Sunday, February 28, 2016

4th quarter GDP revision, January’s income and outlays, durable goods, new and existing home sales, and December Case-Shiller HPI

it's been a pretty busy week....the key reports were the 2nd estimate of 4th quarter GDP and the January report on Personal Income and Spending, both from the Bureau of Economic Analysis, which were both released on Friday...other widely watched reports released earlier in the week included the January advance report on durable goods and the January report on new home sales, both from the Census bureau, the January report on existing home sales from the National Association of Realtors, and the December Case-Shiller Home Price Index, which is actually a 3 month average of the change in price for homes that resold in October, November and December...also released this week was the Chicago Fed National Activity Index (CFNAI) for January, which is a weighted composite index of 85 different economic metrics, constructed such that a zero value indicates economic growth at the historical trend rate; the CFNAI rose to rose to +0.28 in January, up from −0.34 in December, which still left the 3 month average at -0.15, indicating that national economic activity has been somewhat below its historical trend...the week also saw two more regional Fed manufacturing surveys: the Richmond Fed February Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index fell to -4, following last month's reading of +2, indicating that the region's manufacturing has begun to slow down in February, while the Kansas City Fed manufacturing survey for February, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to -12 in February from readings of -9 in both January and December, the lowest since 2009, indicating that their regional contraction, mostly in energy related industries, continues for the twelfth month in a row...

4th Quarter GDP Revised to Show Growth at a 1.0% Rate

against expectations of a downward revision,  the Second Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.0% rate in the 4th quarter, revised up from the 0.7% growth rate reported in the advance estimate last month, as growth in private inventory investment decreased less than previously estimated and imports were revised lower, more than offsetting downward revisions in consumer spending for goods, private investment in structures, and in state and local government investment....in current dollars, our fourth quarter GDP grew at a 2.0% 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 $18,148.4 billion annual rate in the 4th quarter, with the headline 1.0% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 0.9%, aka the GDP deflator, was applied to the current dollar change...

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

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 2.0% annual rate in the 4th quarter, rather than the 2.2% growth rate reported last month…that figure was arrived at by deflating the dollar amount of consumer spending with the PCE price index, which indicated inflation at a 0.4% annual rate in the 4th quarter, which was revised from the 0.1% inflation rate that was applied to PCE in the first estimate, sp hence this revision to PCE is more about the inflation adjustment than it is about consumer spending...real consumption of durable goods grew at a 1.9% annual rate, which was revised from 2.4% in the advance report, and added 0.42 percentage points to GDP, as real output of recreational equipment and vehicles consumed rose at a 13.3% annual rate even as real consumption of automotive vehicles decreased at a 4.6% rate.....real consumption of nondurable goods by individuals rose at a 1.2% annual rate, revised from the 1.5% increase reported in the 1st estimate, and added 0.17 percentage points to 4th quarter economic growth, as lower consumption of food and energy goods were a drag on non-durables growth, while consumption of services rose at a 2.1% annual rate, revised from the 2.0% rate reported last month, and which added 0.96 percentage points to the final GDP tally...an increase at a 3.6% rate in the real output of health care services led the services increase, while real outlays for housing and utilities shrunk at a 1.4% rate and subtracted 0.18 percentage points from 4th quarter growth, due to much warmer than normal weather in November and December.....

seasonally adjusted real gross private domestic investment contracted at a 0.7% annual rate in the 4th quarter, revised from the 2.5% shrinkage estimate made last month, as real private fixed investment was revised from growth at a 0.2% rate to growth at a 0.1% rate, while the contraction in inventory growth was much smaller than previously estimated...growth in investment in non-residential structures was revised down, however, from shrinking at rate of 5.3% to shrinking at a 6.6% growth rate, and the 4th quarter's investment in intellectual property products was revised from growth at a 1.6% rate to growth at a 1.3% rate...on the other hand, real investment in equipment was revised to show contraction at a 1.8% rate, a positive revision from the 2.5% contraction rate previously reported, and the growth rate of residential investment remained strong, with growth barely revised from 8.1% to 8.0% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.18 percentage points from the 4th quarter's growth rate, investment in intellectual property added 0.05 percentage points, while investment in equipment subtracted 0.11 percentage points from growth, and growth in residential investment added 0.26 percentage points to 4th quarter GDP...

meanwhile, the growth in real private inventories was revised from the originally reported $68.6 billion in real growth to show inventory growth at an inflation adjusted $81.7 billion rate, which came after inventories had grown at an inflation adjusted $85.5 billion rate in the 3rd quarter, and hence the $3.8 billion smaller real inventory growth than in the 3rd quarter subtracted 0.14 percentage points from the 4th quarter's growth rate, in contrast to the 0.45 percentage point subtraction due to slower inventory growth reported in the advance estimate....since less growth in inventories indicates that less of the goods produced during the quarter were left "sitting on the shelf”, their decrease by $3.8 billion meant that real final sales of GDP were actually greater by that much, and hence real final sales of GDP grew at a 1.2% rate in the 4th quarter, which was actually unchanged from the advance estimate, compared to the real final sales increase at a 2.7% rate in the 3rd quarter, when the change in inventories was larger, and thus 0.7% was added to GDP to arrive at the real final sales growth rate for the quarter...

the previously reported decrease in real exports was revised slightly lower with this estimate, but the reported increase in real imports was revised to show a decrease, and as a result our net trade was a smaller subtraction from GDP rather than was previously reported...our real exports fell at a 2.7% rate rather than the 2.5% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their shrinkage subtracted 0.34 percentage points from the 4th quarter's growth rate....meanwhile, the previously reported 1.1% increase in our real imports was revised to a 0.6% decrease, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their shrinkage added 0.09 percentage points to 4th quarter GDP....thus, our still weakening trade balance subtracted a net 0.25% percentage points from 4th quarter GDP, rather than the 0.47% percentage points subtraction from foreign trade that was indicated in the advance estimate..

finally, there was also a downward revision to real government consumption and investment in this 2nd estimate, as the real growth rate for the entire government sector went from a positive 0.7% to a negative 0.1% rate...real federal government consumption and investment was seen to have grown at a 2.2% rate from the 3rd quarter in this estimate, revised from the 2.7% growth rate of the federal government previously reported...real federal spending for defense was revised to show it growing at a 2.7% rate, rather than the 3.6% growth rate previously reported, still adding 0.11% percentage points to 4th quarter GDP, while all other federal consumption and investment grew at a 1.5% rate, rather than the 1.4% growth rate previously reported, 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 those goods or services, as even helicopter money would not add to GDP...meanwhile, real state and local consumption and investment was revised from shrinking at a 0.6% rate in the first estimate to a contraction at a 1.4% rate in this estimate, as state and local investment spending fell at a 9.2% rate and subtracted 0.19 percentage points from 4th quarter GDP, while state and local consumption spending grew at a 0.3% rate and added 0.03 percentage points to GDP...

in our FRED bar graph below, each color coded bar shows the real change, in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2012...in each quarterly grouping of seven bars on this graph, the quarterly changes in real, or inflation adjusted, personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and investment is shown in pink, and the real change in Federal government spending and investment is shown in grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtracted from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, as they have in the recent quarter, they'll appear below the zero line...you can clearly see that the major contribution to GDP growth in the 4th quarter came as a result of increased real personal consumption in blue, while lower exports (purple) and lower real state and local consumption and investment (pink) were the major subtractions from 2015 Q4 growth...

4th quarter 2015 GDP 2nd estimate

Personal Income and Spending Both up 0.5% in January; Q1 PCE growth already tops 4th Quarter

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

for example, when the opening line of the press release for this report tell us "Personal income increased $79.6 billion, or 0.5 percent, and disposable personal income (DPI) increased $63.5 billion, or 0.5 percent, in January", they mean that the annualized figure for personal income in January, $15,691.4 billion, was $79.6 billion, or a bit more than 0.5% greater than the annualized  personal income figure of $15,611.8 billion for December; the actual change in personal income from December to January is not given...similarly, annualized disposable personal income, which is income after taxes, rose by almost 0.5%, from an annual rate of an annual rate of $13,618.9 billion in December to an annual rate of $13,682.4 billion in January...likewise, all the contributors to the increase in personal income, listed under "Compensation" in the press release, are also annualized amounts, all of which can be more clearly seen in the Full Release & Tables (PDF) for this release...so when the press release says, "Wages and salaries increased $48.1 billion in January, compared with an increase of $18.3 billion in December" that really means wages and salaries would increase by $48.1 billion over an entire year if January's seasonally adjusted increase in wages and salaries were extrapolated over that year, just as interest and dividend income rose at a $11.6 billion annual rate in January, and personal current transfer receipts, the largest contributor to the December income increase, rose at a $10.6 billion annual rate in January...so you can see what's written in the press release is confusingly misleading, and often leads to media reports that parrot those lines the same way the BEA wrote them...

for the January personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased by $63.0 billion, or 0.5%, which means the rate of personal consumption expenditures rose from $12,457.3 billion annually in December to $12,520.4 billion annually in January; in addition, the December PCE figure was revised up from the originally reported $12,448.3 billion annually...however, before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is included in Table 9 in the pdf for this report, which is a chained price index based on 2009 prices = 100....that index rose from 109.843 in December to 109.956 in January, giving us a month over month inflation rate of 0.103%, which BEA rounds to a 0.1% increase in reporting it....applying that 0.1% inflation adjustment to the increase in January PCE leaves real PCE up 0.4032% in January, which the BEA reports as a 0.4% increase...comparing the annualized January real PCE of 11,387.0 in chained 2009 dollars from Table 7 of this release to the annualized real PCE of 11,319.3 in chained dollars that was reported in table 3 of the 4th quarter GDP revision, we find that real PCE is already growing at a 2.41% annual rate so far in the 1st quarter, or at a pace that is already better than we saw for PCE growth in the 4th quarter, such that if it were continued in February and March, would add 1.66 percentage points to 1st quarter GDP...

with disposable personal income and personal consumption expenditures both up by 0.5%, there was little change in our personal savings for January from a month earlier...to arrive at the figures for that, the BEA takes total personal outlays, or the sum of PCE, personal interest payments, and personal current transfer payments, which was at $12,977.3 billion annual rate in January, and subtracts that from disposable personal income, to show personal savings growing at a $705.1 billion annual rate in January, down from the $709.2 billion that we would have ‘saved"’ over a year had December's savings been extrapolated for a year...this small decrease left the personal savings rate, or personal savings as a percentage of disposable personal income, at 5.2% in January, the savings rate as in December...

January Durable Goods New Orders up 4.9%, Shipments up 1.9%, Inventories Down 0.1%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods increased by $11.1 billion or 4.9 percent to $237.5 billion in January, following a revised decrease of $11.0 billion, or 4.6%, in December new orders, which were originally reported as down 5.1% from November...this was only the second increase in new orders for durables in the last 6th months, but the value of year over year new orders have now turned positive, as they are 0.6% higher than a year ago......as is usually the case, the volatile monthly change in new orders for transportation equipment drove the January headline change, as those transportation equipment orders rose $8.2 billion or 11.5 percent to $79.7 billion, as a 54.2% increase to $14,483 million in new orders for commercial aircraft was coupled with 84.8% jump to $4,959 million in new orders for defense aircraft, reversing the December new orders drops in those industries....excluding those new orders for transportation equipment, other new orders still rose by 1.8% in January, as the important new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 3.9% to $69,016 million, after the December change in orders for such capital goods was revised from a 4.3% decrease to a 3.7% decrease....

meanwhile, the seasonally adjusted value of January shipments of durable goods, which which will be inputs into various components of 1st quarter GDP after adjusting for deflation, rose by $4.6 billion, or 1.9 percent, to $241.9 billion, after December's shipments were revised from a drop of 2.2% to a decrease of 1.6% while November's shipments had increased 0.6%, unrevised...again, increased shipments of transportation equipment drove the change, as they rose $4.3 billion or 5.7 percent to $80.0 billion, as the value of shipments of commercial aircraft rose 30.7% to $14,173; excluding that volatile sector, the value of other shipments of durable goods rose 0.2% in January but still remains 1.0% lower than a year ago....meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 6th time in 7 months, decreasing by $0.1 billion or 0.1 percent to $175.4 billion, following a 0.2% increase in December that was originally reported as a 0.5% increase...inventories of transportation equipment rose 0.5% to $132,014 million in January, while inventories ex-transport equipment fell 0.4%, mostly on a $0.7 billion or 2.0 percent decrease to $33.8 billion in inventories of primary metals...

finally, unfilled orders for manufactured durable goods, which we consider a better measure of industry conditions than the widely watched but volatile new orders, increased for the third time in four months, rising by $0.6 billion or 0.1 percent to $1,187.7 billion, after a 0.5% decrease in December which was essentially unrevised...an increase in unfilled orders for computers and electronic products, which have been up twenty-five consecutive months, drove the increase, as they rose by $0.7 billion or 0.5 percent to $137.2 billion....compared to a year ago, the unfilled order book for durable goods is still 1.7% below last January's level, with unfilled orders for transportation equipment 1.5% below their year ago level, on a 4.1% decrease in the backlog of orders for motor vehicles.....

New Homes Continue to Sell at a Half Million a Year Rate

the Census report on New Residential Sales for January (pdf) estimated that new single family homes were selling at a seasonally adjusted rate of 494,000 new homes a year in January, which was 9.2 percent (±13.5%)* below the revised December rate of 544,000 new single family homes a year, but still 9.9 percent (±25.0%)* above the estimated annual rate that new homes were selling at in January of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether January new home sales rose or fell from those of December 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 491,000 reported last month to a 503,000 a year rate, while the annual rate of October's sales, revised from from from 470,000 to 482,000 last month, were now revised down a bit, to an annual rate of 480,000...

the annual rates of sales reported here are extrapolated from the estimates of Census field reps, which showed that approximately 37,000 new single family homes sold in January, down from the 38,000 new homes that sold in December, which was unrevised, while the unadjusted estimate for November home sales was revised from 34,000 to 35,000, and the estimate for October sales, first reported at 41,000, unrevised from last month's 39,000 estimate, after a earlier downward revision to 38,000.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in January was $278,800, down from $295,800 in December, which was originally reported as $288,900, while the average new home sales price was $365,700, down from $364,200 in December, and down from the average sales price of $356,000 in January a year ago....a seasonally adjusted estimate of 238,000 new single family houses remained for sale at the end of January, which represents a 5.8 month supply at the January sales rate, up from a 5.2 month supply in December...for more details and graphics on this report, see Bill McBride's two posts, New Home Sales decreased to 494,000 Annual Rate in January and Comments on January New Home Sales...

Realtors Say January Home Prices Were Up 8.2% From a Year Earlier

the National Association of Realtors (NAR) reported that seasonally adjusted existing home sales rose by 0.4% in January, projecting that 5.47 million homes would sell over an entire year if January's home sales were extrapolated over that year, which was 11.0% greater than the annual sales rate projected in January of a year ago, making this the largest year-over-year gain since July 2013...that came after the annual rate of December home sales was revised down, from 5.46 million to 5.45 million...the NAR also reported that the median sales price for all existing-home types in January was $213,800, which was 8.2% higher than a year earlier and the 47th consecutive monthly year over year increase in home prices...the NAR press release, which is titled Existing-Home Sales Inch Forward in January, Price Growth Accelerates, 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 302,000 homes sold in January, down 30.7% from the 436,000 homes that sold in December but up 7.5% from the 281,000 homes that sold in January of last year...home sales were down by nearly 30% in every region of the country, ranging from a 32.8% decrease to 39,000 home sales in the Northeast to a 29.8% decrease to 66,000 home sales in the Midwest, so you can see there was a large seasonal adjustment applied to arrive at the headline numbers....that same pdf indicates that the median home selling price for all housing types fell 4.2% from a revised $223,200 in December to $213,800 in January, while the average home sales price was $257,500, down 3.2% from the $266,100 average in December, but up 4.8% from the $245,800 average home sales price of January a year ago, with the regional average home sales prices ranging from a low of $196,900 in the Midwest to a high of $346,500 in the West...for additional coverage with long term graphs on this report, see Existing Home Sales increased in January to 5.47 million SAAR and A Few Comments on January Existing Home Sales by Bill McBride at Calculated Risk…

Case-Shiller Says December Home Prices Were Up 5.1% from a Year Ago

the Case-Shiller house price indexes for December indicated a 5.1% year over year increase in sales prices on repeat home sales in the ten cities of the original index, a 5.7% year over year increase in the 20 City Composite, and a 5.4% increase in home prices nationally since the December report of last year, led by an 11.4% increase in home prices in Portland, a 10.3% increase in home prices in San Francisco, and a 10.2% increase in home prices in Denver....Case-Shiller also reports a 'monthly' increase of 0.1% in the national index and no change in the 10 city and 20 city indexes, all of which compare prices of houses sold in September, October and November to those sold in October, November, and December, and hence the change in the month over month indexes are arithmetically equal to 1/3rd the difference between September home prices and December home prices, ie, not really a useful monthly change at all...seasonally adjusting those so called month over month indexes shows that the national index and the in 20 city index are 0.8% higher than last month's; thus, while home prices in 10 of the 20 cities showed an actual increase in December price indices when compared to those of September, after those seasonal adjustments were applied, home prices in all 20 of the cities increased...the full pdf of the release, titled Home Prices Marginally Increased in December, 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 5.4% year-over-year in December, followed by his analysis in Real Prices and Price-to-Rent Ratio in December....

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...


(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, February 21, 2016

January's consumer and producer prices, industrial production, and new home construction, et al

the key reports released this past week were the January Consumer Price Index and the January Producer Price Index, both from the Bureau of Labor Statistics, the report on Industrial Production and Capacity Utilization for January from the Fed, and the December report on New Residential Construction from the Census Bureau...in addition, this week also saw the release of the first two regional Fed manufacturing indexes for February: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, saw their headline general business conditions index rise from -19.4 to -16,6, which was still the seventh negative monthly index reading in a row, indicating an ongoing recession in First District manufacturing, and the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose from -3.5 in January to -2.8 in February, still its sixth consecutive negative reading, also implying an ongoing contraction in that region's manufacturing...

CPI Unchanged in January: Implies Real Retail Sales Up 0.3% from 4th Quarter

the consumer price index was unchanged in January, as lower prices for energy offset higher prices for core goods and services....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices were unchanged in January after revised prices fell 0.1% in December, rose 0.1% in November, rose 0.2% in October and fell 0.1% in September...with this release, the BLS has revised the seasonal adjustment factors used over the past year, resulting in minor changes to many monthly metrics that had been reported previously, which nonetheless still nets out to the same price changes year over year....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 236.916 in January from 236.525 in December, which left it statistically 1.4% higher than the 233.707 index reading of last January....regionally, prices for urban consumers have risen 2.6% in the West, 1.2% in the South, 0.8% in the Midwest, and 0.7% in the Northeast over the past year, with greater price increases within regions in cities of more than 1,500,000 people...with lower energy prices alone responsible for the unchanged CPI, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 243.779 to 244.528, which is now 2.21% ahead of its year ago reading of 239.248...

the seasonally adjusted energy price index fell by 2.8% in January after falling by a revised 2.8% in December and rising by a revised 0.3% in November, as the energy index is now just 6.5% lower than it was in January a year ago, when the energy price index had dropped 9.7% in one month.....prices for energy commodities were 4.8% lower in January while the index for energy services saw an 0.7% drop, after decreasing by 0.7% in December....the decrease in the energy commodity index included a 4.8% drop in the price of gasoline, the largest component, while fuel oil prices fell 6.5% 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 0.6%, leaving utility gas priced 12.7% lower than a year ago, while the electricity price index fell by 0.7%, after it fell by 0.4% in December...energy commodities are now only priced 8.5% below their year ago levels, with gasoline just 7.3% lower priced than it was a year ago, as it was last January that the gasoline index fell 18.7% in one month, and hence the year over year comparisons going forward will be from that lower price level...meanwhile, the energy services price index is 4.7% lower than last January, as even electricity prices have fallen 2.4% over that period..

the seasonally adjusted food index was unchanged in January, after by falling by 0.2% in December and 0.1% in November, as prices for food purchased for use at home fell 0.2% while prices for food away from home rose 0.3%, as average prices at fast food outlets rose 0.5% and school lunches rose 0.7%, while prices at full service restaurants rose 0.2% ...meanwhile, prices for all categorizes of food at home except for fruits and vegetables fell in January, with the fruits and vegetables index rising 1.3% above December, as fresh vegetables rose 2.2% on a 15.3% jump in tomato prices, which more than offset 5.1% lower priced lettuce, while fresh fruits and canned fruits and vegetables both rose 1.1%...at the same time, however, the price index for the meats, poultry, fish, and eggs group fell 1.3% after falling 1.1% in December on an 8.4% drop in egg prices, coupled with 0.8% decreases in the indexes for both beef and poultry and a 0.7% decrease in the price index for pork...meanwhile, the index for cereals and bakery products fell 0.2% as breakfast cereal prices fell 2.2% and cracker group prices fell 0.7%, which together more than offset a 1.1% increase in prices for rice, pasta and cornmeal and a 0.9% increase in cookie prices...the index for dairy products also fell 0.2% as prices for milk other than whole milk fell 1.5% while cheese prices rose 0.4%...likewise, the index for beverages and beverage materials was also 0.2% lower as instant and freeze dried coffee was price 0.9% lower and carbonated drinks prices fell 0.4%... lastly, prices in the other foods at home category also averaged 0.2% lower as frozen and freeze dried preparations were marked down 1.4% and packaged salads fell 1.5%, more than offsetting a 1.6% increase in prices for salt and other seasonings and spices....only two food line items have seen price changes greater than 10% over the past year; ham prices, which were up 0.1% in January, remain 10.1% lower than they were in January a year ago, while the "other pork" category shows a 10.4% decrease over the past year...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 0.3% in January, the composite of all commodities less food and energy commodities rose by 0.2%, while the composite for all services less energy services rose by 0.3%....among the commodity components, which will be used by the Bureau of Economic Analysis to adjust January retail sales for inflation in national accounts data, the index for household furnishings and supplies fell 0.1% on a 0.5% decrease in prices for outdoor equipment and supplies and a 0.2% decrease in prices for housekeeping supplies, both of which were weighted heavily enough to offset a 2.9% increase in prices for window coverings and a 1.4% increase in prices for living room, kitchen, and dining room furniture....apparel prices were up 0.6% on a 7.2% increase in prices for women's outerwear, a 4.1% increase in prices for jewelry and a 3.7% increase in prices for girl's apparel, which were partially offset by 3.3% lower prices for men's furnishings and a 2.9% decrease in prices for men's shirts and sweaters...at the same time, prices for transportation commodities less fuel were up 0.4% as prices for new cars and trucks were up 0.3% and prices for tires were up 0.5%, and prices for medical care commodities were also up 0.4% on 0.7% higher drug prices...meanwhile, the recreational commodities index was unchanged as 2.2% lower prices for TVs were offset by 1.2% higher prices for audio discs, tapes and other media and 0.5% higher prices for pets and pet supplies...on the other hand, the education and communication commodities index fell 1.3% on a 2.2% decrease in prices for personal computers, an 0.8% decrease in prices for telephone hardware, and a 0.4% decrease in prices for educational books and supplies, while the separate index for alcoholic beverages rose 0.5%, and the index for other goods rose 0.2%...

within services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.2% increase in owner's equivalent rent and a 2.0% increase in costs for lodging away from home, while costs for household services like water, sewer and trash collection rose 0.2%....medical care services rose 0.5% on a 1.1% increase in health insurance and a 0.6% increase in inpatient hospital services, and transportation services rose 0.4% on a 4.0% increase in car and truck rentals, a 1.2% increase in airline fares, and a 1.0% increase in parking fees and tolls...in addition, the recreation services index rose 0.3% as a 5.4% increase in admissions to sporting events more than offset a 1.8% decrease in video discs and other media rentals, and education and communication services were 0.2% higher on a 0.8% increase in prices of internet services and electronic information providers and 0.5% higher technical and business school tuition and fees...lastly, other personal services were also up 0.2% on a 0.9% increase in tax return preparation and other personal accounting fees....among core prices, a 10.6% increase in moving and storage expenses was the only line item with a year over year increase greater than 10%, while only telephones, which were priced 15.9% lower, and televisions, which are 14.3% cheaper, saw their prices drop by more than 10% over the past year...

with this release, we should be able to estimate the economic impact of last week's January retail sales report...for the most accurate estimate, and the way the BEA will be figuring 1st quarter GDP at the end of April, 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, January's clothing store sales, which rose by 0.2% in dollars, should be adjusted with the price index for apparel, which was up by 0.6%, to show us that real retail sales of clothing were actually down 0.4% in January...then, to get a GDP relevant quarterly change, we'd have to compare those January real clothing sales with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer, obviously quite a tedious task to undertake manually...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 up 0.2%, to retail sales less grocery, gas station, and restaurant sales, which accounts for nearly 70% of the aggregate sales....those sales were up almost 0.4% in January, and since their price index was up 0.2%, real retail sales excluding food and energy sales were up approximately 0.2%...then, for the rest of the total, we find sales at grocery stores were up 0.8%, while prices for food at home were down 0.2%, suggesting a real increase of 1.0% in the volume of food purchased in January....next, sales at bars and restaurants were down 0.5% in dollars, and in addition those dollars bought 0.3% less, so real sales of food away from home were actually down about 0.8%...and while gas station sales were down 3.3%, gasoline prices were down 4.8%, suggesting a solid real increase in gasoline sold, with the caveat that gas stations sell more than gasoline, and we don't have the details on that...weighing the food and energy components at one third of total retail sales suggests that net real retail sales were up on the order of 0.2% in January, following a real decrease of 0.3% in December, an increase of 1.0% in November, and a decrease of 0.1% in October (data which we get from Table 7 of the income and outlays report (pdf))...that means we can estimate that January's real consumption of goods was 0.2% higher than that of December, 0.1% lower than that of November, and 0.9% higher than that of October, suggesting a real increase of more than 0.3% in January from the average monthly real sales of the 4th quarter...

Wholesale Prices Fell 0.7% in January While Margins of Service Providers Increased 0.5%

the seasonally adjusted Producer Price Index (PPI) for final demand increased by 0.1% in January as prices for finished wholesale goods fell by 0.7%, while margins of final services providers were 0.5% higher...this followed a December report that showed the overall PPI down 0.2%, with prices for finished goods also down 0.7% while final demand for services was up 0.1%....producer prices are now just 0.2% lower than they were a year ago, and 0.2% lower than two years ago, as the producer price index was unchanged over the span from January 2014 to January 2015...like the CPI, the PPI also underwent an annual revision of its seasonal adjustments with this release, resulting in minor revisions to previous reports...

as noted, the index for final demand for goods, aka 'finished goods', fell by 0.7% in January after falling 0.7% in December, and increasing 0.1% in November, as the index for wholesale energy prices fell 5.0% on a 41.0% drop in wholesale prices for home heating oil and a 8.3% drop in the price of wholesale gasoline...that was partially offset by a 1.0% increase in the index for wholesale food prices as a 17.3% increase in the index for fresh and dry vegetables, a 7.0% increase in the index for fresh and dry fruit, and a 7.4% increase in the index for beef and veal more than offset generally lower wholesale prices for other foods....excluding food and energy, the index for final demand for wholesale core goods was unchanged in January, as a 1.6% increase in wholesale prices for pharmaceutical preparations and a 1.3% increase in wholesale prices for tires offset a 3.4% decrease in wholesale prices for industrial chemicals...

meanwhile, the index for final demand for services rose by 0.5% in January after rising 0.1% in December, 0.5% in November, while falling by 0.3% in October and 0.4% in September, as the index for final demand for trade services rose 0.9%, the index for final demand for transportation and warehousing services rose 0.4%, while the core services index for final demand for services less trade, transportation, and warehousing services was also 0.4% higher....noteworthy among trade services, seasonally adjusted margins for fuels and lubricants retailers were 8.2% higher and margins for machinery and equipment wholesaling rose 4.0%, while margins for TV, video, and photographic equipment and supplies retailers were 10.1% lower after falling 27.4% in December...among transportation and warehousing services, passenger airlines saw their margins increase 2.6% and freight airline margins rose 2.4%, while in the core final demand services index, margins for securities brokerage, dealing, investment advice, and related services rose 11.8% after rising 9.2% in December...

this report also showed the price index for processed goods for intermediate demand fell by 1.2% after a 1.0% decrease in December, as intermediate processed goods prices have now been down 16 out of the last 18 months and are 5.4% lower than in January a year ago....all intermediate goods indices were down for the 6th consecutive month, with prices for intermediate energy goods 4.6% lower, the index for processed foods and feeds 0.4% lower, while the price index for processed goods for intermediate demand less food and energy was down 0.5%...meanwhile, the price index for intermediate unprocessed goods was down 0.7% after falling 3.4% in December and 4.9% in November, with the index for crude energy goods down 10.0%, the index for unprocessed foodstuffs and feedstuffs down up 5.5%, and producer prices for raw materials other than food and energy materials unchanged... this raw materials index remains 17.9% lower than it was a year ago, as most commodity prices are still near multi year lows...

lastly, the price index for services for intermediate demand was up 1.1% in January after it rose 0.1% in both December and November, as a 0.7% decrease in the index for transportation and warehousing services for intermediate demand and a 0.1% increase in the index for trade services for intermediate demand were offset by a record 1.8% increase in the the core price index for services less trade, transportation, and warehousing for intermediate demand...over 70 percent of the rise in that core index can be traced to a 31.1 % increase in margins for securities brokerage, dealing, investment advice, and related services, while indexes for business loans, metals, minerals, and ores wholesaling, food wholesaling, management consulting services, and airline passenger services also contributed...over the 12 months ended in January, the year over year price index for services for intermediate demand, which has never turned negative, is now 1.5% higher than it was a year ago...  

January Industrial Production Up 0.9%, Boosted by Normal Weather

after December industrial production was revised lower, January's jump in industrial production was the largest increase since November 2014, but more than half of it was due to a return to seasonal utility usage...the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.9% in January after falling by a revised 0.7% in December and a revised 0.8% November, which still left the index 1.7% below its year ago level...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 106.8% in January from 105.9 in December, which was originally reported at 106.0...at the same time, the November reading for the index was revised up from 106.4 to 106.6, the October index was unchanged from the last report at 107.4, and both the August and September index readings were revised down from 107.6 to 107.5...to the extent that this report plays into GDP, the changes to November and December industrial production might boost the 4th quarter's growth rate incrementally, while the January index is still less than 0.2% above the average of the prior three months...

the manufacturing index increased by 0.5 to 106.2 in January, after the index for December was revised down from 106.0 to 105.7, the manufacturing index for November was revised down from 106.1 to 105.9, the indices for September and October were left unchanged at 105.8 and 106.2 respectively, while the manufacturing index for August was revised from 106.0 to 105.9...as a result of these changes, combined with a weak reading last January, the year over year increase in the manufacturing index has now increased to 1.2% from last month's 0.8%... meanwhile, the mining index, which includes oil and gas well drilling, was unchanged at 110.1 in January, after falling from 113.9 in October and 112.3 in November, and still remains 9.8% lower than a year earlier....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 5.4%, from a depressed level of 95.5 in December to 101.7 in January...however, while cold, January's weather was still warmer than normal, so utility usage was still below par, and hence the index remains 2.8% below its level of January 2015...

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 rise from a revised 76.4% in December to 77.1% in January...seasonally adjusted capacity utilization for all manufacturing industries was up 0.3% to 76.1% in January as manufacturing capacity utilization for December was revised down 0.2% to 75.8%...after a downward revision of 0.4% to December's figure, utilization of NAICS durable goods production facilities rose 0.3% to 75.7% in January, while capacity utilization for non-durables rose from an unrevised 77.6% in December to 77.9% in January....capacity utilization for mining rose from 78.4% in December to 78.8% in January, probably as some capacity was scrapped, while utilities were operating at 77.5% of capacity during January, up from the revised 73.6% of capacity in December...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....

Housing Starts and New Permits Little Changed in January

the January 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 1,099,000 in January , which was 3.8 percent (±12.0%)* below the revised December estimated seasonally adjusted annual rate of 1,143,000 housing units started, but was 1.8 percent (±13.5%)* above last January's rate of 1,080,000 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, January housing starts could have been up 8.2% or down as much as 15.8% from those of December, with even larger revisions subsequently possible...in this report, the annual rate for December housing starts was revised from the 1,149,000 reported last month to 1,143,000, while November starts, which were first reported at a 1,073,000 annual rate, were revised from last month's initial revised figure of 1,179,000 annually down to 1,079,000 annually with this report....

those annual rates of starts indicated by the annualized headline change were extrapolated from a survey of a small percentage of permit offices visited by Census field agents, which estimated that 73,600 housing units were started in January, down from 77,500 units started in December...of those housing units started in January, an estimated 47,900 were single family homes and 24,700 were units in structures with more than 5 units, down from 50,500 single family starts and 25,900 units started in structures with more than 5 units in December....the unadjusted estimates also show that total housing starts were down in every region of the country, with only the South seeing an increase in single family starts from 28,900 homes in December to 29,900 homes in January, which was still unchanged on a seasonally adjusted basis, with a ±19.2% margin of error on that metric...

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 January, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,202,000 housing units, which was 0.2 percent (±0.5%)* below the revised December rate of 1,204,000 permits annually but 13.5 percent (±1.5%) above the rate of permit issuance in January a year earlier...the annual rate for housing permits issued in December was revised from 1,232,000 to 1,204,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates, which showed permits for 74,700 housing units were issued in January, down from the estimated 96,800 new permits issued in December, with permits in the Northeast down from 16,700 to 5,100, as seasonably cold weather returned to the region....the January permits included 45,200 permits for single family homes, down from 50,600 single family permits in December, and 27,100 permits for housing units in apartment buildings with 5 or more units, down from 43,600 such multifamily permits a month earlier...for charts and additional analysis on this report, without our disparaging caveats, see Bill McBride's coverage in two posts: Housing Starts declined to 1.099 Million Annual Rate in January and Comments on January Housing Starts....



(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, February 14, 2016

4th quarter household debt, January retail sales, December wholesale sales, business inventories, & JOLTS

the key reports of this past week, retail sales for January and business inventories for December, were both released by the Census bureau on Friday...leading up to the latter, the Census released the Monthly Wholesale Trade: Sales and Inventories report for December (pdf), accounting for a third of the business inventories report's components...earlier, the BLS had released the Job Openings and Labor Turnover Survey (JOLTS) for December, while on Friday they released the Import and Export Price Indexes for January, which indicated that average import prices fell 1.1% for the second month in a row, while export prices fell 0.8% after falling 1.1% in December...

in addition, the 4th quarter Household Debt and Credit Report (pdf) was released by the New York Fed on Friday, which showed that total household indebtedness increased by $51 billion over the 4th quarter to end the year at $12.12 trillion, while 5.4% of that outstanding debt was in some stage of delinquency, the lowest rate since the second quarter of 2007...this report is a 33 page report that's mostly graphics, half of which is graphs of national credit data, while half graphs the outstanding credit data for the 10 largest states, plus Arizona and Nevada...below we have the first graphic from this 33 page graphic presentation, which shows the components of total household debt nationally for each quarter since the beginning of 2003...each bar on the graph represents a quarter of a year, and within each bar is a color coded representation of the amount of each type of debt in trillions of dollars that was outstanding at the end of that given quarter…in each bar, orange represents the amount of mortgage debt that was outstanding at the end of that quarter, violet indicates the amount of home equity loans outstanding, green is the amount of auto loans outstanding, blue is the unpaid credit card debt, red are student loans outstanding, and grey is ‘other’ debt outstanding in the quarter….we can see that the aggregate total debt outstanding has been increasing over the past two and a half years, and that student loan debt has now expanded to 10% of the total, or more than one seventh of the amount of mortgage debt...note that although mortgage debt in orange is considerably lower than at the peak, this report and its graphics do not distinguish between mortgage debt that has been paid off and mortgage debt that has been extinguished through a foreclosure or a short sale....

4th quarter 2015 household credit

January Retail Sales Up 0.2% after December Sales Revised 0.2% Higher

seasonally adjusted retail sales rose 0.2% in January after retail sales for December were revised 0.2% higher, so on net this month's report handily beat expectations of a 0.1% increase...the Advance Retail Sales Report for January (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $449.9 billion, which was an increase of 0.2 percent (±0.5%) from December's revised sales of $449.1 billion and 3.4 percent (±0.7%) above the adjusted sales of January of last year...December's seasonally adjusted sales were revised from the $448.1 billion first reported to $449.1 billion, while November's sales, which were revised up to $448.6 billion from the originally reported $448.1 billion last month, were revised down to $448,376 billion with this report...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated unadjusted sales fell 21.9%, from $514,928 million in December to $402,209 in January, while they were up just 1.4% from the $396,495 million of sales in January a year ago, so there were obviously large seasonal adjustments to both month's reports before arriving at that reported 0.2% difference...while we can't judge the economic impact of this month's report on 1st quarter GDP until the consumer price index is released next Friday, the revisions to November and December sales would add about 0.02 percentage point to the previously published figure for 4th quarter GDP...

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

January 2016 retail sales

the first thing we see on that table is that without the sales at automobile and parts dealers, seasonally adjusted retail sales were only 0.1% higher than December, as sales at those automobile and parts dealers rose 0.6% to $95,745 million...the other large outlier is the 3.1% drop to $32,801 million in sales at gasoline stations, which we figure most if not all of was due to lower prices; take out those gasoline sales from the total, and retail sales would have risen 0.4% for the month...other than auto related sales, other types of retailers showing strength in January included non-store (mostly online) retailers, where sales rose 1.6% to $42,165 million, miscellaneous store retailers, who saw their sales rise 1.2% to $10,177 million, general merchandise stores, where sales were up 0.8% to $56,514 million, and grocery stores, where sales were also up 0.8% to $51,273 million....on the other hand, specialty shops, such as sporting goods stores and bookstores, saw their sales fall 2.1% to $7,558 million, while sales at furniture stores fell 0.5% to $8,798 million and sales at bars and restaurants also fell 0.5% to $53,528 million...but note, in the 3rd column, that each of those business types who saw sales fall in January had seen a sizable increase in December, and they are still among the leaders in year over year sales, as shown in the 4th column..

December Wholesale Sales Down 0.3%; Wholesale Inventories Down 0.1%

both wholesale sales and wholesale inventories were lower in December, roughly in line with expectations...the December report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $440.0 billion, down 0.3 percent (+/-0.9%) from the revised November level, and 4.5 percent (+/-1.4%) lower than wholesale sales of December 2014... the November preliminary estimate was revised down $1.3 billion or 0.3 percent, leaving November's sales 1.3% below the October level... December wholesale sales of durable goods rose 0.3 percent (+/-1.1%)* from November but were still down 3.0 percent (+/-2.1%) from a year earlier, with a 2.5% increase in wholesale sales of automotive products and a 2.4% increase in wholesale sales of lumber and other construction materials carrying the sector gain for the month...wholesale sales of nondurable goods were down 0.9 percent (+/-1.1%) from November and were down 5.9 percent (+/-1.8%) from last December, with wholesale sales of clothing and wholesale sales of petroleum and petroleum products both down 4.5%, the latter due 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 December report estimated that wholesale inventories were valued at $582.0 billion at month end, a decrease of 0.1 percent (+/-0.4%)* from the revised November level but 1.9 percent (+/-1.6%) higher than December a year ago, with the November preliminary estimate revised downward a statistically insignificant $0.1 billion...inventories of durable goods were down 0.3 percent (+/-0.5%)* from November but were up 0.5 percent (+/-1.8%)* from a year earlier, with inventories of metals and minerals down 4.4% mostly on lower commodity prices...meanwhile, the value of wholesale inventories of nondurable goods was up 0.1 percent (+/-0.7%)* from November and was up 4.1 percent (+/-2.1%) from last December, as the value of wholesale inventories of petroleum and petroleum products fell 7.8% on lower prices and dragged the gross value of non-durable inventories down with it..

when computing 4th quarter GDP two weeks ago, the BEA assumed an increase in non-motor-vehicle merchant wholesale inventories for December, from the November wholesale inventory valued at $582.9 billion that had been reported at that time...November inventory figures have now been revised down a bit, and December wholesale inventories were down to $582.0 billion from that...thus, we'd have to say that the BEA overestimated 4th quarter wholesale inventories by at least $1.0 billion wherein the $16.9 billion slower real inventory growth had already subtracted 0.45% from the 4th quarter's growth rate....just extrapolating from that, then, we could estimate that this new wholesale inventory data for December would subtract at least 0.03 percentage points from reported 4th quarter growth, and maybe more...

December Business Inventories Up Just 0.1%, Implies 58 Basis Point Downward Revision to GDP

following the release of the retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for December (pdf), which incorporates the revised December 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 $1,302.3 billion in December, down 0.6 percent (±0.3%) from November's revised sales, and down 2.7 percent (±0.5%) from December sales of a year earlier...note that total November sales were also revised down by more than 0.2%, from $1,313.5  billion to $1,310.6 billion....manufacturer's sales fell by 1.4% from November to $467,021 million in December, retail trade sales, which exclude restaurant & bar sales from the revised December retail sales reported earlier, were virtually unchanged at $395,292 million, while wholesale sales fell 0.3% to $440,020 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,813.1 billion at the end of December, up 0.1 percent (±0.1%)* from November and 1.7 percent (±0.6%) higher than in December a year earlier...the value of end of November inventories was also revised up by less than 0.1%, from the $1,809.8 billion reported last month to $1,810,442 million with this report...seasonally adjusted inventories of manufacturers were estimated to be valued at $642,317 million, 0.2% more than in November, inventories of retailers were valued at $588,845 million, 0.4% greater than November, while inventories of wholesalers were estimated to be valued at $581,979 million at the end of December, down 0.4% from November...

last week we reviewed factory inventories as compared to BEA estimates and judged that their level reported then would have little impact of revisions to 4th quarter GDP...however, in computing 4th quarter GDP, the BEA assumed an increase inventories in merchant wholesale and retail industries other than motor vehicles (pdf) for December at a $26.5 billion annual rate, which would work out to an increase of about $2.2 billion for the month...this report shows retail inventories ex-autos up 0.2%, or a bit over $0.8 billion, whereas the wholesale inventories we reviewed earlier showed total inventories down almost $0.8 billion despite a $168 million increase in automotive products inventories...so it appears that the BEA overestimated December and end of quarter wholesale and retail inventories by nearly $2.4 billion, which would work out to a decrease at $9.5 billion annual rate from previously published figures, which would in turn would result in a subtraction of about 0.58 percentage points from 4th quarter GDP...

December Job Openings, Hiring and Job Quitting Up; Layoffs Down

the Job Openings and Labor Turnover Survey (JOLTS) report for December from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 261,000, from 5,346,000 in November to 5,607,000 in December, after November's job openings were revised down, from 5,431,000 to 5,346,000, 3,000 lower than October's....December jobs openings were 15.0% higher than the 4,877,000 job openings reported in December a year ago, as the job opening ratio expressed as a percentage of the employed rose to 3.8% in December from 3.6% in November and from 3.4% a year ago...moreover, the greatest increase in job openings were in manufacturing, where openings rose 86,000 to 365,000, and construction, where job openings rose 69,000 to 207,000, while openings in the broad-professional and business services category  decreased by 47,000 to 1,039,000 (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 December, seasonally adjusted new hires totaled 5,361,000, up 105,000 from the revised 5,256,000 who were hired or rehired in November, as the hiring rate as a percentage of all employed remained unchanged at 3.7%, which was also unchanged from the hiring rate in December a year earlier (details of hiring by industry since June are in table 2)....meanwhile, total separations rose by 110,000, from 4,962,000 in November to 5,072,000 in December, as the separations rate as a percentage of the employed was unchanged at 3.5%, which was also unchanged from the separations rate of 3.5% a year ago (see table 3)...subtracting the 5,072,000 total separations from the total hires of 5,361,000 would imply an increase of 289,000 jobs in December, a bit higher than the revised payroll job increase of 262,000 for December reported by the January establishment survey last week, not an unusual difference and within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,055,000 of us voluntarily quit their jobs in December, the most in 9 years, and up 196,000 from the revised 2,859,000 who quit their jobs in November, while the quits rate, widely watched as an indicator of worker confidence, rose from 2.0% to 2.1% of total employment (see details in table 4)....in addition to those who quit, another 1,607,000 were either laid off, fired or otherwise discharged in December, down 81,000 from the revised 1,686,000 who were discharged in November, which lowered the discharges rate from 1.2% to 1.1 of all those who were employed during the month....meanwhile, other separations, which includes retirements and deaths, were at 411,000 in December, down from 417,000 in November, 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...


(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, February 7, 2016

January jobs report; December’s income and outlays, trade deficit, construction spending, factory inventories and Mortgage Monitor

in addition to the Employment Situation Summary for January from the Bureau of Labor Statistics, this week also saw the release of four December reports that input into our GDP, three of which could result in revisions to the 4th quarter GDP estimate released last week: the Census report on our International Trade for December, the Full Report on Manufacturers' Shipments, Inventories and Orders for December and the December report on Construction Spending, both also from the Census Bureau...the December report on Personal Income and Spending from the BEA, which includes personal consumption expenditure data for December, was released on Monday and had already been incorporated into the advance GDP figures released Friday...in addition, this week brought us the Consumer Credit Report for December from the Fed, which showed that overall credit expanded by a seasonally adjusted $21.3 billion, or at a 7.2% annual rate, as non-revolving credit expanded at a 7.1% rate to $2,611.2 billion and revolving credit outstanding rose at a 8% rate to $935.6 billion...the BLS also released the 4th Quarter Report on Labor Productivity and Costs, which showed nonfarm business sector labor productivity decreased at a 3.0% annual rate during the fourth quarter, as hours worked increased 3.3% and output of goods and services from those hours increased just 0.1%...

privately issued reports this week included the report on light vehicle sales for January from Wards Automotive, which estimated that vehicles sold at a 17.46 million annual rate in January, the strongest January sales rate since 2006, the Mortgage Monitor for December (pdf) from Black Knight Financial Services, and both of the widely followed reports from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) increased from 48.0% in December to 48.2% in January, still indicating an ongoing contraction in manufacturing firms nationally, and the January Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 53.5%, down from 55.8% in December, 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...

Employers Add 151,000 Jobs in January; Official Jobless Rate Drops to 4.9%

the Employment Situation Summary for January indicated weakness in payroll job formation coupled with a decent increase in average hourly pay, while the unemployment rate fell and the labor force participation rate rose....estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 151,000 jobs in January, after the payroll job increase for December was revised down from 292,000 to 262,000, and the November jobs increase was revised up from 252,000 to 280,000, making the combined number of jobs created in those months 2,000 less than was previously reported…as is usual for January, this report included the results of the annual benchmark revision, which revised prior reports and set March 2015 (the benchmark) at 140,099,000 payroll jobs, 206,000 less than previously reported, which was narrowed to 105,000 fewer jobs by December; hence, 2015 job growth totaled 2.74 million payroll jobs, up from the prior reading of 2.65 million, while job growth in earlier years was reduced...since all the revised figures are incorporated into this months report as if previously reported totals had never been reported, that's the way we'll cover it...

seasonally adjusted job increases in January were spread through construction, manufacturing, and the private service sector, gains which were partially offset by job losses in the resource extraction sector, transportation and warehousing, educational services, government, and temporary help services...57,700 jobs were added in retail sales, with 13,300 of those in clothing stores and 13,200 in department stores...another 48,800 jobs were added in accommodation and food services, as bars and restaurants increased payrolls by 46,700...the health care and social assistance sector added another 44,000 jobs, with 23,700 of those in hospitals....29,000 jobs were added in manufacturing, spread through a large variety of both durable goods and non-durable goods manufacturers... and both the financial services sector and construction trades saw an addition of 18,000 jobs...meanwhile, private educational services shed 38,500 jobs in January, due to larger than normal seasonal layoffs, and the transportation and warehousing sector shed 20,300 jobs, as 14,400 more couriers and messengers than normal were let go, following stronger than normal seasonal hiring in the prior 2 months...there were also 7,000 fewer resource extraction jobs, as the mining and drilling industries cut 6,600...finally, the normally strong professional and business services category, which added 60,000 jobs in December, only added 9,000 in January, as temporary help service jobs were reduced by 25,000...partially offsetting the weak job creation, the average workweek for all private employees rose by 0.1 hour to 34.6 hours, with the manufacturing workweek up by 0.1 hour while factory overtime was unchanged at 3.3 hours...employers also reported that average hourly earnings for all employees rose by 12 cents to $25.39, after December's hourly earnings were unchanged, leaving us with a 2.5% wage gain over the past 12 months...

meanwhile, the January household survey estimated that the seasonally adjusted count of those who were employed rose by 615,000 to 150,544,000, while the number of unemployed fell by 113,000 to 7,791,000, resulting in a drop in the unemployment rate from 5.0% to 4.9%...after accounting for the annual adjustments to the population controls, the net increase in the number employed less the decrease in the number unemployed was greater than the 502,000 increase in the civilian working age population, so the count of those not in the labor force fell by 41,000 to 94,062,000, which was enough to increase the labor force participation rate from 62.6% in December to 62.7% in January, its third 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 59.6%...January also saw a 34,000 drop in the number who reported they were involuntarily working part time, from 6,022,000 in December to 5,988,000 in January...however, 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 December...

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 paragraph such as "The unemployment rates for adult men (4.5 percent) and Whites (4.3 percent) declined in January. The jobless rates for adult women (4.5 percent), teenagers (16.0 percent), Blacks (8.8 percent), Asians (3.7 percent), and Hispanics (5.9 percent) showed little change over the month. (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 adult men fell 0.3%, from 4.2% in December to 3.9% in January, while the "little changed"  unemployment rate for Blacks actually rose from 8.3% to 8.8%...

December Personal Income Up 0.3%, Personal Consumption Flat

while our personal consumption expenditures (PCE), the major component of GDP, are probably the most important metric we get from the Personal Income and Outlays report for December from the BEA, this report also gives us personal income data, disposable personal income, which is income after taxes, our monthly savings rate and the PCE price index, the inflation gauge the Fed targets....it is also probably one of the least understood and most misreported of the monthly economic reports, which is largely due to the NIPA-related manner in which the press release from the BEA reports on it...to start with, all the dollar amounts referenced by this report are seasonally adjusted and at an annual rate; so the nominal monthly dollar changes, which are not reported, are actually on the order of one twelfth of the reported amounts... however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from November to December, making for a difficult report to unpack and report on correctly...

thus, when the opening line of the press release for this report tell us "Personal income increased $42.5 billion, or 0.3 percent, and disposable personal income (DPI) increased $37.8 billion,or 0.3 percent, in December", they mean that the annualized figure for personal income in December, $15,648.0 billion, was $42.5 billion, or almost 0.3% greater than the annualized  personal income figure of $15,605.5 billion for November; the actual change in personal income from November to December is not reported...similarly, annualized disposable personal income, which is income after taxes, also rose by almost 0.3%, from an annual rate of an annual rate of $13,616.6 billion in November to an annual rate of $13,654.4 billion in December...likewise, the contributors to the increase in personal income, listed under "Compensation" in the press release, are also annualized amounts, all of which can be more clearly seen in the Full Release & Tables (PDF) for this release...so when the press release says, "Wages and salaries increased $13.1 billion in December" that really means wages and salaries would increase by $13.1 billion over an entire year if December's seasonally adjusted increase were extrapolated over that year, just as current personal transfer receipts from government agencies, the largest contributor to the December income increase, rose at a $18.1 billion annual rate...so you can see what's written in this press release is misleading, and often leads to media reports that misleadingly parrot those lines the same way the BEA wrote it,like the 24/7 Wall St site did this month...

personal consumption expenditures (PCE) are reported in the same manner, ie, they fell at an annual rate of $0.7 billion to $12,448.3 billion annually in December, or virtually unchanged from the annual rate of $12,449.0 billion of PCE for November...however, when they're included in the GDP report, the monthly personal consumption expenditures are adjusted with the price index for PCE, the BEA's chained type price index based on 2009 prices equal to 100, to give us "real" PCE, and hence the change in the output of goods and services produced for consumers....in table 9 of the pdf for this report we see that that price index fell to 109.731 in December, from 109.835 in November, a decrease of 0.09%, which the BEA rounds to 0.1% when reporting it...hence, we find that real personal consumption expenditures, or PCE after the inflation adjustment, rose by 0.089% for the month, which the BEA rounds to a increase of 0.1%....using the same PCE price index, disposable personal income would be adjusted to show that real disposable personal income, or the purchasing power of disposable income, rose by 0.4% in December, after an increase of 0.2% in November..

with disposable personal income up and personal consumption expenditures virtually unchanged, it only goes to reason that our personal savings for December would be higher...to arrive at the figures for that, the BEA takes total personal outlays, which is the sum of PCE, personal interest payments, and personal current transfer payments, and subtracts that from disposable personal income, to show personal savings at a $753.5 billion annual rate in December, up from the $717.8 billion that we would have ‘saved"’ over a year had November's savings been extrapolated for a year...this brought the personal savings rate, or personal savings as a percentage of disposable personal income, to 5.5% in December, up  from the savings rate of 5.3% in November...

Trade Deficit Rises in December, Subtracts 5 Basis Points from GDP

our trade deficit rose by 2.6% December, as the net value of our exports decreased and the value of our imports increased....the Census report on our international trade in goods and services for December indicated that our seasonally adjusted goods and services trade deficit rose by $1.1 billion to $43.4 billion in December from a November deficit which was revised from $42.4 billion to $42.2 billion (rounded)...the value of our December exports fell by $0.5 billion to $181.5 billion on a $0.8 billion decrease to $121.2 billion in our exports of goods and a $0.3 billion increase to $60.3 billion in our exports of services, while our imports rose $0.6 billion to $224.9 billion on a $0.5 billion increase to $183.7  billion in our imports of goods and a $0.1 billion increase to $41.2 billion in our imports of services...export prices averaged 1.1% lower in December, so the real growth in exports was greater than the nominal dollar value by that percentage, while import prices were 1.2% lower, similarly incrementally increasing growth in real imports from the dollar values reported here...

the decrease in our December goods exports resulted from lower exports of autos, industrial supplies, capital goods, and foods and feeds, only offset by an increase in our exports of consumer goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of automotive vehicles, parts and engines fell by $599 million to $12,296 million, and our exports of industrial supplies and materials fell by $414 million to $32,434 million on a $491 million drop in our exports petroleum products other than fuel oil and a $429 million drop in our exports of organic chemicals, which were only partially offset by a $373 million increase in our exports of non-monetary gold...in addition, our exports of foods, feeds and beverages fell by $347 million to $9,900 million on a $183 million drop in our exports of soybeans, and our exports of capital goods fell by $339 million to $44,013 million as a $1,454 million decrease in our exports of civilian aircraft was only partially offset by a $413 million increase in our exports of oilfield drilling equipment, a $279 million increase in our exports of computers and a $278 million increase in our exports of aircraft engines, and our exports of goods not categorized by end use fell by $155 million to $4,083 million....on the other hand, our exports of consumer goods rose by $937 million to $16,818 on a $614 million increase in our exports of artwork and antiques and a $175 million increase in our exports of jewelry...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that an increase of $980 million to $30,080 million in our imports of automotive vehicles, parts and engines accounted for more than the total increase in our December imports, as our imports of consumer goods and other goods fell...also increasing in December were our imports of industrial supplies and materials, which rose $507 million to $36,644 million on a $263 million increase in our imports of non-monetary gold and a $203 million increase in our imports of crude oil, and our imports of foods, feeds, and beverages, which rose by $181 million to $10,581 million....on the other hand, our imports of consumer goods fell by $631 million to $48,093 million on a $526 million drop in our imports of artwork and antiques and a $451 million reduction in our imports of televisions and video equipment, our imports of goods not categorized by end use fell by $443 million to $7,210 million, and our imports of capital goods fell by $27 million to $49,162 million as a $345 million increase in our imports of civilian aircraft was offset by a $439 decrease in our imports of computer accessories.....

when computing last week's GDP report, the BEA used the estimates from the advance report on our trade in goods for December which was released the same day; that report showed a deficit in our trade of goods of $61,513 million for the month...this report indicates an increase in the goods deficit of $1.3 billion to $62.514 billion from a revised November deficit of $61,241 million...also with this report, November exports of goods were revised downward $0.3 billion, November exports of services were revised upward less than $0.1 billion, November imports of goods were revised downward $0.3 billion and November imports of services were revised downward $0.1 billion...in round numbers, that suggests the trade data used in the GDP report had underreported our 4th quarter trade deficit by $0.8 billion, which suggests a downward revision of 0.02 percentage points to GDP when the 2nd estimate of GDP is released at the end of this month...

December Construction Spending Up 0.1% after November revised down 0.5%

in the report on December construction spending (pdf), the Census Bureau estimated that December's seasonally adjusted construction spending would work out to $1,116.6 billion annually if extrapolated over an entire year, which was barely 0.1 percent (±1.2%)* above the revised annualized estimate of $1,116.0 billion of construction spending in November and 8.2 percent (±1.8%) above the estimated annualized level of construction spending of December last year...the November spending estimate was revised down from $1,122.5 billion to $1,116.0 billion, which when combined with less than expected spending in December, suggests another downward revision to 4th quarter GDP.....private construction spending was at a seasonally adjusted annual rate of $824.0 billion, 0.6 percent (±0.8%)* below the revised November estimate, with residential spending rising  0.9 percent (±1.3%) to an annual rate of $429.6 billion in December, 0.9 percent (±1.3%) above the revised November estimate, while private non-residential construction spending fell 2.1 percent (±0.8%) to $394.4 billion on a 7.3% decrease of private spending for construction of manufacturing facilities...meanwhile, public construction spending was estimated to be at a rate of  $292.5 billion, 1.9 percent (±2.0%)* above the revised November estimate, with spending for highway construction up 9.4% to $95.4 billion while spending for conservation and development was off 9.6% to an annualized $6,839 million for the month...for the entirety of 2015, construction spending totaled $1,097.3 billion, 10.5 percent (±1.2%) above the $993.4 billion spent in 2014...

in reporting 4th quarter GDP, the BEA assumed an increase in nonresidential construction and an increase in residential construction in December....however, gauging the actual impact of this December construction spending report on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP is adjusted for changes in price, using a multitude of privately published price indexes for the various components of non-residential investment...furthermore, the GDP categories for construction spending include brokers’ commissions, title insurance, state and local taxes, attorney fees, title escrow fees, fees for surveys and engineering services, and remodeling that are not captured by this report...for instance, if we look at the aggregate figures here for the residential construction portion of this report and compare them to the change shown for the nominal value of residential construction in the pdf for the 1st estimate of 4th quarter GDP, we find the numbers barely correspond at all...but we do have two certain number to work with from this report; first, we know that overall annualized construction spending for November was revised down by $6.5 billion annualized; secondly, we also know that the advance GDP report overestimated non-residential construction spending for December by at least $8.6 billion annualized, because it decreased by that much, and they had assumed an increase...that means that the annualized estimates for 4th quarter GDP were at least $15.1 billion too high, or approximately 0.09% of inflation adjusted GDP...thus the annualized change in construction spending implies a subtraction of at least 0.36 percentage points from 4th quarter GDP when the second estimate is released at the end of February..

December Factory Shipments Down 1.4%, Factory Inventories Up 0.2%

press reports say that the Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) for December, aka "the factory orders report," showed that new orders for factory goods fell by 2.9% in December, after falling by 0.7% in November...however, as we learned in October from a conversation with the Census personnel responsible for that report, the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "Full Report on ...Orders" 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 lack of hard data, in effect, leaves the "new orders" and "unfilled orders" sections of this report useful only as a revised update to the advance report on durable goods from last week...in the case of December new orders for durable goods, then, the December Full Report showed that new orders for manufactured durable goods fell $11.8 billion or 5.0% to $225.6 billion, a slight upward revision from last week's reported 5.1% decrease, following a November decrease of 0.5% that was reported as unchanged a month ago...including the 0.8% decrease in shipments of non-durable goods with that, then, the Census Bureau reported that new orders for manufactured goods decreased $13.5 billion or 2.9 percent to $456.5 billion in December, after falling 0.7% in November and 4 out of the last 5 months..

more importantly, then, this report indicated that the value of December factory shipments fell by $6.8 billion or 1.4 percent to $467.0 billion, the 8th decrease in 9 months, with only a 0.1% increase in November...shipments of durable goods were down by $5.1 billion or 2.1 percent to $236.1 billion, revised from the 2.2% decrease reported in the durables report, as shipments of transportation equipment fell 6.7% on a 32.4% drop in shipments of commercial aircraft...without those transportation sector shipments, factory shipments were still 0.4% lower....the value of shipments (and hence of "new orders") of non-durable goods fell by $1.75 billion, or 0.8%, with a 3.3% drop in shipments from refineries accounting for nearly three-fourths of that decrease and a 2.4% drop in shipments of meat, poultry and seafood products accounting for most of the rest...however, with producer prices for finished goods down 0.2% in December, and prices for intermediate goods down 1.0%, 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 December factory inventories rose for the first time in 6 months, increasing by $1.0 billion or 0.2 percent to $642.3 billion, following an November decrease that was revised from 0.2% to a 0.3% decrease from October...inventories of durable goods rose by $1.9 billion or 0.5 percent to $397.6 billion, the first increase in six months, following a decrease of 0.3% in November...the value of non-durable goods' inventories fell nearly $1.0 billion or 0.4 percent to $246.0 billion, following a decrease of 0.3% in November...the value of inventories of petroleum and coal products, down in value most of the year, drove the decrease in non-durable inventories, as they fell by $0.8 billion or 2.6% percent to $32.6 billion, which was undoubtedly mostly due to lower prices...as we previously noted, producer prices for finished goods were down 0.2% in December, and prices for intermediate goods were down 1.0%, so real factory inventories of other goods might have also increased as well...in computing last week's GDP estimate, the BEA assumed a decrease in nondurable manufacturing inventories in December, without quantifying the amount of the decrease, so unless their estimate was significantly lower than this report indicates, the change to 4th quarter GDP estimates should be minimal..

Mortgage Delinquencies Down 2.8%, New Foreclosures Up 17.2% in December; Mean Time in Foreclosure at 1060 Days

the Mortgage Monitor for December (pdf) from Black Knight Financial Services (BKFS, formerly LPS) reported that there were 688,672 home mortgages, or 1.37% of all mortgages outstanding, remaining in the foreclosure process at the end of December, which was down from 721,435, or 1.38% of all active loans that were in foreclosure at the end of November, and down from 1.75% of all mortgages that were in foreclosure in December of last year...these are homeowners who had a foreclosure notice served but whose homes had not yet been seized, and the December "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 highest level since September, rising to 78,088 in December from 66,626 in November, but still down from 89,357 in December a year ago...while foreclosure starts have been volatile from month to month, 2015's new foreclosure starts remained in a range about one-third higher than number of new foreclosures we saw in the precrisis year of 2005...

in addition to homes in foreclosure, BKFS data showed that 2,408,249 mortgages, or 4.78% of all mortgage loans, or were at least one mortgage payment overdue but not in foreclosure in December, down from 4.92% of homeowners with a mortgage who were more than 30 days behind in November, but still up from this year's lowest delinquency rate of 4.66% in March, while still down from the mortgage delinquency rate of 5.42% in December a year earlier...of those who were delinquent in December, 807,656 home owners, or 1.60% 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 that a total of 6.15% of homeowners with a mortgage were either late in paying or in foreclosure at the end of December, and that 2.97% of all homeowners were in serious trouble, ie, either "seriously delinquent" or already in foreclosure at month end...

for the details of the history of both those metrics, we're including below that part of one Mortgage Monitor table showing the monthly count of active home mortgage loans and their delinquency status, which comes from page 15 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 slipped from the April record of 536 days and is now at 491 days, while the average time for those who’ve been in foreclosure without a resolution is just a day off its record high set in November but at 1060 days is still nearly three years…

December 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…)