Sunday, December 11, 2016

October trade deficit, factory inventories, wholesale sales, job openings, and Mortgage Monitor

this week's releases included three reports that will input into 4th quarter GDP: the Census report on our International Trade for October, the Full Report on Manufacturers' Shipments, Inventories and Orders for October, and the October report on Wholesale Trade, Sales and Inventories, also from the Census Bureau...in addition to those, the Bureau of Labor Statistics released the Job Openings and Labor Turnover Survey (JOLTS) for October from the Bureau of Labor Statistics and the Fed released the Consumer Credit Report for October from the Fed...the later showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $16.0 billion, or at a 5.2% annual rate, as non-revolving credit expanded at a 6.0% rate to $2,746.0 billion and revolving credit outstanding rose at a 2.9% rate to $981.3 billion... private reports released this week included the November Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to a 12 month high of 57.2%, up from 54.8% in October, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in November, and the Mortgage Monitor for October (pdf) Black Knight Financial Services, which we'll also briefly review today...

October Trade Deficit Up 18% on Much Higher Imports and Much Lower Exports

our trade deficit rose by 17.7% in October as the value of our exports decreased and the value of our imports increased....the Census report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $6.4 billion to $42.6 billion in October from a revised September deficit of $36.2 billion...the value of our October exports fell by $3.4 billion to $186.4 billion on a $3.5 billion decrease to $123.1 billion in our exports of goods and a $0.1 billion increase to $63.3 billion in our exports of services, while our imports rose $3.0 billion to $229.0 billion on a $2.8 billion increase to $186.5 billion in our imports of goods and a $0.2 billion increase to $42.4 billion in our imports of services...export prices were on average 0.2% higher in October, so the relative real decrease in October exports would be greater than the nominal decrease by that percentage, while import prices were 0.5% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage....

the drop in our October exports of goods resulted from lower exports of foods, feeds and beverages, industrial supplies and materials, and consumer goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages fell by $1404 million to $11,250 million on a $984 million decrease in our exports soybeans and a $451 million decrease in our exports of corn...our exports of industrial supplies and materials fell by $1040 million to $33,703 million on a $495 million decrease in our exports of nonmonetary gold, a $450 million decrease in our exports of fuel oil, a $314 million decrease in our exports of aluminum, a $274 million decrease in our exports of organic chemicals, and a $260 million decrease in our exports of crude oil, which were partially offset by a $306 million increase in our exports of natural gas liquids and a $254 million increase in our exports of other petroleum products...in addition, our exports of consumer goods fell by $902 million to $15,921 million on a $956 million decrease in our exports of artwork and antiques, and our exports of automotive vehicles, parts, and engines fell by $35 million to $12,413 million as decreased exports of trucks, buses, and special purpose vehicles were offset by increased exports of bodies and chassis for passenger cars...slightly offsetting the decreases in those export categories, our exports of capital goods rose by $37 million to $43,717 million and our exports of other goods not categorized by end use rose by $138 million to $5,887 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods and capital goods were responsible for the $2.8 billion increase in our goods imports, even as our imports of passenger cars decreased...our imports of consumer goods rose by $2,374 million to $49,556 million on a $671 million increase in our imports of pharmaceuticals, a $373 million increase in our imports of cellphones, and a $331 million increase in our imports of apparel and fabric household goods, other than those made of wool or cotton...at the same time, our imports of capital goods rose by $1,067 million to $49,552 million on a $581 million increase in our imports of computer accessories, and a $319 million increase in our imports of telecommunications equipment...in addition, our imports of foods, feeds, and beverages rose by $23 million to $10,932 million and our imports of other goods not categorized by end use fell by $247 million to $7,829 million...partially offsetting those increases, our imports of automotive vehicles, parts and engines fell by $667 million to $29,175 million on a $1,222 million drop in our imports of of new and used passenger cars even as our imports of trucks, buses, and special purpose vehicles rose by $466 million, and our imports of industrial supplies and materials fell by $340 million to $37,737 million as our imports of organic chemicals fell by $595 million and our imports of nonmonetary gold fell by $485 million while our imports of crude oil rose by $217 million...

to gauge the impact of October trade on 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can estimate that 3rd quarter real exports of goods averaged 122.746.7 million monthly in 2009 dollars, while inflation adjusted October exports were at 120,548 million in the same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that October's real exports of goods are running at a 7.0% annual rate below those of the 3rd quarter, or at a pace that would subtract about 0.56 percentage points from 4th quarter GDP if continued through November and December.....in a similar manner, we find that our 3rd quarter real imports of goods averaged 179,347.3 million monthly in chained 2009 dollars, while inflation adjusted October goods imports were at 180,896 million...that would indicate that so far in the 4th quarter, we have seen an increase in our real imports at annual rate of 3.5% from those of the 3rd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 3.5% rate would subtract another 0.40 percentage points from 4th quarter GDP....hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our deteriorating balance of trade in goods would subtract about 0.96 percentage points from the growth of 4th quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all their price changes... 

October Factory Shipments Up 0.4%, Inventories Inch Higher

the October Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $12.5 billion or 2.7 percent to $469.4 billion, following an increase of 0.6% in September, which was revised from the 0.3% increase reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the advance report on durable goods we reported on two weeks ago...this report showed that new orders for manufactured durable goods rose by $10.6 billion or 4.6 percent to $238.8 billion in October, revised from the previously published 4.8% increase to $239.4 billion....

this report also indicated that the seasonally adjusted value of October factory shipments rose for the seventh time in 8 months, increasing by $1.7 billion or 0.4 percent to $464.7 billion, following a 0.9% increase in September, revised from the previously published 0.8% increase...shipments of durable goods were down by $0.3 billion or 0.1 percent to $234.1 billion, revised from the 0.2% increase that was published two weeks ago...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods rose by $2.0 billion, or 0.9%, to $230.7 billion, as a $2.1 billion, 6.3% increase in the value of shipments from petroleum refineries accounted for the increase...

meanwhile, the aggregate value of October factory inventories rose for the third time in four months, increasing by $0.3 billion to $621.4 billion, which was unchanged from the total published in September... October inventories of durable goods increased in value by less than $0.1 billion to $383.7 billion, essentially unrevised from what was reported in the advance report....the value of non-durable goods' inventories increased by $0.3 billion or 0.1% to $237.8 billion, following a decrease of 0.2% in September...to gauge the effect of those October inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was up 0.3% to $221.6 billion in October; the value of work in process inventories was down 0.3% to $191.0 billion, and materials and supplies inventories were valued 0.2% higher at $208.9 billion...the October producer price index reported prices for finished goods increased 0.4%, prices for intermediate processed goods inventories were 0.3% higher, while prices for unprocessed goods were 0.6% lower, thus indicating that real finished goods inventories were 0.1% lower, real inventories of intermediate processed goods were 0.6% lower, and raw material inventory inventories were 0.8% higher...the aggregate change in real factory inventories are thus little changed, and so would have a negligible impact on 4th quarter GDP...

October Wholesale Sales Up 1.4%, Wholesale Inventories Down 0.4%

the value wholesale sales increased in October, while the value of wholesale inventories decreased, in a month when producer prices for finished goods were 0.4% higher...the October report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $452.2 billion, up by 1.4 percent (+/0.7%) from the revised September level of $446.1 billion, and 2.2 percent (+/-0.9%) above the value of wholesale sales of a year earlier...the September preliminary estimate was revised upward $1.2 billion, which now means September sales were 0.4% more than those of August....wholesale sales of durable goods were up 1.1 percent (+/-0.7%) from last month and were up 2.5 percent (+/-1.4%) from a year earlier, with wholesale sales of electrical and electronic goods 2.2% higher than in September while wholesale sales of computer equipment fell 2.3%...wholesale sales of nondurable goods were up by 1.6 percent (+/-0.9%) from September, and were up 1.9 percent (+/-1.4%) from last October, with wholesale sales of petroleum and petroleum products up 6.6%, and wholesale sales of raw farm products up 8.6% on the month, mostly on higher prices...as an intermediate activity, wholesale sales are not included in GDP except as a trade service, since they do not represent an increase in the output of the goods sold....

on the other hand, the monthly change in private wholesale inventories is a major factor in GDP, as additional goods “on the shelf” represent goods that were produced, and the Census estimated they were valued at $587.7 billion at the end of October, 0.4 percent (+/-0.4%)* lower than the revised September and 0.4 percent (+/-1.2%)* below the valuation of last October's inventories...September's preliminary inventory estimate was revised down from the previously reported $590.2 billion to $589.5 billion, and hence September wholesale inventories were up just 0.1% from August....wholesale durable goods inventories were down 0.3 percent (+/-0.4%)* from September and were 2.2 percent (+/-1.4%) lower than a year earlier, as the value of furniture and home furnishings were 1.6% higher, while the value of inventories of metals and minerals were down 1.0%...inventories of nondurable goods were valued 0.4 percent (+/-0.7%)* lower than in September, but were valued 2.5 percent (+/-2.1%) higher than last October, as the value of inventories of  petroleum and petroleum products was up 1.9% while the value of inventories of drugs and druggists' supplies was 3.2% lower than in September...with the October producer price index for finished goods up by 0.4% on 2.5% higher energy prices, while intermediate wholesale prices rose 0.3%, real wholesale inventories appear to be down on the order of 0.8% from September, which would subtract about 0.07 or 0.08 percentage points from 4th quarter GDP growth... 

Job Openings, Hiring and Firing Decrease in October

the Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 97,000, from 5,631,000 in September to 5,534,000 in October, after September job openings were revised 145,000 higher, from 5,486,000 to 5,631,000...October's jobs openings were 2.1% higher than the 5,422,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed at 3.7% was unchanged from September and from October a year ago...most of the October decrease in openings can be accounted for by the 87,000 job opening decrease to 926,000 openings in the broad professional and business services sector, while the health care and social assistance sector saw openings by increase 139,000 to 1,109,000 (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are 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 October, seasonally adjusted new hires totaled 5,099,000, down by 22,000 from the revised 5,121,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed remained unchanged at 3.5% in October, but was down from 3.7% in October a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 61,000, from 4,936,000 in September to 4,875,000 in October, while the separations rate as a percentage of the employed remained unchanged at 3.4%, which was also unchanged from October a year ago (see table 3)...subtracting the 4,875,000 total separations from the total hires of 5,081,000 would imply an increase of 224,000 jobs in October, quite a bit more than the revised payroll job increase of 142,000 for October reported in the November establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 2,986,000 of us voluntarily quit our jobs in October, down from the revised 3,052,000 who quit their jobs in September, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.1% of total employment, while it was up from 2.0% a year earlier (see details in table 4)....in addition to those who quit, another 1,518,000 were either laid off, fired or otherwise discharged in October, up by 5,000 from the revised 1,513,000 who were discharged in September, as the discharges rate remained unchanged at 1.0% of all those who were employed during the month, which was down from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 372,000 in October, up from 370,000 in September, for an 'other separations rate’ of 0.3%, which unchanged from September and from October of last year....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... 

Mortgage Delinquencies Rise Again in October Even as New Foreclosures Fall to 12 Year Low

the Mortgage Monitor for October (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 503,719 home mortgages, or 0.99% of all mortgages outstanding, remaining in the foreclosure process at the end of October, which was down from 509,047, or 1.00% of all active loans, that were in foreclosure at the end of September, and down from 1.43% of all mortgages that were in foreclosure in October of last year....these are homeowners who at least had a foreclosure notice served, but whose homes had not yet been seized, and the October "foreclosure inventory" now represents the lowest percentage of homes that remained in the foreclosure process since July of 2007... new foreclosure starts, which have been volatile from month to month, fell to a 12 year low of 56,451 in October from 61,664 in September and were down from the 73,200 new foreclosures we saw in October a year ago...

in addition to homes in foreclosure, Mortgage Monitor data also showed that 2,202,394 mortgages, or 4.35% of all mortgage loans, were at least one monthly mortgage payment overdue but not in foreclosure at the end of October, up from the 4.27% of homeowners with a mortgage who were more than 30 days behind in September, but down from the mortgage delinquency rate of 4.77% in October a year earlier, while also up from the mortgage crisis low of 4.08% of all mortgages that were delinquent in March of this year...of those who were delinquent in October, 676,993 home owners, or 1.34% of those with a mortgage, were more than 90 days behind on mortgage payments, but still not in foreclosure at the end of the month, which was also up from the 668,114 such "seriously delinquent" mortgages in September...combining the total number of delinquent mortgages with those in foreclosure, we find that a total of 2,706,068 mortgage loans, or 5.34% of homeowners with a mortgage, were either late in paying or in foreclosure at the end of October, and that 1,180,712 of them, or 2.33% of all mortgaged homeowners, were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

 

(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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