Sunday, December 31, 2017

a light holiday schedule of economic releases

with the usual month end reports all released last week, the only widely watched report released this week was the Case-Shiller Home Price Index for October from S&P Case-Shiller, which doesn’t even include homes prices, but just a index generated by averaging relative home sales prices from repeat home sales that closed in August, September and October as compared to sales prices from prior 3 month periods going back to January 2000...Case Shiller reported that home prices nationally for the 3 cited months averaged 6.2% higher than prices for the same homes that sold during the same 3 month period a year earlier, while their popular 20 city index saw a 6.4% year over year increase....in addition to that report, the Census released the Advance Economic Indicators report for November, a relatively new report intended to help the BEA estimate trade and inventory figures for the GDP reports, which in this month's case has already been published....preliminary estimates from that advance report, which are presented as a table without much detail, showed that our November goods trade deficit rose to $69.68 billion, following a revised $68.1 billion deficit in October, while the value of wholesale inventories for November rose 0.7 percent from October to $610.2 billion in November, and the value of retail inventories rose 0.1% to $619.1 billion...the full international trade report will be released this coming week, while the wholesale sales and inventory and retail sales reports will follow in the weeks later...

this week also saw the release of the last two regional Fed manufacturing indices for December; 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 fell to +20 in December from +30 in November, still suggesting a strong expansion of that region's manufacturing, while the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +29.7 from last month's +19.4, indicating a robust expansion of the Texas manufacturing economy...

 

 

(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, December 24, 2017

3rd quarter GDP revision, November income and outlays, durable goods, new home construction, new and existing home sales

in advance of the holidays, several of the reports that are normally released during the last week of the month were accelerated into this one...that means this week had the 3rd estimate of 3rd quarter GDP and the November report on Personal Income and Spending, both from the Bureau of Economic Analysis, the advance report on durable goods for November, the November report on New Residential Construction, and the November report on new home sales, all from the Census bureau, and the Existing Home Sales Report for November from the National Association of Realtors (NAR)...we also had the release of the Chicago Fed National Activity Index (CFNAI) for November, a weighted composite index of 85 different economic metrics, which fell to +0.15 in November from +0.76 in October, which was revised from the +0.65 that had been reported for October last month….however, the widely watched 3 month average of the CFNAI index still rose to +0.41 in November, up from a revised + 31 in October, which indicates that national economic activity continues at a pace above the historical trend over recent months....

in addition, the week also saw the release of the Philadelphia Fed Manufacturing Survey for December, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions increased from a reading of +22.7 in November to +26.2 in December, indicating a robust expansion of that the region's manufacturing, and the Kansas City Fed manufacturing survey for December, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index slipped to +14 in December from +16 in November, still suggesting an ongoing expansion for that region's manufacturing...

3rd Quarter GDP Revised to Indicate Growth at a 3.2% Rate

the Third Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 3.2% annual  rate in the quarter, revised from the 3.3% growth rate reported in the second estimate last month, as personal consumption growth was revised lower than was previously reported and the change in our net trade was a smaller addition to GDP than in the 2nd estimate...in current dollars, our third quarter GDP grew at a 5.3% annual rate, revised down from the rounded 5.5% reported in the 2nd estimate, increasing from what would extrapolate to $19,250.0 billion annually in the 2nd quarter of this year to an annualized $19,500.6 billion in the 3rd quarter, with the headline 3.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.1%, aka the GDP deflator, was applied to the current dollar change...

as we review this month's revisions, recall that the press release for the GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that 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 3rd 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 4th quarter of 2013; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components in the most recent quarters; table 4, which shows the change in the price indexes for each of those components; and table 5, which shows the quantity indexes for each of the GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the second estimate of the 3rd quarter, which this estimate revises, is here...

growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.3% growth rate reported last month to a 2.2% rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 3.7% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation at a 1.5% annual rate in the 3rd quarter, which was statistically unrevised from the PCE inflation rate reported a month ago...real personal consumption of durable goods grew at a 8.6% annual rate, which was revised from the 8.1% growth rate shown in the 2nd estimate, and added 0.97 percentage points to GDP, as an increase in real consumption of motor vehicles and parts at a 12.2% rate accounted for more than a third of the durables goods increase...real consumption of nondurable goods by individuals grew at a 2.3% annual rate, revised from the 2.0% rate reported in the 2nd estimate, and added 0.34 percentage points to the 3rd quarter economic growth rate, as slightly lower consumption of clothing and energy goods was more than offset by greater consumption of food and other non-durables….at the same time, consumption of services rose at a 1.1% annual rate, revised from the 1.5% growth rate reported last month, and added 0.52 percentage points to the final GDP tally, as real consumption of health care services rose at a 4.5% rate while real consumption of all other services averaged slightly lower...

meanwhile, seasonally adjusted real gross private domestic investment grew at a 7.3% annual rate in the 3rd quarter, on net unrevised from last month, as real private fixed investment grew at a 2.4% rate, also statistically the same as the second estimate, while inventory growth was slightly less than previously estimated...investment in non-residential structures was revised to show contraction at a 7.0% rate, worse than the 6.8% contraction rate previously reported, while real investment in equipment was revised from growth at a rate of 10.4% to growth at a 10.8% rate, and the quarter's investment in intellectual property products was revised from growth at a 5.8% rate to growth at a 5.3% rate...on the other hand, real residential investment was shown to be shrinking at a 4.7% annual rate, rather than the 5.1% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.21 percentage points from the 3rd quarter's growth rate, the increase in investment in equipment added 0.58 percentage points to the quarter's growth rate, lower residential investment subtracted 0.18 percentage points from GDP, while growth in investment in intellectual property added 0.21 percentage points to the growth rate of 3rd quarter GDP...

in addition, investment in real private inventories grew by an inflation adjusted $38.6 billion in the 3rd quarter, revised from the $39.0 billion of inventory growth last month...this came after inventories had grown at an inflation adjusted $5.5 billion rate in the 2nd quarter, and hence the $33.0 billion increase in real inventory growth added 0.79 percentage points to the quarter's growth rate, revised from the 0.80 percentage point addition from inventory growth that was indicated in the second estimate....since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or "sitting on the shelf”, their increase by $33.0 billion meant that real final sales of GDP were relatively smaller by that much, and hence real final sales of GDP increased at a 2.4% rate in the 3rd quarter, down from the real final sales growth rate of 2.9% in the 2nd quarter, when the smaller increase in inventory growth meant that growth in real final sales was fairly close to real growth in GDP...

the previously reported increase in real exports was revised a bit lower with this estimate, while the previously reported decrease in real imports was was not as large as previously  estimated, and as a result the change in our net trade was a smaller addition to GDP rather than was previously reported...our real exports grew at a 2.1% rate rather than the 2.2% 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 0.25 percentage points to the 3rd quarter's growth rate, down from the 0.27 percentage point addition shown in the previous report....meanwhile, the previously reported 1.1% decrease in our real imports was revised to a 0.7% decrease, and since imports are subtracted from GDP because they represent either consumption or investment that was not produced here, their decrease conversely added 0.11  percentage points to 3rd quarter GDP, rather than the 0.17 percentage point addition indicated by the larger contraction estimate last month....thus, our improving trade balance added a total of 0.36 percentage points to 3rd quarter GDP, rather than the (rounded) 0.43 percentage point addition that had been indicated by the second estimate…

finally, the entire government sector grew at a 0.7% rate, revised from the 0.4% rate previously reported, as federal government consumption and investment was unchanged from the second estimate, while real state & local government consumption and investment grew rather than shrinking as was previously reported...real federal government consumption and investment was seen to have grown at a 1.3% rate from the 2nd quarter in this estimate, unrevised from the second estimate, as real federal outlays for defense grew at a 2.4% rate and added 0.09 percentage points to 3rd quarter GDP, while all other federal consumption and investment shrunk at a 0.2% rate, revised from last month's 0.3% contraction, and subtracted 0.01 percentage point from 3rd quarter GDP....meanwhile, real state and local consumption and investment grew at a 0.2% rate in the quarter, which was revised from the 0.1% contraction rate reported in the 2nd estimate, and added 0.03 percentage points to 3rd 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, indicating an increase in the output of those goods or services...

November Personal Income Up 0.3%; Personal Spending up 0.6%; PCE Price Index Up 0.2%

the November report on Personal Income and Outlays from the Bureau of Economic Analysis includes the month's data for our personal consumption expenditures (PCE), which accounts for roughly 69% of the month's GDP, and with it 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...in addition, this release reports our 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 dollar value change reported for each of those metrics is 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 November’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 October to November....

hence, when the opening line of the press release for this report tell us "Personal income increased $54.0 billion (0.3 percent) in November", they mean that the annualized figure for seasonally adjusted personal income in November, $16,629.1 billion, was $54.0 billion higher, or more than 0.3% higher than the annualized personal income figure of $16,575.1 billion extrapolated for October; the actual, unadjusted change in personal income from October to November is not given...at the same time, annualized disposable personal income, which is income after taxes, also rose by more than 0.3%, from an annual rate of $14,515.6 billion in October to an annual rate of $14,566.5 billion in November...these figures were arrived at after personal income for October was revised up from $16,574.6 billion annually and October's disposable personal income was revised up from $14,513.3 billion annually....the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in November, the largest contributors to the $54.0 billion annual rate of increase in personal income were a $34.3 billion increase in wages and salaries and a $11.4 billion increase in dividend and interest income…

for the personal consumption expenditures (PCE) that we're interested in, BEA reports that they increased at a $87.1 billion rate, or at a rate greater than 0.6%, as the annual rate of PCE rose from $13,548.7 billion in October to $13,635.8 billion in November....at the same time, October PCE was revised lower, from $13,557.4 billion annually to $13,548.7 billion....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $91.7 billion to $14,140.3 billion annually in November, which left total personal savings, which is disposable personal income less total outlays, at a $426.2 billion annual rate in November, down from the revised $466.9 billion in annualized personal savings in October ... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to a post recession low of 2.9% in November, from the October savings rate of 3.2%...

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 113.242 in October to 113.504 in November, a month over month inflation rate that's statistically 0.02314%, which BEA reports as a 0.2% increase, following the 0.1% PCE price index increase they reported for October...applying the actual November inflation adjustment to the nominal amount of spending left real PCE up 0.4% in November, after October's real PCE was statistically unchanged...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 those familiar 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 November's chained dollar consumption total works out to 12,014.2 billion annually in 2009 dollars, 4.014% more than October's 11,965.1 billion, a difference that the BEA rounds down and reports as +0.4%...

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 October's and November's real PCE to the the real PCE of the 3 months of the third 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 3rd quarter was represented by 11,916.6 billion in chained 2009 dollars...(ie, that's the same as what's shown in table 3 of the pdf for the revised 3rd quarter GDP report)....then, by averaging the annualized chained 2009 dollar figures for October and November, 11,965.1 billion and 12,014.2 billion, we get an equivalent annualized PCE for the two months of the 4th quarter that we have data for so far....when we compare that average of 11,989.65 to the 3rd quarter real PCE of 11,916.6, we find that 4th quarter real PCE has grown at a 2.47% annual rate for the two months of the 3rd quarter we have so far...(notice the math we used to get that annual growth rate: [ (((12,014.2 + 11,965.1) / 2) / 11,916.6) ^4 = 1.02474681 ]...that's a pace that would add 1.71 percentage points to the GDP growth rate of the 4th quarter by itself, even if there is no improvement in December PCE from that average... 

November Durable Goods: New Orders up 1.3%, Shipments Up 1.0%, Inventories Up 0.2%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for November (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $3.1 billion or 1.3 percent to $241.4 billion in November, after October's new orders were revised from the $236.0 billion reported last month to $238.3 billion, now down just 0.4% from September's new orders...year to date new orders are now 5.4% above those of 2016, up from the +4.9% year over year change we saw in this report last month....a reversal of the volatile monthly new orders for transportation equipment was responsible for this month's increase, as new transportation equipment orders rose $3.3 billion or 4.2 percent to $80.9 billion, on a 14.5% decrease to $12,513 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders actually fell 0.1%, while excluding just new orders for defense equipment, new orders rose 1.0%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, slipped by $56 million or less than 0.1% to $67,142 million...

meanwhile, the seasonally adjusted value of November shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased by $2.4 billion or 1.0 percent to $244.5 billion, after the value of October shipments was revised from from $241.0 billion to $242.1 billion, still up 0.5% from September...shipments of transportation equipment were up $2.1 billion or 2.6 percent to $81.3 billion on a 1.4% increase in shipments of motor vehicles and a 11.7% increase in shipments of commercial aircraft, while shipments of defense aircraft fell 1.7%...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 16th time in the past 17 months, increasing by $0.9 billion or 0.2 percent to $405.2 billion, after October inventories were revised from $404.1 billion to $404.3 billion, up 0.2% from September...a $0.3 billion or 0.2 percent increase to $124.1 billion in inventories of transportation equipment were down 0.2% to $130,699 million, without which all other inventories were up 0.4%…

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, increased for the third month in a row, rising by $1.1 billion or 0.1 percent to $1,137.0 billion, following a statistically insignificant October increase...a $0.5 billion or 0.6 percent to $81.3 billion increase in unfilled orders for fabricated metal products was responsible for nearly half the increase, while unfilled transportation equipment orders were down 0.4% to $769,844 million...compared to a year earlier, the unfilled order book for durable goods is 0.7% higher than the level of last November, with unfilled orders for transportation equipment still 1.0% below their year ago level, largely on a 2.0% decrease in the backlog of orders for defense aircraft...  

November Report Shows New Housing Starts Up, Permits Down

the November report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,297,000 units during the month, which was 3.3 percent (±9.1 percent)* above the revised October estimated annual rate of 1,256,000 housing unit starts, and was 12.9 percent (±11.7) above last November's rate of 1,149,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, November housing starts could have been down by 5.8% or up by as much as 12.4% from those of October, with even larger revisions possible...in this report, the annual rate for October housing starts was revised from the 1,290,000 reported last month to 1,256,000, while September starts, which were first reported at a 1,127,000 annual rate, were revised down from last month's initial revised figure of 1,135,000 annually up to 1,159,000 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 canvassing Census field agents, which estimated that 98,400 housing units were started in November, down from the 109,000 units that were started in October...of those housing units started in November, an estimated 67,900 were single family homes and 29,800 were units in structures with more than 5 units, down from the revised 75,200 single family starts and the 32,300 units started in structures with more than 5 units in October...

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 November, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,298,000 housing units, which was 1.4 percent (±1.7 percent)* below the revised October rate of 1,316,000 permits, but was 3.4 percent (±2.3 percent) above the rate of building permit issuance in November a year earlier...the annual rate for housing permits issued in October was revised up from the originally reported 1,297,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 95,600 housing units were issued in November, down from the revised estimate of 114,000 new permits issued in October...the November permits included 61,700 permits for single family homes, down from 70,900 single family permits issued in October, and 31,600 permits for housing units in apartment buildings with 5 or more units, down from 40,100 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 increased to 1.297 Million Annual Rate in November and Comments on November Housing Starts...

November New Home Sales Much Higher After Prior Months Revised Way Down

the Census report on New Residential Sales for November (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 733,000 homes annually, which was 17.5 percent (±10.4 percent) above the revised October rate of 624,000 new single family home sales a year and 26.6 percent (±16.6 percent) above the estimated annual rate that new homes were selling at in November of last year...the figures in parenthesis indicate 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 October were revised down from the annual rate of 685,000 reported last month to 624,000, while home sales in September, initially reported at an annual rate of 677,000 and revised to a 645,000 a year rate last month, were also revised lower to a 635,000 a year rate with this report, and while August's annualized home sale rate, initially reported at an annual rate of 580,000 and revised from the initially revised 561,000 a year rate to a 565,000 a year rate last month, were further revised down to a 559,000 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 52,000 new single family homes sold in November, up from the estimated 49,000 new homes that sold in October and in September.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in November was $318,700, down from the median sale price of $319,600 in October but up from the median sales price of $315,000 in November a year ago, while the average November new home sales price was $377,100, down from the $394,700 average sales price in October, but up from the average sales price of $363,400 in November a year ago....a seasonally adjusted estimate of 283,000 new single family houses remained for sale at the end of November, which represents a 4.6 month supply at the November sales rate, down from the reported 4.9 months of new home supply in October...for graphs and additional commentary on this report, see the following  two posts by Bill McBride at Calculated Risk: New Home Sales increase to 733,000 Annual Rate in November and A few Comments on November New Home Sales...

November Existing Home Sales Up 5.6% to Eleven Year High

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 5.6% from October to November, projecting that a post recession record 5.81 million existing homes would sell over an entire year if the November home sales pace were extrapolated over that year, a pace that was also 3.8% above the annual sales rate they projected in November of a year ago...October sales, now shown at a 5.50 million annual rate, were revised up from the 5.48 million annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $248,000 in November, up from from the $247,000 reported in October and 5.8% higher than in November a year earlier, which they report as "the 69th consecutive month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Soar 5.6 Percent in November to Strongest Pace in Over a Decade", 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 of the actual number of homes that sold each month...this unadjusted data indicates that roughly 427,000 homes sold in November, down by 6.8% from the 458,000 homes that sold in October, but up by 2.2% from the 418,000 homes that sold in November of last year, so we can see that it was a seasonal adjustment that caused the annualized published figures to indicate a month over month increase and a record high....that same pdf indicates that the median home selling price for all housing types rose 0.8%, from a revised $246,000 in October to $248,000 in November, while the average home sales price was $289,900, also up 0.8% from the $287,600 average sales price in October, and up 4.8% from the $276,600 average home sales price of November a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Soar 5.6 Percent in November" and A Few Comments on November 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, December 17, 2017

November’s consumer and producer prices, retail sales, industrial production, & job openings; October business inventories

major reports released this week included the the November Producer Price Index, the November Consumer Price Index, and the November Import-Export Price Index from the Bureau of Labor Statistics, Retail Sales for November and Business Sales and Inventories for October from the Census Bureau, and the November report on Industrial Production and Capacity Utilization from the Fed...in addition, the BLS also released the the Job Openings and Labor Turnover Survey (JOLTS) for October, while the New York Fed released the Empire State Manufacturing Survey for December, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey...they reported that their headline general business conditions index slipped from +19.4 in November to +18.0 in December, still suggesting an ongoing broad-based expansion of First District manufacturing....

November Consumer Prices up 0.4% on Higher Energy Costs

the consumer price index increased by 0.4% in November, as higher prices for energy were only slightly offset by lower prices for groceries and clothing... the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.4% in November after it had risen 0.1% in October, 0.5% in September, 0.4% in August, 0.1% in July, and after it was unchanged in June and had fallen 0.1% in May....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, inched up from 246.663 in October to 246.669 in November, which left it statistically 2.203% higher than the 241.353 index reading of last November, which is reported as a 2.2% year over year increase...with an increase in energy prices accounting for three-fourths of the CPI increase, seasonally adjusted core prices, which exclude food and energy, rose by just 0.1% for the month, with the unadjusted core index actually falling from 253.638 to 253.492, which put it 1.711% ahead of its year ago reading of 249.227...

the volatile seasonally adjusted energy price index rose by 3.9% in November, after it had fallen by 1.0% in October, risen by 6.1% in September and by 2.8% in August, but after it had fallen by 0.1% in July, 1.6% in June, and 2.7% in May...prices for energy commodities were 7.1% higher while the index for energy services rose by 0.6%, after rising by 0.4% in October....the increase in the energy commodity index included a 7.3% jump in the retail price of gasoline, the largest component, and a 5.0% increase in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.4%…as a result of this month's price hikes, energy commodities are now priced 16.4% above their year ago levels, with gasoline prices averaging 16.5% higher than they were a year ago….within energy services, the index for utility gas service rose by 0.6% after increasing by 0.3% in October, meaning utility gas is now priced 3.6% higher than it was a year ago, while the electricity price index rose by 0.5%, after rising 0.5% in October...hence, the energy services price index is now 2.8% higher than last November, as even electricity prices have increased by 2.5% over that period..

the seasonally adjusted food price index was unchanged for the second month in a row in November, after rising 0.1% in September, 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 0.1% lower in November, while prices for food bought to eat away from home was 0.1% higher, as prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.1%, while food prices at schools were unchanged...

in the food at home categories, the price index for cereals and bakery products decreased by 0.2%, as prices for bread fell 0.3%, prices for cookies fell 1.4%, and prices for crackers and cracker products fell 1.5%...the price index for the meats, poultry, fish, and eggs group was down 0.3% as egg prices fell 1.9%, ham prices fell 2.3%, and processed fish and seafood prices fell 0.8%, while the index for dairy products was 0.3% higher on a 0.9% increase in the price of fresh whole milk...the fruits and vegetables index was 0.5% lower on a 1.3% decrease in prices for fresh vegetables and a 1.3% decrease in prices for frozen fruits and vegetables....in addition, the beverages index was 0.6% lower as roast coffee prices fell 1.5% and carbonated drink prices fell 1.3%....lastly, prices in the ‘other foods at home’ category were 0.4% higher on average, as butter prices rose 2.3% and sauces and gravies were 2.0% higher....among food at home line items, only oranges, which are up 12.8%, have seen a price changes 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 November after rising by 0.2% in October, 0.1% in September, 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 0.1%, 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 October retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.2% lower on a 2.7% decrease in the index for window and floor coverings and a 3.7% decrease in prices for laundry equipment...the apparel price index was 1.3% lower on a 4.3% decrease in prices for men's furnishings, a 3.2% decrease in prices for women's underwear, nightwear, sportswear and accessories, and a 2.5 decrease in prices for boy's apparel....on the other hand, prices for transportation commodities other than fuel were up 0.5%, as prices for used cars were up 1.0% while prices for new cars rose 0.4%...meanwhile, prices for medical care commodities were 0.6% higher on a 0.6% increase in prescription drug prices, while at the same time, the recreational commodities index was 0.5% lower on another 1.1% drop in TV prices, a 5.6% drop in the index for audio equipment, and a 1.3% decrease in the index for toys....meanwhile, the education and communication commodities index was unchanged as a 1.7% increase in prices for college textbooks was offset by a 1.4% decrease in prices for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.2% on 0.6% higher wine prices, while the price index for ‘other goods’ was unchanged as a 1.5% increase in the index for cosmetics, perfume, bath, nail preparations and implements was offset by a 1.1% decrease in the index for stationery, gift wrap and other personal paper supplies..

within core services, which rose by 0.2%, the price index for shelter rose 0.2% on a 0.2% increase in rents, a 0.2% increase in homeowner's equivalent rent, and a 1.6% decrease in costs for lodging away from home at hotels and motels, while costs for water, sewers and trash collection rose 0.4% and other household operation costs were up 0.3%....at the same time, the index for medical care services was down 0.1%, as prices for physicians' services fell 0.8% and health insurance policies were priced 0.3% lower...meanwhile, the transportation services index was 0.1% higher on a 1.6% increase in car and truck leasing and 0.8% higher motor vehicle insurance....the recreation services index rose 0.2% as cable and satellite television service rose 0.4% and photographer fees rose 1.8%%, while the index for education and communication services rose 0.3% as elementary and high school tuition and fees and and telephone services both rose 0.4%...lastly, the index for other personal services was unchanged as bank services rose 2.8% while haircuts fell 0.1%...among core line items, only prices for audio equipment, which are now 11.5% lower than last November, and prices for wireless phone services, which are still 10.2% lower than a year ago, have seen prices drop by more than 10% over the past year, while only the prices of watches, which are 11.2% higher, have seen prices rise by a double digit magnitude in that span...

Retail Sales Up 0.8% in November after October and September are Revised Higher

seasonally adjusted retail sales increased in November after retail sales for October and September sales were revised higher...the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $492.7 billion during the month, which was up 0.8 percent (±0.5%) from October's revised sales of $488.9 billion and 5.8 percent (±0.9%) above the adjusted sales in November of last year.…October's seasonally adjusted sales were revised up from $486.6 billion to $488.9 billion, while September's sales were also revised higher, from $485.4 billion to $486.2 billion; as a result, the September to October change was revised from up 0.2 percent (±0.5%) to up 0.5 percent (±0.2%), and the change in September's sales was revised from an increase of 1.9% to an increase of 2.1%.....unadjusted sales, extrapolated from surveys of a small sampling of retailers, were estimated to have risen 4.7%, from $476,895 million in October to $499,149 million in November, while they were up 6.4% from the $469,324 million of sales in November a year ago...the $0.8 billion upward revision to September sales should boost previous estimates of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.07 percentage points...

included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the November Census Marts pdf....the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the October revised figure to this month's November "advance" report in the first sub-column, and then the year over year percentage sales change since last November in the 2nd column...the second double column pair below gives us the revision of the October advance estimates (now called "preliminary") as of this report, with the new September to October percentage change under "Sep 2017 r" (revised) and the revised October 2016 to October 2017 percentage change in the last column shown...for your reference, the table of last month’s advance estimate of October sales, before this month's revisions, is here.…

November 2017 retail sales table

the first thing we’ll note from this table is that seasonally adjusted sales at motor vehicle and parts dealers were down 0.2% to $102,445 million in November, but that came after October sales were revised up from $101,919 million to $102,626 million, now 1.2% higher than September...September vehicle sales had been up 4.6% on post hurricane car replacements in flooded out areas, so auto sales remain quite elevated despite this month's small decrease...and excluding those weaker auto sales, retail sales would have shown a 1.0% increase for this month, with a seasonally adjusted 2.5% jump in non-store or online retail sales indicating pre-holiday online buying is running well above prior years...as we saw in reviewing the CPI, the composite of all goods less food and energy goods fell by 0.1%, so real core sales will be roughly 0.1% higher than the nominal sales reported here...on the other hand, the 7.3% jump in the retail price of gasoline is not reflected in the 2.8% increase in sales at gas stations, so real gasoline sales might well be lower...still, this report indicates a strong contribution to 4th quarter GDP, which was evidenced by forecasters raising their GDP estimates 0.3% or 0.4% after its release..

Producer Prices Up 0.4% in October on Higher Priced Gasoline and Loan Services Margins

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in November, as prices for finished wholesale goods increased 1.0%, while margins of final services providers increased by 0.2%...this followed a October report that indicated the overall PPI had increased by 0.4%, as prices for finished goods hed increased 0.3%, while margins of final services providers increased by 0.5%, and a September report that showed the overall PPI had increased by 0.4%, as prices for finished goods had increased 0.7%, while margins of final services providers increased by 0.4%....excluding food, energy and trade services, core producer prices were up 0.4% in November, after rising 0.2% in both October and September...on an unadjusted basis, producer prices are now 3.1% higher than a year earlier, the highest annual producer inflation reading since the same increase was logged in January 2012, while the core producer price index increased to 2.4% higher than a year earlier...

as we noted, the price index for final demand for goods, aka 'finished goods', rose 1.0% in November, after rising 0.3% in October, 0.7% in September, 0.5% in August, but after slipping 0.1% in July, by a revised 0.1% June, and falling by 0.5% in May...the index for wholesale energy prices jumped 4.6% after it had been unchanged in October, but after rising 3.4% in September and a revised 3.5% in August, while the price index for wholesale foods rose 0.3% and the index for final demand for core wholesale goods (ex food and energy) was also 0.3% higher...the wholesale energy price increase was driven by a 15.8% increase in the wholesale price of gasoline, while for wholesale foods, a 3.9% increase in wholesale prices of fresh fruits and a 3.4% increase in the wholesale price of pork were partially offset by a 3.2% decrease in wholesale prices for turkeys....among wholesale core goods, wholesale prices for household appliances rose 1.4% and the index for household furniture was up 1.1%…

at the same time, the index for final demand for services rose 0.2% in November, after rising 0.5% in October, 0.4% in September, but after August's increase was revised to unchanged, after a revised 0.1% increase in July, as the November index for final demand for trade services fell 0.3%, the index for final demand for transportation and warehousing services rose 0.6%, while the index for final demand for services less trade, transportation, and warehousing services was 0.4% higher....among trade services, seasonally adjusted margins for fuels and lubricants retailers decreased 7.0% and margins for TV, video, and photographic equipment and supplies retailers fell 11.0%, while margins for book retailers rose 9.5%... among transportation and warehousing services, margins for airline passenger services were 1.2% higher and margins for air transportation of freight rose 0.6%...in the core final demand for services index, the index for loan services (partial) rose 3.1% and accounted for almost half the month's increase in final demand for services...

this report also showed the price index for intermediate processed goods was 0.5% higher, after rising 1.0% in October, 0.5% in September, a revised 0.4% in August, but after falling by a revised  0.1% in July....the price index for intermediate energy goods rose 1.7% as diesel fuel rose 1.8% and gasoline rose 15.8%, while prices for intermediate processed foods and feeds rose 0.3% as processed meat prices rose 2.3% while processed poultry prices fell 4.6%....the core price index for processed goods for intermediate demand less food and energy was also 0.3% higher on a 0.5% increase in the index for primary basic organic chemicals and a 2.7% increase in prices for plastic construction products...prices for intermediate processed goods are now 5.3% higher than in November a year ago, now the thirteenth 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 rose 3.2% in November, after being unchanged in October, falling 0.4% in September, falling a revised 1.3% in August, but after rising a revised 0.7% in July....the price index for crude energy goods rose 5.5% as crude oil prices rose 11.0%, while the index for unprocessed foodstuffs and feedstuffs rose 2.7%, as prices for slaughter hogs rose 34.1% and prices for for slaughter cattle rose 4.2%...in addition, the index for core raw materials other than food and energy materials rose 0.8%, as prices for copper base scrap rose 3.3% and prices for wastepaper rose 14.9%...this raw materials index is now up 10.6% from a year ago, up from the year over year increase of 7.7% that we saw in October...

lastly, the price index for services for intermediate demand rose 0.7% in November after rising 0.3% in October, 0.1% in September and 0.2% in August, but after falling a revised 0.1% in July...the index for trade services for intermediate demand was 1.0% higher, as margins for machinery and equipment parts and supplies wholesalers rose 1.9%…the index for transportation and warehousing services for intermediate demand was up 0.5%, as intermediate prices for transportation of passengers (partial) rose 1.4% and warehousing, storage, and related services rose 2.4%...at the same time, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.6% higher, as margins for securities brokerage, dealing, and investment advice rose 1.5%...over the 12 months ended in November, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 3.2% higher than it was a year ago...

Industrial Production Up 0.2% in November

the Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production rose 0.2% in November after rising by a revised 1.2% in October and by 0.3% in September, as a jump in the mining index offset a drop in the utility index....the total industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 106.4 in November from 106.1 in October, which was statistically unrevised from last month, despite the Fed's summary noting that it saw an "upwardly revised increase"...the reason the increase in October index was greater than previously reported was that the September index was revised down from 105.2 to 104 9...at the same time, the August index was revised from 104.7 to 104.6, the July index was revised from 105.2 to 105.1, and the June index was revised from 105.2 to 105.3....year over year industrial production is now up 3.4%, an improvement from last month's 2.9% YoY decrease....

the manufacturing index, which accounts for more than 77% of the total IP index, increased from 104.7 in October to 104.8 in November but was reported 0.2% higher, after the change from September to October was revised from a 1.3% increase to a 1.4% increase because the index for October was revised from 104.8 to 104.7 while the index for September was revised from 103.5 to 103.2; in addition, the August manufacturing index was revised from 103.1 to 103.0, and July's manufacturing index was revised down from 103.3 to 103.2....meanwhile, the mining index, which includes oil and gas well drilling, rose from 109.7 in October to 111.9 in November, after the October index was revised up from 108.9, which meant the mining index is now 9.4% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 1.9% in November, from an unrevised 103.6 in October to 101.6 in November, and is now 2.3% higher than it was a year earlier..

this report also includes capacity utilization data, which is 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 rose to 77.1% in November from 77.0% in October, which was unrevised from last month ...capacity utilization of NAICS durable goods production facilities rose from 75.7% in October to 75.9% in November, while capacity utilization for non-durables producers fell from 78.1% to 78.0%...at the same time, capacity utilization for the mining sector rose to 84.5% in November from 83.0% in October, which was originally reported as 82.4%, while utilities were operating at 75.1% of capacity during November, down from their 77.1% of capacity during October, which was revised down from the previously reported 77.2%...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....  

October Business Sales Up 0.6% Business Inventories Down 0.1%

after the release of the November retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for October (pdf), which incorporates the revised October retail data from that November report and the earlier published October 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 $1,400.8 billion in October, up 0.6 percent (±0.2%) from September's revised sales, and up 6.5 percent (±0.3 percent) from October sales of a year earlier...note that total September sales were concurrently revised up from the originally reported $1,389.7 billion to $1,392,347 million....manufacturer's sales were up 0.6% to $484,223 million in October; retail trade sales, which exclude restaurant & bar sales from the revised October retail sales reported earlier, also rose 0.6% to $432,041 million, and wholesale sales rose 0.7% to $484,582 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,885.7 billion at the end of October, down 0.1 percent (±0.1%)* from September, but still 3.5 percent (±0.3 percent) higher than in October a year earlier...at the same time, the value of end of September inventories was revised from the $1,888.7 billion reported last month to $1,887.2 billion, now unchanged from August...that $1.5 billion downward revision to September inventories should reduce previous estimates of the inventory component to 3rd quarter GDP by about $6.0 billion annually, which would clip around 0.14 percentage points off 3rd quarter GDP...seasonally adjusted inventories of manufacturers were estimated to be valued at $661,568 million at the end of October, an increase of 0.2% from September, while inventories of retailers were valued at $618,753 million, statistically unchanged from September, and while inventories of wholesalers were estimated to be valued at $605,348 million at the end of October, 0.5% lower than in September...

for GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for October, which was up 0.3% for finished goods...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories would have a negative impact on 4th quarter GDP…also last week, we found that real wholesale inventories were down about 0.8% and hence would subtract substantially from 4th quarter GDP growth….since nominal retail inventories for October have now been shown to be unchanged, real retail inventories for the month, after the 0.3% finished goods price adjustment, thus would have thus decreased by about 0.3% from September, in a third quarter that saw the increase in total inventories add 0.80 percentage points to GDP, before the revision we noted above...therefore, any inventory decrease in the 4th quarter would necessarily subtract that much, if not more, from the growth of 4th quarter GDP...

Job Openings and Discharges Decrease in October, Hiring at a 16 Year High

the Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 181,000, from the record high of 6,177,000 openings in September to 5,996,000 in October, after September job openings were revised 84,000 higher, from 6,093,000 to 6,177,000...October's jobs openings were still 7.3% higher than the 5,587,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed fell to 3.9% in October from 4.0% September while it was up from 3.7% in October a year ago...most of the October decrease in openings can be accounted for by the decrease of 137,000 to 1,010,000 job openings in the trade, transportation, and utilities sector, while the accommodation and food services sector saw openings by increase 94,000 to 776,000 (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

the JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in October, seasonally adjusted new hires totaled 5,552,000, up by 232,000 from the revised 5,320,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed rose to 3.8% from 3.6% in September, and was also up from from 3.6% in October a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 66,000, from 5,278,000 in September to 5,178,000 in October, while the separations rate as a percentage of the employed fell to 3.5%, down from 3.6% in September but unchanged from October a year ago (see table 3)...subtracting the 5,178,000 total separations from the total hires of 5,552,000 would imply an increase of 374,000 jobs in October, quite a bit more than the revised payroll job increase of 244,000 for October reported in the November establishment survey last week, and outside of the expected +/-115,000 margin of error in these reports, so one or both of these reports is off by a net of 130,000 jobs...

breaking down the seasonally adjusted job separations, the BLS finds that 3,180,000 of us voluntarily quit our jobs in October, unchanged from the number who quit their jobs in September, and hence the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.2% of total employment, while it was up from 2.1% a year earlier (see details in table 4)....in addition to those who quit, another 1,631,000 were either laid off, fired or otherwise discharged in October, down by 115,000 from the revised 1,746,000 who were discharged in September, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was unchanged from the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 367,000 in October, up from 318,000 in September, for an 'other separations rate’ of 0.2%, which was unchanged from September but down from 0.3% in October of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...  

 

(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, December 10, 2017

November’s jobs report; October’s trade deficit, factory inventories and wholesale sales

in addition to the Employment Situation Summary for November from the Bureau of Labor Statistics, this week's releases included three reports that will feed into 4th quarter GDP: the Census report on our International Trade for October, the Full Report on Manufacturers' Shipments, Inventories and Orders for October, and the October report on Wholesale Trade, Sales and Inventories, also from the Census Bureau...in addition, the Fed released the Consumer Credit Report for October from the Fed, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $20.5 billion, or at a 6.5% annual rate, as non-revolving credit expanded at a 5.6% rate to $2,790.7 billion and revolving credit outstanding rose at a 9.9% rate to $1,011.5 billion...

privately issued reports released this week included the November Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 57.4%, down from 60.1% in October, indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in November, and the Mortgage Monitor for October (pdf) Black Knight Financial Services, which indicated that 4.44% of all mortgages were delinquent in October, up from 4.40% in September and up from 4.35% in October of 2016, and that 0.68% of all mortgages were in the foreclosure process, down from from 0.70% in September and down from 0.99% a year ago....mortgage delinquencies continue to be elevated in regions of the country where properties have experienced hurricane damage...

Employers Add 228,000 Jobs, Unemployment Rate and Labor Force Participation Unchanged

the Employment Situation Summary for November reported better than average job creation, while the employment rate fell even as the unemployment rate was unchanged…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 228,000 jobs in November, after the previously estimated payroll job increase for September was revised up from up from 18,000 to 38,000, while the payroll jobs increase for October was revised down from 261,000 to 244,000…that means that this report represents a total of 232,000 more seasonally adjusted payroll jobs than were reported last month, about 50,000 more than the average of the past 12 months...the unadjusted data, meawhile, shows that there were actually 532,000 more payroll jobs extent than in October, 451,600 of which were seasonal jobs added in the retail sector...

seasonally adjusted job increases in November were spread throughout the private goods producing and service sectors and in government, with the 4,000 jobs lost in the information sector the only notable decrease...the largest job increase was seen in the broad professional and business services sector, which added 46,000 jobs, with 18,300 of those working for temporary employment services...the health care and social assistance sector saw the addition of 33,500 jobs, with the addition of 6,800 jobs in doctor's offices and 6,900 jobs in home health care services...another 31,000 jobs were added in manufacturing, with 8,300 of those employed in the manufacture of machinery...in addition, 19,000 jobs were added in construction, with 11,900 of those working for nonresidential specialty trade contractors....then, after the seasonal adjustment, retail sales added 18,700 workers, with 6,800 of those working in general merchandise stores, and another 14,000 were employed in the leisure and hospitality sector, with the addition of 18,900 jobs in bars and restaurants...meanwhile, other sectors including mining, wholesale trade, transportation and warehousing, financial activities, private education and government, all saw smaller job gains over the month..

the establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $26.55 an hour in November, after it had decreased by a revised 3 cents an hour in October; at the same time, the average hourly earnings of production and non-supervisory employees also increased by 5 cents to $22.24 an hour...employers also reported that the average workweek for all private payroll employees increased by a tenth of an hour to 34.5 hours in November, while weekly hours for production and non-supervisory personnel was unchanged at 33.7 hours...at the same time, the manufacturing workweek was unchanged at 40.9 hours, while average factory overtime was unchanged at 3.5 hours...

meanwhile, the November household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 57,000 to 153,918,000, while the estimated number of those unemployed and looking for work rose by 90,000 to 6,610,000; and hence the total labor force increased by a rounded total of 148,000....since the working age population had grown by 183,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 35,000 to a record high of 95,420,000, which was still not enough to statistically change the labor force participation rate, which remained at 62.7% in November....meanwhile, the increase in number employed as a percentage of the increase in the population was small enough to lower the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.1%...on the other hand, the increase in the number unemployed was not enough to change the unemployment rate, which remained at 4.1%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 48,000, from 4,753,000 in October to 4,801,000 in November, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.9% of the labor force in October to 8.0% in November...

like most reports from the Bureau of Labor Statistics, the employment situation press release itself is easy to read and understand, so you can get more details on these two reports from there...note that almost every paragraph in that release points to one or more of the tables that are linked to on the bottom of the release, and those tables are also on a separate html page here that you can open it along side the press release to avoid the need to scroll up and down the page..

October Trade Deficit Up 8.6%, Revisions to 3rd Quarter Trade are a Big Hit to GDP

our trade deficit rose by 8.6% in October as the value of our exports slipped a bit while the value of our imports increased....the Census report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $3.8 billion to $48.7 billion in October from a revised September deficit of $44.9 billion...the value of our October exports fell by less than $0.1 billion to $195.9 billion on a $0.3 billion decrease to $130.3 billion in our exports of goods and a $0.3 billion increase to $65.6 billion in our exports of services, while our imports rose $3.8 billion to $244.6 billion on a $3.5 billion increase to $199.4 billion in our imports of goods and a $0.3 billion increase to $45.2 billion in our imports of services...export prices were on average unchanged in October, so the relative real decrease in October exports is close to the nominal decrease, while import prices were 0.2% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage...

major changes in October's exports of goods included:

  • Foods, feeds, and beverages exports decreased $1.3 billion as soybean exports decreased $1.4 billion.
  • Capital goods exports decreased $1.2 billion as civilian aircraft exports decreased $1.1 billion.
  • Industrial supplies and materials increased $2.6 billion on increased exports of fuel oil, crude oil, natual gas liquids and other petroleum products.

major changes in October's imports of goods included:

  • Industrial supplies and materials imports increased $1.8 billion on a $1.5 billion increase in crude oil imports
  • Consumer goods imports increased by $0.8 billion led by a $0.3 billion increase in imports of cell phones
  • Imports of other goods not categorized by end use increased by $1.1 billion.

further details from the press release indicate that  "October figures show surpluses, in billions of dollars, with South and Central America ($3.9), Hong Kong ($2.3), Brazil ($1.1), Singapore ($0.7), Saudi Arabia ($0.3), and United Kingdom ($0.2).  Deficits were recorded, in billions of dollars, with China ($31.9), European Union ($12.0), Mexico ($6.0), Japan ($5.9), Germany ($5.3), Italy ($2.7), South Korea ($2.7), India ($2.1), Canada ($1.9), OPEC ($1.6), France ($1.6), and Taiwan ($1.6).

note that with this release, data for exports and imports of goods and services going back to April have been revised, which means previously published GDP figures for the 2nd and 3rd quarter will also have to be revised...while the new 2nd quarter trade data for 2017 will not be incorporated into GDP figures until the annual revision to GDP is undertaken with the 2nd quarter 2018 release at the end of July 2018, revisions to 3rd quarter trade will be included with the 3rd estimate of 3rd quarter GDP, which will be released later this month...the revisions are rather significant, especially to services; for instance, September exports of services were revised down $0.9 billion, while September imports of services revised up $0.6 billion; as result, the September trade deficit was at $44.9 billion, revised from the $43.5 billion reported last month...in like manner, the August trade deficit was revised higher, from the revised deficit of $42.8 billion reported last month to $44.3 billion, and the July trade deficit was revised from the $43.6 billion reported last month to $45.2 billion...hence, the total $4.5 billion upward revision in the trade deficit for the 3rd quarter months would work out to a decrease to third quarter GDP at a rate in excess of $18 billion annually...that means that revisions to trade included with this release will have the effect of subtracting 0.40 percentage points or more from previously published 3rd quarter GDP figures...

to gauge the impact of October trade on 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized here....from that table, we can estimate that revised 3rd quarter real exports of goods averaged 125,674.3 million monthly in chained 2009 dollars, while inflation adjusted October exports were at 125,658 million in the same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that October's real exports of goods are running at a 0.05% annual rate below those of the 3rd quarter, a change that would not have a statistically significant impact on 4th quarter GDP even if continued through November and December....at the same time,  however, we find that our 3rd quarter real imports of goods averaged 187,706.3 million monthly in chained 2009 dollars, while inflation adjusted October goods imports were at 190,978 million...that would indicate that so far in the 4th quarter, we have seen our real imports of goods increase at annual rate of 7.16% over those of the 3rd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 7.16% rate would subtract about 0.88 percentage points from 4th quarter GDP....hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our deteriorating balance of trade in goods would subtract about 0.88 percentage points from the growth of 4th quarter GDP....note that we have not estimated the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to all their price changes...  

October Factory Shipments Up 0.4%, Inventories 0.2% Higher

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for October, which includes revisions to the November 22nd advance durable goods report, is quite complete, so we'll just quote directly from it here:

  • New orders for manufactured goods in October, down following two consecutive monthly increases, decreased $0.3 billion or 0.1 percent to $479.6 billion, the U.S. Census Bureau reported today. This followed a 1.7 percent September increase. Shipments, up ten of the last eleven months, increased $2.7 billion or 0.6 percent to $484.2 billion. This followed a 1.1 percent September increase. Unfilled orders, down three of the last four months, decreased $0.2 billion or virtually unchanged to $1,135.1 billion. This followed a 0.3 percent September increase. The unfilled orders-to-shipments ratio was 6.68, unchanged from September. Inventories, up eleven of the last twelve months, increased $1.2 billion or 0.2 percent to $661.6 billion. This followed a 0.6 percent September increase. The inventories-to-shipments ratio was 1.37, unchanged from September.
  • New orders for manufactured durable goods in October, down following two consecutive monthly increases, decreased $1.9 billion or 0.8 percent to $237.4 billion, up from the previously published 1.2 percent decrease. This followed a 2.4 percent September increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $3.4 billion or 4.2 percent to $77.4 billion. New orders for manufactured nondurable goods increased $1.6 billion or 0.7 percent to $242.2 billion.
  • Shipments of manufactured durable goods in October, up five of the last six months, increased $1.1 billion or 0.4 percent to $242.0 billion, up from the previously published 0.1 percent increase. This followed a 1.2 percent September increase. Primary metals, up three of the last four months, led the increase, $0.3 billion or 1.6 percent to $19.9 billion. Shipments of manufactured nondurable goods, up six of the last seven months, increased $1.6 billion or 0.7 percent to $242.2 billion. This followed a 1.0 percent September increase. Petroleum and coal products, up four consecutive months, led the increase, $1.2 billion or 2.6 percent to $46.2 billion.
  • Unfilled orders for manufactured durable goods in October, down three of the last four months, decreased $0.2 billion or virtually unchanged to $1,135.1 billion, unchanged from the previously published decrease. This followed a 0.3 percent September increase. Transportation equipment, also down three of the last four months, drove the decrease, $1.8 billion or 0.2 percent to $770.0 billion.
  • Inventories of manufactured durable goods in October, up fifteen of the last sixteen months, increased $0.6 billion or 0.2 percent to $404.2 billion, up from the previously published 0.1 percent increase. This followed a 0.6 percent September increase. Primary metals, also up fifteen of the last sixteen months, led the increase, $0.3 billion or 0.8 percent to $34.0 billion. Inventories of manufactured nondurable goods, up five consecutive months, increased $0.5 billion or 0.2 percent to $257.3 billion. This followed a 0.7 percent September increase. Chemical products, up three of the last four months, drove the increase, $0.9 billion or 1.0 percent to $84.1 billion. By stage of fabrication, October materials and supplies decreased 0.4 percent in durable goods and decreased 0.3 percent in nondurable goods. Work in process increased 1.0 percent in durable goods and decreased 0.3 percent in nondurable goods. Finished goods decreased 0.4 percent in durable goods and increased 0.9 percent in nondurable goods.

to gauge the effect of October factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased 0.3% to $229,026 million; the value of work in process inventories was up 0.6% at $206,903 million, and materials and supplies inventories were valued 0.4% lower at $225,639 million...the producer price index for October indicated that prices for finished goods increased 0.3%, prices for intermediate processed goods were 1.0% higher, and that prices for unprocessed goods were on average unchanged....assuming similar valuations for like inventories, that would suggest that October's real finished goods inventories were little changed, while real inventories of intermediate processed goods were 0.4% smaller, and that real raw material inventory inventories were 0.4% smaller…since real factory inventories in the 3rd quarter were somewhat higher, any real inventory decreases in the 4th quarter will subtract from growth of 4th quarter GDP...

October Wholesale Sales Up 0.7%, Wholesale Inventories Down 0.5%

the September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$484.6 billion, up 0.7 percent (±0.5 percent) from the revised September level and were up 8.4 percent (±0.9 percent) from the October 2016 level. The August 2017 to September 2017 percent change was revised from the preliminary estimate of up 1.3 percent (±0.4 percent) to up 1.4 percent (±0.4 percent)" ...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold...

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted "$605.3 billion at the end of October, down 0.5 percent (±0.4 percent) from the revised September level. Total inventories were up 3.9 percent (±0.5 percent) from the revised October 2016 level. The September 2017 to October 2017 percent change was revised from the advance estimate of down 0.4 percent (±0.4 percent)* to down 0.5 percent (±0.4 percent)."

like factory inventories, to estimate the effect of October wholesale inventories on 4th quarter GDP we must first adjust them for changes in price with appropriate components of the producer price index...although details are not broken out, we've previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...as we noted earlier, the producer price index for October indicated that prices for finished goods increased 0.3%; thus the 0.5% decline in the nominal value of wholesale inventories suggest that the lion's share of real wholesale inventories were down on the order of 0.8% in October...since real wholesale inventories in the 3rd quarter were higher each month, such a real wholesale inventory decrease in the 4th quarter would necessarily subtract substantially from growth of 4th 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, December 3, 2017

3rd quarter GDP revision, October income and outlays, construction spending, and new home sales

major economic reports released over the past week included the 2nd estimate of 3rd quarter GDP and the October report on Personal Income and Spending, both from the Bureau of Economic Analysis, and the October report on Construction Spending (pdf) and the October report on new home sales, both from the Census bureau...in addition, the week brought us the last two regional Fed manufacturing surveys for November; the Richmond Fed Survey of Manufacturing Activity for November, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index jumped to a record high of +30 in November, up from +12 in October, suggesting a robust expansion of that region's manufacturing, while the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity index fell to +19.4 in November from +27.6 in October, still indicative of a strong expansion of the Texas economy...

the week’s privately issued reports included the Case-Shiller Home Price Index for September from S&P Case-Shiller, an index generated by averaging relative home sales prices from July, August and September of this year against a January 2000 baseline, and which reported that home prices nationally for those 3 months averaged 6.2% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the 6.1% year over year increase shown in the prior report; the light vehicle sales report for November from Wards Automotive, which estimated that vehicles sold at a 17.35 million annual rate in November, down 3.0% from the 17.89 million annual rate in October, and down 3.3% from the 17.95 million annual rate in November a year ago, and the widely followed November Manufacturing Report On Business from the Institute for Supply Management (ISM), which indicated that the manufacturing PMI (Purchasing Managers Index) fell to 58.2% in November, down slightly from 58.7% in October, still suggesting an ongoing expansion in manufacturing firms nationally...

3rd Quarter GDP Revised to Show Growth at a 3.3% Rate

the Second Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 3.3% rate in the quarter, revised up from the 3.0% growth rate reported in the advance estimate last month, as growth in both fixed investment and investment in inventories were revised higher, the decrease in our imports was greater than previously estimated, and state and local government spending were revised up from the prior estimate....in current dollars, our third quarter GDP grew at a 5.5% annual rate, increasing from what would work out to be a $19,250.0 billion a year rate in the 2nd quarter to a $19,509.0 billion annual rate in the 3rd quarter of this year, with the headline 3.3% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.1%, aka the GDP deflator, was applied to the current dollar change...

as we review this month's revisions, recall that the press release for the GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that 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 2nd estimate of 3rd 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 4th quarter of 2013; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components in the most recent quarters; table 4, which shows the change in the price indexes for each of those components; and table 5, which shows the quantity indexes for each of the GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 3rd quarter advance estimate, which this estimate revises, is here...

growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.4% growth rate reported last month to a 2.3% rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 3.9% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation grew at a 1.5% annual rate in the 3rd quarter, which was statistically unrevised from the PCE inflation rate reported a month ago...real consumption of durable goods grew at a 8.1% annual rate, which was revised from the 8.3% growth rate shown in the advance report, and added 0.59 percentage points to GDP, as an increase in real consumption of motor vehicles and parts at a 12.6% rate accounted for almost half the durables goods increase...real consumption of nondurable goods by individuals grew at a 2.0% annual rate, revised from the 2.1% growth rate reported in the 1st estimate, and added  0.30 percentage points to 3rd quarter economic growth, as lower consumption of clothing and energy goods was more than offset by greater consumption of food and other non-durables ….at the same time, consumption of services rose at a 1.5% annual rate, statistically unrevised from the growth rate reported last month, and added 0.70 percentage points to the final GDP tally, as real consumption of health care rose at a 4.2% rate and accounted for 60% of the quarter’s growth in services...

meanwhile, seasonally adjusted real gross private domestic investment grew at a 7.3% annual rate in the 3rd quarter, revised from the 6.0% growth estimate reported last month, as real private fixed investment grew at a 2.4% rate, revised from the 1.5% rate reported in the advance estimate, while inventory growth was greater than previously estimated...investment in non-residential structures was revised to show contraction at a 6.8% rate, worse than the 5.2% contraction rate previously reported, while real investment in equipment was revised from growth at a rate of 8.6% to growth at a 10.5% rate, and the quarter's investment in intellectual property products was revised from growth at a 4.3% rate to growth at a 5.8% rate...on the other hand, real residential investment was shown to be shrinking at a 5.1% annual rate, rather than the 6.0% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.20 percentage points from the 3rd quarter's growth rate, the increase in investment in equipment added 0.56 percentage points to the quarter's growth rate, lower residential investment subtracted 0.20 percentage points from GDP, while growth in investment in intellectual property added 0.23 percentage points to the growth rate of 3rd quarter GDP...

in addition, investment in real private inventories grew by an inflation adjusted $39.0 billion in the 3rd quarter, revised from the originally reported $35.8 billion of inventory growth...this came after inventories had grown at an inflation adjusted $5.5 billion rate in the 2nd quarter, and hence the $33.5 billion increase in real inventory growth added 0.80 percentage points to the quarter's growth rate, revised from the 0.73 percentage point addition from inventory growth that was indicated in the advance estimate....since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or "sitting on the shelf”, their increase by $33.5 billion meant that real final sales of GDP were relatively smaller by that much, and hence real final sales of GDP increased at a 2.5% rate in the 3rd quarter, down from the real final sales growth rate of 2.9% in the 2nd quarter, when the smaller increase in inventory growth meant that growth in real final sales was fairly close to real growth in GDP...

the previously reported increase in real exports was revised a bit lower with this estimate, while the previously reported decrease in real imports was revised even lower, and as a result the change in our net trade was a larger addition to GDP rather than was previously reported...our real exports grew at a 2.2% rate rather than the 2.3% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 0.27 percentage points to the 3rd quarter's growth rate, down a tad from the 0.28 percentage point addition shown in the previous report....meanwhile, the previously reported 0.8% decrease in our real imports was revised to a 1.1% decrease, and since imports are subtracted from GDP because they represent either consumption or investment that was not produced here, their decrease conversely added 0.17  percentage points to 3rd quarter GDP, rather than the 0.12 percentage point addition shown last month....thus, our improving trade balance added a rounded total of 0.43 percentage points to 3rd quarter GDP, rather than the (rounded) 0.41 percentage point addition that had been indicated by the advance estimate…

finally, the entire government sector grew at a 0.4% rate, revised from a contraction at a 0.1% rate previously reported, as federal government consumption and investment grew more than initially estimated, while real state & local government consumption and investment shrunk less...real federal government consumption and investment was seen to have grown at a 1.3% rate from the 2nd quarter in this estimate, revised from the 1.1% growth rate shown in the advance estimate, as real federal outlays for defense grew at a 2.4% rate and added 0.09 percentage points to 3rd quarter GDP, revised from the 2.3% growth rate shown previously, while all other federal consumption and investment shrunk at a 0.3% rate and subtracted 0.01 percentage point from 3rd quarter GDP....meanwhile, real state and local consumption and investment shrunk at a 0.1% rate in the quarter, which was revised from the 0.9% contraction rate reported in the 1st estimate, and subtracted 0.01 more percentage point from 3rd 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, indicating an increase in the output of those goods or services...

Personal Income up 0.4% in October, Personal Spending up 0.3%, PCE Price Index up 0.1%

the October report on Personal Income and Outlays from the Bureau of Economic Analysis includes the month's data for our personal consumption expenditures (PCE), which accounts for roughly 69.5% of the month's GDP, and with it 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...in addition, this release reports our 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 dollar value change reported for each of those metrics is 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 October'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 September to October....

thus, when the opening line of the press release for this report tell us "Personal income increased $65.1 billion (0.4 percent) in October", they mean that the annualized figure for seasonally adjusted personal income in October, $16,574.6 billion, was $65.1 billion, or a bit less than 0.4% greater than the annualized personal income figure of $16,509.5 billion extrapolated for September; the actual, unadjusted change in personal income from September to October is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by less than 0.5%, from an annual rate of $14,447.2 billion in September to an annual rate of $14,513.3 billion in October...the monthly contributors to the increase in personal income, which can be viewed in detail in the Full Release & Tables (PDF) for this release, are also annualized...in October, the largest contributors to the $65.1 billion annual rate of increase in personal income were a $26.0 billion increase in wages and salaries and a $19.2 billion increase in dividend and interest income…

for the personal consumption expenditures (PCE) that we're most interested in, BEA reports that they increased at a $34.4 billion rate, or by less than 0.3%, as the annual rate of PCE rose from $13,523.0 billion in September to $13,557.4 in October....September PCE was revised from $13,531.2 billion annually to $13,523.0 billion, a revision that was already included in the 2nd estimate of 3rd quarter GDP which we just reviewed (this report, although usually released a business day later than the GDP release, is computed concurrently)....the current dollar increase in October spending resulted from a $5.0 billion annualized increase to an annualized $4,355.7 billion in spending for goods, and a $29.4 billion increase to an annualized $9,201.7 billion in spending for services...total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $38.7 billion to $14,056.0 billion annually in October, which left total personal savings, which is disposable personal income less total outlays, at a $457.3 billion annual rate in October, up from the revised $429.9 billion in annualized personal savings in September... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 3.2% in October from the September savings rate of 3.0%, which was a post recession low...

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....that's done with the price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, which is included in Table 9 in the pdf for this report...that index was at 113.245 in October, up from 113.082 in September, giving us a PCE price index change and an inflation adjustment of 0.0144% in October, which the BEA rounded to +0.1% for the press release...note that when the PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in our familiar 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 that of another....that result is shown in table 7 of the PDF, where we see that October's chained dollar consumption total works out to 11,972.4 billion annually, 0.1095% more than September's 11,959.3 billion, a difference that the BEA reports as +0.1%...

however, to estimate the impact of the change in October PCE on the change in GDP, the month over month change in PCE doesn't help us much, since GDP is reported quarterly...thus we have to compare October's real PCE to the the real PCE of the 3 months of the third quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 of the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 11,921.1 billion in chained 2009 dollars..(ie, that's the same as what's shown in table 3 of the pdf for the 3rd quarter GDP report)....when we compare October's real PCE representation of 11,972.4 to the 3rd quarter real PCE figure of 11,921.1, we find that October real PCE has grown at a 1.73% annual rate compared to the 3rd quarter....that would mean that even if October real PCE does not improve during November and December, growth in PCE would still add 1.20 percentage points to the growth rate of the 4th quarter...

Construction Spending Rose 1.4% in October after Prior Months Were Revised Higher

the Census Bureau's report on construction spending for October (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,241.5 billion annually if extrapolated over an entire year, which was 1.4 percent (±1.5 percent)* above the revised annualized September estimate of $1,224.6 billion and also 2.9 percent (±1.6 percent) above the estimated annualized level of construction spending in October of last year...the annualized September construction spending estimate was revised 0.4% higher, from $1,219.5 billion to $1,224.6 billion, while the annual rate of construction spending for August was also revised 0.4% higher, from $1,216.0 billion to $1,220.8 billion...the combined upward revisions of $9.9 billion to annualized August and September construction spending figures would be averaged over the 3 months of the quarter and increase 3rd quarter construction by around $3.3 billion annually, and would thus imply a further upward revision of about 0.09 percentage points to third quarter GDP when the third estimate is released on December 22nd....

quoting details on types of construction spending from the Census release: Spending on private construction was at a seasonally adjusted annual rate of $949.9 billion, 0.6 percent (±0.8 percent)* above the revised September estimate of $943.8 billion. Residential construction was at a seasonally adjusted annual rate of $517.7 billion in October, 0.4 percent (±1.3 percent)* above the revised September estimate of $515.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $432.2 billion in October, 0.9 percent (±0.8 percent) above the revised September estimate of $428.4 billion.   In October, the estimated seasonally adjusted annual rate of public construction spending was $291.6 billion, 3.9 percent (±2.6 percent) above the revised September estimate of $280.7 billion. Educational construction was at a seasonally adjusted annual rate of $79.0 billion, 10.9 percent (±2.5 percent) above the revised September estimate of $71.2 billion. Highway construction was at a seasonally adjusted annual rate of $86.8 billion, 1.1 percent (±6.3 percent)* above the revised September estimate of $85.9 billion.

as you can see, 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 October spending reported in this release on 4th quarter GDP is difficult because all 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... there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment... that index showed that aggregate construction costs were up 0.5% month over month in October, after being up 0.3% in August and rising 0.1% in September... 

on that basis, we can estimate that October construction costs were roughly 0.9% more than those of July, 0.6% more than those of August, and obviously 0.5% more than September...we then use those percentages to inflate higher priced spending figures for each of those months, which is arithmetically the same as deflating October construction spending, for purposes of comparison...annualized construction spending in millions of dollars for the third quarter months is given as 1,224,551 in September, 1,220,897 in August, and 1,160,407 in July...thus to adjust October's nominal construction spending of $1,241,538 million for inflation compared to that of the third quarter, our formula becomes: 1,241,538  / (((1,224,551 * 1.005) + ( 1,220,897 *1.006) + (1,215,351 * 1.009)) / 3) = 1.010699, meaning real construction spending in October was up 1.07% vis a vis that of the 3rd quarter, or up at a 4.35% annual rate...to figure the effect of that change on GDP,  we figure the difference between the third quarter average and October and take the annualized result of that as a fraction of annualized 3rd quarter GDP, and find that October construction spending is rising at a rate that would add 0.34 percentage points to 4th quarter GDP, assuming hypothetically that there would be no change over the next two months…

Average Prices for New Homes Sold in October Tops $400 K

the Census report on New Residential Sales for October (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 685,000 homes annually, which was 6.2 percent (±18.0 percent)* above the revised September rate of 645,000 new single family home sales a year and 18.7 percent (±23.5 percent)* above the estimated annual rate that new homes were selling at in October of last year....the asterisks indicates that based on their small sampling, Census could not be certain whether October new home sales rose or fell from those of September, 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 September were revised from the annual rate of 677,000 reported last month down to a 645,000 a year rate, while home sales in August, initially reported at an annual rate of 580,000 and revised to a 561,000 a year rate last month, were revised to a 565,000 a year rate with this report, and while July's home sale rate, initially reported at an annual rate of 571,000 and revised from a 580,000 a year rate to a 582,000 a year rate last month, were revised down to a 564,000 annaul 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 55,000 new single family homes sold in October, up from the estimated 50,000 new homes that sold in September and up from the 48,000 that sold in October a year ago.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in October was $312,800, down from the median sale price of $314,900 in September but up from the median sales price of $302,800 in October a year ago, while the average new home sales price in October was $400,200, up from the $381,100 average sales price in September, and up from the average sales price of $352,200 in October a year ago....a seasonally adjusted estimate of 282,000 new single family houses remained for sale at the end of October, which represents a 4.9 month supply at the October sales rate, down from the reported 5.0 months of new home supply in September...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 685,000 Annual Rate in October and A few Comments on October 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…)