Sunday, November 15, 2015

October’s retail sales & producer & import-export prices; September’s job openings & wholesale and business inventories

the key reports this week were on retail sales for October and the business inventories report for September from the Census bureau, and the Producer Price Index for October and the Import and Export Price Indexes for October from the Bureau of Labor Statistics...leading up to the business inventories report, the Census also released the September report on Wholesale Trade, Sales and Inventories (pdf), while the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for September...

October Retail Sales Not Much Changed from August and September

seasonally adjusted retail sales rose 0.1% in October while September sales were revised more than 0.1% lower and August's sales were also revised a bit lower, resulting in an advance sales figure nearly 0.1% lower than what was reported last month...the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $447.3 billion, which was an increase of 0.1 percent (±0.5%) from September's revised sales of $447.0 billion and 1.7 percent (±0.7%) above the sales of October of last year...September's seasonally adjusted sales were revised from the $447.7 billion first reported to $447.0 billion, while August's sales, which were revised down to $447.2 billion from the originally reported $447.7 billion last month, were revised down again, to $447.1 billion with this report...estimated unadjusted sales in October, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 3.5%, from $430,925 million in September to $445,189 million in October, while they were up 1.8% from the $437,277 million of sales in October a year ago, showing the effect of seasonal adjustments on this month’s report...

included below is the table of monthly and yearly percentage changes in sales by business type taken from the Census pdf, which you should all be familiar with by now.....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business type from September to October in the first sub-column, and then the year over year percentage change for those businesses since last October in the 2nd column; the second pair of columns gives us the revision of last month’s September advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the August to September change under "Aug 2015 revised" and the revised September 2014 to September 2015 percentage change in the last column shown...for your reference, the table of last month’s advance September estimates before this month's revision is here....

October 2015 retail sales table

from this table we can see that the 0.5% decrease to $93,863 million in sales at automobile and parts dealers was in part responsible for the October sales weakness; without the drop in automotive sales, retail sales increased by 0.2% to $353,392 million...0.9% lower sales gasoline stations were also a drag, but at $35,085 million they're a smaller part of the aggregate than they were when gasoline prices were higher...other retailers showing lower sales included general merchandise stores, where sales fell 0.4% to $56,678 million, electronics and appliance stores, where sales fell 0.4% to $8,633 million, and sales at food and beverage stores, where sales fell 0.3% to $56,817 million...on the other hand, miscellaneous store retailers saw sales rise 1.8% to $10,161 million, and non-store retailers, who are mostly online, saw sales rise 1.4% to $41,380 million...in addition, sales at building material and garden supply stores rose 0.9% to $27,978 million, sales at drug stores rose 0.7%% to $26,731 million, sales at specialty shops such as sporting goods and book stores rose 0.4% to $7,522 million, and sales at furniture stores rose 0.4% to $8,747 million...

while we can't estimate the impact of these October sales on 4th quarter GDP until the consumer prices indices are released next week, the decrease of roughly $0.8 billion in sales for August and September should subtract nearly $3.4 billion from the growth of annualized personal consumption expenditures for goods when the 2nd estimate of third quarter GDP is release at the end of the month, which would hence subtract 0.02 percentage points from 3rd quarter GDP growth…

October Producer Prices Down 0.4% on Widespread Lower Pricing

the seasonally adjusted Producer Price Index (PPI) for Total Final Demand for October, which had been expected to show a small increase, came in with a 0.4% decrease, as prices for finished wholesale goods fell by 0.4% while margins for final services providers were 0.3% lower...this followed a September report that showed the overall PPI down 0.5%, with prices for finished goods down 1.2% while final demand for services was down 0.4%....producer prices are now down 1.6% over the past 12 months, as producer price have only risen 2 months over that span, as the year over year index has now been down for 10 consecutive months...

the index for final demand for goods, aka 'finished goods', fell by 0.4% in October after falling 1.2% in September and 0.6% in August, as the index for wholesale food prices fell by 0.8% on the back of a 26.9% drop in the wholesale price for fresh eggs and a 4.7% drop in wholesale beef and veal prices, while wholesale oilseeds rose 5.7%...meanwhile, the index for wholesale energy prices was unchanged as a 0.5% decrease in wholesale residential electric prices offset a 3.8% increase in prices for wholesale gasoline...excluding food and energy, the index for final demand for wholesale core goods was 0.3% lower in October, as wholesale prices for tires fell 2.5%, wholesale prices for light trucks fell 1.8%, producer prices for transformers and power regulators fell 2.5%, and producer prices for oil and gas field machinery fell 1.1%...

as we previously noted, the index for final demand for services fell 0.3% in October after falling 0.4% in September, as the index for final demand for trade services fell 0.7%, the index for final demand for transportation and warehousing services rose 0.1%, and the index for final demand for services less trade, transportation, and warehousing services was down by 0.1%....seasonally adjusted margins for fuels and lubricants retailers fell 15.8% while margins for household appliances retailers were down 8.7% and margins for phone and wireless telecommunication services fell 5.6%....partially offsetting those decreases, margins for apparel wholesalers rose 2.8%, margins for TV, video, and photographic equipment retailers rose 3.8%, and margins for recreational activity instruction fees were 7.4% higher...over the past year, the index for final demand of services is now only 0.1% higher than it was last October...

in addition, the October report showed the price index for processed goods for intermediate demand fell by 0.4% after a 1.5% decrease in September as intermediate processed goods prices have now been down 13 out of the last 15 months and are 7.5% lower than in October a year ago....all intermediate goods indices were down for the month, with prices for intermediate energy goods 1.0% lower, the index for processed foods and feeds 0.5% lower, while the price index for processed goods for intermediate demand less food and energy was down 0.2%...however, the price index for intermediate unprocessed goods was unchanged in October after falling 3.1% in September and 4.4% in August, as a 1.7% drop in the index for unprocessed foodstuffs and feedstuffs and a 1.3% drop in producer prices for raw materials other than food and energy materials was offset by a 3.0% increase in crude energy goods…nonetheless, this raw materials index still remains 23.7% lower than it was a year ago, as commodity prices are the lowest they've been in 16 years..

finally, the price index for services for intermediate demand fell by 0.4% in October following a 0.7% decrease in September, as the index for trade services for intermediate demand fell by 0.4%, the index for transportation and warehousing services for intermediate demand fell 0.2%, and the price index for services less trade, transportation, and warehousing for intermediate demand was 0.5% lower, with a 3.3% decline in the index for intermediate portfolio management services accounting for one-third of the decrease in prices for services for intermediate demand...over the 12 months ended in October, the year over year price index for services for intermediate demand, which has never gone negative, is now just 0.5% higher than it was a year ago...  

Revisions to the Import-Export Price Index will Lower 3rd Quarter GDP

we also want to take a quick look at the Import and Export Price Indexes for October, in which the BLS reported the price index for imports fell 0.5% after falling a revised 0.6% in September, while the price index for exports fell 0.2%, also after falling 0.6% in September....import prices for fuels were down 2.0% while other imports averaged 0.3% lower, while export prices for agricultural products fell 0.1% while prices for non-agricultural exports averaged 0.3% lower...October figures in this report will be used to adjust October trade figures for price changes when our international trade report for that month is released the first week in December...our interest in this report today is in the revisions to import and export prices for September, which will impact the real figures for trade in that month and thereby result in revisions to 3rd quarter GDP...

a month ago, the BLS reported that September import prices were 0.1% lower, while September export prices were reported to be 0.7% lower; with this report, September import prices were revised to 0.6% lower, while September export prices were revised to indicate they were 0.6% lower...since the BEA used the former figures in their advance estimate, that means our real imports, after adjusting the dollar value of them for those changes in prices, were 0.5% higher than was reported in the GDP report, while our real exports were actually 0.1% lower...the September trade report indicates goods imports of $187.6 billion, and goods exports of $127.3 billion, so thus real imports for September were approximately $0.94 billion higher than those included in the GDP report, while real exports were roughly $0.13 billion lower...annualized, those changes would subtract around $4.4 billion from real net exports in the 3rd quarter, which in turn would subtract around 0.03 percentage points from 3rd quarter GDP...

0.5% Rise in September Wholesale Inventories Will Boost 3rd quarter GDP

both wholesale sales and wholesale inventories increased more than was expected in September, with the higher inventories implying an upward revision to 3rd quarter GDP…the September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $448.0 billion, 0.5 percent (+/-0.7%)* higher than the revised August level, but 3.9 percent (+/-1.2%) lower than wholesale sales of a year earlier...the August preliminary estimate was revised upward $0.5 billion or 0.1% to $445.9 billion but was still 0.9% below July's level...September wholesale sales of durable goods rose 0.7 percent (+/-1.1%)* from last month but are still down 0.8 percent (+/-1.8%)* from a year earlier, with wholesale sales of computer and computer peripheral equipment and software 3.8% higher than August while wholesale sales of furniture fell 2.7%...wholesale sales of nondurable goods were up 0.3 percent (+/-0.9%)* from August, but were down 6.7 percent (+/-1.6%) from last September, with wholesale sales of farm products up 3.6% on higher prices while wholesale sales of petroleum and petroleum products fell 4.6% on lower prices...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....

however, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at $588.1 billion at month end, an increase of 0.5 percent (+/-0.4%)* from the revised August level and 4.7 percent (+/-1.6%) higher September a year ago, with the August preliminary estimate revised upward $1.3 billion or more than 0.2 percent...inventories of durable goods were down 0.4 percent (+/-0.4%)* from August but were up 2.8 percent (+/-1.9%) from a year earlier, with inventories of metals and minerals down 2.2% while inventories furniture were up 1.3%...meanwhile, the value of wholesale inventories of nondurable goods was up 1.9 percent (+/-0.5%) from August and was up 7.7 percent (+/-2.3%) from last September, as the value of inventories of raw farm products was 6.7% higher while inventories of chemicals and allied products were down 1.6%...

when computing 3rd quarter GDP two weeks ago, the BEA assumed a decrease in wholesale inventories and used the August inventory figures that had been reported at that time...August inventory figures have now been revised up by $1.3 billion, and since September producer prices for finished goods were down 0.5%, that means real wholesale inventories for the month were up by around 1.0% over August....together, that means that 3rd quarter inventories were at least $8.4 billion higher in inflation adjusted dollars than the BEA estimated in their advance estimate of 3rd quarter GDP...on an annualized basis, that would boost the change in the inventory contribution to the change in GDP by at least $34 billion dollars, or enough to add at a minimum 0.21 percentage points to the next estimate of 3rd quarter GDP growth...

September Business Inventories, 3rd Quarter GDP Component, Increase More than Estimated

following the release of retail sales report, Census released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data and gives us a complete picture of the business contribution to the economy for that month...according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,320.3 billion in September, statistically unchanged (±0.2%) from August revised sales, and down 2.8 percent (±0.4%) from September a year earlier...note that total August sales were revised down by less than 0.1%, from $1,320.5 billion to $1,319,921 million....manufacturer's sales fell by 0.4% from August to $477,314 million, retail trade sales, which exclude restaurant & bar sales from the revised September retail sales reported earlier, were statistically unchanged at $394,950 million, and wholesale sales rose by 0.5% to $448,004 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be at a seasonally adjusted $1,817.5 billion at the end of September, 0.3 percent (±0.1%) higher than in August and 2.5 percent (±0.5%) higher than in September a year earlier...seasonally adjusted inventories of manufacturers were estimated to be valued at $645,129 million, 0.4% less than in August, inventories of retailers were valued at $584,283 million, 0.8% greater than August, and inventories of wholesalers were estimated to be valued at $588,120 million at the end of September, up 0.5% from August...

in the advance estimate of third quarter GDP, the BEA assumed a decrease in nondurable manufacturing inventories, and in wholesale and retail inventories, so they were wrong on two out of the three...when we looked at the data on factory inventories last week, we judged that a negative revision to durable inventories would offset the positive change in non-durable inventories, and hence September factory inventories would have a negligible impact on 3rd quarter GDP revisions...earlier we looked at the surprise increase in wholesale inventories and judged it would add at least 21 basis points to 3rd quarter GDP growth…in evaluating the impact of the 0.8% increase in retail inventories, what the BEA would do would be to adjust the value each different kind of retail inventory for the wholesale price change in each type of good, quite a complex computation...however, we can get a rough estimate on the aggregate by using the producer price index for finished goods as a deflator...for September, wholesale prices for finished goods were down 1.2%, but that was driven by a 5.9% decrease in energy goods, comparatively little of which are inventoried at retail...meanwhile, prices for finished consumer goods less foods and energy were down 0.2%, while prices for finished consumer foods, about 12% of retail inventories, were down 1.1%....thus we could approximate a deflator of roughly minus 0.3% could be used to adjust aggregate retail inventories, which would indicate real retail inventories grew at a 1.1% rate in September...that would mean that real September inventories were at least $6.4 billion higher than had been estimated by the BEA, which would make for another upward annualized revision of roughly $26 billion to real third quarter inventory growth, which in turn would add a minimum of 0.16 percentage percentage points to the next estimate of 3rd quarter GDP...

Job Openings Increase in September; Hiring Does Not

the Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 149,000 to 5,526,000 in September after August job openings were revised from 5,370,000 to 5,377,000....September jobs openings were also 18.1% higher than the 4,678,000 job openings reported in September a year ago, as the ratio of the unemployed to openings fell from 1.47 to 1.43 in September....job openings increased across all service sectors except leisure and hospitality, while openings in construction and durable goods manufacturing declined (see table 1 for more details)...like most BLS releases, the press release for report is easily readable and also refers us to the associated table for the data cited, linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in September, seasonally adjusted new hires totaled 5,049,000, down 32,000 from the revised 5,081,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed fell from 3.6% to 3.5%, which was also down from the hiring rate of 3.6% in September a year earlier (details of hiring by industry since May are in table 2)....meanwhile, total separations fell by 47,000, from 4,886,000 in August to 4,839,000 in September, as the separations rate as a percentage of the employed remained unchanged at 3.4%, while it was down from the separations rate of 3.5% a year ago (see table 3)...subtracting the 4,839,000 total separations from the total hires of 5,049,000 would imply an increase of 210,000 jobs in September, quite a bit higher than the revised payroll job increase of 137,000 for September reported by the October establishment survey last week, suggesting one or both of these surveys is off by nearly the margin of error expected from these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 2,720,000 quit their jobs in September, down 51,000 from the revised 2,737,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 1.9% of total employment (see details in table 4)....in addition to those who quit, another 1,732,000 were either laid off, fired or otherwise discharged in September, up 7,000 from the 1,725,000 who were discharged in August, as the discharges rate also remained unchanged at 1.2% of all those who were employed during the month....meanwhile, other separations, which includes retirements and deaths, were at 387,000 in September, down from 389,000 in August, for an 'other separations' rate of 0.3%, which was unchanged...both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...


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

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