Sunday, November 29, 2015

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

we had a full plate of economic releases this past week, despite the holiday...the key reports were the 2nd estimate of 3rd quarter GDP and the October report on Personal Income and Spending, both from the Bureau of Economic Analysis, which were released on Tuesday and Wednesday respectively...other widely watched reports released early in the week included the October advance report on durable goods and the October report on new home sales, both from the Census bureau, the October report on existing home sales from the National Association of Realtors, and the September Case-Shiller Home Price Index, which is actually a 3 month average of July, August, and September home prices...also released this week was the Chicago Fed National Activity Index (CFNAI) for October, which is a weighted composite index of 85 different economic metrics, constructed such that a zero value indicates economic growth at the historical trend rate; the CFNAI rose to rose to −0.04 in October, up from −0.29 in September, which still left the 3 month average at -0.20, indicating that national economic activity has been somewhat below its historical trend...the week also saw the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported its broadest composite index fell to -3, following last month's reading of -1, indicating that the region's manufacturing remains stagnated in November...

3rd Quarter GDP Revised to Show Growth at a 2.1% Rate

as was widely expected,  the Second Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% rate in the 2nd quarter, revised from the 1.5% growth rate reported in the advance estimate last month, as fixed investment and inventories were revised higher while exports were revised lower....in current dollars, our third quarter GDP grew at a 3.4% annual rate, increasing from what would extrapolate to $17,913.7 billion a year in the 2nd quarter to $18,064.7 billion annually in the 3rd quarter, with the headline 2.1% annualized rate of increase in real output arrived at after a deflator of 1.3% was applied to that current dollar change to adjust for inflation..

while we cover the details below, remember that the press release for GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that they only use the prefix "real" to indicate that the change has been adjusted for inflation using prices chained from 2009, and then calculate all percentage changes in this report from those artificial 2009 dollar figures, which we think would be better thought of as representing quantity indexes...given the misunderstanding evoked by the text of the press release, all the data that we'll use in reporting the changes here comes from the pdf for the 2nd estimate of 3rd quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since 2012, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 2nd quarter advance estimate, which this estimate revises, is here...

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show their growth at a 3.0% annual rate in the 3rd quarter, rather than the 3.2% growth rate reported last month…that figure was arrived at by deflating the dollar amount of consumer spending with the PCE price index, which indicated inflation at a 1.3% annual rate in the 3rd quarter, which was revised from the 1.2% inflation rate that was applied to PCE in the first estimate....real consumption of durable goods grew at a 6.5% annual rate, which was revised from 6.7% in the advance report, and added 0.47 percentage points to GDP, as real output of recreational equipment and vehicles consumed rose at a 10.1% annual rate and output of all other consumer durable categories also grew...real consumption of nondurable goods by individuals rose at a 4.0% annual rate, revised from the 3.5% increase reported in the 1st estimate, and added 0.58 percentage points to 3rd quarter growth, as all categories of non-durable consumption also saw growth, while consumption of services rose at a 2.2% annual rate, revised from the 2.6% rate reported last month, and which added 1.00 percentage points to the final GDP tally...an increase at a 3.7% rate in the real output of health care services led the services increase, as only real consumption of recreational services was slightly lower than it was in the second quarter...

seasonally adjusted real gross private domestic investment contracted at a 0.3% annual rate in the 3rd quarter, revised from the 5.6% shrinkage estimate made last month, as real private fixed investment was revised from growth at a 2.9% rate to growth at a 3.4% rate, while the contraction in inventory growth was much smaller than previously estimated...investment in non-residential structures was revised down, however, from shrinking at rate of 4.0% to a contraction at a 7.0% growth rate, while the quarter's investment in intellectual property products was revised from growth at a 1.8% rate to contraction at a 0.8% rate, on a cutback in real R&D...on the other hand, investment in equipment was revised to show growth at a 9.5% rate, not the 5.3% rate previously reported, and the growth rate of residential investment was also revised up, from 6.1% to 7.3% annually…after those revisions, lower investment in non-residential structures subtracted 0.22 percentage points from the 3rd quarter's growth rate, investment in intellectual property subtracted 0.03 percentage points, while investment in equipment added 0.55 percentage points to growth, and growth in residential investment added 0.24 percentage points to 3rd quarter GDP...

meanwhile, the growth in real private inventories were revised from the originally reported $56.8 billion in real growth to show inventory growth at an inflation adjusted $90.2 billion rate, which came after inventories had grown at an inflation adjusted $113.5 billion rate in the 2nd quarter, and hence the $23.3 billion smaller real inventory growth than in the 2nd quarter subtracted 0.59 percentage points from the 3rd quarter's growth rate, in contrast to the 1.44 percentage point subtraction from slower inventory growth reported in the advance estimate....however, since slower growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, their decrease by $23.3 billion means real final sales of GDP were actually greater by that much, and hence real final sales of GDP grew at a 2.7% rate in the 3rd quarter, revised from 3.0%, compared to the real final sales increase at a 3.9% rate in the 2nd quarter, when the change in inventories was insignificant, and hence growth in real final sales then was the same as growth in GDP…

the increase in real exports was revised lower with this estimate while the increase in real imports was revised higher, and as a result our net trade was a subtraction from GDP rather than the addition previously reported, as exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (hence not counted elsewhere), while increased imports subtract from GDP because they represent either consumption or investment that was not produced here....our real exports grew at a 0.9% rate rather than the 1.9% real export growth reported in the first estimate, and as a result added just 0.11 percentage points to 3rd quarter GDP growth...meanwhile, the real growth of our imports was revised to 2.1% from the previously reported 1.8% growth and hence imports subtracted 0.33  percentage points from the quarter's growth rate...thus, our deteriorating trade balance subtracted a net 0.22% percentage points from 3rd quarter GDP, after an improving trade balance had added 0.18 percentage points to 2nd quarter growth...

finally, there were only minor revisions to real government consumption and investment in this 2nd estimate, as the real growth rate for the entire government sector was unchanged at a 1.7% rate...real federal government consumption and investment was seen to have grown at a 0.1% rate from the 2nd quarter in this estimate, revised from the 0.2% growth rate of the federal government previously reported...real federal spending for defense was revised to show it shrinking at a 1.5% rate rather than the 1.4% contraction rate previously reported, subtracting 0.06% percentage points from 3rd quarter GDP, while all other federal consumption and investment grew at a 2.6% rate, rather than the 2.8% growth rate previously reported, and added 0.7 percentage points to GDP.....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services....meanwhile, real state and local consumption and investment was revised from growing at 2.8% rate in the first estimate to growth at a 2.6% rate in this estimate, that hence added 0.29 percentage points to 3rd quarter GDP...

in our FRED bar graph below, each color coded bar shows the real 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, the quarterly changes in real, or inflation adjusted, personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...you can clearly see that the major contribution to GDP growth in the 3rd quarter came as a result of increased real personal consumption in blue, while slower growth in inventories (yellow) and increased imports (green) were the major subtraction from 2015 Q3 growth...

3rd quarter 2015 GDP 2nd estimate

Personal Consumption Expenditures Rise 0.1% in October as Personal Income Increases 0.4%

as you can infer from the chart above, the key monthly release in determining the ultimate trajectory of GDP each quarter would usually be the report on Personal Income and Outlays from the Bureau of Economic Analysis, which gives us the monthly data on our personal consumption expenditures (PCE), the major component of GDP, and the PCE price index, which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated...this report also gives us monthly personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those are not the current monthly change; rather, they're seasonally adjusted and at an annual rate, ie, in today’s case they tell us what income and spending would be for a year if October's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, and in this case of this month's report they give us the percentage change in each annual metric from September to October...

hence, when the opening line of the press release for this report tell us "Personal income increased $68.1 billion, or 0.4 percent, and disposable personal income (DPI) increased $56.8 billion, or 0.4 percent, in October", they mean that the annualized figure for personal income in October, $15,573.8 billion, was $68.1 billion, or a bit over 0.4% greater than the annualized  personal income figure of $15,505.7 billion for September; the actual change in personal income from September to October is not given...similarly, annualized disposable personal income, which is income after taxes, rose by more than 0.4%, from an annual rate of an annual rate of $13,545.2 billion in September to an annual rate of $13,601.9 billion in October...likewise, all the contributors to the increase in personal income, listed under "Compensation" in the press release, are also annualized amounts, all of which can be more clearly seen in the Full Release & Tables (PDF) for this release...so when the press release says, "Wages and salaries increased $45.0 billion in October, compared with an increase of $2.5 billion in September." that really means wages and salaries would rise by $45.0 billion over an entire year if October's seasonally adjusted increase in wages and salaries were extrapolated over that year, just as rental income of individuals rose at a $5.2 billion annual rate and interest and dividend income, the largest contributor to the September income increase, rose at a $4.7 billion annual rate in October...so you can see what's written in the press release is misleading, and often leads to media reports that parrot those lines the same way the BEA wrote it...

for the October personal consumption expenditures (PCE) that will be included in 4th quarter GDP, BEA reports that they increased by $15.2 billion, or 0.1%, which means the rate of personal consumption expenditures rose from $12,378.3 billion annually in September to $12,393.5 billion annually in October; in addition, the September PCE figure was revised down from the originally reported $12,389.2 billion annually...however, before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is included in Table 9 in the pdf for this report, which is a chained price index based on 2009 prices = 100....that index rose from 109.680 in September to 109.749 in July, giving us a month over month inflation rate of 0.063%, which BEA rounds to a 0.1% increase in reporting it....applying that functionally less than 0.1% inflation adjustment to the increase in October PCE leaves real PCE up 0.0598% in October, which the BEA reports as a 0.1% increase...comparing the annualized October real PCE of 11,292.8 in chained 2009 dollars from Table 7 of this release to the annualized real PCE of 11,262.8 in chained dollars that was reported in table 3 of the 3rd quarter GDP revision, we find that real PCE is growing at a 1.07% annual rate so far in the 4th quarter, or at a pace that, if continued in November and December, would add a meager 0.69 percentage points to 4th quarter GDP...

with disposable personal income up by 0.4% and personal consumption expenditures up by 0.1%, it only goes to reason that our personal savings for October would have increased from a month earlier...to arrive at the figures for that, the BEA takes total personal outlays, which is the sum of PCE, personal interest payments, and personal current transfer payments, and subtracts that from disposable personal income, to show personal savings at a $761.9 billion annual rate in October, up from the $722.9 billion that we would have ‘saved"’ over a year had September's savings been extrapolated for a year...this brought the personal savings rate, or personal savings as a percentage of disposable personal income, to 5.6% in October, up from the savings rate of 5.3% in September...

New Orders for Durable Goods Jumped 3% in October on Aircraft; Shipments and Inventories Fell

the value of new orders for durable goods jumped on higher aircraft orders in October and almost recovered to their July level, when new car orders had provided a large boost...the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods rose by a seasonally adjusted $6.9 billion, or 3.0%, to $239.01 billion in October, following a September drop of $1.9 billion or 0.8% that was revised from the previously reported  $2.9 billion or 1.2% drop, and a August drop of 2.9% that was revised up from the 3.0% decrease that was reported last month....year to date new orders still remain 4.2% below the orders level of 2014, in part due to falling prices of some durable goods, such as primary metals and fabricated metal products, and in part due to the July 1st shutdown of the Export-Import Bank, the financing vehicle for large export orders...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the headline change, as those transportation equipment orders rose $6.1 billion or 8.0% to $82,082 billion on a 81.0% increase to $17,492 million in new orders for commercial aircraft, which are nonetheless still 39.2% below the year ago level year to date....excluding new orders for transportation equipment, new orders were still up 0.5% in October, as the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 1.3% to $70,046 million, after September orders for such capital goods were revised from a 0.3% decrease to a 0.4% increase...

meanwhile, the seasonally adjusted value of October shipments of durable goods, which will be an input into 4th quarter GDP after an inflation adjustment, fell by $2.5 billion or 1.0% to billion to $240.1 billion, after a September increase of 0.2%...again, reduced shipments of transportation equipment drove the change, as they fell $2.0 billion or 2.5% to $78.8 billion, as the value of shipments of motor vehicles and parts fell 2.7% to $51,716 million and shipments of commercial aircraft fell 4.7% to $13,696; excluding that volatile sector, the value of other shipments of durable goods still fell 0.3% to $161,358 million....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 5th time in 6 months, dropping $0.7 billion or 0.2% to $397.4 billion, after a 0.6% decrease in September that was originally reported as a 0.3% decline ...a $0.3 billion or 0.9% decrease to $35.7 billion in the value of inventories of primary metals, which were priced 1.0% lower, was a factor, although inventories of computers and defense capital goods, not likely to be so skewed by price changes, were also down...

finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, were up for the first time in 3 months, rising by $3.5 billion or 0.3% to $1,192.0 billion, largely due to an increase in the backlog in orders for transportation equipment, which rose $3.3  billion or 0.4 percent to $798.2 billion, which you'll note is more than half the total of unfilled orders outstanding, as the $612,365 million backlog in commercial aircraft orders alone accounts for more than half of this metric...without the transportation equipment sector, October's unfilled orders barely increased, rising by $192 million to $393,853 million....compared to a year ago, the unfilled order book is now 2.1% below last October's level, with unfilled orders for transportation equipment 2.3% below their year ago level...

New Homes Selling at Annual Rate of 495,000 in October, Give or Take 88,600

the Census report on New Residential Sales for October (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 495,000 new homes a year, which was 10.7 percent (±17.7%)* above the revised September rate of 447,000 new single family homes a year and 4.9 percent (±17.6%)* above the estimated annual rate that new homes were selling at in October of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether October new home sales rose or fell from those of September or even from those of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and subject to the largest revisions of any census construction series....sales new single family homes in September were revised from the annual rate of 468,000 reported last month to a 447,000 a year rate with this report, August's annualized home sale rate was revised from 552,000 to 513,000, while the annual rate of July sales was revised from 503,000 to 500,000...

the annual rates of sales reported here are extrapolated from the estimates of Census field reps, which showed that approximately 41,000 new homes sold in October, up from the 34,000 new homes that sold in September, which was revised from the originally reported 36,000....in addition, the unadjusted estimate for August home sales was revised down again, from 43,000 to 42,000 after it was originally reported at 45,000, while the estimate for July sales was unrevised at 43,000....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in October was $281,500, down from $307,800 in September, which was originally reported as $296,900, while the average October new home sales price was $366,000, down from $369,600 in September, and down from the average sales price of $384.000 in October a year ago....a seasonally adjusted estimate of 226,000 new single family houses remained for sale at the end of October, which represents a 5.5 month supply at the October sales rate, down from a 5.8 month supply in September....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales increased to 495,000 Annual Rate in October and Comments on October New Home Sales.. 

Existing Homes Sales Fell 3.4% to 5.35 Million Annual Rate in October

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell by 3.4% in October, projecting that 5.35 million homes would sell over an entire year if October sales were extrapolated over that year, a rate still 3.9% higher than the annual sales rate projected in October of a year ago...the annual rate of September home sales was unrevised at 5.55 million home sales, which had been the 2nd highest monthly pace of existing home sales since February 2007...the NAR also reports that the median existing-home price for all housing types in October was $219,600, which was up 5.8% from a year earlier and the 44th consecutive year over year increase in home prices...the NAR press release, which is titled Existing-Home Sales Dial Back in October, is in easy to read plain English, so if you're interested in the details on cash sales, distressed sales, first time home buyers, et al. you can find them in that press release...as sales of existing properties do not add to our national output, neither these sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we'll take a look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this indicates that roughly 447,000 homes sold in October, down 5.1% from the 471,000 homes that sold in September and up only 0.9% from the 443,000 homes that sold in October last year...the regional change in October home sales ranged from a decrease of 3.1% to 63,000 home sales in the Northeast to a 5.9% decrease to 96,000 home sales in the West....that same pdf indicates that the median home selling price for all housing types fell 0.9% from a revised $221,700 in September to $219,600 in October, while the average home sales price was $262,800, also down 0.9% from the $265,100 average in September, but up 3.4% from the $254,100 average home sales price of October a year ago, with the regional average home sales prices ranging from a low of $203,800 in the Midwest to a high of $352,800 in the West...for additional coverage with long term graphs on this report, see Existing Home Sales in October: 5.36 million SAAR and A Few Random Comments on October Existing Home Sales by Bill McBride at Calculated Risk… 

September Case-Shiller Report Shows National Home Prices up 4.9% Since Last Year

the Case-Shiller house price indexes for September indicated a 5.0% year over year increase in prices on repeat home sales in the ten cities of the original index, a 4.9% annual increase in the 20 City Composite, and a 4.9% increase in home prices nationally since the September report of last year, led by an 11.2% increase in home prices in San Francisco and a 10.9% increase in home prices in Denver...they also report a 'monthly' increase of 0.2% in all three indexes, which compare prices of houses sold in July, August, and September to those sold in June, July, and August and hence the change in the month over month indexes are actually equal to 1/3rd the difference between June home prices and September home prices, ie, not really a monthly change at all...seasonally adjusting these so called month over month indexes shows that the national index is 0.8% higher while the 10 and 20 city indices would be up 0.6% from the previous report...thus, while home prices in 15 of the 20 cities showed an increase in September when compared to the June index, after seasonal adjustments, home prices in 19 of the cities increased, with only Washington DC showing a 0.1% decrease....the full pdf of the release, titled Across the Board Gains in Home Prices for September, is here, and it includes full unadjusted and adjusted tables for all 20 cities and the 3 indexes, as well as graphs and commentary...for coverage of this Case-Shiller report on the web, Bill McBride has two thorough posts, which include several graphs: Case-Shiller: National House Price Index increased 4.9% year-over-year in September, followed by his analysis in Real Prices and Price-to-Rent Ratio in September...


(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…)

Sunday, November 22, 2015

October consumer prices, industrial production, new home starts, state employment summary, et al

the major releases of this past week were the October Consumer Price Index from the Bureau of Labor Statistics, the October report on Industrial Production and Capacity Utilization from the Fed, and the October report on New Residential Construction from the Census Bureau...other reports released this week included the 3rd Quarter Household Debt and Credit Report from the New York Fed, which reported that US household debt increased by a $212 billion in the third quarter to a five year high of $12.07 trillion; the 3rd quarter National Delinquency Survey from the Mortgage Bankers Association, which reported that 3.57% of US home loans were at least 90 days overdue and 1.88% were in some stage of the foreclosure process, the Regional and State Employment and Unemployment Summary for September, and with the release of the Consumer Price Index, the October report on Real Average Hourly Earnings, which indicated that inflation adjusted and seasonally adjusted earnings for all employees increased by 0.2% from September to October, which resulted from a 0.4% increase in average hourly earnings offset by a 0.2% increase in the CPI…real average weekly earnings also increased by just 0.2%, on the 0.2% increase in real average hourly earnings combined with no change in the average workweek...

in addition, this week also saw the release of the first three regional Fed manufacturing indexes for November: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -11.4 to -10.7, the fourth month in a row that index was below minus ten, indicating an ongoing recession in First District manufacturing, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions rose from -4.5 in October to +1.9 in November, it's first positive reading in 3 months; and the Kansas City Fed manufacturing survey for November, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, and which reported its broadest composite index rose to +1 in November from -1 in October, it's first positive reading after seven months negative, suggesting that the regional contraction, mostly in the energy industry, has abated somewhat... 

October Prices 0.2% on Higher Rent and Medical Services

the consumer price index rose in October as modestly higher prices for food, energy, and services were only partially offset by lower prices for core goods....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.2% in October after falling 0.2% in September and 0.1% in August...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell in October to 237.838 from 237.945 in September due to seasonal factors, which left it statistically 0.2% higher than the 238.031 reading of October of last year...regionally, prices for urban consumers have risen 1.1% in the West, while they have fallen 0.1% in the South, 0.3% in the Midwest and 0.1% in the Northeast over the past year, with greater increases or smaller decreases within regions in cities of more than 1,500,000 people...since both food and energy prices rose modestly, core prices, which exclude food and energy, also rose by 0.2% in October, as the unadjusted core index rose from 243.359 to 243.985, a level 1.91% ahead of its year ago reading of 239.413...

the seasonally adjusted energy price index rose by 0.3% in October after falling by 4.7% in September, as the energy index remains 17.1% lower than it was in October a year ago...prices for energy commodities were 0.4% higher in October while the index for energy services saw a 0.2% increase after falling 0.4% in September....the increase in the energy commodity index was largely due to a 0.4% increase in the price of gasoline, the largest component, while fuel oil prices fell 1.1% and prices for other fuels, including propane, kerosene and firewood, averaged a 2.1% increase…within energy services, the index for utility gas service fell by 0.7%, leaving utility gas priced 11.0% lower than a year ago, while the electricity price index rose by 0.4%, after it fell by 0.5% in September...energy commodities are still priced 27.8% below their year ago levels, with gasoline 27.9% lower than it was a year ago, while the energy services price index is 2.9% lower than last October, as electricity prices have also fallen 0.5% over that period...

the seasonally adjusted food index rose by 0.1% in October, after rising 0.4% in September and rising 0.2% in both July and in August, as prices for food at home rose 0.1% while prices for food away from home rose 0.2% on a 2.3% increase in school lunches, while average prices at fast food outlets and at full service restaurants rose 0.2%...price increases for food at home were led by an 0.8% increase in the index for cereals and bakery products, which was driven by a 2.4% increase in prices for breakfast cereal, a 2.2% increase in prices for rice, and an average 1.7% increase in prices for frozen and refrigerated bakery products...the index for fruits and vegetables rose 0.5% as fresh fruit prices were 1.6% higher on 3.5% higher priced apples and 2.8% higher priced oranges, fresh vegetables rose 0.5% on 2.6% higher prices potatoes and a 2.3% increase in prices for tomatoes, while processed fruit and vegetables fell 1.5% on a 3.1% drop in prices for canned vegetables...in addition, the index for beverages and beverage materials was up by 0.2% as prices for non-carbonated juices were 0.8% higher while instant coffee prices fell 1.1%, and prices in the 'other food at home' category rose 0.1% as butter prices were 5.3% higher, salt and other seasonings averaged a 1.9% increase, while sauces and gravies fell 1.5% and sugars and sweets were 0.7% lower...on the other hand, the index for meats, poultry, fish, and eggs was 0.5% lower in October as egg prices fell 4.8%, prices for beef and veal fell 1.0%, and fish and seafood prices averaged 0.8% lower, while bacon prices rose 3.4% and turkeys were priced 1.8% higher, while the index for dairy products fell 0.2% on 0.7% lower milk prices and 0.8% lower priced cheese...only two food line items have seen price changes greater than 10% over the past year; egg prices are still 30.0% higher than a year ago, while ham prices, which were up 1.5% in October, are still 10.4% lower than they were in October a year ago...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.2% in October, the composite of all commodities less food and energy commodities fell by 0.1%, while the composite for all services less energy services rose by 0.3%....among the commodity components, which will be used by the BEA to adjust October retail sales for inflation in national accounts data, the index for household furnishings and supplies fell 0.2% on a 1.5% cut in prices for major appliances and a 1.0% decrease in infant's furniture, apparel prices were down 0.8% on 2.1% lower prices for men's apparel and 0.7% lower prices for women's apparel including 3.6% lower prices for dresses; transportation commodities were down 0.3% on 0.2% lower prices for new and used cars while car parts other than tires were 1.2% lower; medical care commodities rose 0.2% on higher prices for both drugs and medical supplies; recreational commodities were 0.1% lower on a 1.6% decrease in prices bicycles and 1.3% lower priced TVs; education and communication commodities fell 0.1% on a 0.9% decrease in prices for computers and peripheral equipment while prices for college textbooks rose 0.7%; the index for alcoholic beverages rose 0.6%, and the index for other goods rose 0.5%...

within services, the price index for shelter rose 0.3% on a 0.3% increase in rent, a 0.2% increase in owner's equivalent rent and an 0.8% increase in lodging away from home; medical care services rose 0.8% on 2.3% jump in inpatient hospital services; transportation services rose 0.2% on 1.5% higher airline fares and a 0.9% increase in charges for vehicle body work; recreation services rose 0.4% despite a 3.2% decrease in video rentals as photographer's fees rose 2.4% and admission to sporting events was 1.5% higher; education and communication services were 0.4% higher on 0.8% higher internet services and 0.6% higher college tuition and fees, and other personal services rose 0.3% on a 0.7% increase in laundry and dry cleaning services...other than the aforementioned ham and eggs and energy prices, only telephones, which were priced 14.7% lower, and televisions, which are 13.3% cheaper, saw their prices change by more than 10% over the past year...

Industrial Production Falls 0.2% in October from Upwardly Revised Prior Months

industrial production fell again in October, but manufacturing strengthened as the composite was pulled down by lower output from mines and by utilities...the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.2% in October after falling by 0.2% in September and after the 0.1% drop in August was revised to a 0.1% increase, ultimately resulting in a total net increase from last month's report...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, thus rose to 107.2 in October from the 107.1 reading reported in September, as the June index was revised from 106.6 to 106.7, the July index was revised from 107.4 to 107.5, the August index was revised from 107.3 to 107.6, and the September index was revised from 107.1 to 107.4...to the extent that this report plays into GDP, the increases in July, August and September industrial production imply an upward revision to 3rd quarter growth in those market group where production changed leading to those revisions...

most of the aforementioned revisions originated in the manufacturing index, which rose by 0.4% in October after falling 0.1% in September, as its 0.4% drop in August was revised to a 0.2% decrease, and its 0.2% decrease in June was revised to a 0.1% decrease...thus the October manufacturing index is now at 106.3, up from last month's reported 105.5, which has now been revised to 105.9...with the revisions, the manufacturing index is now 1.9% higher than a year ago, in contrast to month's 1.4% year over year increase...meanwhile, the mining index, which includes output of oil and gas wells, fell by 1.5% in October after falling a slightly revised 2.4% in September, and at 112.5 it's now 6.9% below its level of October a year ago...finally, the utility index, which often fluctuates wildly due to above or below normal temperatures, fell by 2.5% in October after rising 1.2% in September, as changes in both months were due to warmer than normal temperatures...September temperatures, 3.7°F above the 20th century average, resulted in greater than normal use of air conditioning, while October temperatures, 3.3°F above the 20th century average, resulted in a reduced use of utilities for heating...at 101.9, the utility index was thus 1.5% lower than it was in October a year ago...

production within the major market groups was mixed in October, with production of consumer goods slipping 0.1%, as output of consumer durable goods rose 0.5% on 0.8% increases in production of both automotive products and household durables such as furniture and appliances, while production of non-durables fell by 0.3% on a 1.7% drop in the output of consumer energy products...production of business equipment rose 0.2%, while production of defense and space equipment was unchanged....production of construction supplies rose 1.7% while production of business supplies fell 0.1%, and output of intermediate materials to be used in later industrial production fell 0.4%... further details for industrial production by market group, including the changes for each of the last 6 months, 3 quarters and 3 years, can be found on Table 1 and Table 4 of the report, with table 1 showing the percentage change from the prior month, quarter or year, and table 4 giving the new index and subindex values for the same...

this report also gives us capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which fell after revisions from 77.7% in September to 77.5% in October, which happens to be the same figure published for capacity utilization last month....seasonally adjusted capacity utilization for all manufacturing industries was up 0.2% to 76.4% in October as manufacturing capacity utilization for September was revised up 0.3% to 76.2%...after a similar upward revision, utilization of NAICS durable goods production facilities rose from 76.0% in September to 76.2% in October, while capacity utilization for non-durables rose from 77.7% to 77.9%....capacity utilization for mining fell from 81.9% in September to 80.5% in October, while utilities were operating at 77.8% of capacity during October, down from the revised 79.9% usage rate in September...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

Census Estimates New Housing Starts Fell in October, New Permits Rose

the October report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing unit starts was at a seasonally adjusted annual rate of 1,060,000 in October, which was 11.0 percent (±13.5%)* below the revised September estimated rate of 1,191,000 housing units started annually and 1.8 percent (±11.2%) below last October's rate of 1,079,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, October housing starts could have been up 2.5% or down 24.5% for all they know, with subsequent large revisions likely...in this report, the annual rate for September housing starts was revised from the 1,206,000 reported last month to 1,191,000, while August starts, which were first reported at 1,126,000 annually, were revised from last month's revised figure of 1,132,000 annually to 1,116,000 annually with this report.....those annual rates of starts indicated by the annualized headline change were extrapolated from a survey of a small percentage of permit offices visited by Census field agents, which estimated that 92,200 housing units were started in October, down from 110,000 units started in September, which was initially estimated at 111,000 housing starts...of those housing units started in October, an estimated 60,100 were single family homes and 29,100 were units in structures with more than 5 units, down from 65,000 single family and 43,800 units in structures with more than 5 units in September....the unadjusted estimates also show that housing starts were up in the Northeast and in the Midwest, while they were down in the South and the West, with a 15,000 drop to 41,700 starts in the South greater than the statistical margin of error for that region, and hence the only directionally certain metric in this month's starts data...

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised starts data...in October, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,150,000 housing units, which was 4.1 percent (±1.5%) above the revised September rate of 1,105,000 permits annually and 2.7 percent (±2.2%) above the rate of permit issuance in October a year earlier...again,.the estimates for new permits reported here were extrapolated from the unadjusted estimate, which showed permits for 97,100 housing units were issued in October, which was actually down from the estimated 97,100 new permits issued in September, with the South showing the only monthly increase...the October permits included 59,100 permits for single family homes, down from 59,400 single family permits in September, and 35,000 permits for housing units in apartment buildings with 5 or more units, up from 34,300 such multifamily permits a month earlier...

State and Regional Employment Report for October

the Regional and State Employment and Unemployment Summary for October expands on the national employment situation summary of two weeks ago by breaking down the state and regional details...as with most BLS reports, the press release is very readable & self explanatory, with BLS referring to appropriate tables linked to at the bottom of the press release wherever relevant, and with tables and coverage of all 50 states, it's more detailed than we can meaningfully cover in a short synopsis....the BLS table corresponding to household survey data, including the seasonally adjusted count of the unemployed and the unemployment rate for each state, is here....North Dakota at 2.8% continues as the state with the lowest unemployment rate despite the troubles in the oil patch, largely through a reduction of their labor force, while West Virginia had the highest unemployment rate at 6.9%, marking the first month since the recession started with no state seeing higher than a 7% rate..

for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment since last October, see the following two BLS tables accompanying this release: Table 5. Employees on nonfarm payrolls by state and selected industry sector, seasonally adjusted and Table 6. Employees on nonfarm payrolls by state and selected industry sector, not seasonally adjusted ...the latter two tables are very detailed, giving you both actual and seasonally adjusted totals for jobs in each state and the District of Columbia in several categories, including construction, manufacturing, trade, transportation and utilities, financial, professional and business services, education and health services, leisure and hospitality and government....the 20 page pdf version of this report has even more detail also includes map graphics for both the employment rate and the year over year payroll jobs increase by state and region...


(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…)

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…)

Sunday, November 8, 2015

October jobs report, September trade deficit, construction spending, factory inventories, and Mortgage Monitor, et al

  in addition to the Employment Situation Summary for October from the Bureau of Labor Statistics, this week also saw the release of three September reports that could result in revisions to 3rd quarter GDP: the Census report on our International Trade for September, the Full Report on Manufacturers' Shipments, Inventories and Orders for September and the September report on Construction Spending, both also from the Census Bureau...in addition, this week brought us the Consumer Credit Report for September from the Fed, which showed that overall credit expanded by a seasonally adjusted $28.9 billion, or at a 10.0% annual rate, as non-revolving credit expanded at a 10.5% rate to $2,574.0  billion and revolving credit outstanding rose at a 8% rate to $925.2 billion...

privately issued reports this week included the release of the Mortgage Monitor for September (pdf) from Black Knight Financial Services, which we'll take a quick look at today, the report on light vehicle sales for October from Wards Automotive, which estimated that vehicles sold at a 18.12 million annual rate in October, up from the 18.07 million annual sales rate in September, and only the third time US auto sales have topped the 18 million rate two months in a row....in addition, the week also saw the release of the two widely watched diffusion indexes from the Institute for Supply Management (ISM), the October Manufacturing Report On Business, which saw the manufacturing PMI (Purchasing Managers Index) slip from 50.2 in September to 50.1 in October, indicating a stagnation in manufacturing firms nationally, and the October Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise from 56.9% in September to 59.1% in October, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business...both of those reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...

Employers Add 271,0000 Jobs in October; Employees Confirm That as Jobless Rate Falls to 5.0%

it appears that the October jobs report is the best we've seen all year, as the Employment Situation Summary for October saw the greatest job creation since December, a reduction in the unemployment rate that was not due to discouraged workers leaving the labor force, and a decent increase in hourly earnings...the establishment survey data indicated that employers added a seasonally adjusted 271,000 jobs in October, while the payroll job increase for September was revised down by 5,000 to 137,000, and while August's jobs creation number was revised up from 136,000 to 153,000, making the combined number of jobs going into October 12,000 more than previously reported ….October job increases were spread through the construction trades and the private service sector, with only the resource extraction sector seeing a loss as great as 4,000 jobs, with 2,700 of those job losses in the oil and gas patch...78,000 jobs were added in the broad professional and business services category, with 46,000 of those in administrative and waste services and 26,900 jobs spread through a variety of professional and technical service positions...the health care and social assistance sector added 56,700 jobs, with 26,900 of those in ambulatory services and another 17,800 jobs in hospitals, while another 43,800 seasonally adjusted jobs were added in retail, with 19,500 of those in clothing and accessories stores...(NB: actual retail jobs increased by 214,500 as seasonal hiring has begun)...in addition, the leisure and hospitality sector added 41,000 jobs, as jobs in restaurants and bars increased by 42,000...employers also reported that average hourly earnings for all employees rose by 9 cents to $25.20 after the September penny decrease was revised to a penny increase, boosting the wages gain over the last 12 months to 2.5%...meanwhile, the average workweek for all private employees was unchanged at 34.5% , although the factory workweek did rise by 0.1 hour to 40.7 hours, and factory overtime rose 0.1 hour to 3.3 hours..

the October household survey estimated that the seasonally adjusted count of those employed rose by 320,000 to 149,120,000, while the number of unemployed fell by 7,000 to 7,908,000, which was enough to cause the unemployment rate to tick down from 5.1% to 5.0%...with the increase in the number employed greater than the 216,000 increase in the civilian working age population, the count of those not in the labor force fell by 97,000 to 94,513,000, which was not enough to statistically change the labor force participation rate, which remained unchanged at 62.4% in October, still near a 38 year low ...with the large increase in the employed, the employment to population ratio, which we could think of as an employment rate, rose from 59.2% to 59.3%...there was also a drop in the number who reported they were involuntarily working part time, from 6,036,000 in September to 5,767,000 in October...as a result, the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell by 0.2% to 9.8%... 

the BLS employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page...thus, when you encounter a line such as "The number of long-term unemployed (those jobless for 27 weeks or more) was essentially unchanged at 2.1 million in October and has shown little change since June.(See table A-12.)"  you can quickly open Table A-12 where you will find a table with the count of the unemployed by duration and the distribution thereof, and where you'd see that 2,142,000 of us have been unemployed for more than 26 weeks, up from 2,104,000 in September, and now account for 26.8% of all those unemployed...

September Trade Deficit Falls by 15%, Revisions Should Add 0.11% Percentage Points to 3rd quarter GDP

our trade deficit fell by 15.0% in September, virtually reversing the 15.6% jump in August, as the value of our exports rose and the value of our imports fell...the Census report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit fell by $7.2 billion to $41.8 billion in September from an August deficit which was revised from $48.3 billion to $48.0 billion....the value of our September exports rose $3.0 billion to $187.9 billion on a $2.9 billion increase to $127.3 billion in our exports of goods and an increase of $0.1 billion to $60.1 billion in our exports of services, while our imports fell $4.2 billion to $228.7 billion as a $4.4 billion decrease to $187.6 billion in our imports of goods was partially offset by a $0.1 billion increase to $41.1 billion in our imports of services...export prices averaged 0.7% lower in September, so the real growth in exports was greater by that percentage, while import prices were 0.1% lower, similarly incrementally increasing growth in real imports...

referencing the Full Release and Tables for September (pdf), Exhibit 7, we find that a $1,278 million increase to $17,042 million in the value of our exports of consumer goods was a major driver of our September increase in our exports; included in that was a $536 million increase in our exports of art and antiques, a $336 million increase in our exports of jewelry, a $266 million increase in our exports of cell phones and similar goods, and a $222 million increase in our exports of pharmaceutical preparations...our exports of capital goods also increased by $892 million to $45,319 million as we exported $327 million more electric apparatuses, $307 million more industrial engines, and $260 million more civilian aircraft engines ...in addition, our exports of foods, feeds, and beverages rose by $388 to $10,809 on a $605 million increase in our exports of soybeans, which was partially offset by a $184 million decrease in our exports of corn, and our exports of vehicles, parts and engines rose $167 million to $12,946 million...a $33 million decrease to $35,155 million in our exports of industrial supplies and materials was the only end use category of exports to see a decrease, as a $469 million increase in our exports of fuel oil was offset by a $217 million decrease in our exports of other petroleum products and a $178 million decrease in our exports of crude oil, while our exports of goods not categorized by end use rose by $75 million to $5,281 million...

Exhibit 8 in the Full Release and Tables gives us details on our imports and shows us that our imports of every end use category except foods, feeds, and beverages, which were up by $52 million, decreased in September...our imports of industrial supplies and materials fell by $1,583 million to $38,454 million on a $1,283 million drop in our imports of crude oil and a $192 decrease in our imports of nuclear fuel materials; our imports of capital goods fell by $1041 million to $49,237 million on a $558 million decrease in our imports of civilian aircraft, a $386 million decrease in our imports of telecommunications equipment and decreases in our imports of medicinal equipment, semiconductors, electric apparatuses, computer accessories, and excavating machinery in excess of $100 million each, which were partially offset by a $693 million increase in our imports of computers...in addition, our imports of vehicles, parts and engines fell by $831 million to $28,780 million, our imports of goods not categorized by end use fell by $494 million to $7,142 million, and our imports of consumer goods fell by $442 million to $51,356 million on a $530 million decrease in our imports of cell phones, a $468 million decrease in our imports of gem diamonds, and a $433 million decrease in our imports of synthetic textiles and apparel, which were offset by an increase of $1,183 million in our imports of pharmaceutical preparations and an increase of $416 million in our imports of televisions and video equipment...

this international trade report, typically released about a week after the release of an advance estimate of GDP, formerly resulted in major revisions to GDP...however, as of the second quarter, the commerce department began releasing an advance report on our trade in goods, the most volatile part of our monthly trade, to give the BEA a fair clue as to what the monthly and hence quarterly trade would be...that advance report for September, released last week, indicated $126,868 million in exports of goods in September and $185,501 million in imports of goods...this report revised September exports up to $127,323 million and revised imports up to $187,616 million, a swing of $1,660 million in imports over exports from the figures used by the BEA when reporting 3rd quarter GDP...in addition, the August trade deficit was revised from $48,330 million to $48,017 million. which was a net $3,130 million improvement in the August balance....subtracting the error in the advance estimate for September from that August improvement reduces the net revision to $1,530 million on a monthly basis, or about $18.5 billion annualized...that improvement in our balance of trade should add 0.11 percentage points to 3rd quarter GDP when the 2nd estimate is released at the end of November...

September Construction Spending Rises 0.6%; Should Boost 3rd Quarter GDP

in the report on September construction spending (pdf), the Census Bureau estimated that our seasonally adjusted September construction spending would work out to $1,094.2 billion annually if extrapolated over an entire year, which was 0.6 percent (±1.8%)* above the revised estimate of $1,087.5 billion annual rate of construction spending in August and 14.1 percent (±2.1%) above the estimated annualized level of construction spending of September last year...the August spending estimate was revised up slightly from $1,086.2 to $1,087.5 billion, which when combined with the greater than expected spending in September, suggests an incremental upward revision to third quarter GDP.....private construction spending was at a seasonally adjusted annual rate of $794.2 billion, 0.6 percent (±0.8%) above the revised August estimate, with residential spending rising to an annual rate of $394.7 billion in September, 1.9 percent (±1.3%) above the revised August estimate, while private non-residential construction spending fell 0.7 percent (±0.8%) to $399.5 billion on a 1.4% decrease of private spending for energy and power construction...meanwhile, public construction spending was estimated to be at a rate of $300.0 billion annually, 0.7 percent (±3.0%) above the revised August estimate, with spending for education up 2.4% to $69,147 while spending for public power utilities was off 3.7% to an annualized $11,841 million for the month...

in reporting 3rd quarter GDP, the BEA assumed a decrease in nonresidential construction, and an increase in residential construction in September...however, gauging the actual impact of this September construction spending report on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP is adjusted for changes in price, using a multitude of privately published price indexes for the various components of non-residential investment...furthermore, the GDP categories for construction spending include brokers’ commissions, title insurance, state and local taxes, attorney fees, title escrow fees, fees for surveys and engineering services, and remodeling that are not captured by this report...for instance, if we look at the aggregate figures here for the residential construction portion of this report and compare them to the change shown for the nominal value of residential construction in the pdf for the 1st estimate of 3rd quarter GDP, we find the numbers barely correspond at all... taking the annualized numbers in millions of dollars from September, August and July in this report and comparing them to the annual construction rates of April, May and June, we find that the nominal value of residential construction grew by 7.2% in the 3rd quarter, from $362,076 million annually to $388,076 million annually, or at a 32.0% annual rate...the GDP report, on the other hand, shows 2.3% nominal growth in residential construction, from $600 billion annually in the 2nd quarter to $614 billion annually in the 3rd quarter, a 9.6% annual rate which is reduced to a 6.1% real rate after the inflation adjustment is applied...so while we believe this report will give a boost to the 2nd estimate of 3rd quarter GDP, quantifying that boost with the numbers we have here is next to impossible..

September Factory Inventories Down 0.4% in Third Consecutive Decrease

a month ago we learned that the Census Bureau does not collect data on new orders for non durable goods for their widely watched Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf), aka "the factory orders report" because, due to the quick turnaround time on non-durable goods orders, they figured that shipments of those goods would be a fair proxy for orders...that, in effect, leaves the "new orders" and "unfilled orders" sections of this report useful as not much more than revised updates to the advance report on durable goods we covered last week...in the case of September new orders for durable goods, then, the September Full Report showed that new orders for manufactured durable goods fell by a seasonally adjusted $2.8 billion or 1.2% to $231.8 billion, following a August drop of 2.9% that was revised from the previously reported 3.0% drop; September durable goods orders were previously reported down $2.9 billion or 1.2% to $231.1 billion...

more importantly, then, this report also showed that the value of factory shipments fell by $1.8 billion or 0.4 percent to $477.3 billion, which followed a decrease of 0.9% in August...shipments of durable goods were up by 0.1%, revised from last week's reported 0.2% increase, as a 5.1% increase in shipments of light trucks and utility vehicles resulted in a 0.4% increase in shipments of transportation equipment, without which factory shipments would have fallen 0.5%....the value of shipments (and hence "new orders") of non-durable goods fell 0.8% on a 5.4% drop in shipments of petroleum and coal products, which were priced 5.9% lower, and which account for 20% of the value of non-durable shipments...with shipments of food products up 0.4% while producer prices for food, which account for another 28% of non-durables, were down 0.8%, it appears that real shipments of non-durable goods actually rose in September as well...

meanwhile, the aggregate value of September factory inventories, which have been down 3 months in a row, fell by $2.4 billion or 0.4 percent to $645.1 billion, following a 0.4% decrease in August...inventories of both durable goods and non-durable goods fell 0.4% in value...the decrease in inventories of durable goods was revised from the 0.3% decrease reported in last week's advance report; inventories of transportation equipment were down 0.7% to $131,451 million on 3.1% lower inventories of automobiles and a 6.5% drop in inventories of defense aircraft...the value of non-durable inventories fell 0.4% on a 3.4% drop in inventories of petroleum and coal products, which again was due to lower prices...since inventories of food products were up 0.7% and prices for industrial commodities less fuel were down 0.5% in September, we figure new real inventories of non-durable goods were likely up at least 0.2% for the month...recall that when estimating 3rd quarter GDP last week, BEA assumed a decrease in nondurable manufacturing inventories in September, without specifying an inflation adjustment....while that certainly was true in nominal terms, real non-durable inventories were up, and the data within the GDP report does not isolate factory inventories from other private inventories...however, offsetting the real increase in non-durables, we had a 0.1% downward revision to September durable goods inventories, from the $399,369 million reported with the durable goods report last week, to $399,052 million, reported here, while August durable goods inventories were also revised down an additional $99 million more...so with the durables negative revision washing out the non-durables positive change, the net impact on 3rd quarter inventories for GDP from this report will likely be insignificant...

Mortgage Delinquencies and Foreclosures Rise Again in September; Mean Time in Foreclosure at 1056 Days

the Mortgage Monitor for September (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 737,254 home mortgages, or 1.46% of all mortgages outstanding, remaining in the foreclosure process at the end of September, which was down from 747,930, or 1.48% of all active loans that were in foreclosure at the end of August, and down from 1.89% of all mortgages that were in foreclosure in September of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the September "foreclosure inventory" remains the lowest percentage of homes that were in the foreclosure process since late 2007... new foreclosure starts, however, rose for the second month in a row, from 76,180 in August to 79,899 in September, up more than 10% from July, while they remain lower than the 95.400 new foreclosures started in September of 2014, they've been volatile from month to month, and they have remained in a range about 50% higher than number of new foreclosures we saw in the precrisis year of 2005...

in addition to homes in foreclosure, BKFS data showed that 2,456,739 mortgages, or 4.87% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure in September, up from 4.79% of homeowners with a mortgage who were more than 30 days behind in August and the highest mortgage delinquency rate since May, while still down 11.4% from the mortgage delinquency rate of 5.66% in September a year earlier...of those who were delinquent in September, 816,725 home owners, or 1.62% of those with a mortgage, were considered seriously delinquent, meaning they were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month...combining these totals, we find a total of 6.33% of homeowners with a mortgage were either late in paying or in foreclosure at the end of September, and 3.08% of them were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

the Mortgage Monitor (pdf) is a mostly graphics presentation from what was once the Analytics division of Lender Processing Services that covers a variety of mortgage related issues each month...the graph below, from page 6 of the mortgage monitor, shows the percentage of mortgages that were 30 days, 60 days or more than 90 days delinquent for each quarter since the beginning of 2005...seriously delinquent mortgages, or those more than 90 days behind on payments but not yet in foreclosure, are shown in black; those mortgages more than 60 days but less than 90 days late are shown in red, while those mortgages that are just one month behind in payments are shown in blue....you can see that the seriously delinquent mortgages in black continue to fall steadily and as of the 3rd quarter amount to 1.62% of mortgage loans outstanding, down 4.3% from the 2nd quarter down 25.2% from a year ago, and down from nearly 5 1/2% of all mortgages in late 2009....60 day delinquency rates in red, however, have been up each of the past two quarters, but at 0.85% of all mortgages outstanding are still down 11.0% from a year ago...meanwhile, 30 days delinquencies in blue were up 4.7% in the quarter, but are down 5.5% from a year ago, and as BKFS tells us, still below the level of 2005 30 day late loans...

>September 2015 LPS delinquency rates

the next graph, from page 8 of the Mortgage Monitor, shows the percentage of mortgage loans that have become more than 60 days late in the prior 6 months, separated into three groups based on when these newly mortgages originated...the green graph shows the percentage of those loans originating before 2005 that became "severely delinquent", from a prior up to date status for each month going back to January 2005....the red graph shows the percentage of loans originating between 2005 and 2008 that transitioned to "severely delinquent", or 60 days behind, over the same time period, while the blue graph shows the percentage of loans originating after 2009 that fell 60 days behind on their payments from a prior paid up status...what we see here is that although those new post crisis mortgages make up 68% of all mortgages outstanding, they only account for a small percentage of the mortgage loans transitioning into trouble...on the other hand, while bubble era vintage mortgages only account for 17% of current active mortgages, they stilll account for 45% of all new severely delinquent loans...

September 2015 LPS seriously delinquent loans by vintage

in a statistical summary from page 14 of the pdf, the columns in the table below show the total active mortgage loan count nationally for each month given, number of mortgages that were delinquent by more than 90 days but not yet in foreclosure, the monthly count of those mortgages that are in the foreclosure process (FC), the total non-current mortgages, including those that just missed one or two payments, and then the number of foreclosure starts for each month the past year and for each January shown going back to January 2005….in the last two columns, we see the average length of time that those who have been more than 90 days delinquent have remained in their homes without foreclosure, and then the average number of days those in foreclosure have been stuck in that process because of the lengthy foreclosure pipelines…this table has been revised from last month's data and now shows the average length of delinquency for those who have been more than 90 days delinquent without foreclosure is now at 510 days, down from 519 in August and down from the April record of 536 days, as some of those who have been delinquent the longest are now transitioning to foreclosure....meanwhile, the average time for those who’ve been in foreclosure without a resolution is also off its record high of 1061 days first reached in last October, but is still nearly three years at 1056 days…

September 2015 LPS loan counts and days delinquent


(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…)