Sunday, January 24, 2016

December’s consumer prices, new home construction, and existing home sales, et al

the most widely watched reports released this past week were the December Consumer Price Index from the Bureau of Labor Statistics, the December report on New Residential Construction from the Census Bureau, and the December report on existing home sales from the National Association of Realtors (NAR)....with the release of the Consumer Price Index, the December report on Real Average Hourly Earnings was also released by the BLS, which indicated that inflation adjusted and seasonally adjusted hourly earnings for all employees increased by 0.1% from November to December, only because of the small decrease in the CPI, and despite no change in average hourly earnings…meanwhile, real average weekly earnings also increased by 0.1%, due to the increase in real average hourly earnings combined with no change in the average workweek....

this week also saw the release of the Chicago Fed National Activity Index (CFNAI) for December, 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 from a downwardly revised –0.36 in November to -0.22 in December, which left the 3 month average at –0.24 in December, indicating national economic activity has been slower than the historical trend during the 4th quarter...in addition, the Philadelphia Fed reported on its Manufacturing Outlook Survey for January, covering most of Pennsylvania, southern New Jersey, and Delaware, which incorporated revised seasonal adjustments for 2015...the Philly Fed indicated its broadest diffusion index of current manufacturing conditions increased from a revised reading of -10.2 in December to -3.5 in January, its fifth consecutive negative reading, indicating an ongoing contraction in the region's manufacturing...

CPI Down 0.1% in December, Real Retail Sales up 0.2% in Boost to 4th Quarter GDP

the consumer price index fell in December as lower prices for food, energy, and most goods were only partially offset by higher prices for core services....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices fell 0.1% in December after prices were unchanged in November, rose 0.2% in October and fell 0.2% in September...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, fell to 236.525 in December from 237.336 in November, which left it statistically 0.7% higher than the 234.812 reading of December of last year...regionally, prices for urban consumers have risen 1.8% in the West,  0.5% in the South, and 0.5% in the Northeast, while they were unchanged in the Midwest over the past year, with greater price increases within regions in cities of more than 1,500,000 people...with lower food and energy prices responsible for the lower CPI, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, while the unadjusted core index actually fell from 244.075 to 243.779, a level still 2.10% ahead of its year ago reading of 238.775...

the seasonally adjusted energy price index fell by 2.4% in December after falling by 1.3% in November and rising 0.3% in October, as the energy index remains 12.6% lower than it was in December a year ago...prices for energy commodities were 4.0% lower in December while the index for energy services saw an 0.8% drop, after decreasing by 0.1% in November....the decrease in the energy commodity index included a 3.9% drop in the price of gasoline, the largest component, while fuel oil prices fell 7.8% and prices for other fuels, including propane, kerosene and firewood, averaged a 0.9% decrease…within energy services, the index for utility gas service fell by 2.3%, leaving utility gas priced 14.9% lower than a year ago, while the electricity price index fell by 0.4%, after it rose by 0.3% in November...energy commodities are still priced 20.0% below their year ago levels, with gasoline 19.7% lower priced than it was a year ago, while the energy services price index is 4.3% lower than last December, as even electricity prices have fallen 1.2% over that period..

the seasonally adjusted food index fell by 0.2% in December, after by falling by 0.1% in November, while rising 0.1% in October, 0.4% in September and 0.2% in both July and in August, as prices for food purchased for use at home fell 0.5% while prices for food away from home rose 0.1%, as average prices at both fast food outlets and at full service restaurants rose 0.1% while school lunches rose 0.2%...meanwhile, prices for all categorizes of food at home except dairy fell in December, with dairy seeing a 0.1% increase on 0.6% higher milk prices, while prices for cheese and related products fell 0.3%...the price index for the meats, poultry, fish, and eggs group fell 1.4% after falling 0.6% in November on a 2.4% drop in beef and veal prices and a 3.4% drop in egg prices, while poultry prices fell 1.3%, pork prices fell 0.8%, and fish & seafood prices averaged 0.6% lower...the fruits and vegetables index was 0.5% lower on a 1.0% decrease in fresh fruit prices, despite a 2.8% increase for apples, and a 2.2% drop in prices for canned fruit, which was only partially offset by a 0.4% increase in fresh vegetable prices, led by a 3.7% increase in prices for lettuce...in the other food at home categories, the index for cereals and bakery products fell 0.1% as bread prices fell 0.8% and rice prices fell 1.6%, which more than offset a 0.7% increase in prices for breakfast cereals; the index for beverages and beverage materials was also 0.1% lower despite an 0.8% increase in roast coffee prices as prices for noncarbonated juices and drinks fell 0.4%, and lastly, prices in the other foods at home category averaged 0.3% lower as prices for spices, seasonings, condiments, sauces fell 1.8% while peanut butter prices rose 1.7%....three food line items have seen price changes greater than 10% over the past year; egg prices still remain 14.8% higher than a year ago, despite dropping 5 months in a row, and tomato prices are now down 10.3% year over year, despite rising 4 months in a row, while ham prices, which were up 0.2% in December, remain 10.5% lower than they were in December 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 0.1% in December, 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 0.2%....among the commodity components, which will be used by the BEA to adjust December retail sales for inflation in national accounts data, the index for household furnishings and supplies rose 0.1% on a 3.4% increase in prices for window coverings and a 0.6% increase in prices for bedroom furniture which were mostly offset by a 2.1% drop in prices for dishes and flatware and a 1.4% drop in prices for nonelectric cookware and tableware; apparel prices were down 0.2% on a 2.7% reduction in prices for women's dresses, 2.5% lower prices for women's outerwear, and 4.5% lower prices for infants' and toddlers' apparel, partially offset by 3.8% higher prices for men's furnishings and a 2.5% increase in prices for men's pants and shorts... prices for transportation commodities less fuel were unchanged as 0.2% lower new truck prices offset 0.2% higher parts and equipment and a 1.1% increase in prices for motor oil, coolant, and fluids....medical care commodities fell 0.1% on 0.3% lower prices for prescription drugs, while recreational commodities were 0.6% lower for the 2nd month in a row on 4.0% lower priced TVs and 1.9% lower toy prices ...in addition, education and communication commodities fell 0.4%, also for the 2nd month in a row, on a 2.4% decrease in prices for telephone hardware, calculators, and other consumer information items and a 0.9% decrease in prices for personal computers, offset by a 0.8% increase in prices for educational books and supplies, while the index for alcoholic beverages fell 0.1%, and the index for other goods was unchanged...

within services, the price index for shelter rose 0.2% on a 0.2% increase in rent, a 0.2% increase in owner's equivalent rent and a 0.5% decrease in costs for lodging away from home, while costs for household services like water, sewer and trash collection rose 0.5%....medical care services rose 0.1% on a 0.4% increase in eyeglasses and eye care and a 0.5% increase in prices for health insurance, and transportation services rose 0.3% on a 1.6% increase in car and truck leases and a 3.8% increase in intercity bus fare, while airline fares fell 1.1%...meanwhile, the recreation services index rose 0.3% as a 3.3% increase in services providing video discs and other media and a 1.4% increase in admissions to theaters and concerts was only partially offset by a 1.7% decrease in admissions to sporting events, while education and communication services were 0.1% higher on a 1.9% increase in delivery services...among core prices, a 12.9% increase in moving and storage expenses was the only line item with an increase greater than 10%, while only telephones, which were priced 15.2% lower, and televisions, which are 13.8% cheaper, saw their prices drop by more than 10% over the past year...

with this release, we are now able to estimate the economic impact of last week's December retail sales report...for the most accurate estimate, and the way the BEA will figure 4th quarter GDP next week, we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales; for instance, December's clothing sales, which fell by 0.9%, should be adjusted with the price index for apparel, which was down by 0.2%, to show us that real retail sales of clothing were down just 0.7% in December....then, to get GDP relevant changes, we'd have to compare those real clothing sales in the months of October, November and December to real sales in the 3rd quarter months of July, August and September, and then repeat that for each other type of retailer, obviously quite tedious...the short cut we usually use for a ballpark estimate is to apply the composite price index of all commodities less food and energy commodities, which was down 0.1%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales....those sales were almost down 0.1% in December, and since their price index was also down 0.1%, real retail sales ex food and energy was up a bit but statistically unchanged...in the food and energy components, grocery stores sales were down 0.1% while prices for food at home were down 0.5%, meaning real food sales rose by 0.4% in December..next, sales at bars and restaurants were up 0.8% in dollars, but those dollars bought 0.2% less, so real sales of food away from home were up 0.6%...and while gas station sales were down 1.1%, gasoline prices were down 3.9%, suggesting a solid real increase in gasoline sold as well...weighing the food and energy components at one third of total retail sales suggests that real retail sales were up on the order of 0.2% in December, following a an increase of 0.5% in real sales in November and a 0.2% increase in October...together, these increases suggest a decent contribution from personal consumption of goods, which accounts for 23% of GDP,  when the advance 4th quarter GDP report is released on January 29th....

Housing Starts Little Changed in December; Up 10.8% in 2015

the December 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 1,149,000 in December, which was 2.5 percent (±8.6%)* below the revised November estimated seasonally adjusted annual rate of 1,179,000 housing units started, but was 6.4 percent (±12.2%)* above last November'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, December housing starts could have been up 6.1% or down as much as 11.1% from those of November, with even larger revisions subsequently possible...in this report, the annual rate for November housing starts was revised from the 1,173,000 reported last month to 1,179,000, while October starts, which were first reported at a 1,060,000 annual rate, were revised from last month's initial revised figure of 1,161,000 annually back down to 1,071,000 annually with this report....an estimated 1,111,200 housing units were started in 2015, 10.8 percent (±2.9%) above the 2014 figure of 1,003,300...

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 77,500 housing units were started in December, down from 90,000 units started in November, which was initially estimated at 89,800 housing starts...of those housing units started in December, an estimated 50,500 were single family homes and 25,900 were units in structures with more than 5 units, down from 57,500 single family starts and 31,900 units started in structures with more than 5 units in November....the unadjusted estimates also show that housing starts were down in every region of the country except the Northeast, where they were up from 10,700 units in November to 11,500 units in December, which once seasonally adjusted was a 26.8% increase, undoubtedly due to the record warm weather in that region of the country in December...

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 December, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,232,000 housing units, which was 3.9 percent (±2.2%) below the revised November rate of 1,282,000 permits annually but 14.4 percent (±1.2%) above the rate of permit issuance in December a year earlier...again, the estimates for new permits reported here were extrapolated from the unadjusted estimate, which showed permits for 99,800 housing units were issued in December, which was actually up from the estimated 90,100 new permits issued in November, with permits in the Northeast up from 8,900 to 17,400, while new housing permits in the Midwest fell from 15,400 to 10,800 ...the December permits included 51,200 permits for single family homes, up from 49,300 single family permits in November, and 45,700 permits for housing units in apartment buildings with 5 or more units, up from 38,700 such multifamily permits a month earlier..for the entire year, building permits were issued for an estimated 1,178,400 housing units, 2.0 percent (±1.8%) above the 1,052,100 permits that were issued in 2014...for charts and additional analysis on this report without our caveats, see Bill McBride's coverage in two posts: Housing Starts declined to 1.149 Million Annual Rate in December and Comments on December Housing Starts....

Existing Homes Sales Rose 14.7% to a 4.76 Million Annual Rate in December

finally, the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose by 14.7% in December, projecting that 5.46 million homes would sell over an entire year if December's home sales were extrapolated over that year, the largest monthly increase ever recorded, and 7.7% higher than the annual sales rate projected in December of a year ago...the annual rate of November home sales was unrevised at 4.76 million, down from October's 5.32 million home sales rate, a one month drop which the NAR blames on the rollout of the CFPB's Know Before You Owe initiative....the NAR also reported that the median existing-home price for all housing types in December was $224,100, which was 7.6% higher than a year earlier and the 46th consecutive monthly year over year increase in home prices...the NAR press release, which is titled Existing-Home Sales Surge Back in December, is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily 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 438,000 homes sold in December, up 24.8% from the 351,000 homes that sold in November and up 6.1% from the 413,000 homes that sold in December last year...home sales were up in every region of the country, ranging from a 16.0% increase to 58,000 home sales in the Northeast to a 33.3% increase to 100,000 home sales in the West....that same pdf indicates that the median home selling price for all housing types rose 0.5% from a revised $220,000 in November to $224,100 in December, while the average home sales price was $266,800, up 1.2% from the $263,700 average in November, and up 4.7% from the $254,800 average home sales price of December a year ago, with the regional average home sales prices ranging from a low of $203,800 in the Midwest to a high of $355,000 in the West...for additional coverage with long term graphs on this report, see Existing Home Sales increased in December to 5.46 million SAAR and A Few Random Comments on December Existing Home Sales by Bill McBride at Calculated Risk… 


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

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