Sunday, October 15, 2017

September's retail sales, consumer prices and producer price index; August's business inventories and job openings

the key reports released this past week were Retail Sales for September and Business Sales and Inventories for August from the Census Bureau, and the September Consumer Price Index and the September Producer Price Index from the Bureau of Labor Statistics...in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for August...

September CPI up 0.5% on Gasoline Price Spike

the consumer price index increased by 0.5% in September, as gasoline prices spiked after the Texas Gulf Coast refineries were shut down by Hurricane Harvey, accounting for about three-fourths of the month’s overall price increase...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.5% in September after rising 0.4% in August. 0.1% in July, being unchanged in June and after falling 0.1% in May....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 245.519 in August to 246.819 in September, which left it statistically 2.233% higher than the 241.428 index reading of last September, which is reported as a 2.2% year over year increase...with higher prices for gasoline driving the gain in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, with the unadjusted core index rising from 252.460 to 252.941, which put it 1.69% ahead of its year ago reading of 248.731...

the volatile seasonally adjusted energy price index increased by 6.1% in September, after it had risen 2.8% in August but after it fell by 0.1% in July, 1.6% in June, and 2.7% in May...however, energy prices are now averaging 10.1% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were up by 12.6% in September, while the index for energy services fell by 0.2%, after falling 0.1% in August, 0.2% in July and 0.5% in June... the increase in the energy commodity index included a 13.0% jump in the price of gasoline, the largest component, and a 8.2% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.8%…within energy services, the index for utility gas service fell by 0.8% after decreasing by 0.5% in August and 2.3% in July, but utility gas is still priced 3.8% higher than it was a year ago, while the electricity price index was unchanged for the second month in a row....energy commodities are now priced 18.9% above their year ago levels, with gasoline prices averaging 19.3% higher than they were a year ago...meanwhile, the energy services price index is now 2.2% higher than last September, as electricity prices have also risen by 1.7% over that period..

the seasonally adjusted food price index was up 0.1% in September, after rising 0.1% in August, 0.2% in July, being unchanged in June, rising 0.2% in May, 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as the index for food purchased for use at home was unchanged in September, while prices for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.4% and prices at full service restaurants both rose 0.2%, while food prices at schools rose 2.1%...

in the food at home categories, the price index for cereals and bakery products increased by 0.1%, as prices for bread fell 0.7% while other bakery product prices rose 1.0%...the price index for the meats, poultry, fish, and eggs group was down 0.4% as beef prices fell 0.7% and ham prices fell 2.2%, while the index for dairy products was 0.6% lower on 1.6% decrease in the price of fresh milk other than whole...the fruits and vegetables index was 0.2% lower on a 0.8% decrease in prices for fresh vegetables, and a 1.5% decrease in prices for frozen fruits and vegetables...on the other hand, the beverages index was 0.4% higher as roast coffee prices were up 1.3% and carbonated drink prices rose 0.5%....lastly, prices in the ‘other foods at home’ category were 0.3% lower on average, as butter prices fell 2.0% and salad dressing prices were 0.6% lower.......among food at home line items, only bacon, which is now priced 13.4% higher than a year ago, has seen a price change greater than 10% 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 0.1% in September after rising by 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods fell by 0.2%, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust September retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.4% lower on a 1.5% decrease in prices for laundry appliances and a 3.2% drop in prices for dishes and flatware, while the apparel price index was 0.1% lower as a 3.2% increase in prices for men's suits and outerwear was offset by a 5.1% decrease in prices for women's outwear...prices for transportation commodities other than fuel were down 0.3%, as prices for new cars were down 0.5% while prices for motor oil, coolant, and fluids fell 0.9%...meanwhile, prices for medical care commodities were 0.8% lower on a 1.4% decrease in nonprescription drug prices...on the other hand, the recreational commodities index was unchanged as another 1.5% drop in TV prices was offset by a 1.0% increase in prices for film and photographic supplies and a 1.2% increase in the index for toys, games, hobbies and playground equipment...at the same time, the education and communication commodities index was 1.2% lower on 1.9% decreases in prices for college textbooks and for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.4% on 0.8% higher beer prices, while the price index for ‘other goods’ was up 0.5% on a 1.1% increase in the index for hair, dental, shaving, and other personal care products and a 1.7% increase in prices for stationery, gift wrap and other personal paper supplies..

within core services, the price index for shelter rose 0.3% on a 0.2% increase in rents, a 0.2% increase in owner's equivalent rent, and a 1.7% increase in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.3% and other household operation costs were unchanged....meanwhile, the index for medical care services was up 0.1%, as prices for both hospital services and physicians' services were up 0.2% while health insurance was 0.2% lower...at the same time, the transportation services index was 0.3% higher on an 1.8% increase in intracity mass transit fees and 0.8% higher motor vehicle repairs....the recreation services index rose 0.2% as film processing rose 2.1% and video & audio rental services rose 1.2%, while the index for education and communication services also rose 0.2% as wireless telephone services rose 0.4% and college tuitions rose 0.6%...lastly, the index for other personal services was unchanged as tax return services rose 0.1% and legal services fell 0.2%...among core prices, only the index for clocks, lamps, and decorator items, which is now 13.1% lower than a year ago, and prices for wireless phone services, which are now 11.7% lower than a year ago, have seen prices drop by more than 10% over the past year, while no core line item has seen prices rise by a double digit magnitude in that span..  

Retail Sales Increased by 1.6% in September after July and August Sales were Revised Higher

seasonally adjusted retail sales increased in September after retail sales for July and August were both revised higher...the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $483.9 billion during the month, which was 1.6 percent (±0.5%) higher than August's revised sales of $476.5 billion and 4.4 percent (±0.7%) above the adjusted sales in September of last year...August's seasonally adjusted sales were revised from $474.8 billion to $476.5 billion, while July sales were also revised higher, from $475.8 billion to $476,752 million, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 4.8%, from $491,572 million in August to $468,192 million in September, while they were up 4.1% from the $449,948 million of sales in September a year ago...

since it's the end of the quarter for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what it shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month's September "advance" report figure in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called "preliminary") as of this report, with the new July to August percentage change under "Jul 2017 (r)" (revised) and the August 2016 to August 2017 percentage change as revised in the 2nd column of the pair; for your reference, the table of last month’s advance estimate of August sales, before this month's revisions, is here.... then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and then from the same three months (July, August and September) of a year ago....that first column of that pair gives us a snapshot comparison of 2nd quarter sales to third quarter sales which, when adjusted for price changes, can useful in estimating the impact of this report on 3rd quarter GDP:

September 2017 retail sales table

from this table, we can see that the 1.6% increase in September sales was underpinned by a 3.6% increase to $100,061 million in seasonally adjusted sales at motor vehicle and parts dealers; without which retail sales would have shown a 1.0% increase for the month...given that last week's September light vehicle sales report from Wards Automotive indicated a 15.2% increase in vehicles sales as hurricane victims replaced their damaged cars, we'd think even that 3.6% increase is an underestimation based on limited data and will likely be revised higher over the next two months....also note that there was an 5.8% increase to $39,414 million in sales at gas stations, which was driven by 13% higher prices for gasoline, which means retail sales ex vehicles and gasoline were only up 0.5%...since many gas stations in Texas and Florida were closed or out of fuel after the hurricanes, real gasoline sales almost certainly fell during the month, despite the higher dollar volume of sales...

nonetheless, this report will change the complexion of the first estimate of 3rd quarter GDP, which will be out in a couple weeks...as we saw when we reviewed the Consumer Price report earlier, the composite of all goods less food and energy goods fell by 0.2%, which means real sales will be on average 0.2% higher than the percentage increase reported here....that boost in unit sales from lower prices is especially true for the new car component, which saw prices fall 0.5% in September...when we looked at the August report Personal Income and Outlays from the BEA a couple weeks back, we computed that 3rd quarter real PCE had grown at a 1.41% annual rate for the two months of the 3rd quarter, and would only add 0.98 percentage points to the growth rate of GDP...although we did not note it at the time, that weakness in the first two months of the 3rd quarter was due to falling personal consumption expenditures of durable goods, and specifically of automobile sales in August...hence, this report not only shows the reversal of the decline in auto sales and strong real growth overall, it also revises the goods component of PCE for July and August higher at the same time...

Producer Prices Up 0.4% in September on Higher Priced Gasoline, Trade Services

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in September, as prices for finished wholesale goods increased 0.7%, while margins of final services providers increased by 0.4%...this followed an August report that indicated the PPI was up 0.2%, with prices for finished wholesale goods up 0.5%, and margins of final services providers up 0.1%, and a July report that indicated the PPI was down 0.1%, with prices for finished wholesale goods down 0.1%, and margins of final services providers down 0.2%....excluding food, energy and trade services, core producer prices were up 0.2% in September, after rising 0.2% in August and being unchanged in July...on an unadjusted basis, producer prices are now 2.6% higher than a year earlier, the highest annual producer inflation reading since February 2012, while the core producer price index increased to 2.1% higher than a year earlier...

as we noted, the price index for final demand for goods, aka 'finished goods', rose 0.7% in September, after rising 0.5% in August, slipping 0.1% in July, being unchanged in June, falling by a revised 0.5% in May, rising by 0.5% in April, falling by 0.2% in March, and rising by 0.4% in February and by 1.0% in January... the index for wholesale energy prices rose 3.4% in September after rising 3.3% in August, while the price index for wholesale foods was unchanged and the index for final demand for core wholesale goods (ex food and energy) was 0.3% higher...the largest wholesale energy price change was a 10.9% increase in the wholesale price of gasoline, which by itself accounted for two-thirds of the increase in the September goods index....meanwhile, a 20.6% increase in the wholesale price of eggs was offset by lower wholesale prices for beef and veal, chicken, seafood and dairy products....among wholesale core goods, wholesale prices for motor homes rose 1.5% and the index for appliances was up 0.9%…

at the same time, the index for final demand for services rose 0.4% in September, after rising 0.1% in August, falling by 0.2% in July, and rising by a revised 0.3% in May and in June, as the September index for final demand for trade services rose 0.8%, the index for final demand for transportation and warehousing services rose 1.0%, while the index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for food and alcohol wholesalers increased 2.5%, while margins for chemicals and allied products wholesalers rose 2.3%... among transportation and warehousing services, margins for airline passenger services were 1.4% higher...in the core final demand for services index, margins for passenger car rentals rose 9.7%, the index for deposit services (partial) increased 3.3% while prices for residential real estate loans (partial) fell 2.6%..

this report also showed the price index for processed goods for intermediate demand was 0.5% higher, after rising 0.5% in August, falling 0.1% in July, but after rising by a revised 0.1% June and falling by a revised 0.1% in May....the price index for intermediate energy goods rose 2.4% on a 10.9% increase for gasoline, while prices for intermediate processed foods and feeds fell 0.6% on a 3.5% drop in wholesale prices for processed poultry, and the core price index for processed goods for intermediate demand less food and energy was 0.2% higher...prices for intermediate processed goods are now 4.3% higher than in September a year ago, now the eleventh consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods fell 0.4% in September, after falling 0.7% in August and 0.4% in July, but after rising a revised 0.5% in June and falling a revised 1.0% in May....the price index for crude energy goods fell 0.8%, even as crude oil prices rose 1.1%, while the index for unprocessed foodstuffs and feedstuffs fell 1.7%, as prices for slaughter hogs dropped 18.4% and prices for raw milk fell 3.9%...however, the index for core raw materials other than food and energy materials rose 2.0%, as prices for nonferrous metal ores rose 6.5% and wholesale prices for copper scrap rose 7.2% ...this raw materials index is still up 7.0% from a year ago, up from the year over year increase of 6.8% that we saw in August...

lastly, the price index for services for intermediate demand rose 0.1% in September after rising 0.2% in August, but after falling 0.3% in July, which had been its first decrease since last September... the index for trade services for intermediate demand was 0.4% higher, as margins for intermediate machinery and equipment parts and supplies wholesalers rose 1.8 percent…the index for transportation and warehousing services for intermediate demand was up 0.6%, as intermediate prices for air mail and package delivery services other than USPS rose 1.3%...on the other hand, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.1% lower, as margins for business loans (partial) fell 3.7%, and intermediate prices for loan services (partial) fell 2.9%...over the 12 months ended in September, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.7% higher than it was a year ago...

Business Sales and Business Inventories Both Up 0.7% in August

after the release of the September retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data from that September report and the earlier published August wholesale and factory data to give 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 $1,369.2 billion in August, up 0.7 percent (±0.2%) from July revised sales, and up 5.5 percent (±0.4 percent) from August sales of a year earlier....note that total July sales were concurrently revised up from the originally reported $1,358.8 billion to $1,359.5 billion....manufacturer's sales were 0.5% higher at $475,942 million in August, while retail trade sales, which exclude restaurant & bar sales from the revised August retail sales we reported earlier, fell 0.1% to $419,884 million, while wholesale sales rose 1.7% to $473,383 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,889.0 billion at the end of August, also up 0.7 percent (±0.1%) from July, and 3.6 percent (±0.3%) higher than in August a year earlier...the value of end of July inventories were revised to $1,875.9 billion from the $1,873.9 billion reported last month...seasonally adjusted inventories of manufacturers were estimated to be valued at $655,564 million, 0.4% higher than in July, inventories of retailers were valued at $625,351 million, 0.7% more than in July, while inventories of wholesalers were estimated to be valued at $608,083 million at the end of August, 0.9% higher than in July...

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index...while we reviewed the September index earlier, the producer price index for August indicated that prices for finished goods increased 0.5%, prices for intermediate processed goods were 0.4% higher, while prices for unprocessed goods were 0.7% lower...retail inventories are all finished goods, as are the lion's share of wholesale inventories, while factory inventories, which we looked at last week, are roughly evenly split between the three stages of production...a gross increase of 0.7% in nominal inventories thus implies an significant real increase in inventories at all stages, in addition to the real increase that was seen in July...since real 2nd quarter inventories were little changed, these real inventory increases in the 3rd quarter will substantially boost 3rd quarter GDP...

Job Openings, Hiring, Layoffs and Job Quitting All Lower in August

the Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 58,000, from 6,140,000 in July to 6,082,000 in August, after July job openings were revised 30,000 lower, from 6,170,000 to 6,140,000...August jobs openings were still 10.8% higher than the 5,491,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 4.0% in August, which was still up from 3.7% a year ago...although job openings decreased in many sectors, the the largest percentage drop was the 51,000 job opening decrease to 93,000 openings in the educational services sector (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in August, seasonally adjusted new hires totaled 5,430,000, down by 91,000 from the revised 5,521,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed fell from 3.8% to 3.7%, the same as in August a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 134,000, from 5,362,000 in July to 5,228,000 in August, while the separations rate as a percentage of the employed fell from 3.7% to 3.6%, which was still up from 3.5% in August a year ago (see table 3)...subtracting the 5,228,000 total separations from the total hires of 5,430,000 would imply an increase of 202,000 jobs in August, somewhat more than the revised payroll job increase of 169,000 for August reported by the September establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,124,000 of us voluntarily quit our jobs in August, down by 70,000 from the revised 3,194,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.2% to 2.1% of total employment, the same rate it was at a year earlier (see details in table 4)....in addition to those who quit, another 1,729,000 were either laid off, fired or otherwise discharged in August, down by 60,000 from the revised 1,789,000 who were discharged in July, as the discharges rate remained unchanged at 1.2% of all those who were employed during the month, while it was up from the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 376,000 in August, down from 379,000 in July, for an 'other separations rate’ of 0.3%, the same as in July but up from 0.2% in August of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

 

(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, October 8, 2017

September’s jobs; August’s trade deficit, new construction, and factory inventories

in addition to the Employment Situation Summary for September from the Bureau of Labor Statistics, this week also saw the release of four August reports from the Census Bureau that entail large contributions to 3rd quarter GDP: the August report on our International Trade, the August report on Construction Spending (pdf), the Full Report on Manufacturers' Shipments, Inventories and Orders for August and the August report on Wholesale Trade, Sales and Inventories...also released from the Fed this week was the Consumer Credit Report for August, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $13.1 billion, or at a 4.2% annual rate, as non-revolving credit expanded at a 3.2% rate to $2,766.4 billion and revolving credit outstanding rose at a 7.0% rate to $999.7  billion....

this week’s privately issued reports included the ADP Employment Report for September, the September report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 18.47 million annual rate in September, up from the 16.03 million annual pace in August and the highest vehicle sales rate since summer 2005, and the Mortgage Monitor for August (pdf) released by Black Knight Financial Services, which indicated that 3.93% of all mortgages were delinquent in August, up from 3.90% in July but down from 4.24% in August of 2016, and that 0.76% of all mortgages were in the foreclosure process, down from from 0.78% in July and down from 1.04% a year ago...both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM) were also released: the September Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 60.8% in September, up from 56.3% in August, suggesting a somewhat more robust expansion in manufacturing firms nationally, and the September Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to a twelve year high of 59.8% in September, up from 55.3% in August, indicating a somewhat larger plurality of service industry purchasing managers reported expansion in various facets of their business in September...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...

Employers Cut 33,000 Jobs in September; Unemployment Rate Falls to 4.2%, a 16 Year Low

the Employment Situation Summary for September was impacted by both Hurricanes Harvey and Irma as recovery from Harvey was far from complete at the time of the two surveys while Irma made landfall on September 10th, the beginning of the week that the surveys were conducted…here is the BLS explanation of how those hurricanes affected the data:

Our analysis suggests that the net effect of these hurricanes was to reduce the estimate of total nonfarm payroll employment for September. There was no discernible effect on the national unemployment rate. No changes were made to either the establishment or household survey estimation procedures for the September figures. For both surveys, collection rates generally were within normal ranges, both nationally and in the affected states. In the establishment survey, employees who are not paid for the pay period that includes the 12th of the month are not counted as employed. In the household survey, persons with a job are counted as employed even if they miss work for the entire survey reference week (the week including the 12th of the month), regardless of whether or not they are paid.

hence, since those who were temporarily laid off because of the hurricanes were not counted as employed by the establishment survey, it projected a seasonally adjusted loss of 33,000 jobs in September, the first drop in seven years....in addition, the previously estimated payroll job increase for July was revised down from 189,000 to 138,000, while the payroll jobs increase for August was revised up from 156,000 to 169,000…that means that this report represents a total of 71,000 fewer seasonally adjusted payroll jobs than were reported last month...the unadjusted data, however, shows that there were actually 340,000 more payroll jobs in September, largely due to the beginning of the school year, so the seasonal adjustment in effect knocked the headline jobs number down to a negative.. 

the seasonally adjusted job changes for September indicated job increases in resource extraction, construction, and most service sectors, as the jobs losses were concentrated in the leisure and hospitality sector, which lost 111,000 jobs, as a net of 104,700 workers in bars and restaurants were laid off and not paid....elsewhere, the only job losses were in the information sector, with a reduction of 9,000 payroll jobs, in retail sales, which saw 2,900 fewer employed, in non-durable manufacturing, which shed 5,000 employees, and the miscellaneous "other services", which also saw employment fall by 5,000...sectors adding more than 10,000 jobs in September included transportation and warehousing, which gained 21,800 spots, as 9,400 employees were added by ground passenger transporters, private educational services, which added 13,900 employees, health care and social assistance, which added 13,100, jobs, and the broad professional and business services sector, which added 13,000 jobs, with 5,900 of those in temporary help employment services...

with the loss of jobs in the low paying leisure and hospitality sector, the September establishment survey also showed that average hourly pay for all employees rose by rose by 12 cents to $26.55 an hour, after it had increased by 4 cents an hour in August; at the same time, the average hourly earnings of production and non-supervisory employees increased by 9 cents to $22.23 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in September, while hours for production and non-supervisory personnel was unchanged at 33.6 hours, after their August workweek figure was revised lower by a tenth of an hour...at the same time, the manufacturing workweek was unchanged at 40.7 hours without a revision, while average factory overtime was likewise unchanged at 3.3 hours...

meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who reported being employed, even if they didn’t work during the survey week, rose by an estimated 906,000 to 154,345,000, while the estimated number of unemployed fell by 331,000 to 6,801,000, and hence the labor force increased by a total of 575,000...since the working age population had grown by 205,000 over the same period, that meant the number of employment aged individuals who were 'not in the labor force' fell by 368,000 to 94,417,000, which was enough to increase the labor force participation rate from 62.9% to 63.1%...in addition, the large increase in number employed was also enough to boost the employment to population ratio, which we could think of as an employment rate, by 0.3%, as it rose from 60.1% to 60.4%...at the same time, with the relatively large decrease in the number unemployed was also enough to cut the unemployment rate from 4.4% to 4.2%, the lowest since January 2001....meanwhile, the number of those who reported they were forced to accept just part time work fell by 133,000, from 5,255,000 in August to 5,122,000 in September, which lowered the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.6% in August to 8.3% of the labor force in September, the lowest since June 2007....

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..

August Trade Deficit Down 2.7% on Higher Exports of Consumer and Capital Goods

our trade deficit fell by 2.7% in August as the value of our exports increased while the value of our imports decreased....the Census report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit fell by $1.2 billion to $42.4 billion in August from a revised July deficit of $43.56 billion...the value of our August exports rose by $0.8 billion to $195.3 billion on a $0.6 billion increase to $129.2 billion in our exports of goods and a $0.2 billion increase to $66.1 billion in our exports of services, while our imports fell by $0.4 billion to $237.7 billion on a $0.3 billion decrease to $193.6 billion in our imports of goods while our imports of services fell $0.1 billion to $44.1 billion...export prices were on average 0.6% higher in August, so the relative change in real August exports would be lower than the nominal dollar amount by that percentage, while import prices were 0.6% higher, meaning that relative real imports were similarly smaller than the nominal dollar values reported here by that percentage...

the increase in our August exports of goods resulted from higher exports of consumer goods and of capital goods, which were partially offset by lower exports of industrial supplies and farm products...referencing the Full Release and Tables for August (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $1015 million to $16,760 million on a $646 million increase in our exports of pharmaceuticals and a $252 million increase in our exports of gem diamonds, and that our exports of capital goods rose by $407 million to $45,295 million on a $372 million increase of in our exports of telecommunications equipment and a $225 million increase in our exports of semiconductors...in addition, our exports of automotive vehicles, parts, and engines rose by $60 million to $13,029 million on a $476 million increase in our exports of new and used passenger cars which was offset by a $516 million decrease in our exports of trucks, buses, and special purpose vehicles...partially offsetting those increases, our exports of industrial supplies and materials fell by $954 million to $36,552 million on a $717 million decrease in our exports of fuel oil, and a $354 million decrease in our exports of other petroleum products, and our exports of foods, feeds and beverages fell by $417 million to $11,830 million on a $239 million decrease in our exports of corn and a $152 million decrease in our exports of wheat....in addition, there was also $28 million decrease to $5,211 million in our exports of other goods not categorized by end use..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of industrial supplies and of capital goods were responsible for the $0.3 billion drop in our goods imports, because our imports of motor vehicles rose at the same time...our imports of industrial supplies and materials fell by $523 million to $39,997 million, on a $206 million decrease in our imports of finished metal shapes and a $197 million decrease in our imports of copper, while our imports of capital goods fell by $495 million to $53,660 million on a $286 million decrease in our imports of computer accessories and a $214 million decrease in our imports of civilian aircraft...in addition, our imports of foods, feeds, and beverages fell by $80 million to $11,570 million on a $149 million decrease in our imports of fish and shellfish. and our imports of other goods not categorized by end use fell by $94 million to $7,857 million...partially offsetting the decreases in those categories, our imports of automotive vehicles, parts and engines rose by $675 million to $30,035 million on a $455 million increase in our imports of passenger cars, and our imports of consumer goods rose by $99 million to $48,877 million on a $542 increase in our imports of pharmaceuticals...

to gauge the impact of July and August goods trade on 3rd quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can estimate that 2nd quarter real exports of goods averaged 125,251 million monthly in 2009 dollars, while similarly inflation adjusted July and August goods exports were at 126,270 million and 125,216 million respectively, in that same 2009 dollar quantity index representation.... annualizing the change between the second and third quarter figures, we find that the 3rd quarter's real exports are running at a 1.58% annual rate above those of the 2nd quarter, or at a pace that would add about 0.13 percentage points to 3rd quarter GDP if continued through September.....in a similar manner, we find that our 2nd quarter real imports averaged 187,682 million monthly in chained 2009 dollars, while inflation adjusted July and August imports were at 188,073 million and 186,977 million respectively...that would indicate that so far in the 3rd quarter, real imports have been shrinking at annual rate of around 0.33% from those of  the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 0.33% rate would conversely add about 0.04 percentage points to 3rd quarter GDP....hence, if our July and August trade deficit in goods is maintained throughout September, our improving balance of trade in goods would add about 0.17 percentage points to the growth of 3rd quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all the relevant price changes...

Construction Spending Clips 55 basis points from Q3 GDP Despite 0.5% August Rise

the August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $1,218.3 billion, which was 0.5 percent (±1.3 percent)* above the revised estimate of $1,212.3 billion in construction spending in July, but 0.3 percent (±1.8%)* below the estimated annualized level of construction spending of August of last year....July construction spending was originally reported at a $1,211.5 billion annual rate, and it has thus been revised up to a $1,212.3 billion annual rate, while June construction spending was revised up from a $1,221.6 billion annual rate to a $1,226.4 billion rate, which suggests that growth in 2nd quarter GDP was underestimated by a tenth of a percent...

quoting further details from the Census release: "Spending on private construction was at a seasonally adjusted annual rate of $954.8 billion, 0.4 percent (±1.2 percent)* above the revised July estimate of $950.5 billion. Residential construction was at a seasonally adjusted annual rate of $520.9 billion in August, 0.4 percent (±1.3 percent)* above the revised July estimate of $518.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $433.9 billion in August, 0.5 percent (± 1.2 percent)* above the revised July estimate of $432.0 billion.  In August, the estimated seasonally adjusted annual rate of public construction spending was $263.5 billion, 0.7 percent (±2.3 percent)* above the revised July estimate of $261.7 billion. Educational construction was at a seasonally adjusted annual rate of $67.3 billion, 3.5 percent (±3.9 percent)* above the revised July estimate of $65.0 billion. Highway construction was at a seasonally adjusted annual rate of $81.9 billion, 1.3 percent (±5.1 percent)* below the revised July estimate of $83.0 billion."

construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of August spending reported in this release on 3rd quarter GDP is difficult because all the figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price... in lieu of the multiple prices indexes for construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), we've opted to use the producer price index for final demand construction as an inexact shortcut to make that adjustment and thereby produce an estimate...

that producer price index showed that aggregate construction costs rose 0.3% in August after rising 1.2% in July, 0.2% in and June and being unchanged from April to May...on that basis, we can estimate that construction costs for August were roughly 1.5% more than June, roughly 1.7% more than those of May and 1.7% more than those of April, and obviously 0.3% more than those of July...we then use those percentages to inflate lower priced spending figures for each of those months, which is arithmetically the same as adjusting higher priced July and August construction spending downward, for comparison purposes...annualized construction spending in millions of dollars for the second quarter is given as 1,226,429 for June, 1,236,722 for May, and 1,217,658 for April, while it was $1,212,277 million for July and $1,218,312 million for August...thus to compare July and August’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((1,218,312 + 1,212,277 * 1.003) / 2 ) / ((1,226,429 * 1.015 + 1,236,722 * 1.017 + 1,217,658 *1.017) / 3) = 0.97605, meaning real construction over July and August was down 2.2395% vis a vis the 2nd quarter...in GDP terms, that means real construction for the 3rd quarter fell at a 9.24% annual rate from that of the 2nd quarter, or at a pace that would subtract about 0.55 percentage points from 3rd quarter GDP, should September follow the same trend… 

Factory Shipments Up 0.5% in August, Factory Inventories Up 0.4%

the Census Bureau's own summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for August, which includes revisions to last week's advance durable goods report, is quite complete, so we'll just quote directly from it here:

New orders for manufactured goods in August, up two of the last three months, increased $5.4 billion or 1.2 percent to $471.7 billion, the U.S. Census Bureau reported today. This followed a 3.3 percent July decrease. Shipments, up eight of the last nine months, increased $2.2 billion or 0.5 percent to $475.9 billion. This followed a 0.2 percent July increase. Unfilled orders, up two of the last three months, increased $0.2 billion or virtually unchanged to $1,132.6 billion. This followed a 0.3 percent July decrease. The unfilled orders to-shipments ratio was 6.77, unchanged from July. Inventories, up nine of the last ten months, increased $2.9 billion or 0.4 percent to $655.6 billion. This followed a 0.4 percent July increase. The inventories-to shipments ratio was 1.38, unchanged from July.

New orders for manufactured durable goods in August, up two of the last three months, increased $4.5 billion or 2.0 percent to $233.5 billion, up from the previously published 1.7 percent increase. This followed a 6.8 percent July decrease. Transportation equipment, also up two of the last three months, led the increase, $3.7 billion or 5.1 percent to $77.5 billion. New orders for manufactured nondurable goods increased $0.9 billion or 0.4 percent to $238.2 billion.

Shipments of manufactured durable goods in August, up three of the last four months, increased $1.3 billion or 0.5 percent to $237.8 billion, up from the previously published 0.3 percent increase. This followed a 0.1 percent July increase. Machinery, up six of the last seven months, led the increase, $0.5 billion or 1.7 percent to $31.6 billion. Shipments of manufactured nondurable goods, up four of the last five months, increased $0.9 billion or 0.4 percent to $238.2 billion. This followed a 0.3 percent July increase. Petroleum and coal products, up two consecutive months, drove the increase, $0.9 billion or 2.2 percent to $42.3 billion.

Unfilled orders for manufactured durable goods in August, up two of the last three months, increased $0.2 billion or virtually unchanged to $1,132.6 billion, unchanged from the previously published increase. This followed a 0.3 percent July decrease. Fabricated metal products, up seven of the last eight months, drove the increase, $0.4 billion or 0.6 percent to $79.2 billion.

Inventories of manufactured durable goods in August, up thirteen of the last fourteen months, increased $1.5 billion or 0.4 percent to $400.8 billion, up from the previously published 0.3 percent increase. This followed a 0.5 percent July increase. Machinery, up nine of the last ten months, led the increase, $0.6 billion or 0.9 percent to $69.1 billion. Inventories of manufactured nondurable goods, up three consecutive months, increased $1.4 billion or 0.6 percent to $254.8 billion. This followed a 0.3 percent July increase. Petroleum and coal products, up two consecutive months, led the increase, $1.3 billion or 3.7 percent to $36.4 billion..

to gauge the effect of August factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was up 0.2% to $228,679 million; the value of work in process inventories was up 0.7% at $203,637 million, and materials and supplies inventories were valued 0.5% higher at $223,248 million...the producer price index for August indicated that prices for finished goods increased 0.5%, prices for intermediate processed goods were 0.4% higher, while prices for unprocessed goods were 0.7% lower....assuming similar valuations for like inventories, that would suggest that August's real finished goods inventories shrank by roughly 0.3%, while real inventories of intermediate processed goods were 0.3% greater, and that real raw material inventory inventories were 1.2% greater...those are in addition to July’s inventories, which saw all stages of factory inventories higher…since real 2nd quarter inventories were little changed, any real inventory increases in the 3rd quarter will boost 3rd quarter GDP...

 

(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, October 1, 2017

2nd quarter GDP, 3rd revision; August’s income and outlays, durable goods, and new home sales

the key economic releases of the past week were the 3rd estimate of 2nd quarter GDP from the Bureau of Economic Analysis, and the August report on Personal Income and Spending, also from the BEA, which includes 2 months of data on personal consumption expenditures and hence accounts for more than 46% of 3rd quarter GDP....other widely watched releases included the August advance report on durable goods and the August report on new home sales, both from the Census bureau, and the Case-Shiller Home Price Index for July, which is an index generated by averaging relative prices of May, June and July repeat sales home sales, and which reported that home prices nationally for those 3 months averaged 5.9% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 5.8% YoY increase shown in the prior report...the week also saw the release of the Chicago Fed National Activity Index (CFNAI) for August, a weighted composite index of 85 different economic metrics, which fell to –0.31 in August, down from a revised +0.03 in July;  that left the 3 month moving average of the index at –0.04, down from zero in July, which indicates national economic activity has been slightly below the historical trend over the summer months...

this week saw the release of the last three regional Fed manufacturing surveys for September: the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity index rose from +17.0 in August to +21.3 in September, their highest reading in seven months, indicative of an ongoing robust expansion in the Texas oil patch economy; the Richmond Fed 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 rose to +19 in September from +14 in August, also suggesting a strong ongoing expansion in that region's manufacturing, and the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +17 in September, up from +16 in August and +10 in July, also suggesting an ongoing expansion of that region's manufacturing.....

2nd Quarter GDP Revised to Indicate Growth at a 3.1% Rate, the Strongest Since Q1 of 2015

the Third Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 3.1% annual rate in the quarter, revised from the 3.0% growth rate reported in the second estimate a month ago, largely because inventory investment increased more than was previously estimated...in current dollars, our second quarter GDP grew at a 4.1% annual rate, up from the 4.0% reported in the 2nd estimate, increasing from what would extrapolate to $19,057.7 billion annually in the 1st quarter of this year to an annualized $19,250.0 billion in the 2nd quarter, with the headline 3.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.0%, aka the GDP deflator, was applied to the current dollar change...

remember that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 2nd 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 the 3rd quarter of 2013; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; table 4, which shows the change in the price indexes for each of the components; and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 2nd quarter second estimate, which this estimate revises, is here...

growth of real personal consumption expenditures (PCE), the largest component of GDP, remained the same as the 3.3% growth rate reported last month in this estimate…that growth rate figure was arrived at by deflating the 3.6% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated that consumer inflation was at a 0.3% annual rate in the 2nd quarter, which was statistically unrevised from the PCE inflation rate reported a month ago...real (inflation adjusted) consumption of durable goods grew at a 5.4% annual rate, which was revised from the 5.9% growth rate shown in the second estimate, and added 0.56 percentage points to GDP, as an increase in real consumption of recreational goods and vehicles at a 13.2% rate accounted for more than half of the durables goods increase...real personal consumption of nondurable goods rose at a 4.2% annual rate, revised from the 4.3% rate shown in the 2nd estimate, and added 0.61 percentage points to 2nd quarter economic growth, as all non-durable goods saw higher real consumption in the quarter….at the same time, real consumption of services rose at a 2.3% annual rate, revised from the 2.1% growth rate reported last month, and added 1.11 percentage points to the final GDP tally, as real consumption of housing and utilities rose at a 3.4% rate and accounted for nearly 40% of the 2nd quarter growth in services...

meanwhile, seasonally adjusted real gross private domestic investment grew at a 3.9% annual rate in the 2nd quarter, revised from the 3.6% growth estimate reported last month, even as real private fixed investment grew at a 3.2% rate, rather than at the 3.6% rate reported in the second estimate, because inventory growth was greater than previously estimated....real investment in non-residential structures was revised from growth at a 6.2% rate to growth at a 7.0% rate, while real investment in equipment was revised to show growth at a 8.8% rate, unchanged from the growth rate previously reported...at the same time, the quarter's investment in intellectual property products was revised lower, from growth at a 4.9% rate to growth at a 3.7% rate, while the contraction rate of residential investment was revised from -6.5% to -7.3% annually…after those revisions, the increase in investment in non-residential structures added 0.20 percentage points to the 2nd quarter's growth rate, the increase in investment in equipment added 0.48 percentage points to the quarter's growth, the smaller growth in investment in intellectual property added 0.15 percentage points, while the decrease in investment in residential structures subtracted 0.30 percentage points from the 2nd quarter's GDP...

at the same time, investment in real private inventories grew by an inflation adjusted $5.5 billion in the 2nd quarter, revised from the previously reported real inventory growth of $1.8 billion...this came after inventories had grown at an inflation adjusted $1.2 billion rate in the 1st quarter, and hence the $4.3 billion increase in real inventory growth added 0.12 percentage points to the quarter's growth rate, in contrast to the 0.02 percentage point addition that was shown in the advance estimate....however, since growth in inventories indicates that more of the goods produced during the quarter were left "sitting on the shelf”, their increase by $4.3 billion meant that real final sales of GDP were relatively smaller by that much, and hence real final sales of GDP were revised from growth at a 3.0% rate to growth at a 2.9% rate...

the previously reported increase in real exports was revised smaller with this estimate, while at the same time the reported increase in real imports was also revised lower by a similar amount, and as a result the net impact of our foreign trade was little changed from what was previously reported...our real exports grew at a 3.5% rate rather than the 3.7% rate reported in the second 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 growth added 0.42 percentage points to the 2nd quarter's growth rate, down from the 0.45 percentage point addition shown in the previous report....meanwhile, the previously reported 1.6% increase in our real imports was revised to a 1.5% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their increase subtracted 0.22 percentage points from 2nd quarter GDP....thus, our improving trade balance added a net 0.21 percentage points (rounded) to 2nd quarter GDP, essentially the same as was shown in the second estimate…

finally, there was a small upward revision to real government consumption and investment in this 3rd estimate, as the entire government sector shrunk at a 0.2% rate, revised from the shrinkage at a 0.3% rate previously reported...real federal government consumption and investment was seen to have grown at a 1.9% rate from the 1st quarter in this estimate, which was essentially unrevised from the growth rate shown in the 2nd estimate...real federal outlays for defense grew at a 4.7% rate, and added 0.18% percentage points to 2nd quarter GDP, while all other federal consumption and investment shrunk at a 1.9% rate, also the same as was previously reported, and subtracted 0.05% percentage points from 2nd quarter GDP....meanwhile, real state and local consumption and investment shrunk at a 1.5% rate in the quarter, which was revised from the 1.7% contraction rate reported in the 2nd estimate, and subtracted 0.16 percentage points from 2nd quarter GDP....note that 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, thus indicating an increase in the output of those goods or services...

August Personal Income up 0.2%; 2 Months PCE Would Add 0.98 Percentage Points to Q3 GDP

the August report Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 3rd quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for more than 2/3rds of GDP, and the PCE price index, the inflation gauge the Fed targets, and 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 August's 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 amounts at an annual rate, ie, they tell us how much income and spending would increase for a year if July’s adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's 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 July to August....

thus, when the opening line of the press release for this report tell us "Personal income increased $28.6 billion (0.2 percent) in August", they mean that the annualized figure for seasonally adjusted personal income in August, $16,468.8 billion, was $28.6 billion, or somewhat less than 0.2% greater than the annualized  personal income figure of $16,440.2 billion for July; the actual, unadjusted change in personal income for July to August is not given...similarly, annualized disposable personal income, which is income after taxes, rose by 0.1%, from an annual rate of an annual rate of $14,402.5 billion in July to an annual rate of $14,417.4 billion in August....the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also thus annualized...in August, the largest contributors to the $28.6 billion annual rate of increase in personal income were a $5.1 billion increase in rental income and a $9.6 billion increase in personal current transfer receipts…wages and salaries, on the other hand, only represented $3.3 billion of August's annualized increase in personal income...

for personal consumption expenditures (PCE), BEA reports that they increased at a $18.0 billion annual rate (rounded), or by more than 0.1 percent, as the annual rate of PCE rose from $13,372.7 billion in July to $13,390.6 in August; that happened as the July PCE figure was revised down from the originally reported $13,383.3 billion annually and prior months were slightly revised as well, all of which were already included in the concurrent 3rd estimate of 2nd quarter GDP....the current dollar increase in August spending resulted from a $26.7 billion annualized increase in spending for services, which was partially offset by a $8.8 billion decrease in annualized spending for goods, which we saw evidence of in the August retail sales report....total personal outlays for August, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $16.8 billion to $13,894.5 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $522.9 billion annual rate in August, down just a bit from the revised $524.8 billion annualized personal savings in July... hence, the personal saving rate, which is personal savings as a percentage of disposable personal income, remained unchanged at 3.6% in August...

as you know, 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....the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, and which is included in Table 9 in the pdf for this report...that index rose from 112.392 in July to 112.623 in August, a month over month inflation rate that's statistically 0.2055%, which BEA reports as an increase of 0.2 percent, following the +0.1% change in the PCE price index they reported for July...applying that August inflation adjustment to the nominal amount of spending left real PCE down 0.1% in August, after a real PCE increase of 0.2% in July ...notice that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that August's chained dollar consumption total works out to 11,890.4 billion annually, 0.071% less than July's 11,898.9 billion, a difference that the BEA rounds and reports as -0.1%...

however, to estimate the impact of the change in PCE on the change in GDP,  the month over month changes don't help us much, since GDP is reported quarterly...thus we have to compare July and August's real PCE to the the real PCE of the 3 months of the second quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 2nd quarter was represented by 11,853.0 billion in chained 2009 dollars..(note that's also what's shown in table 3 of the pdf for the revised 2nd quarter GDP report)....then, by averaging the annualized chained 2009 dollar figures for July and August, 11,898.9 billion and 11,890.4 billion, we get an equivalent annualized PCE for the two months of the 3rd quarter that we have data for so far....when we compare that average of 11,894.65 to the 2nd quarter real PCE of 11,853.0, we find that 3rd quarter real PCE has grown at a 1.41% annual rate for the two months of the 3rd quarter we have...(note the math to get that annual growth rate: (((11,898.9 + 11,890.4) / 2 ) / 11,853.0) ^ 4 = 1.01413 )...that's a pace that would add 0.98 percentage points to the growth rate of the 3rd quarter, should there be no improvement in September PCE from that average... 

August Durable Goods: New Orders U 1.7%, Shipments Up 0.3%, Inventories Up 0.3%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for August (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods grew by $3.9 billion or 1.7 percent to $232.8 billion in August, after falling by 6.8% in July...July's new orders were revised from the $229.2 billion reported last month to $228.9 billion, but the 6.8 percent month over month decrease remained the same...year to date new orders are still 5.0% above those of 2016, the same year over year change we saw in this report last month....the volatile monthly change in new orders for transportation equipment drove the headline change, as those transportation equipment orders rose $3.6 billion or 4.9 percent to $77.4 billion, on a 44.8% increase to $10,521 million in new orders for commercial aircraft....excluding new orders for transportation equipment, other new orders were up 0.2% in August, as new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 0.9% to $64,752 million...

at the same time, the seasonally adjusted value of August's shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, increased by $0.7 billion or 0.3 percent to $237.2 billion, after July shipments were revised from a increase of 0.4% to one of 0.1% from June....an increase in shipments of machinery led the August increase, as those machinery shipments rose $0.3 billion or 1.1 percent to $31.4 billion...meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 13th time in 14 months, increasing by $1.4 billion or 0.3 percent to $400.5 billion, after the increase in July inventories was revised from a 0.3% increase to a 0.4% increase...an increase in inventories of machinery were also a major factor in the August inventory increase, as they rose $0.6 billion or 0.8 percent to $69.0 billion...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the 2nd time in 3 months, but increased by just $0.1 billion to $1,132.3 billion, which is considered statistically unchanged...unfilled orders for transportation equipment fell 0.1% to $770,982 million on a 1.4% drop in unfilled orders for motor vehicles and parts, while all other unfilled rose 0.3% on a $0.5 billion or 0.6 percent increase to $79.3 billion in unfilled orders for fabricated metal products....compared to a year earlier, the unfilled order book for durable goods is now 0.8% above the level of last August, with unfilled orders for transportation equipment 0.6% below their year ago level, largely on a 1.1% decrease in the backlog of orders for commercial aircraft...

August New Home Sales

the Census report on New Residential Sales for August (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 560,000 new homes a year, which was 3.4 percent (±13.0 percent)* below the revised July rate of 580,000 new single family home sales a year and 1.2 percent (±18.5 percent)* below the estimated annual rate that new homes were selling at in August of last year....the asterisks indicates that based on their small sampling, Census could not be certain whether August new home sales rose or fell from those of July, 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 is subject to the largest revisions of any census construction series....with this report; sales new single family homes in July were revised from the annual rate of 571,000 reported last month to a 580,000 a year rate, while home sales in June, initially reported at an annual rate of 610,000 and revised to a 630,000 a year rate last month, were revised back dwon to a 614,000 a year rate with this report, and while May's annualized home sale rate, initially reported at a 610,000 and revised from a 605,000 a year to a 618,000 rate last month, were revised down to a 606,000 rate with this release..

the annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 45,000 new single family homes sold in August, down from the estimated 50,000 new homes that sold in July and the 56,000 that sold in June....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in August was $300,200, down from the median sale price of $319,900 in July and but up from the median sales price of $298,900 in August a year ago, while the average August new home sales price was $368,100, down from the $371,300 average sales price in July, but up from the average sales price of $355,100 in August a year ago....a seasonally adjusted estimate of 284,000 new single family houses remained for sale at the end of August, which represents a 6.1 month supply at the August sales rate, up from the 5.8 months of supply reported for July...for more details and graphics on this report, see Bill McBride's three posts, New Home Sales decrease to 560,000 Annual Rate in August, New Home Prices, and A few Comments on June New Home Sales...

 

(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, September 24, 2017

August’s new home construction and existing home sales

there were just two reports with large followings released this week: the August report on New Residential Construction from the Census Bureau and the Existing Home Sales Report for August from the National Association of Realtors (NAR)...in addition, the Bureau of Labor Statistics released the August Import-Export Price Index, which showed that average prices for both imports and for exports rose 0.6% in August, figures which will be used by the BEA to adjust next week’s preliminary international trade data for inflation...this week also saw the release the Philadelphia Fed Manufacturing Survey for September, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose from +18.9 in August to +23.8 in September, suggesting continuing strong growth in that region's manufacturing...

New Housing Construction Little Changed in August; Building Permits Rising

the August report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started during the month was at a seasonally adjusted annual rate of 1,180,000, which was 0.8 percent (±9.6%)* below the revised July estimated annual rate of 1,190,000 housing unit starts, but was 1.4 percent (±8.9 percent)* above last August's pace of 1,164,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually 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, August's housing starts could have been up by 8.8% or down by as much as 10.4% from those of July, with even larger revisions possible after a number of months...in this report, the annual rate for July housing starts was revised from the 1,155,000 reported last month  to 1,190,000, while June starts, which were first reported at a 1,215,000 annual rate, were revised up from last month's initial revised figure of 1,213,000 annually to 1,217,000 annually with this report....

those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 103,300 housing units were started in August, down from the 112,900 units started in July...of those housing units started in August, an estimated 76,100 were single family homes and 26,700 were units in structures with more than 5 units, down from the revised 79,200 single family starts in July, and down from the 38,200 units started in structures with more than 5 units in July...

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 housing starts data...in August, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,300,000 housing units, which was 5.7 percent (±2.0 percent) above the revised July rate of 1,230,000 permits, and was 8.3 percent (±1.6 percent) above the rate of building permit issuance in August a year earlier...the annual rate for housing permits issued in July was revised from 1,223,000 up to 1,230,000  annually....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 122,600 housing units were issued in August, up from the revised estimate of 101,000 new permits issued in July...the August permits included 76,500 permits for single family homes, up from 69,100 in July, and 42,500 permits for housing units in apartment buildings with 5 or more units, up from 28,700 such multifamily permits a month earlier...

for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.180 Million Annual Rate in August and Comments on August Housing Starts...

August Existing Home Sales Down 1.7 from July

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell by 1.7% from July to August, the 4th decrease in five months, projecting that 5.35 million homes would sell over an entire year if the August home sales pace were extrapolated over that year, a pace that was just 0.2% above the annual sales rate projected in August of a year ago….July sales at a 5.44 million annual rate were essentially unrevised...the NAR also reported that the median sales price for all existing-home types was $253,500 in August, 5.6% higher than in August a year earlier, which they report as "the 66th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Subside 1.7 Percent in August", 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 home 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 during the selling process…

since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 535,000 homes sold in August, up by 4.3% from the 513,000 homes that sold in July, but down by 0.7% from the 539,000 homes that sold in August of last year, so we can see that it was a seasonal adjustment that caused the annualized published figures up to show a decrease...that same pdf indicates that the median home selling price for all housing types fell 1.8%, from a revised $258,100 in July to $253,500 in August, while the average home sales price was $294,600, down 1.4% from the $298,800 average in July, but up 4.5% from the $282,000 average home sales price of August a year ago, with the regional average home sales prices ranging from a low of $231,700 in the Midwest to a high of $394,700 in the West...

for both seasonally adjusted and unadjusted graphs and additional commentary on this report, check out the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Subside 1.7 Percent in August " and A Few Comments on August Existing Home Sales...

 

(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, September 17, 2017

August’s consumer and producer prices, retail sales, and industrial production; July’s business inventories and JOLTS

reports released this past week included Retail Sales for August and Business Sales and Inventories for July from the Census Bureau, August Industrial Production and Capacity Utilization from the Fed, and the August Consumer Price Index, the August Producer Price Index, the Job Openings and Labor Turnover Survey (JOLTS) report for July and the Regional and State Employment and Unemployment report for August, all from the Bureau of Labor Statistics...this week also saw the release of the Empire State Manufacturing Survey for September from the New York Fed, which covers New York and northern New Jersey; they reported their headline general business conditions index fell from +25.2 in August to +24.4 in September, still suggesting that First District manufacturing was growing at a robust pace...

Consumer Prices Up 0.4% in August on Higher Prices for Gasoline, Shelter

the consumer price index rose 0.4% in August, as much higher prices for gasoline and shelter were only slightly offset by lower prices for groceries...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose 0.4% in August after rising 0.1% in July, being unchanged in June and  falling 0.1% in May, but after rising 0.2% in April....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 244.786 in July to 245.519 in August, which left it statistically 1.939% higher than the 240.849 index reading in August of last year...with prices for energy much higher, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core index rose from 251.936 to 252.460, which left the core index 1.684% ahead of its year ago reading of 248.278...

the volatile seasonally adjusted energy price index was 2.8% higher in August after it had fallen 0.1% in July, 1.6% in June, and 2.7% in May, but after it rose by 1.1% in April, fell by 3.2% in March and by 1.0% in February, but after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and by 2.9% last September....thus, energy prices are now averaging 6.4% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were up by 6.1% in August, while the index for energy services fell by 0.1%, after falling  0.2% in July and 0.5% in June... the increase in the energy commodity index included a 6.3% jump in the price of gasoline, the largest component, and a 2.9% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.1%…within energy services, the index for utility gas service fell by 0.5% after decreasing by 2.3% in July, but utility gas is still priced 5.1% higher than it was a year ago, while the electricity price index was unchanged, after increasing by 0.4% in July...energy commodities are now priced 10.3% above their year ago levels, with gasoline prices averaging 10.4% higher than they were a year ago...meanwhile, the energy services price index is now 2.9% higher than last August, as electricity prices have risen by 2.3% over that period..

the seasonally adjusted food price index was up 0.1% in August, after rising 0.2% in July, being unchanged in June, rising 0.2% in May, 0.2% in April, 0.3% in March, 0.2% in February, and 0.1% in January, but after being unchanged in each of the prior 6 months, as prices for food purchased for use at home fell 0.2% in August, while prices for food bought to eat away from home was 0.3% higher, as prices at fast food outlets and at full service restaurants both rose 0.2%, while food at work sites and schools rose 3.9%...in the food at home categories, the price index for cereals and bakery products increased by 0.3%, as prices for bread other than white rose 1.3% and cookie prices rose 1.4%...the price index for the meats, poultry, fish, and eggs group was down 0.2% as roast beef prices fell 2.1% and ham prices fell 2.2%, while the index for dairy products was 0.4% lower on 1.5% decrease in the price of fresh whole milk...the fruits and vegetables index was 0.2% lower on a 1.0% decrease in prices for fresh fruits, as prices for oranges fell 5.2%...at the same time, the beverages index was 0.4% lower as roast coffee prices were down 2.4% and tea prices fell 1.4%....lastly, prices in the ‘other foods at home’ category were 0.1% lower on average, as salad dressing prices fell 2.1% while prepared frozen foods prices were 1.4% lower.......among food at home line items, only bacon, which is now priced 12.5% higher than a year ago has seen a price change greater than 10% 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 0.2% in August and by 0.1% in each of the prior 4 months, the composite of all goods less food and energy goods was down 0.1% in August, while the more heavily weighted composite for all services less energy services was 0.4% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust August retail sales for inflation in national accounts data, the index for household furnishings and supplies was unchanged as prices for bedroom furniture rose 2.6% while prices for living room, kitchen, and dining room furniture fell 1.0%...the apparel price index, meanwhile, was 0.1% higher, as prices for boys' apparel rose 9.6% while prices for women's dresses fell 4.9%....prices for transportation commodities other than fuel were down 0.1%, as prices for new cars and prices for used cars and trucks both fell 0.2%...prices for medical care commodities were also 0.1% lower on a 0.5% decrease in prices for nonprescription drugs...at the same time, the recreational commodities index fell 0.4% on a 2.0% drop in TV prices and 2.7% lower prices for video equipment other than TVs...meanwhile, the education and communication commodities index was 0.8% lower on a 1.1% decrease in prices for computer software and accessories and 1.3% lower prices for educational books and supplies...lastly, a separate price index for alcoholic beverages was up 0.1%, while the price index for ‘other goods’ was down 0.4% on 1.1% decreases in the indexes for hair, dental, shaving, and miscellaneous personal care products and for stationery, stationery supplies, and gift wrap..

within core services, the price index for shelter rose 0.5% on a 0.4% increase in rents, a 0.3% increase in owner's equivalent rent, and a 5.1% increase in costs for lodging away from home at hotels and motels, while household operation costs were 0.3% higher...the index for medical care services was up 0.2% as prices for prescription eyeglasses and eye care rose 1.4%, while the transportation services index was 0.4% higher despite a 2.1% decrease in car and truck rentals on a 1.0% increase in motor vehicle insurance...at the same time, the recreation services price index was up 0.5% as admissions to movies, theaters, and concerts rose 1.0%, while the index for education and communication services was unchanged as a 0.9% increase in technical and business school tuition and fees was offset by a 0.3% decrease for college tuition....lastly, the index for other personal services was 0.1% higher as tax return preparation and other accounting services were 0.8% higher...among core prices, only the index for clocks, lamps, and decorator items, which is now 12.5% lower than a year ago, prices for toys, which have fallen by 10.45, and prices for wireless phone services, which have now dropped 13.2% from a year ago, have seen prices drop by more than 10% over the past year, while no line item has seen prices rise by a double digit magnitude in that span..   

Retail Sales Down by 0.2% in August after June and July Sales Revised Lower

seasonally adjusted retail sales were down in August after retail sales for June and July were revised much lower...the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $474.8 billion during  the month, which was down 0.2 percent (±0.5%)* from July's revised sales of $475.8 billion but 3.2 percent (±0.7 percent) above the adjusted sales in August of last year...July's seasonally adjusted sales were revised from $478.9 billion to $475.8 billion, while June sales were also revised lower, from $476.0 billion to $474.5 billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 2.7%, from $476,699 million in July to $489,851 million in August, while they were up 3.5% from the $473,169 million of sales in August a year ago...the revision to June sales means that 2nd quarter sales were roughly $1.5 billion lower than previously reported, which would be enough to knock 0.12 percentage points from 2nd quarter GDP when the 3rd estimate is published at the end of the month…

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the June to July change under "Jun 2017 (r)evised" and the revised July 2016 to July 2017 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance July sale estimates, before this month's revision, is here....

August 2017 retail sales table

Industrial Production Down 0.9% in August on Weather

August saw the largest drop in US industrial production since May 2009, as Hurricane Harvey impacted Gulf of Mexico and inland oil & gas production and southeast Texas manufacturing and refining, while unseasonably cool temperatures on the East Coast reduced the demand for electricity....the Fed's G17 release on Industrial production and Capacity Utilization report indicated that industrial production fell by 0.9% in August, after rising by a revised 0.4% in July...as a result, industrial production is only up 1.5% from a year ago, as compared to last month's year over year increase of 2.2%....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 104.7 in August from 105.7 in July, which was revised from the 105.5 that was reported for July a month ago...at the same time, the June reading for the index was unrevised at 105.3, the May reading for the index was revised up from 104.9 to 105.1, and the April index reading was revised from 104.7 to 104.9...

the manufacturing index, which accounts for more than 77% of the total IP index, fell by 0.3, from 103.6 in July to 103.3 in August, after July's manufacturing index was revised up from 103.4, and is now up 1.5% from a year ago....meanwhile, the mining index, which includes oil and gas well drilling, fell from 111.2 in July to 110.3 in August, after the July index was revised up from 111.0....however, the mining index still remains 9.7% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell by 5.5% in August after rising a revised 1.5% in July and falling a revised 1.0% in June, and is now 7.8% below last August's level...

this report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell from 76.9% in July to 76.1% in August...capacity utilization of NAICS durable goods production facilities rose from 74.3 in July to 74.5 in August, after July's figure was revised down from 74.4%, while capacity utilization for non-durables producers fell from an upwardly revised 77.9% to 77.2%...capacity utilization for the mining sector fell to 83.9% in August from 84.8% in July, which was originally reported as 84.6%, while utilities were operating at 73.9% of capacity during August, down from their 78.2% of capacity during July, which was revised up from 78.1%...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....

Producer Prices Up 0.2% in August on Higher Priced Energy Commodities

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.2% in August, as prices for finished wholesale goods increased 0.5%, while margins of final services providers increased by 0.1%...this followed a July report that indicated the PPI was down 0.1%, with prices for finished wholesale goods down 0.1%, and margins of final services providers down 0.2%, and a June report that indicated the PPI was up 0.1%, with prices for finished wholesale goods up 0.1%, and margins of final services providers up 0.2%....on an unadjusted basis, producer prices remain 1.9% higher than a year earlier, same as in June, but down from the 2.5% YoY increase seen in April, which had been the largest year over year increase in the PPI since February 2012...

as we noted, the price index for final demand for goods, aka 'finished goods', rose 0.5% in August, after slipping 0.1% in July, rising by 0.1% in June, falling by 0.6% in May, rising by 0.5% in April, falling by 0.2% in March, and rising by 0.4% in February, and by 1.0% in January... the index for wholesale energy prices rose 3.3% in August, while the price index for wholesale foods fell 1.3% and the index for final demand for core wholesale goods (ex food and energy) was 0.2% higher...the largest wholesale energy price changes were a 14.1% increase in the wholesale price of home heating oil and distillates and 13.4% in the wholesale price of LP gas, while wholesale gasoline prices were up 9.5%....meanwhile, a 8.6% decrease in the wholesale price of grains and a 6.5% decrease in the wholesale price for beef and veal pulled the wholesale food price index lower....among wholesale core goods, the index for industrial chemicals was up 2.9%, while wholesale prices for sanitary paper products were 1.1% lower…

at the same time, the index for final demand for services rose 0.1% in August, after falling by 0.2% in July, rising by 0.2% in June, and a revised 0.5% in May and 0.4% in April, as the July index for final demand for trade services was unchanged, the index for final demand for transportation and warehousing services rose 0.3%, while the index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for fuels and lubricants retailers decreased 6.8%, while margins for TV, video, and major household appliances retailers rose 13.7%... among transportation and warehousing services, margins for truck transporters of freight were 0.9% higher...in the core final demand for services index, prices for consumer loans (partial) increased 1.7%..

this report also showed the price index for processed goods for intermediate demand was 0.4% higher, after falling 0.1% in July and 0.2% in June, but after rising by a revised 0.1% in May and 0.5% in April....the price index for intermediate energy goods rose 1.4%, while prices for intermediate processed foods and feeds fell 1.0%, and the core price index for processed goods for intermediate demand less food and energy was 0.4% higher, as prices for industrial chemicals rose 2.9%...prices for intermediate processed goods are now 4.1% higher than in August a year ago, now the tenth consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods fell 0.7% in August, after falling 0.4% in July, rising 1.5% in June, falling a revised 2.0% in May, and rising a revised 1.6% in April....the price index for crude energy goods rose 4.0%, as crude oil prices rose 11.0%, while the index for unprocessed foodstuffs and feedstuffs fell 5.2%, as prices for wheat dropped 20.6% and prices for slaughter steers and heifers fell 10.0%...in addition, the index for core raw materials other than food and energy materials rose 0.9%, as prices for iron and steel scrap rose 5.4% and wholesale prices for copper scrap rose 4.1% ...this raw materials index is now up 6.8% from a year ago, up from the year over year increase of 5.2% that we saw in June...

lastly, the price index for services for intermediate demand rose 0.2% in August after falling 0.3% in July, which was its first decrease since last September... the index for trade services for intermediate demand was 0.5% lower, as margins for intermediate chemicals and chemical products wholesalers fell 4.3 percent…the index for transportation and warehousing services for intermediate demand was up 0.3%, as intermediate prices for air mail and package delivery services other than USPS rose 1.3%...at the same time, the core price index for services less trade, transportation, and warehousing for intermediate demand was also 0.3% higher, as margins for business loans (partial) rose 5.3%, and intermediate services related to portfolio management rose 1.9%...over the 12 months ended in June, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.6% higher than it was a year ago...

July Business Sales and Business Inventories Both Up 0.2%

after the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July(pdf), which incorporates the revised July retail data from that August report and the earlier published wholesale and factory data to give 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 $1,358.8 billion in July, up 0.2 percent (±0.1%) from June revised sales, and up 4.9 percent (±0.4 percent) from July sales of a year earlier...note that total June sales were concurrently revised down from the originally reported $1,356.8 billion to $1,356,076 million....manufacturer's sales were up 0.3% to $474,337 million in July, and retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, also rose 0.3% to $419,400 million, while wholesale sales fell 0.1% to $446,437 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,873.9 billion at the end of July, up 0.2% (±0.1%) from June, and 3.0 percent (±0.3 percent) higher than in July a year earlier...the value of end of June inventories was revised up slightly from the $1,869.3 billion reported last month to $1,869.4 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $651,560 million, 0.2% higher than in June, inventories of retailers were valued at $619,956 million, 0.1% less than in June, while inventories of wholesalers were estimated to be valued at $602,352 million at the end of July, up 0.6% from June...

Job Openings were at a Record High in July,  with Hiring and Job Quitting Both Up

the Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 54,000, from 6,116,000 in June to a record high of 6,170,000 in July, after June job openings were revised lower, from 6,163,000 to 6,116,000...July jobs openings were also 3.3% higher than the 5,973,000 job openings reported for July a year ago, as the job opening ratio expressed as a percentage of the employed remained unchanged at 4.0% in July, which was also unchanged from a year ago...job openings increased in several sectors, with the 70,000 job opening increase to 253,000 openings in the transportation, warehousing, and utilities sector the largest increase for the month (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in July, seasonally adjusted new hires totaled 5,501,000, up by 69,000 from the revised 5,432,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed rose from 3.7% in June to 3.8% in July, which was also up from 3.7% in July a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 23,000, from 5,309,000 in June to 5,332,000 in July, while the separations rate as a percentage of the employed was unchanged at 3.6%, which was up from the separations rate of 3.5% in July a year ago (see table 3)...subtracting the 5,332,000 total separations from the total hires of 5,501,000 would imply an increase of 169,000 jobs in July, a bit less than the revised payroll job increase of 189,000 for July reported by the August establishment survey last week, but still not an unusual difference and well within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,164,000 of us voluntarily quit our jobs in July, up by 34,000 from the revised 3,130,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, inched up to 2.2% of total employment, from 2.1% in June and from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,783,000 were either laid off, fired or otherwise discharged in July, down by 23,000 from the revised 1,806,000 who were discharged in June, as the discharges rate remained unchanged at 1.2% of all those who were employed during the month, which was up from the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 384,000 in July, up from 373,000 in June, for an 'other separations rate’ of 0.3%, which was unchanged from both June and from July of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

 

(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…)