Sunday, December 28, 2014

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

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

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

the Third Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our economy grew at a 5.0% rate in the third quarter, revised from the 3.9% growth rate reported in the second estimate last month, and up from the first estimate of 3.5%, as personal consumption expenditures, especially for health care, and non-residential fixed investment were revised upward...in current dollars, our 3rd quarter GDP would extrapolate to $17,599.8 billion annually, up 1.56%, or at a 6.42% annual rate from the $17,328.2 billion annualized figure of the 2nd quarter...however, since the change in GDP being reported here is not a measure of the change in the dollar value of our GDP but a measure of the change in our output, the current dollar value of output is adjusted for inflation based on prices chained from 2009 , from which all percentage calculations in this report are based....the resulting inflation adjustment used in the third quarter, aka the "GDP deflator", implies overall annual inflation at a 1.4% rate, unchanged from the 3rd quarter deflator reported a month ago, but up from the 2.1% annualized inflation factor reported for the second quarter...while we cover the details below, recall that all quarter over quarter percentage changes reported in this release are given at an annual rate, which means that they're expressed as a change a bit over 4 times the change that actually occurred over the 3 month period...  

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

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

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

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

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

3rd qtr 2014 3rd estimte GDP

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

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

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

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

while our personal consumption expenditures accounted for 68.2% of our third quarter GDP, before they were included in the measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption...that's done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2009 prices = 100....that index fell to 109.015 in November from 109.203 in October, giving us a negative month over month inflation rate of 0.017%, which BEA reports as -0.2%, and a year over year PCE price index increase of 1.17%, while core prices rose 1.41%, well below the Fed's target of 2.5% inflation articulated in their December 2012 FOMC meeting...because of the decrease in prices, the inflation adjusted or real personal consumption expenditures actually increased 0.7% in November, after rising 0.2% in October, when the PCE price index was reported as unchanged by was actually up fractionally...together, these October and November adjustments imply an annualized increase of approximately 4.2% in 4th quarter PCE, even if December PCE is unchanged ...using the same PCE price index, disposable personal income was inflated to show that real disposable personal income, or the purchasing power of disposable income, rose by  0.5% in November, after increasing by 0.3% in October...

our FRED graph below shows monthly real disposable personal income in blue and real personal consumption expenditures in red since January 2000, with the annualized scale in chained 2009 dollars for both shown in the current data box and on the lower left; also shown on this same graph in green is the monthly personal savings rate over the same period, with the scale of savings as a percentage of disposable income on the right...the spike in income and savings at the end of 2012 was mostly the result of income manipulation before the year end fiscal cliff; the earlier spikes were as a result of the tax rebates enacted as a fiscal stimulus under George Bush…. 

November 2014 real income and expenditures

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

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

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

Existing Home Sales Fall 6.1% in November

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

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

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

like existing homes sales, sales of new homes also fell in November, but previously reported sales were revised downward for the 6th month in a row as well... the Census bureau report on New Residential Sales for November estimated that new single family homes were sold at a seasonally adjusted annual rate of 438,000 in November, which was is 1.6 percent (±12.3%)* below the revised October rate of 445,000 and was also 1.6 percent (±17.8%)* below the annualized new homes sales pace in November of last year...October's annualized sales rate was revised down from the 458,000 annually reported a month ago to 438,000, while September's sales rate unrevised from the downward revision to 455,000 annually reported last month...the asterisks after the reported figures indicate that based on their small sampling, Census could not be certain whether November's new home sales rose or fell from those of October or even from those of a year ago, but there’s a 90% likelihood that November home sales were in a range between 13.9% less than and 10.7% more than those of October, and that new homes sold could have been as many as 16.2% more than last November or as few as 19.4% less than last November, a range of uncertainty to be expected in this report which has the largest margin of error of any census construction series....

the unadjusted data from Census field reps estimated that 31,000 homes sold in November, down from 36,000 in October, which was revised from the original estimate of 37,000...new home sales for the year through November were 402,000, up 1.0% from the 398,000 sold during the first eleven months of 2013...of the roughly 31,000 homes sold in November, 10,000 were completed, 11,000 were under construction, and 9,000 had not yet been started...the median new home sales price was $280,900 in November, down from $290,100 in October, while the average sales price was $321,800, down from October's $375,200 average price, as there were 2,000 less homes sold for over $750,000 in the sales mix... the Census estimated that a seasonally adjusted 213,000 new homes remained unsold at the end of November, which was a 5.8 month supply at the November sales pace, unchanged from the 5.3 month supply of unsold new homes in August...

the FRED graph below shows the seasonally adjusted annual rate of new single family home sales from this Census report in thousands since January 2000 in red, and the seasonally adjusted annual rate of existing home sales from the NAR monthly over the same time period in blue...note that the number indicated monthly for both represents an extrapolated estimate of how many homes would be sold over an entire year if that month’s pace were continued over 12 months, and that the actual sales for each month are closer to the unadjusted data we cited...this graph can also be viewed as an interactive at the FRED site, where the annualized monthly sales extrapolations for both existing and new homes will appear as you scroll across the face of the graph... 

November 2014 new and existing home sales

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

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