3% from last year, and building & garden supply stores, who sales were up 10.1%, posted double digit year over year gains...meanwhile, year over year sales declined 0.5% at furniture stores and electronic and appliance stores, and 3.9% at department stores (not including their leased departments)...

below we have two FRED graphs which show the track of each of these major retail groups since the beginning of 2007, a date selected to show some of the prerecession sales trend for each....the first FRED graph shows seasonally adjusted monthly sales for motor vehicle & parts dealers in blue, sales for food & beverage stores in red, gasoline station sales in orange, sales at general merchandise stores in green, non-store, or online sales in violet. and sales at bars and restaurants in grey...you'll easily note the collapse in aggregate auto sales, which was recession related, whereas the near halving of gasoline station sales resulted from a rapid fall of the price of gas from over $4 a gallon to below $1.90 nationally...before we look at the second FRED graph below, note the difference in the scale on the left of each graph; the first graph covers sectors with monthly sales amounts from $20 billion to $80 billion, while the second graph tracks sales of retail groups with monthly sales between $4 billion and $28 billion (click either for a larger view)...the second FRED graph shows seasonally adjusted monthly sales at building & garden supply retailers in blue, electronics and appliance store sales in red, furniture stores in green, clothing stores in orange, drug stores in violet, and stores specializing in sporting goods, hobbies, books or music in grey...remember, these seasonally adjusted sales amounts are not adjusted for inflation, so the apparent uptrend in any category may just reflect higher prices and not more unit sales...by rights, May's sales gains should also be adjusted for inflation using the CPI, but the CPI for May will not be released until Monday…

FRED Graph

FRED Graph

with this May report, the basis for these monthly sales estimates were revised for the first time in two and half year to reflect the introduction of a new probability sample, based in part on the results of the 2011 Annual Retail Trade Survey; details on reliability of estimates for each kind of business are included at the end of the report (pdf)...as we mentioned, May's overall sales figures had a margin of error of ±0.5% and are subject to revision..in a special report, doug short looked at the differences between the monthly advance estimate, which we have just covered, and the third estimate, released two months later, over the period from 2007 until the most recent 3rd revision; he found that over this period, there were 33 upward revisions and 41 downward revisions, with an average revision of 0.38%; the average upward adjustment was 0.30%, and the average downward adjustment was -0.44%...the chart he developed showing the dollar value of those revisions in millions is included below....

FRED Graph

on Friday, the Fed released their report on Industrial production and Capacity Utilization for May, which showed seasonally adjusted industrial production unchanged from the April report; the industrial production index, which is benchmarked to 2007=100, stood at 98.7, still 0.2 lower than February, after a decline of 0.4% in April and an small rise of 0.2% in March...the manufacturing index was up 0.1% to 95.3 after declines of 0.3 in both March and April, bringing that index back to December's levels, while the mining index, now largely tracking oil & gas production, rose 0.7% to 117.5...offsetting that was a 1.8% decrease in utility output which left the utility index at 98.7, which was nonetheless still 3.1 points higher than it's year end reading of 95.6...unusual volatility in the utility index year to date, mostly due to a colder than normal  march which led to a 5.3% jump in utility output, has translated into misleading monthly readings on the overall index, which is up 1.6% year over year, with manufacturing output up 1.7%, mining up 4.8% and utility production still down 3.6% from last May, a month where well above normal temperatures led to increased use of air conditioning...in addition to the indexes for these major industry groups, this report also indexes industrial production by market group; the index for production of consumer goods, which accounts for 27.14% of the total IP index, slipped 0.1% in May to 93.9, after falling 0.7% in April; production of durable consumer goods rose 0.2%, with strength in automotive, electronics, and appliances and furniture; however, production of consumer non-durables, the larger component, saw its index slip 0.2 to 93.8, with weakness in food & tobacco, paper products and energy products more than offsetting increases in the indexes for clothing and chemical products...meanwhile, the May index for production of business equipment rose 0.2% to 102.2, as a 0.5% increase in the-production of transit equipment, primarily medium and heavy trucks, and a 1.2% increase in the index for information processing equipment to 101.5  more than offset a 0.3% decline in the index of industrial and other equipment to 100.9...in addition, the index for production of defense & space equipment extended its string of monthly declines to six as as it fell 0.7 points from 112.3 to 111.6...among non-industrial supplies, the index for output of construction supplies slipped another 0.2% in May and is now at 80.7, down 2.1 points since February, while the index for business supplies fell 0.3% to 90.3 and is now 0.7% below the reading of last May...meanwhile, the index for the output of materials to be processed further rose 0.2% to 104.7 as all major component indexes gained ground, with particular strength in the production of energy materials, chemicals, textiles, consumer durable parts and equipment parts...also reported with this release is the capacity utilization by the major industry groups; simply put, this is the percentage of plant and equipment that was being used during the month, analogous to an employment report for machines...seasonally adjusted capacity utilization for total industry in May slipped 0.1 percentage point to 77.6%, the lowest utilization since October; again, that monthly change was mostly a function of the pullback in utility operations as weather returned to seasonal norms, as a seasonally adjusted 77.3% of utility capacity was in use in May as contrasted with 78.7 in April and 81.3% in March; however, usage of our overall capacity continues to slip, and is now 0.2% below the 77.8% level of a year earlier; as of May, were only using 75.8% of our manufacturing capacity, and that's 0.6% less than we were using at year end...essentially, that means we had 24.2% of our manufacturing plant and equipment idled in May, which also means unemployment of those who'd otherwise run those machines...usage of our mining equipment, which includes drilling rigs, is a bit better at 88.2%, up from 87.6% a year ago, and the year over year decline in utilization of our utility plants from 81.2% to 77.3% is likely more a function of the warm weather last year than of reduced industrial usage of gas & electricity...our FRED graph for this release, to the right above, shows capacity utilization for total industry in pink, with the scale indicating percentage of capacity in use; it also shows the production index for all industry in black, the manufacturing production index in blue, the utility production index in green, and the mining production index in red; note that all these industrial production indices were reset at the peak where 2007=100, and the scale on the left also reflects this...it's fairly obvious that the only significance industrial growth we've seen over the decade is in "mining", driven by the extensive spread of hydraulic fracturing of the bedrock beneath our feet...

FRED Graph

something we didn't expect to see at this stage of what should be a jobs recovery was a reduction in job openings, but that's what the Job Openings and Labor Turnover Summary for April from the BLS showed; seasonally adjusted job openings in April fell to an estimated 3.757 million from 3.875 million in March, with most of the job opening losses occurring in manufacturing, health care and social assistance, and accommodation and food services, while job openings in retail increased slightly....the job openings rate, which is job openings as percent of total employment plus job openings, was at 2.7% percent at month end, and ranged from a low of 2.4% in the northeast to a high of 2.9% in the South; there were 3.1 officially unemployed per every job opening, and 5.8 if one includes those working part time who want full time work, neither of which includes the 7,193,000 of us not in the labor force who say they want a job....this report also includes estimates of the number and rate of hires, and fires, layoffs and quits by industry and by geographic region; both hires and total separations increased in April...a seasonally adjusted estimated total of 4.425 million were hired in April, compared to the 4.227 million hired in March and the 4.252 million hired in April 2012; the hiring rate, expressed as a percentage of those working, increased from 3.1% to 3.3%, with the hiring rate for construction falling from 5.5% to 4.9% and the hiring rate for professional and business services increasing from 4.5% to 5.1%; again, the hiring rate in the Northeast was lowest at 2.9% while the South saw a hiring rate of 3.6%...meanwhile, total separations rose from a seasonally adjusted 4.123 million in March to 4.279 in April, with the separations rate increasing from 3.0 in March to 3.2 in April (NB: hires minus separations should equal the revised April payroll number of 149,000 we saw last week, but it's 3,000 less); a year earlier, there were 4.123 million separations...of those April job separations, a seasonally adjusted 2,251,000 quit their jobs for a quits rate of 1.7%, 1,653,000 were laid off or discharged for a layoffs & firing rate of 1.2%, and 375,000 were separated for other reasons, such as retirement, death, or disability, yielding an ‘other separations’ rate of 0.3%; the layoffs and firings rate was lowest in the Midwest at 1.0% and highest in the West at 1.4%, while the quits rate was highest in the South at 1.9% and lowest in the Northeast at 1.2%...our FRED graph to the right above includes the track of each of these JOLTS metrics since 2005; total monthly job opening in thousands is tracked in blue, monthly hires are tracked in orange, total separations are tracked in violet, monthly layoffs and firings are tracked in red, and monthly quits are tracked in green…note that workers were much more likely to quit their jobs before the recession, and that the difference between hires & separations should correspond to the non farm payroll jobs added or subtracted in the corresponding month…

(the above is my weekly commentary that accompanied my 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 getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)