Sunday, January 31, 2016

4th quarter GDP, December durable goods, new home sales, & state jobs report, November Case-Shiller, et al

the key release this week was the the first or "advance" estimate of 4th quarter GDP from the Bureau of Economic Analysis; the other most widely watched reports were the December advance report on durable goods from the Census bureau, the December report on new home sales, also from the Census bureau, and the November Case-Shiller Home Price Index, which is a 3 month average of prices for repeat home sales closed in September, October and November; in addition, the Bureau of Labor Statistics released the Regional and State Employment and Unemployment Summary for December, and the week also saw the release of the last three regional Fed manufacturing surveys for January...

the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity composite index had fallen to a six year low of -34.6, from a revised reading of -20.1 in December, the thirteenth consecutive negative reading, the result of an going recession in the Texas oil patch economy...the Richmond Fed Survey of Manufacturing Activity for January, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index slipped to +2, following last month's reading of +6, indicating ongoing sluggish growth in the region's manufacturing, and the Kansas City Fed manufacturing survey for January, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index was unchanged at –9 in January, its eleventh consecutive negative reading, indicating that their regional contraction, mostly in the energy industry, continues...we also saw the private release of the Chicago Purchasing Managers Index (PMI) for January, which reported their Chicago Business Barometer jumped 12.7 points, from 42.9 in December to 55.6 in January, in a diffusion index where readings above 50 indicate that a plurality of Chicago area purchasing managers saw growth in various facets of their business...

4th Quarter GDP Growth Slows to 0.7% Rate on Inventories and Trade

our economy grew at a 0.7% rate in the 4th quarter as growth in personal consumption slowed, exports fell, fixed investment contributed little, and the increase in private inventories decreased, while growth in the federal government was the sole positive change...the Advance Estimate of 4th Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 0.7% annual rate over the output of the 3rd quarter of this year, when our real output grew at a 2.0% real rate...in current dollars, our fourth quarter GDP grew at a 1.5% annual rate, increasing from what would work out to be a $18,060.2 billion a year output rate in the 3rd quarter to a $18,128.2 billion annual rate in the 4th quarter, with the headline 0.7% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 0.8%, aka the GDP deflator, was applied to the current dollar change... as is always the case with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have now averaged +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate for the quarter is released, which will be two months from now...also note that December construction and inventory data have yet to be reported, and that BEA assumed an increase in nonresidential construction, an increase in residential construction, a decrease in nondurable manufacturing inventories, and an increase in wholesale and retail inventories ex-autos in December before estimating 4th quarter output..

while we look at the details, 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 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 unreal 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 here comes from the pdf for the 1st estimate of 4th quarter GDP, which is linked to on the sidebar of the BEA press release, which also offer links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real (inflation adjusted) 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...

personal consumption expenditures (PCE), which accounts for over 68% of GDP, grew at a 2.3% rate in current dollars in the 4th quarter, but once the inflation adjustment was made with the quarterly annualized PCE price index change of 0.1%, we find real PCE grew at a 2.2% rate in the 4th quarter, after rising at a 3.0% rate in the 3rd quarter...after annualized 4th quarter consumer spending for durable goods was adjusted for a 1.9% decrease in durable goods prices, the BEA found real growth in output of consumer durables was at a 4.3% annual rate, as real consumption of recreational goods and vehicles led the durables increase with a 11.9% growth rate even as real consumption of automotive vehicles decreased at a 4.9% rate...real output of consumer non-durable goods grew at a 1.5% rate after consumer spending for non-durables was adjusted for lower prices at a 4.5% rate, with real consumption of both food and energy goods seeing minor decreases...meanwhile, the 4.0% nominal growth in consumer outlays for services was reduced with a 2.0% increase in prices for services to show real output of consumer services grew at a 2.0% annual rate, led by a 3.8% real growth rate in health care services while real outlays for housing and utilities shrunk at a 1.4% rate and subtracted 17 percentage points from 4th quarter growth due to warmer than normal weather....thus, with real growth in each of the major components of personal consumption expenditures, real growth in output of consumer durable goods added 0. 32 percentage points to the change in GDP, real growth in non-durable goods output for consumers added 0.22 percentage points to 4th quarter GDP growth, and real growth in services provided to consumers added 0.93 percentage points to the change in 4th quarter GDP...

the change in other components of the change in GDP are computed by the BEA in the same manner; ie, the actual increase in current dollar spending for the quarter is adjusted with an inflation factor for that component, giving the change in real units of goods or services produced in the quarter, and then those quarterly changes are converted to an annualized figure by compounding them 4 times...thus, real gross private domestic investment, which had shrunk at a 0.7% annual rate in the 3rd quarter, shrunk at a 2.5% annual rate in the 4th quarter; however, most of that decrease in investment growth in both quarters came from slower growth of inventories, as real growth in fixed investment still grew at a 0.2% annual rate in the 4th quarter, down from the 3.7% growth rate of the 3rd quarter...of 4th quarter fixed investment, real non-residential fixed investment fell at a 1.8% rate, as real investment in non-residential structures fell at a 5.3% rate and subtracted 0.15 percentage points from 4th quarter GDP and real investment in equipment fell at a 2.5% rate and subtracted 0.31 percentage points from GDP, while real investment in intellectual property grew at 1.6% rate and added 0.07 percentage points to GDP...in addition, real residential investment grew at a 8.1% rate in the 4th quarter, little changed from the 8.2% growth it saw in the 3rd quarter, and added 0.20 percentage points to GDP...for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

as was mentioned, slower growth in inventories also reduced investment and hence GDP, as real private inventories grew by an inflation adjusted $68.6 billion in the 4th quarter, down from the $85.5 billion of inflation adjusted inventory growth we saw in the 3rd quarter, and as a result the $16.9 billion slower real inventory growth subtracted 0.45% from the 4th quarter's growth rate, after $28.0 billion slower real inventory growth in the 3rd quarter subtracted 0.71% from that quarter's GDP...since slower growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, their decrease by $16.9 billion means real final sales of GDP were actually greater by that much, and hence real final sales of GDP rose at a 1.2% rate in the quarter, after real final sales increased at a 2.7% rate in the 3rd quarter, when the change in inventories was larger…

the value of both exports and imports in current dollars fell in the 4th quarter, but after large inflation adjustments due to lower prices for both, mostly for traded commodities, the BEA found that real imports rose while real exports shrunk...after adjusting for a 5.4% annualized decrease in prices, our real exports of goods and services fell at a 2.5% rate in the 4th quarter, after rising at a 0.7% rate in the 3rd quarter, while our real imports, adjusted for lower prices at a 7.8% rate, rose at a 1.1% rate in the 4th quarter, after rising at a 2.3% rate in the 3rd quarter...as you'll recall, real increases in 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 in GDP elsewhere), while real increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been, because it was not produced here and hence not part of our national product...thus the 4th quarter decrease in real exports subtracted .31 percentage points from 4th quarter GDP,  a reversal of the 0.09 percentage points that our exports added to GDP in the 3rd quarter, while the 1.1% increase in real imports subtracted .16 percentage points from GDP, down from the 0.35 percentage points that an increase in imports subtracted in the 3rd quarter...thus, our worse trade balance subtracted a net 0.47% percentage points from 4th quarter GDP, after our increased trade deficit had subtracted 0.26% percentage points in the third quarter...

finally, real consumption and investment by branches of government increased at a 0.7% annual rate in the 4th quarter, after increasing at a 1.8% rate in the 3rd quarter, as federal government consumption and investment rose at a 2.7% rate while state and local consumption and investment fell at a 0.6% rate.....inflation adjusted federal spending for defense rose at a 3.6% rate and added 0.14 percentage points to 4th quarter GDP growth, while real non-defense federal consumption and investment rose at a 1.4% rate and added  0.04 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 goods or services....meanwhile, state and local government investment and consumption expenditures fell at a 0.6% annual rate and subtracted 0.06 percentage points from the quarter's growth rate, as real growth in state and local consumption expenditures added 0.05 percentage points and a contraction in real state and local investment subtracted 0.11 percentage points...

we'll again include our FRED GDP graph, so you can picture how these GDP components all come together...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 (ie, 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 only significant positive contribution to GDP growth in the 4th quarter came as a result of increased real personal consumption, with just a bit of help from increased government consumption and investment; the increase in private fixed investment in the 4th quarter was so small it doesn't even appear on a graph of this scale...meanwhile, the major negatives were slower inventory growth (yellow) smaller exports (purple), and greater imports (green)...

4th quarter 2015 advance GDP

December New Orders for Durable Goods Crash 5.1%, Shipments Down 2.2%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for December (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods fell $12.0 billion or 5.1 percent to $225.4 billion, following a revised decrease of $1.2 billion, or 0.5% in November new orders, which were originally reported as unchanged...new orders for durable goods have now been down 4 out of the last 5 months, and ended the year 3.5% below the level of 2014, the largest drop in the history of the report, 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 through November 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 December headline change, as those transportation equipment orders fell $10.1 billion or 12.4% to $71.3 billion, as a 69.1% drop to $2,500 million in new orders for defense aircraft was coupled with 29.4% decrease to $9,360 million in new orders for commercial aircraft, which ended the year 32.7% below their level of 2014....excluding those new orders for transportation equipment, other new orders still fell by 1.2% in December, as the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, fell 4.3% to $65,866 million, after the November change in orders for such capital goods was revised from a 0.4% decrease to a 1.1% decrease....

meanwhile, the seasonally adjusted value of December shipments of durable goods, which were inputs into various components of 4th quarter GDP after adjusting for deflation, fell by  $5.4 billion, or 2.2 percent, to $235.8 billion, after November's shipments were revised from a increase of 0.9% to a increase of 0.6% and October's were down 1.2%, unrevised...again, lower shipments of transportation equipment drove the change, as they were down $5.4 billion or 6.7 percent to $75.1 billion, as the value of shipments of commercial aircraft fell 32.4% to $10,844 million; excluding that volatile sector, the value of other shipments of durable goods was unchanged in December but 1.1% lower than 2014 for the year as a whole....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 1st time in 6 months, increasing by $2.1 billion, or 0.5 percent, to $397.9 billion, after a 0.2% decrease in November that was originally reported as a 0.3% decrease ...a $1.8 billion or 1.4 percent increase to $131.8 billion billion in the value of inventories of transportation equipment was again a major factor, as the value of inventories of motor vehicles rose 2.2% to $36,504 million...essentially flat in the 4th quarter, end of the year inventories of durable goods still remain 0.1% lower than at the end of 2014...

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 down following two consecutive monthly increases, falling by $$5.6 billion or 0.5 percent to $1,187.6 billion after a 0.1% increase in November, again largely due to a decrease in the backlog in orders for transportation equipment, which fell by $3.8 billion or 0.5 percent to $795.2 billion, which you might note is more than half the total of unfilled orders outstanding, as the $607,807 million backlog in commercial aircraft orders alone accounts for more than half of this metric...without the transportation equipment sector, December's unfilled orders still fell by 0.5%, rising from $394,229 million in November to $392,453 million in December....compared to a year ago, the unfilled order book for durable goods is 1.9% below last December's level, with unfilled orders for transportation equipment 1.8% below their year ago level...

Half a Million New Homes Sell in 2015, Up More than 10% from 2014

the Census report on New Residential Sales for December (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 544,000 new homes a year, which was 10.8 percent (±17.1%)* above the revised November rate of 491,000 new single family homes a year and 9.9 percent (±25.0%)* above the estimated annual rate that new homes were selling at in December of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether December new home sales rose or fell from those of November 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....hence, these initial reports are not very reliable and often see significant revisions...with this report; sales new single family homes in November were revised from the annual rate of 490,000 reported last month to a 491,000 a year rate, October's annualized home sale rate, initially reported at 495,000, was revised from 470,000 to 482,000, while the annual rate of September's sales, revised from 447,000 to 442,000 last month, was now revised higher, to an annual rate of 457,000...

the annual rates of sales reported here are extrapolated from the estimates of Census field reps, which showed that approximately 38,000 new single family homes sold in December, up from the 34,000 new homes that sold in November, which was unrevised, while the unadjusted estimate for October home sales was revised from 38,000 to 39,000 after it was originally reported at 41,000, and the estimate for September sales, first reported at 36,000, was revised back up to 35,000, after prior downward revisions to 34,000 and 33,000...all totaled, an estimated 501,000 new homes were sold in 2015, 14.5 percent (±4.5%) above the 437,000 single family homes that sold in 2014....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in December was $288,900, down from $297,000 in November, which was originally reported as $305,000, while the average December new home sales price was $346,400, down from $364,200 in November, and down from the average sales price of $373,500 in December a year ago....a seasonally adjusted estimate of 237,000 new single family houses remained for sale at the end of December, which represents a 5.2 month supply at the December sales rate, down from a 5.7 month supply in November....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales increased to 544,000 Annual Rate in December and Comments on December New Home Sales...

November Case-Shiller Report Shows National Home Prices up 5.3% From a Year Earlier

the Case-Shiller house price indexes for November indicated a 5.3% year over year increase in sales prices on repeat home sales in the ten cities of the original index, a 5.5% year over year increase in the 20 City Composite, and a 5.3% increase in home prices nationally since the November report of last year, led by an 11.1% increase in home prices in Portland and an 11.0% increase in home prices in San Francisco....Case-Shiller also reports a 'monthly' increase of 0.1% in the national index and the in 20 city index, and no change in the 10 city index, all of which compare prices of houses sold in August, September and October to those sold in September, October and November, and hence the change in the month over month indexes are arithmetically equal to 1/3rd the difference between August home prices and November home prices, ie, not really a useful monthly change at all...seasonally adjusting those so called month over month indexes shows that all three indexes are 0.9% higher than last month's; thus, while home prices in 14 of the 20 cities showed an actual increase in November prices when compared to those of August, after those seasonal adjustments were applied, home prices in all 20 of the cities increased...the full pdf of the release, titled Home Prices Continue to Increase in November, 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, see the following two posts from Bill McBride, which include several graphs: Case-Shiller: National House Price Index increased 5.3% year-over-year in November, followed by his analysis in Real Prices and Price-to-Rent Ratio in November...
as we mentioned, since Case-Shiller indexes are simple averages of home price changes over 3 months, they are not very useful for monthly comparisons...that's simply because two of the months are being compared to themselves, leaving only prices changes from the current month, and the month before the month before last left in each month over month comparison....this is also the case with any three month average, which we can represent by (a + b + c) / 3, with a being the current month, b being last month, and c being the month before that...another way of writing that same expression is "a/3 + b/3 + c/3 " .... when one compares that to the prior month 3 month average, represented by (b + c + d) / 3, where d is the month before the month before last, we end up comparing (a/3 + b/3 + c/3) to (b/3 + c/3 + d/3), and since two of our elements in that comparison are identical, the comparison simply becomes a/3 to d/3, or one-third the difference between months a and d....nonetheless, such 3 month averages are used by economists everywhere, including at the Fed, as if they're providing some special insight, even though the comparison they offer borders on nonsense...

State and Regional Employment Report for December

the Regional and State Employment and Unemployment Summary for December expands on the national employment situation summary of three 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, with tables and complete coverage of all 50 states, which means it’s quite a bit 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 2.7% 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 New Mexico had the highest unemployment rate at 6.7%, as they saw their unemployment rate fall from 6.8% in November..

for a breakdown of payroll employment by job type for each state over the past 3 months, and the change in employment since last December, 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 22 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, 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…)

Sunday, January 17, 2016

December retail sales, industrial production, producer prices; November business inventories, job openings and Mortgage Monitor

the four macroeconomically important reports released this past week -- retail sales for December and business inventories for November from the Census bureau, Industrial Production for December from the Fed, and the Producer Price Index for December from the BLS -- were all released on Friday, leaving us little time to take a detailed look at them before writing about them today.…Friday also saw the release of the Empire State Manufacturing Survey from the New York Fed, which covered New York and northern New Jersey, and which reported their headline general business conditions index fell from -4.6 to -19.4, its lowest level since 2009 and sixth negative monthly index reading in a row, indicating a worsening recession in First District manufacturing…other reports released earlier in the week included the Import and Export Price Indexes for December, the Job Openings and Labor Turnover Survey (JOLTS) for November, and the Mortgage Monitor for November (pdf) from Black Knight Financial Services, which we'll also take a look at today...

December Retail Sales Unchanged from November Report

seasonally adjusted retail sales fell 0.1% in December after retail sales for November were revised 0.1% higher, as this month's sales figure is the same as was published last month...the Advance Retail Sales Report for December (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $448.1 billion, which was an decrease of 0.1 percent (±0.5%) from November's revised sales of $448.6 billion and 2.2 percent (±0.7%) above the sales of December of last year...November's seasonally adjusted sales were revised from the $448.1 billion first reported to $448.6 billion, while October's sales, which were revised down to $447.1 billion from the originally reported $447.3 billion last month, were revised down again, to $446.929 billion with this report...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales rose 15.5%, from $444,581 million in November to $513,757 in December, while they were up 1.5% from the $499,976 million of sales in December a year ago, obviously a large seasonal adjustment to December’s report...while we can't judge the economic impact of this month's report until the consumer price index is released next Wednesday, the revision to October and November sales would add about 0.01 percentage point to our previous estimates of the GDP growth rate for those months...

since it's the end of the quarter for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what it shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the November revised figure to this month's December "advance" report in the first sub-column, and then the year over year percentage sales change since last December in the 2nd column; the second double column pair below gives us the revision of the November advance estimates (now called "preliminary") as of this report, with the new October to November percentage change under "Oct 2015 r" (revised) and the November 2014 to November 2015 percentage change as revised in the 2nd column of the pair....then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (October, November and December) from the preceding three months of the 3rd quarter(July, August and September)  and from the same three months (October, November and December) of a year ago....that pair of columns gives us a snapshot comparison of 3rd quarter sales to 4th quarter sales, which will be useful in estimating the impact of this report on 4th quarter GDP after consumer prices for December are published next week...for the table of last month’s advance November estimates before this month's revision, click here...

December 2015 retail sales table

note that for the first time in several months, a large swing in automobile sales was not the determining factor of the vector of this months sales...sales at motor vehicle and parts dealers were statistically unchanged at $94,562 million, and hence without those automotive sales, month over month retail sales were still down 0.1%....the major reason for the December decrease, however, is the 1.1% decrease in gas station sales, without which retail sales would have just been down just $98 million, which would be considered statistically unchanged...most of the other changes in December sales are fairly typical; furniture stores and specialty stores, such as sporting goods and bookstores, led with 0.9% increases in sales, while sales at general merchandisers fell 1.0% and clothing stores fell 0.9%, not unexpected for the warmest December on record...note that November sales, in the second set of columns, were revised to indicate a 0.4% increase over October, from the 0.2% increase reported last month; that's because while November sales were revised 0.1% higher, October sales were revised 0.1% lower...also note in the 5th column, which shows quarter over quarter results, nominal sales were only up 0.2%, while "retail sales" which excludes restaurants and bars from the total, were flat...that portends a weak contribution from consumers to 4th quarter GDP, which we'll take a more detailed look at next week when consumer prices are released, which will enable us to compute the real change in goods sold at retail...

December Industrial Production Falls 0.4% on Less Heating and Well Drilling

industrial production fell again in December, but once again, half of the drop was due to a much warmer than normal month, reducing the need for heating utilities....the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.4% in December after falling by a revised 0.9% November and 0.2% in October, leaving the index down at a 3.4% annual rate in the 4th quarter and 1.8% below its year ago level...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 106.0 in December from 106.4 in November, which was originally reported at 106.5...meanwhile, the October reading for the index was revised up from 107.1 to 107.4, the September reading for the index was revised up from 107.5 to 107.6, while the August reading was revised down from 106.7 to 106.7....to the extent that this report plays into GDP, the changes in August and September industrial production should be close to a wash on the 3rd quarter's growth rate, while the weaker 4th quarter index levels imply a major subtraction from 4th quarter growth in those GDP components responsible, especially in such areas as household utilities consumption expenditures...

the manufacturing index was down 0.1 at 106.0 in December, after the index for November was revised down from 106.2 to 106.1, the manufacturing index October was left unchanged at 106.2, the manufacturing index for September was revised from 105.9 to 108.8, and the manufacturing index for August was revised from 106.1 to 106.0...thus, the year over year increase in the manufacturing index has now been reduced to 0.8% from last month's 0.9%... meanwhile, the mining index, which includes oil and gas well drilling, fell by 0.8% in December after falling a revised 2.1% in November, and at 110.1 it's now 11.2% below its level of December a year ago...finally, the utility index, which often fluctuates due to above or below normal temperatures, fell by 2.0% in December after a 5.0% drop in November, as the decreases in both months were due to warmer than normal temperatures, reducing the need for heating...at 96.0, the utility index is now 6.0% lower than it was in December a year ago, and at the lowest level since the extraordinarily warm month of March 2012...

this report also gives us capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which saw total capacity utilization fall from 76.9 in November to 76.5 in December...seasonally adjusted capacity utilization for all manufacturing industries was down 0.1% to 76.0% in December as manufacturing capacity utilization for November was revised down 0.1% to 76.1%...after a downward revision of 0.3% to November's figure, utilization of NAICS durable goods production facilities were unchanged at 75.8% in December, while capacity utilization for non-durables fell from 77.8% to 77.6% after November's non-durable utilization was marked down from 77.9%....capacity utilization for mining fell from 79.2% in November to 78.4% in December, while utilities were operating at 73.2% of capacity during December, down from the revised 74.9% in November...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....

December Producer Prices Down 0.2% On Falling Energy Prices

the seasonally adjusted Producer Price Index (PPI) for Total Final Demand decreased by 0.2% in December as prices for finished wholesale goods fell by 0.7%, while margins of final services providers were 0.1% higher...this followed a November report that showed the overall PPI up 0.3%, with prices for finished goods down 0.1% while final demand for services was up 0.5%....producer prices are now 1.0% lower than they were a year ago, and 0.1% lower than two years ago, as producer prices only rose 0.9% in 2014...

as noted, the index for final demand for goods, aka 'finished goods', fell by 0.7% in December after falling 0.1% in November, 0.4% in October, and 1.2% in September, as the index for wholesale energy prices fell 3.4% on an 8.3% drop in the price of wholesale gasoline and accounted for three fourths of the December index drop...in addition, the index for wholesale food prices was down 1.3% on a 38.0% drop in the wholesale price for fresh eggs and a 13.8% drop in wholesale prices for beef and veal...excluding food and energy, the index for final demand for wholesale core goods was 0.1% higher in December, as a 1.1% increase in wholesale prices for pharmaceutical preparations and a 1.0% increase in wholesale prices for printing machinery and equipment were the only core finished goods to see a price change greater than 1% for the month...

meanwhile, the index for final demand for services rose by 0.1% in December after rising 0.5% in November and falling by 0.3% in October and 0.4% in September, as the index for final demand for trade services fell 0.4%, the index for final demand for transportation and warehousing services also fell 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was 0.4% higher....noteworthy among trade services, seasonally adjusted margins for TV, video, and photographic equipment and supplies retailers were 27.4% lower and margins for fuels and lubricants retailers were 4.0% lower...among transportation and warehousing services, airlines saw their margins reduced 1.7%, while in the core final demand services index, margins for securities brokerage, dealing, investment advice, and related services rose 9.2%...

this report also showed the price index for processed goods for intermediate demand fell by 1.0% after a 0.6% decrease in November, as intermediate processed goods prices have now been down 15 out of the last 17 months and are 6.4% lower than in December a year ago....all intermediate goods indices were down for the 5th consecutive month, with prices for intermediate energy goods 3.5% lower, the index for processed foods and feeds 2.4% lower, while the price index for processed goods for intermediate demand less food and energy was down 0.4%...meanwhile, the price index for intermediate unprocessed goods fell 3.0% in December after falling 5.1% in November, as all of the raw material indexes also fell, with the index for crude energy goods down 5.6%, the index for unprocessed foodstuffs and feedstuffs down 1.6%, and producer prices for raw materials other than food and energy materials 1.0% lower... this raw materials index is now 25.0% lower than it was a year ago, as most commodity prices continue to hit multi year lows...

finally, the price index for services for intermediate demand was up 0.2% after it was unchanged in November and fell by 0.4% in October and 0.7% in September, as a 1.1% decrease in the index for trade services for intermediate demand was offset by a 0.5% increase in the the price index for services less trade, transportation, and warehousing for intermediate demand, while the index for transportation and warehousing services for intermediate demand was unchanged...within such intermediate services, an 7.7% decrease in margins for metals, minerals, and ores wholesaling was more than offset by a 2.6% increase in margins prices for television advertising time sales and sizable increases in the indexes for services related to securities brokerage and dealing; courier, messenger, and postal services, tax preparation and planning; passenger car rental; and hardware, building materials, and supplies retailing...over the 12 months ended in December, the year over year price index for services for intermediate demand, which has never turned negative, is still 0.5% higher than it was a year ago...  

Nominal Business Sales and Business Inventories Both Down 0.2% in November

following the release of the retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for November (pdf), which incorporates the revised November 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 1,313.5 billion in November, down 0.2 percent (±0.2%)* from October's revised sales, and down 2.8 percent (±0.5%) from November sales of a year earlier...note that total October sales were revised down by more than 0.1%, from $1,317.7  billion to $1,316.0 billion....manufacturer's sales rose by 0.2% from October's sales to $475,313 million in November, retail trade sales, which exclude restaurant & bar sales from the revised November retail sales reported earlier, were 0.3% higher at $395,336 million, while wholesale sales fell 1.0% to $442,801 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,809.8 billion at the end of November, down 0.2 percent (±0.1%) from October but 1.6 percent (±0.5%) higher than in November a year earlier...the value of October inventories was also revised down by more than 0.1%, from the $1,814.5 billion reported last month to $1,812.5 billion with this report...seasonally adjusted inventories of manufacturers were estimated to be valued at $641,307 million, 0.3% less than in October, inventories of retailers were valued at $585,554 million, 0.2% greater than October, and inventories of wholesalers were estimated to be valued at $582,907 million at the end of November, down 0.3% from October...last week we reviewed factory and wholesale inventories adjusted for inflation with the producer prices index and judged that both would be detrimental to 4th quarter GDP, with wholesale inventories possibly significantly so...November retail inventories, on the other hand, are still up 0.3% from the end of the 3rd quarter, and will be inflated by the 0.4% and 0.1% decreases in producer prices for finished goods for October and November.. so we'd judge that the 0.8% increase in real retail inventories over two months could add incrementally to 4th quarter GDP, but not enough to offset the negative impact from the real drop in wholesale inventories...

November Job Openings, Hiring and Quitting Up; Layoffs Down..

the Job Openings and Labor Turnover Survey (JOLTS) report for November from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 82,000, from 5,349,000 in October to 5,431,000 in November, after October's job openings were revised from 5,383,000 to 5,349,000, 185,000 lower than September's....November jobs openings were 11.2% higher than the 4,886,000 job openings reported in November a year ago, as the job opening ratio expressed as a percentage of the employed rose to 3.7% in November from 3.6% in October and from 3.4% a year ago....the broad-professional and business services category saw an increase of 66,000 openings in the largest change, and there were also 57,000 additional openings in health care, while job openings in retail fell by 58,000 (see table 1 for more details)...like most BLS releases, the press release for report is easy to read understand 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 November, seasonally adjusted new hires totaled 5,197,000, up 29,000 from the revised 5,168,000 who were hired or rehired in October, as the hiring rate as a percentage of all employed remained unchanged at 3.6%, which was also unchanged from the hiring rate in November a year earlier (details of hiring by industry since June are in table 2)....meanwhile, total separations also rose by 29,000, from 4,901,000 in October to 4,930,000 in November, as the separations rate as a percentage of the employed inched up from 3.4% to 3.5%, which was also higher than the separations rate of 3.3% a year ago (see table 3)...subtracting the 4,930,000 total separations from the total hires of 5,197,000 would imply an increase of 276,000 jobs in November, a bit higher than the revised payroll job increase of 262,000 for November reported by the December establishment survey last week, not an unusual difference and well within the expected margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 2,831,000 quit their jobs in November, up 47,000 from the revised 2,784,000 who quit their jobs in October, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 2.0% of total employment (see details in table 4)....in addition to those who quit, another 1,660,000 were either laid off, fired or otherwise discharged in November, down 13,000 from the revised 1,703,000 who were discharged in October, which left the discharges rate unchanged at 1.2% of all those who were employed during the month....meanwhile, other separations, which includes retirements and deaths, were at 409,000 in November, down from 414,000 in October, for an 'other separations' rate of 0.3%, which was also 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...

Mortgage Delinquencies Rise in November; Mean Time in Foreclosure at Record 1061 Days

the Mortgage Monitor for November (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 697,944 home mortgages, or 1.38% of all mortgages outstanding, remaining in the foreclosure process at the end of November, which was down from 721,435, or 1.46% of all active loans that were in foreclosure at the end of October, and down from 1.81% of all mortgages that were in foreclosure in November of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the November "foreclosure inventory" is now showing the lowest percentage of homes that were in the foreclosure process since the fall of 2007... new foreclosure starts, meanwhile, were at their lowest level since April 2006, falling to 66,626 in November from 73,218 in October and from 81,437 in November a year ago, although BKFS cautions there is "some degree of seasonality" in the drop in foreclosure starts, as the month contained two federal holidays (Veterans Day and Thanksgiving Day) and 5 weekends

there was also likely some degree of seasonality in the increase in those who were delinquent on paying their mortgage, as we've often seen more homeowners fall behind on house payments during the Christmas shopping months...BKFS data showed that 2,490,817 mortgages, or 4.92% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure in November, up from 2,414,583, or 4.77% of all homeowners with a mortgage, who were more than 30 days behind on their mortgage in October...while that was the highest mortgage delinquency rate since February, it's still down from the mortgage delinquency rate of 6.03% in November a year earlier...of those who were delinquent in November, 827,338 home owners, or 1.64% 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 6.30% of homeowners with a mortgage were either late in paying or in foreclosure at the end of November, and 3.02% 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 first graph we have selected below comes from page 6 of the mortgage monitor and shows the number of new 90 day delinquencies each month, or those who just fallen 90 days behind on their mortgage, as a dark red line over the period from November 2005 to this month’s report...then it shows the number of new foreclosure starts over the same period marked by black bars each month...as you can see, the 90 day delinquencies have increased 27% since March, but they're still 19% below last year's November high...in the callout on the graph, BKFS explains that the rise in new 90 day delinquencies over the past several months coupled with the low foreclosure start rate is the reason that the inventory of those who are at least 3 months behind on their mortgage and have not yet been foreclosed on is rising...

November 2015 LPS 90 day delinquent vs foreclosure starts

understand that the above graph just shows the new 90 day delinquencies, and that the total of all of those who are more than 90 days overdue on their mortgage is much larger (827,338 home owners, as noted in our summary above)...the percentage of those who are seriously delinquent who are being foreclosed on each month can be more clearly seen in the graph below, from page 5 of the mortgage monitor, which shows foreclosure starts as a percentage of 90 day delinquent mortgages tracked in blue...since, as they point out, foreclosure starts as a percentage of 90-day delinquent loans is higher than 2014's level, a slightly higher percentage of remaining 90 day delinquent loans are being foreclosed on monthly, despite the lower number of foreclosure starts...

November 2015 LPS foreclosure starts as a percentage of seriously delinquent

lastly, we’ll include below that part of a Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 13 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 over the past  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…the average length of delinquency for those who have been more than 90 days delinquent without foreclosure has been falling from the April record of 536 days and is now at 502 days, while the average time for those who’ve been in foreclosure without a resolution is back to its record high of 1061 days that was set in August, meaning the average homeowner who is in foreclosure has been there nearly three years, which, considering ongoing new foreclosure starts, shows the still slow pace of foreclosures, with some foreclosures started early in the crisis still not yet completed…

November 2015 LPS loan counts and days delinquent table

(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, January 10, 2016

December employment; November trade deficit, construction spending, factory orders, wholesale inventories, et al

the major reports released this week were the Employment Situation Summary for December from the Bureau of Labor Statistics and the November report on our International Trade from the Census Bureau,..other regular monthly reports we usually review included the November report on Construction Spending (pdf), the Full Report on Manufacturers' Shipments, Inventories and Orders for November (pdf), and the Monthly Wholesale Trade: Sales and Inventories report for November (pdf), all of which also came from the Census Bureau...in addition, Friday also saw the Consumer Credit report for November from the Federal Reserve, which indicated that consumer credit outstanding rose to $13.9 billion to $3,526.0 billion, increasing at a seasonally adjusted annual rate of 4.8% from October, as revolving credit rose at a 7.4% rate to $929.1 billion and non-revolving credit, which is mostly car and student loans, rose at a 3.8% rate to $2,596.9 billion...

in addition to reports from the government agencies, both of the widely followed reports from the Institute for Supply Management (ISM) were also released this week: the December Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell from 48.6 in November to 48.2 in December, its lowest reading since June 2009, indicating an ongoing contraction in manufacturing firms nationally, and the December Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.3%, down from 55.9% in November, indicating a smaller 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...

Payroll Jobs Up 292,000 in December But Hourly Pay Slips Back

the Employment Situation Summary for December indicated a decent increase in payroll employment and an even larger increase in those who reported they were employed, while average hourly pay slipped....estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 292,000 jobs in December, after the payroll job increase for October was revised up from 298,000 to 307,000, and the November jobs increase was revised up from 211,000 to 252,000, making the combined number of jobs going into December 50,000 more than was previously reported…roughly 2.65 million payroll jobs were added in 2015, second only to 2014 in payroll job creation in this century...

December job increases were spread through construction, government, and the private service sector, with only the resource extraction sector losing 8,000 slots and durable goods manufacturers shedding 6,000 jobs...73,000 jobs were added in the broad professional and business services category, with the increase of 34,400 jobs in temporary help services accounting for nearly half of those...the health care and social assistance sector added another 52,600 jobs, with 12,300 of those in hospitals...construction trades, which led the payroll job increases in November, added another 45,000 jobs in December, with 18,100 of those with residential specialty trade contractors...another 32,100 jobs were added in accommodation and food services, as bars and restaurants increased payrolls by 36,900...in addition, jobs in transportation and warehousing rose by 23,100 with the addition of 15,100 more private couriers and messengers than normal for December, and the information sector added 16,000 jobs as the motion picture and sound recording industries added another 15,200 employees....however, employers also reported that average hourly earnings for all employees fell by a penny to $25.24, after an November increase of 4 cents, leaving us with a 2.5% wage gain over 2015...meanwhile, the average workweek for all private employees was unchanged at 34.5 hours, after falling by a tenth of an hour in November, with the manufacturing workweek down by 0.1 hour to 40.6 hours in December, even though factory overtime was up by 0.1 hour to 3.3 hours...

meanwhile, the December household survey estimated that the seasonally adjusted count of those who were employed rose by 485,000 to 149,929,000, while the number of unemployed fell by 20,000 to 7,904,000, which nonetheless left the unemployment rate unchanged at 5.0%...with the net increase in the number employed and unemployed greater than the 189,000 increase in the civilian working age population, the count of those not in the labor force fell by 277,000 to 94,103,000, which was enough to increase the labor force participation rate from 62.5% in November to 62.6% in December, its second increase in as many months....with the decent increase in the employed, the employment to population ratio, which we could think of as an employment rate, also rose by 0.1% to 59.5%...there was also a 63,000 drop in the number who reported they were involuntarily working part time, from 6,085,000 in November to 6,022,000 in December...however, like the unemployment rate, that decrease was not enough to change the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", which remained at 9.9%, same as in November... 

like most reports from the Bureau of Labor Statistics, the 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 read a line such as "The unemployment rate for blacks declined to 8.3 percent in December, while the rates for adult men (4.7 percent), adult women (4.4 percent), teenagers (16.1 percent), whites (4.5 percent), Asians (4.0 percent), and Hispanics (6.3 percent) showed little or no change. (See tables A-1, A-2, and A-3.)", you can quickly open Table A-1, Table A-2.and Table A-3, where you would see that the unemployment rate for black Americans fell 1.1%, from 9.4% in November to 8.3% in December, while the "little changed"  unemployment rates for whites and Asians both rose 0.1%..

Trade Deficit a 0.43 Percentage Point Hit to 4th Quarter GDP Despite 5% Improvement in November

our trade deficit fell by 5.0% November, after rising by a revised 5.0% in October, as the net value of both our exports and imports decreased....the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit fell by $2.2 billion to $42.4 billion in November from a October deficit which was revised from $43.9 billion to $44.6 billion...the value of our November exports fell by $1.6 billion to $182.2 billion on a $1.4 billion decrease to $122.2 billion in our exports of goods and a $0.1 billion decrease to $60.0 billion in our exports of services, while our imports fell $3.8 billion to $224.6 billion on a $3.7 billion decrease to $183.5 billion in our imports of goods and a $0.1 billion decrease to $41.1 billion in our imports of services...export prices averaged 0.6% lower in November, so the real growth in exports was greater than the nominal dollar value by that percentage, while import prices were 0.4% lower, similarly incrementally increasing growth in real imports from the value shown here...

the decrease in our November goods exports resulted from modestly lower exports of industrial supplies, consumer goods and other goods not categorized by end use...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials fell by $677 million to $32,886 million on a $457 million drop in our exports of non-monetary gold, a $443 million decrease in our exports of fuel oil, a $272 million decrease in our exports of crude oil and a $100 million decrease in our exports of coal, which were only partially offset by a $457 million increase in our exports of other petroleum products...our exports of consumer goods fell by $644 million to $15,882 million on decreases of $264 million in our exports of cell phones and similar goods, $190 million in our exports of artworks and antiques and $174 million in our exports of pharmaceuticals ...in addition, our exports of goods not categorized by end use fell by $733 million to $5,065 million, and our exports of capital goods fell by $2 million to $44,398 million as an $829 million increase in our exports of civilian aircraft and a $383 million increase in our exports of industrial engines were offset by a $537 million decrease in our exports of telecommunications equipment, a $242 decrease in drilling and other oilfield equipment, a $125 million decrease in our exports of medical equipment and a $111 million decrease in our exports of industrial machines not otherwise listed...on the other hand, our exports of automotive vehicles, parts and engines rose by $85 million to $12,868 million, and our exports of foods, feeds and beverages rose by $33 million to $10,247 million as a $197 increase in our wheat exports and modest increases in our exports of other foods and agricultural products was offset by a $360 million drop in our exports of soybeans...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a $2,954 drop to $48,810 million in our imports of consumer goods was largely responsible for the November drop in imports, as our imports of cellphones fell by $1,781 million, our imports of pharmaceutical preparations fell by $586 million, our imports of TVs and video equipment fell by $428 million, our imports of toys, games and sporting goods fell by $246 million, our imports of gem diamonds fell by $165 million, and our imports of household appliances fell by $131 million....the value of our imports of capital goods also decreased, falling by $597 million to $49,319 million, as our imports of computers fell $325 million, our imports of industrial engines fell $152 million, our imports of civilian aircraft fell $126 million, and our imports of industrial machines not separately itemized fell $112 million, which were only partially offset by a $287 million increase in our imports of semiconductors...imports of industrial supplies and materials also fell, by $339 million to $36,139 million, as our imports of nonmonetary gold fell $277 million, our imports of "other" petroleum products fell $265 million, our imports of iron and steel mill products fell $235 million, our imports of other steel making materials fell $157 million, our imports of fuel oil fell $150 million, and our imports of natural gas fell $128 million, all offsetting a $1031 million increase in our imports of crude oil...on the other hand, our imports of foods, feeds and beverages rose $101 million to $10,413 million as increases of $169 million in our imports of fruits and frozen juices and $128 million in our imports of fish and shellfish were only partially offset by a $151 million decrease in our imports of meat products, and our imports of automotive vehicles, parts and engines rose by $8 million to $29,145 million, and our imports of goods not categorized by end use rose by $314 to $7,819 million...

to assess the impact of October and November trade on 4th quarter growth figures, we must first adjust the value of October and November imports and exports for inflation and then compare those figures to the similarly adjusted 3rd quarter figures...normally, that would be done on an item by item basis using the prices changes for those import and export items that we'd find in the import-export price index published earlier by the BLS...however, exhibit 10 in the pdf for this report gives us monthly goods trade figures by end use category and in total that are already adjusted to chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP...although these figures are not annualized like the GDP figures would be, our interest is not in the absolute chained dollar numbers that would appear in the GDP report, but rather the change in exports and imports from the 3rd to the 4th quarter, which we can arrive at by averaging the monthly figures in the 3rd quarter and comparing those to the average of monthly figures from the 4th quarter...thus, computing 1- ((((119,519 + 118,178)/2)/ ((121,126 + 119,242 +122,628) / 3)) ^ 4 = 0.0692, we find that 4th quarter real exports are running at a 6.92% annual rate below those of the 3rd quarter...extrapolating that percentage change against 3rd quarter goods exports as carried in the latest GDP report, we find that a 6.9% decrease in exports would subtract 0.61 percentage points from 4th quarter GDP growth.....in a similar manner, we find that our 3rd quarter real imports averaged 179,814 million monthly in chained 2009 dollars, while inflation adjusted October and November imports averaged 179,167 million in that same chained dollar quantity index...that would mean that so far in the 4th quarter, our real imports have decreased at a 1.43% annual rate over those of the 3rd quarter...since imports subtract from GDP because they represent that portion of our consumption or investment that occurred during the quarter that was not produced domestically, lower imports would add to GDP, in this case by 0.19 percentage points...hence, the combined effect of greater deficit despite a decrease in trade so far in the 4th quarter would subtract 0.43 percentage points from the ultimate 4th quarter GDP growth tally...

November Construction Spending Down 0.4% After Significant Errors Found in Prior Data

with its release of November construction spending data, the Census revised all construction data going back to January 2005, and admitted a large "processing error" that had caused all residential construction data to be misstated in the interim...the November construction spending report (pdf) from the Census Bureau estimated that the seasonally adjusted rate of our construction spending in November would work out to $1,122.5 billion annually if extrapolated over an entire year, which was 0.4 percent (±1.5%)* below the revised estimate of construction spending at a $1,127.0 billion annual rate in October but still 10.5 percent (±1.8%) above the estimated annualized level of construction spending in November of last year...the October spending estimate was revised from a $1,107.4 billion annual rate to a $1,127.0 billion annual rate, as were all the prior months, which will be reflected in revisions to previously published GDP figures when the annual revision to GDP is released this summer...as a result of these revisions, October spending was only 0.3% above that of the September, rather than the 1.0% month over month increase previously reported; this will have the effect of reducing its positive contribution to 4th quarter GDP, even though the actual spending was larger than previously reported...

private construction spending was at a seasonally adjusted annual rate of $828.2 billion, 0.2 percent (±0.8%)* below the revised October estimate, with residential spending rising 0.3 percent (±1.3%)* to an annual rate of $427.9 billion while private non-residential construction spending fell 0.7 percent (±0.8%)* to an annual rate of  $400.3 billion, largely due to a 4.0% decrease to $83,585 million in spending for manufacturing facilities.....meanwhile, public construction spending was estimated to be at a rate of $294.3 billion annually, 1.0 percent (±2.5%)* below the revised October estimate, with large drops in spending for public safety, highways and streets, sewage and water supply construction only partially offset by a 5.0% increase to $71,178 million in spending for construction of educational facilities..

the previously published and revised construction data (xls) going back to January 2005 is provided by the Census Bureau as an Excel file, which Mish has transcribed 2 years of in a table at his blog, should you want to review it online....although it's been widely reported that residential construction was revised lower, from scanning the data it appears to me that most reports on it in recent years up until 2013 were revised higher, and as a result the increase from 2014 residential construction spending data to 2015 residential construction spending was smaller...we aren't going to get into the weeds of what those revisions will mean to prior years and quarterly GDP, but we'll take a quick look at spending for October and November vis-a-vis the third quarter with an eye to how that might affect the coming 4th quarter GDP estimate...

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...to see how this report of two month's construction spending might impact 4th quarter GDP, we have to first adjust those varied categories of spending for inflation to give us the quantity of construction in real terms... the Census Bureau construction price indexes for new one-family houses under construction and for new multi-family homes under construction, which shows a 0.5% increase for both months, are specified as the deflator for residential investment....however, the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, such as the Turner Construction building-cost indices for several types of buildings and the Engineering News Record construction cost index for utilities construction, making an true to form estimate of those adjustments too difficult to undertake manually...however, the producer price index for final demand construction indicates that construction costs rose 1.0% in October and fell 0.3% in November, which we can use as a rough estimate of the deflator for non-residential types of construction...

using the revised monthly annualized construction spending data for July, August and September from Table 1 of this report, we find that 3rd quarter private residential construction spending was at a seasonally adjusted annual rate of $427,642 million, and that the comparable annual rate of October and November residential spending adjusted for inflation would be at a $430,549 million rate, which would mean that real residential construction rose at a 2.7% annual rate so far in this quarter, vis a vis the 3rd quarter...for private non-residential construction, we find that 3rd quarter non-residential construction was at a $399,249 million annual rate, while October and November non-residential spending adjusted for PPI construction inflation would give us a non-residential spending rate of $398.187 in chained third quarter dollars, indicating that real non-residential construction fell at a 1.1% annual rate...lastly, using just the monthly data in this report, we find that public construction averaged at a $299,967 million annual rate in the 3rd quarter, while public construction for October and November adjusted for inflation works out to a $293,291 million annual rate thus far in the 4th quarter...hence, real government investment spending for construction was down at a 8.6% annual rate in October November from the third quarter..

finally, translating those changes in the rate of construction growth we have for these two months, we estimate that real residential construction growth would add 0.07 percentage points to 4th quarter GDP growth, real private non-residential growth would subtract 0.03 percentage points to 3rd quarter growth, and real public construction growth would subtract .17 percentage points to 3rd quarter GDP across the various government investment components...to those estimates we have to add the caveat that this construction spending report does not capture everything that is included in the GDP investment categories of the same names, such as brokers’ commissions on sales and other ownership transfer costs on sales of both new and existing residential and non-residential structures, which often have a significant impact unto themselves...

Value of Factory Inventories Falls 0.3% in November

it was widely reported in the financial and mainstream press that new orders for factory goods fell by 0.2% in November, which is what the report says...however, as we learned from a conversation with the Census personnel responsible for that report three months ago, the Census Bureau does not even 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 the data they have for 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 only useful as a revised update to the advance report on durable goods from two weeks ago...in the case of November new orders for durable goods, then, the November Full Report showed that new orders for manufactured durable goods was virtually unchanged from October, falling less than $0.1 billion to $238.6 billion, following an October increase of 2.8% that was previously reported as a 2.9% increase...including the 0.4% decrease in shipments of non-durable goods with that, then, the Census Bureau reported that new orders for manufactured goods decreased $1.1 billion or 0.2 percent to $472.2 billion in November, after rising 1.3% in October..

more importantly, then, this report indicated that the value of November factory shipments rose by $1.0 billion or 0.2 percent to $475.3 billion, following four monthly decreases, including a drop of 0.7% in October...shipments of durable goods were up by $2.0 billion or 0.8 percent to $241.7 billion, revised from the 0.9% increase reported in the durables report, as shipments of automobiles rose 3.9% and shipments of commercial aircraft were up 16.0%, leading to a 2.6% increase in overall shipments of transportation equipment...without those transportation sector shipments, factory shipments were 0.3% lower....the value of shipments (and hence of "new orders") of non-durable goods fell by more than $1.0 billion, or 0.4%, with a 1.7% drop in shipments from refineries accounting for two-thirds of that decrease and a 7.1% drop in shipments of tobacco products accounting for most of the rest...however, with producer prices for finished goods were down 0.1% in November, and prices for intermediate goods down 0.4%, real shipments of non-durable goods were certainly higher than the nominal change in their value would lead us to believe...

meanwhile, the aggregate value of November factory inventories fell for the 5th month in row, down by $1.7 billion or 0.3 percent to $641.3 billion, following an October decrease that was revised from 0.1% to a 0.2% decrease from September...inventories of durable goods, down six of the last seven months, fell by $1.3 billion or 0.3 percent to $395.3 billion, unchanged from the previously published 0.3% decrease, as the value of inventories of primary metals, which were priced 1.7% lower, fell $412 million or 1.2 percent to $35.25 billion...the value of non-durable goods' inventories fell $0.3 billion or 0.1 percent to $246.0 billion, following a increase of 0.1% in October...the value of inventories of petroleum and coal products, down in value most of the year, drove the decrease in non-durables, as they fell by $0.3 billion or 1.0 percent to $33.8 billion, which was nonetheless a real increase to record levels according to energy department data...as we previously noted, producer prices for finished goods down 0.1% in November, and prices for intermediate goods were down 0.4%, so real factory inventories of other goods might have also increased as well...however, any such change would be minimal, and would not likely be a positive contribution to 4th quarter GDP…

November Wholesale Sales Down 1.0%; Wholesale Inventories Down 0.3%

both wholesale sales and wholesale inventories were lower in November, against expectations of little change...the November report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $442.8 billion, down 1.0 percent (+/-0.5%) from the revised October level, and was 4.6 percent (+/-1.4%) lower than wholesale sales of a year earlier... .the October preliminary estimate was revised down $0.5 billion or 0.1 percent, or more than 0.1 percent lower that the previously reported figure, leaving both month's sales below the September level... November wholesale sales of durable goods rose 0.4 percent (+/-0.7%)* from last month but are still down 1.9 percent (+/-1.9%)* from a year earlier, with a 1.8% increase in wholesale sales of furniture and a 1.4% increase in wholesale sales of lumber and other construction materials carrying the sector gain for the month...wholesale sales of nondurable goods were down 2.4 percent (+/-0.7%) from October and were down 7.2 percent (+/-2.1%) from last November, with wholesale sales of farm  products down 15.0% and wholesale sales of petroleum and petroleum products down 7.4%, both at least in part due to 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....

on the other hand, 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 November report estimated that wholesale inventories were valued at $582.9 billion at month end, a decrease of 0.3 percent (+/-0.4%)* from the revised October level but 2.2 percent (+/-1.6%) higher than November a year ago, with the October preliminary estimate revised downward $1.0 billion or almost 0.2%...inventories of durable goods were down 0.2 percent (+/-0.4%)* from October but were up 1.3 percent (+/-1.4%)* from a year earlier, with inventories of metals and minerals down 3.0% on lower commodity prices and inventories of furniture down 0.9% on higher sales...meanwhile, the value of wholesale inventories of nondurable goods was down 0.5 percent (+/-0.7%)* from October, but was up 3.7 percent (+/-2.1%) from last November, as the value of inventories of raw farm products fell 7.1% while wholesale inventories of petroleum and petroleum products rose 2.3% on the global oil glut...

as you know, to approximate the contribution of wholesale inventories, valued here in current dollars, to the change in GDP, we must first convert these dollar figures into an approximation of the change in the quantity of goods that were inventoried...the BEA does that by deflating the value of each of the categories of inventories with the appropriate sub-index from the producer price index for the same month, but since inventories are notoriously difficult to estimate without knowing the month that each subset of the total was inventoried, and since the BEA does not break out wholesale inventories from other business inventories in the GDP report, we'll simply our rough approximation by referring to the producer price index for finished goods, with the caveat that inventories of wholesale commodities would need to be adjusted separately...so, in November, producer prices for finished goods fell 0.1%, largely on a 0.6% decrease in wholesale energy prices, after October's producer prices for finished goods fell 0.4% on a 0.8% drop in wholesale food prices...that suggests that the October change in real wholesale inventories was positive by about 0.1%, after which real wholesale inventories fell by about 0.2% in November...that would suggest real wholesale inventories at the end of November were lower than they were at the end of the 3rd quarter...since the GDP calculation looks at the change in the growth of inventories, such negative or even slower real growth in wholesale inventories in October and November appears it will be at least a modest subtraction from the 4th quarter growth rate computation, if not worse…


(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…)