Sunday, March 26, 2017

February’s durable goods, new home sales, existiing home sales

widely watched reports that were released this past week were the advance report on durable goods for February and the February report on new home sales, both from the Census bureau, and the Existing Home Sales Report for February from the National Association of Realtors (NAR)…the week also saw the release of the Regional and State Employment and Unemployment Summary for February from the BLS, and the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, which rose to +0.34 in February from –0.02 in January, after January's index was revised from the -0.05 reported last month...as a result, the 3 month average of that index rose to +0.17 in February, up from a revised +0.02 in January, which indicates that national economic activity has been slightly above the historical trend over recent months...in addition, this week also saw the release of the Kansas City Fed manufacturing survey for March, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index at +20 in March, up from +14 in February and its highest reading since March 2011, indicating an accelerating expansion in that region's manufacturing...

February Durable Goods: New Orders Up 1.7%, Shipments Up 0.3%, Inventories Up 0.2%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for February (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $3.9 billion or 1.7 percent to $235.4 billion in February, after January's new orders were revised from the $230.4 billion reported last month to $231.5 billion, now 2.3% more than December's new orders…as a result, year to date new orders are now up by 1.6% from those of 2016...the volatile monthly new orders for transportation equipment were responsible for the month’s increase, as new transportation equipment orders rose $3.3 billion or 4.3 percent to $80.4 billion, on a 47.6% increase to $12,681 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders still rose 0.4%, while excluding just new orders for defense equipment, new orders rose 2.3%....however, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $93 million or 0.1% to $64,641 million...

meanwhile, the seasonally adjusted value of February shipments of durable goods, which will be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.6 billion or 0.3 percent to $239.2 billion, after the value of January shipments was revised from from $478.3 billion to $478.3 billion, still down 0.1% from December...higher shipments of machinery led the February increase, as they increased by $0.3 billion or 0.9 percent to $31.1 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $0.8 billion or 0.2 percent to $385.1 billion, after December inventories were revised from $383.8 billion to $384.3 billion, now up 0.1% from December....

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but somewhat volatile new orders, fell for the eighth time in 9 months, decreasing by just $0.2 billion to $1,114.7 billion however, following a January decrease of 0.3% to $1,114.94 billion, which was revised from the previously reported 0.4% decrease to $1,114.3 billion...a $1.1 billion or 0.1 percent decrease to $752.7 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment orders were up 0.2% to $361,982 million...the unfilled order book for durable goods is now 1.5% below the level of last February, with unfilled orders for transportation equipment now 3.3% below their year ago level, mostly on a 4.6% decrease in the backlog of orders for commercial aircraft...

New Home Sales Reported Higher in February

the Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 592,000 homes annually during the month, which was 6.1 percent (±17.3 percent)* above the revised January annual sales rate of 558,000 new home sales and 12.8 percent (±18.0 percent)* above the estimated annual rate that new homes were selling at in February of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether February new home sales rose or fell from those of January, or even from February sales 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 of new single family homes in January were revised from the annual rate of 555,000 reported last month to an annual rate of 558,000, and new home sales in December, initially reported at an annual rate of 536,000 and revised to a 535,000 rate last month, were revised down to a 530,000 a year rate with this report, while November's annualized new home sales rate, initially reported at an annual rate of 592,000 and revised up to a 598,000 a year rate last month, were revised back down to a 573,000 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 49,000 new single family homes sold in February, up from the estimated 41,000 new homes that sold in January and up from the 38,000 that sold in December.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in February was $296,200, down from the median sale price of $308,200 in January and down from the median sales price of $311,300 in February a year ago, while the average February new home sales price was $390,400, up from the $355,300 average sales price in January, and up from the average sales price of $349,400 in February a year ago....a seasonally adjusted estimate of 266,000 new single family houses remained for sale at the end of February, which represents a 5.4 month supply at the February sales rate, down from the 5.7 months of new home supply reported in January...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 592,000 Annual Rate in February and A few Comments on February New Home Sales..

February Existing Home Sales 3.7% Lower

the National Association of Realtors (NAR) reported that existing home sales fell by 3.7% from January to February on a seasonally adjusted basis, projecting that 5.48 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was still 5.4% above the annual sales rate projected in February of a year ago....the NAR also reported that the median sales price for all existing-home types was $228,400 in February, up from the revised $227,300 in January, and 8.1% higher than in February a year earlier, which they report as "the 60th consecutive month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Stumble in February", 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 usually look at the raw data overview (pdf) to see what actually transpired during the month...this unadjusted data indicates that roughly 315,000 homes sold in February, down 1.3% from the 319,000 homes that sold in January, but up by 0.3% from the 314,000 homes that sold in February of last year....that same pdf indicates that the median home selling price for all housing types rose by half a percent, from a revised $227,300 in January to $228,400 in February, while the average home sales price inched up to $270,100 from the $269,500 average sales price in January, while it was up 5.8% from the $255,300 average home sales price of February 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 Stumble in February" and A Few Comments on February 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, March 19, 2017

February consumer and producer prices, retail sales, industrial production, & new homes sales: January business inventories and JOLTS

major monthly reports this week included the Retail Sales report for February and Business Sales and Inventories for January from the Census Bureau, the February Producer Price Index and the February Consumer Price Index from the Bureau of Labor Statistics, the February report on Industrial Production and Capacity Utilization from the Fed, and the February report on New Residential Construction from the Census Bureau...in addition, the BLS oddly released both the Job Openings and Labor Turnover Survey (JOLTS) for January and the Regional and State Employment and Unemployment Report for January in the same week... this week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index slipped to +16.4,  down from +18.7 in February, still suggesting a decent growth rate in First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell to +32.8 in March from +43.3 in February from a  reading + 23.6 in January, still indicating a large plurality of the region's manufacturing firms reported increases in their activity this month...

February Consumer Prices Rise 0.1% on Higher Food, Shelter, and Clothing

the consumer price index increased by 0.1% in February, as lower prices for gasoline and most goods partially offset higher prices for food, clothing and shelter...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.1% in February after it had risen 0.6% in January, 0.3% in December, 0.2% in November, 0.4% in October, 0.3% in September, and 0.2% in August....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose to 243.603 in Febraury from 242.839 in January, which left it statistically 2.738% higher than the 236.916 index reading of February last year...with lower prices for gasoline a drag on the increase in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, with the unadjusted core index rising from 250.083 to 251.143, which left it 2.224% ahead of its year ago reading of 245.680...

the volatile seasonally adjusted energy price index fell by 1.0% in February, after it had risen by 4.0% in January, 1.5% in December, 1.2% in November, 3.5% in October, and 2.9% in September...hence, energy prices are still 15.2% higher than a year ago, after seeing negative year over year comparisons through most of 2015 and 2016...prices for energy commodities were 2.8% lower while the index for energy services rose by 1.0%, after rising 0.3% in January ....the drop in the energy commodity index included a 3.0% decrease in the price of gasoline, the largest component, and a 0.4% decrease in the price of fuel oil, while prices for other fuels, including propane, kerosene and firewood, rose by an average of 1.8%…within energy services, the index for utility gas service rose by 1.5% in its 8th increase in a row, and hence utility gas is now priced 10.9% higher than it was a year ago, while the electricity price index was up 0.8%, after it was unchanged in December and January....energy commodities are still priced 29.8% above their year ago levels, with gasoline prices averaging 30.7% higher than they were a year ago.…meanwhile, the energy services price index is now 3.8% higher than last February, as even electricity prices have increased by 1.9% over that period..

the seasonally adjusted food price index rose 0.2% in February, after rising 0.1% in January, but after being unchanged for the 6 prior months, as prices for food purchased for use at home rose 0.3% while prices for food bought to eat away from home rose 0.2%, with average prices at fast food outlets up 0.1% while average prices at full service restaurants rose 0.3%...in the food at home categories, the price index for cereals and bakery products decreased by 0.4% as prices for cookies fell 2.1% and prices for flour and mixes were 1.0% lower...the price index for the meats, poultry, fish, and eggs group rose by 0.2% as pork prices rose 1.5% and processed seafood prices rose 2.8%, while the index for dairy products was 0.8% higher on a 1.0% increase in the price of milk....the fruits and vegetables index was 0.7% higher on a 2.3% increase in prices for fresh vegetables, led by a 6.5% increase in the price of lettuce...the beverages index was 1.5% higher as carbonated drink prices rose 2.1% and coffee prices rose 1.8%....lastly, prices in the ‘other foods at home’ category were on average 0.4% lower, as olives, pickles and relishes averaged a 2.5% decrease.....among food at home line items, eggs, which are still priced 23.3% lower than a year ago, tomatoes, which are 13.3% lower, and fruits other than apples, bananas and citrus, which are 10.6% lower than last year, have seen 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 0.2% in February after rising by 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.1% in September, 0.3% in August, 0.1% in July and by 0.2% in April, in May and in June, the composite of all goods less food and energy goods was statistically unchanged, while the more heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust February retail sales for inflation in national accounts data, the index for household furnishings and supplies fell by 0.1% as prices for major appliances fell 1.4%...the apparel price index was 0.6% higher led by a 1.6% increase in prices for men's apparel and a 8.0% increase in prices for women's outwear....prices for transportation commodities other than fuel were down 0.3%, as prices for new vehicles fell 0.2% and prices for used cars and trucks fell 0.6%...prices for medical care commodities were 0.2% lower on 0.2% lower prescription drug prices....meanwhile, the recreational commodities index fell 0.1% on 0.6% lower priced pets, pet supplies, and accessories, while the education and communication commodities index was 0.2% lower on a 1.1% decrease in prices for computer software and accessories...lastly, a separate price index for alcoholic beverages was up down 0.2% on 0.7% lower prices for distilled spirits other than whiskey bought for drinking at home, while the price index for ‘other goods’ was up 0.2% on a 0.4% increase in cigarette prices...

within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.3% increase in owner's equivalent rent, and a 0.6% increase in lodging away from home at hotels and motels, while the household operations services index was unchanged....meanwhile, the index for medical care services was up 0.1% as nursing homes and adult day care services rose 1.0%...in addition, the transportation services index was 0.7% higher on a 2.3% increase in car and truck leasing prices...at the same time, the recreation services price index was up 0.9% as admissions to sporting events rose 2.1%, while the index for education and communication services was 0.2% lower as wireless telephone services were priced 1.4% lower and internet services fell 1.0%...lastly, the index for other personal services was up 0.1% as tax return preparation and other accounting fees were 1.1% higher...among core prices, only televisions, which are now 20.1% cheaper than a year ago, have seen prices drop by more than 10% over the past year, while nothing has seen prices rise by a double digit magnitude.. 

Retail Sales Up 0.1% in February after January Sales Revised Higher

seasonally adjusted retail sales increased 0.1% in February after retail sales for January were revised higher...the Advance Retail Sales Report for February (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $474.0 billion during the month, which was up 0.1 percent (±0.5%) from January's revised sales of $473.6 billion and 5.7 percent (±0.9%) above the adjusted sales in February of last year...January's seasonally adjusted sales were revised up from $472.1 billion to $473.6 billion, while December's sales were revised from $470.46 billion to $470.616 billion; as a result, the December to January change was revised up from up 0.4 percent (±0.5%) to up 0.6 percent (±0.2%).....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down fractionally, from $422,761 million in January to $422,072 million in February, while they were up 2.1% from the $413,554 million of sales in the 29 day February of a year ago..

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

February 2017 retail sales table

despite the weak headline, this February report is better than it appears, because much of the weakness was due to lower prices...for instance, while there was a 0.1% drop to $90,547 million in sales at motor vehicle dealers, prices for new vehicles fell 0.2% and prices for used cars and trucks fell 0.6%, which means weighted real unit sales of vehicles were actually up on the order of 0.2%...without that decrease in car sales, other retail sales rose 0.2%...similarly, there was a 2.8% drop in nominal electronics and appliance stores sales, but the CPI tells us that major appliances were 1.4% cheaper during the month, thus partially ameliorating the real decrease...likewise, the 0.6% drop in gas station sales can easily be explained by the 3.0% drop in gasoline prices...on the other hand, clothing store sales fell 0.5% while the apparel index was up 0.6%, meaning real clothing store sales were down 1.1%, and by a similar calculation we can see that real grocery store and restaurant sales were down as well...still, January sales were revised 0.2% higher, which should partially reverse the negative 0.26% personal consumption expenditures for the month, and February PCE for goods should be up on the order of 0.15% from there...

January Business Sales Up 0.2%, Business Inventories Up 0.3%

after the release of the February retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for January (pdf), which incorporates the revised January retail data from that February report and the earlier published January 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 $1,359.3 billion in January, up 0.2 percent (±0.2%)* from December's revised sales, and up 6.4 percent (±0.4%) from January sales of a year earlier...note that total December sales were concurrently revised up from the originally reported $1,356.0 billion to $1,356.64 billion, now a 2.1% increase from November....manufacturer's sales rose 0.2% to $478,316 million in January; retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, rose 0.5% to $417,362 million, while wholesale sales fell 0.1% to $463,649 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,841.4 billion at the end of January, up 0.3 percent (±0.2%) from the end of December, and 2.3 percent (±0.3%) higher than in January a year earlier...at the same time, the value of end of December inventories was revised from the $1,835.7 reported last month to $1,836.17 billion....seasonally adjusted inventories of manufacturers were estimated to be valued at $627,890 million, up 0.2% from December, and inventories of retailers were valued at $613,489 million, 0.8% more than in December, while inventories of wholesalers were estimated to be valued at $600,030 million at the end of January, 0.2% lower than in December...

Producer Prices Up 0.3% in February on Higher Electricity Prices

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in February, as prices for finished wholesale goods increased 0.3%, while margins of final services providers increased by 0.4%...this followed a revised January report that indicated the PPI was 0.6% higher, with prices for finished goods up 1.0% while final demand for services rose 0.3%, and a December report that indicated the overall PPI had increased 0.2%, with prices for finished goods up 0.6% while final demand for services rose 0.1%....on an unadjusted basis, producer prices are now 1.8% higher than a year earlier, up from the 1.6% YoY increase indicated a month ago...

as noted, the price index for final demand for goods, aka 'finished goods', rose by 0.3% in February, after rising by 1.0% in January, 0.6% in December, 0.2% in November, 0.3% in October, and 0.5% in September, as the index for wholesale energy prices rose 0.6%, the price index for wholesale foods rose 0.3%, and the index for final demand for core wholesale goods (ex food and energy) rose 0.1%...the major wholesale energy price increase was a 1.6% increase in wholesale prices for electric power, while the wholesale food price index moved up on a 16.2% increase in prices fresh and dry vegetables..among wholesale core goods, prices for pharmaceutical preparations increased 1.0%, while wholesale prices for computers and computer equipment were down 1.1%..

meanwhile, the index for final demand for services rose by 0.4% in February after rising by 0.3% in January, and by 0.1% in December, in November and in October, as the index for final demand for trade services rose 0.4%, the index for final demand for transportation and warehousing services rose 0.3%, while the index for final demand for services less trade, transportation, and warehousing services was 0.5% higher....among trade services, seasonally adjusted margins for TV, video, and photographic equipment retailers increased 11.3% after rising 14.1% in January, 6.3% in December and  6.0% in November, while margins for fuels and lubricants retailers fell 8.0%...in the core final demand for services index, margins for traveler accommodation services rose 4.3% as margins for arrangement of flights rose 9.8%..

this report also showed the price index for processed goods for intermediate demand was 0.4% higher, after rising 1.1% in January, 0.4% in December, and by a revised 0.4% in November...prices for intermediate processed goods are now 5.0% higher than in February a year ago, the fourth year over year increase after 16 months of lower year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016.... in February, the price index for intermediate energy goods rose 0.6%, prices for intermediate processed foods and feeds fell 0.1%, and the core price index for processed goods for intermediate demand less food and energy was 0.5% higher...

at the same time, the price index for intermediate unprocessed goods fell 0.2% in February, after rising 3.8% in January and 8.4% in December, but after falling by 0.2% in November, 0.7% in October, 0.6% in September, and 2.1% in August....the index for crude energy goods fell 4.3% as prices for raw natural gas fell 18.0%, while the price index for unprocessed foodstuffs and feedstuffs rose 2.2%, as the index for slaughter barrows and gilts rose 18.2%...in addition, the index for core raw materials other than food and energy materials rose 1.4%, as wholesale prices for copper scrap rose 2.8% and wholesale prices for paper scrap rose 2.5% ... this raw materials index is now up 19.4% from year ago, the largest 12-month jump since a 20.0% increase in September 2011, in contrast to a prior year over year decrease of 26.4% that we saw just 15 months ago, in November of 2015...

lastly, the price index for services for intermediate demand was 0.5% higher in February, after being 0.3% higher in January, 0.4% higher in December and 0.1% higher in November and October.. the index for trade services for intermediate demand was 0.6% higher as margins for intermediate chemicals and allied products wholesalers rose 7.1%…the index for transportation and warehousing services for intermediate demand was also up 0.6%, as pricing for intermediate postal services rose 1.9%, while the core price index for services less trade, transportation, and warehousing for intermediate demand rose 0.5%, as a 2.6% increase in the index for legal services accounted for much of the increase in the intermediate services index...over the 12 months ended in February, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.0% higher than it was a year ago...   

Industrial Production Flat in February on Record Warmth

the Fed's February G17 release on Industrial production and Capacity Utilization, which includes revisions back to September, reported that industrial production was unchanged in February after falling by a revised 0.1% in January, which left it 0.3% higher than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 104.7 in February, after the January index was revised up from 104.6 to 104.7, the December index remained at 104.8, and the November index was revised from the 104.2 reported last month to 104.1..

the manufacturing index, which accounts for more than 77% of the total IP index, rose to 104.5 in February, after the January index was revised from 103.8 to 104.0, and the September index was revised from 103.0 to 102.9...with other months unrevised, the manufacturing index now stands 1.2% above it's year ago level....meanwhile, the mining index, which includes oil and gas well drilling, rose 2.7%, from 107.7 in January to 110.6 in February, after the January index was revised down from 108.3, which left the mining index 1.8% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, fell by 5.7% in February, from 90.0 to 93.4, after the January utility index was revised from 98.8 to 99.0, down 5.8% from December...with February temperatures at record levels across much of the US, the utility index is now at its lowest level since March 2002, 7.0% lower than it was a year ago...

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 fell to 75.4% in February from 75.5% in January, which was revised up from the 75.3% reported last month ...capacity utilization of NAICS durable goods production facilities rose from a upwardly revised 76.4% in January to 76.7% in February, while capacity utilization for non-durables producers rose from an upwardly revised 75.1% to 75.4%...capacity utilization for the mining sector rose to 80.5% in February from 78.4% in January, which was originally reported as 78.1%, while utilities were operating at 70.9% of capacity during February, down from their 75.3% of capacity during January, which was previously reported at 75.1%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories..

February Housing Starts Up from December, Permits Down

the February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,288,000, which was 3.0 percent (±13.0 percent)* above the revised estimated January annual rate of 1,251,000, and was 6.2 percent (±10.4 percent)* above last February's rate of 1,213,000 housing starts a year...the asterisks indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, February housing starts could have been down by 10.0% or up by as much as 16.0% from those of January, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for January housing starts was revised from the 1,285,000 reported last month to 1,251,000, while December starts, which were first reported at a 1,226,000 annual rate, were revised from last month's initial revised figure of 1,285,000 annually back to a 1,275,000 annual rate with this report....these 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 87,100 housing units were started in February, up from the 82,800 units that were started in January and the 86,500 units that were started in December

the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,213,000, which was 6.2 percent (±1.8 percent) below the revised January rate of 1,293,000 permits, but 4.4 percent (±1.3 percent) above the rate of building permit issuance in February a year earlier...the annual rate for housing permits issued in January was revised up from the originally reported 1,285,000....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 roughly 84,500 housing units were issued in February, down from the revised estimate of 87,300 new permits issued in January.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.288 Million Annual Rate in February and Comments on February Housing Starts... 

Job Openings, Hiring, and Job Quitting Up In January, Layoffs Unchanged

the Job Openings and Labor Turnover Survey (JOLTS) report for January from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 87,000, from 5,539,000 in December to 5,626,000 in January, after December job openings were revised 38,000 higher, from 5,501,000 to 5,539,000...January's jobs openings were also 87,000 lower than the 5,713,000 job openings reported in January a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged from the 3.7% logged in December, while it was down from the 3.8% rate of January a year ago...(details on job openings by industry and region can be viewed in Table 1)...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 January, seasonally adjusted new hires totaled 5,440,000, up by 137,000 from the revised 5,303,000 who were hired or rehired in December, as the hiring rate as a percentage of all employed rose from 3.6% in December to 3.7% in January, and was also up from the 3.6% rate in January a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 174,000, from 5,084,000 in December to 5,258,000 in January, as the separations rate as a percentage of the employed rose from 3.5% to 3.6%, which was also up from 3.5% in January a year ago (see table 3)...subtracting the 5,258,000 total separations from the total hires of 5,440,000 would imply an increase of 182,000 jobs in January, somewhat less than the revised payroll job increase of 238,000 for January reported in the February establishment survey last week but still within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS finds that 3,220,000 of us voluntarily quit our jobs in January, up from the revised 3,085,000 who quit their jobs in December, while the quits rate, widely watched as an indicator of worker confidence, rose by 0.1% to 2.2% of total employment, while it was also up from the 2.0% rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,625,000 were either laid off, fired or otherwise discharged in January, up by 1,000 from the revised 1,624,000 who were discharged in December, as the discharges rate remained unchanged at 1.1% of all those who were employed during the month, which was down from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 413,000 in January, up from 375,000 in December, for an 'other separations rate’ of 0.3%, the same as in December and as in January 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, March 12, 2017

February jobs report; January’s trade deficit, factory inventories, and wholesale sales

in addition to the Employment Situation Summary for February from the Bureau of Labor Statistics, this week's releases included three reports that will input into 1st quarter GDP: the Census report on our International Trade for January, the Full Report on Manufacturers' Shipments, Inventories and Orders for January, and the January report on Wholesale Trade, Sales and Inventories, also from the Census Bureau....in addition, the Fed released the Consumer Credit Report for January, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $8.8 billion, or at a 2.4% annual rate, as non-revolving credit expanded at a 5.5% annual rate to $2,778.4 billion and revolving credit outstanding contracted at a 4.6% rate to $995.1 billion...

the week’s privately issued reports included the ADP Employment Report for February and the Mortgage Monitor for January (pdf) Black Knight Financial Services...the latter reported that there were 480,598 home mortgages, or 0.94% of all mortgages outstanding, remaining in the foreclosure process at the end of January, down from the 0.95% of all active loans that were in foreclosure at the end of December, and down from 1.30% of all mortgages that were in foreclosure in January of last year, while new foreclosure starts rose to 70,357 in January, up from 59,739 in December and the highest since March of last year .....

Employers Add 235,000 Jobs in February, Unemployment Rate Down to 4.7%

the Employment Situation Summary for February indicated modest employment increases over the month, while the household survey saw upticks in the employment rate and the labor force participation rate, and lower unemployment…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 235,000 jobs in February, after the previously estimated payroll job increase for January was revised up from 227,000 to 238,000 and the payroll jobs increase for December was revised from 157,000 down to 155,000…that means that this report represents a total of 244,000 more seasonally adjusted payroll jobs than were reported last month, better than the 6 month average of 194,000 jobs per month, and above the past year's average of 196,000 jobs per month...the unadjusted data shows that there were actually 1,010,000 more payroll jobs extant in February than in January, as large seasonal job increases in sectors such as administrative and waste services, leisure and hospitality and state and local government were smoothed over by the seasonal adjustments…

seasonally adjusted job increases in February were spread through through both the goods producing and the service sectors, with only the retail sector dropping 26,000 jobs on a seasonally adjusted basis, as general merchandise stores cut 19,300 employees...the construction sector saw a seasonally adjusted increase of 58,000 jobs, with specialty trade contractors adding 36,400 workers, largely because of record warm temperatures through a large swath of the eastern US....the broad professional and business services sector added 37,000 jobs, as management and technical consulting services employed 6,300 more than in December and 5,500 jobs were added in computer systems design....employment in health care rose by 32,500, with the addition of 6,900 jobs in doctor's offices and 6,300 in hospitals.. in addition, employment in private educational services rose by 29,300 and manufacturing employment rose by 28,000, with 8,800 of those in food manufacturing...another 26,000 seasonally adjusted jobs were added in accommodation and food services, with the addition of 16,700 jobs in bars and restaurants...other major sectors, including resource extraction, wholesale trade, transportation and warehousing. financial, and government all saw job gains of less than 10,000, while the utility sector shed a net of 1,000 employees..

the establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $26.09 an hour in February, after it had increased by a revised 5 cents an hour in January; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $21.86 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in February, while hours for production and non-supervisory personnel was unchanged at 33.6 hours for the seventh consecutive month...in addition, the manufacturing workweek was also unchanged at 40.8 hours, while average factory overtime remained at 3.3 hours...

meanwhile, the February household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 447,000 to 152,528,000, while the similarly estimated number of those unemployed fell by 107,000 to 7,528,000; which thus meant a net 340,000 increase in the total labor force...since the working age population had grown by 164,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 176,000 to 94,190,000...with the increase of  those in the labor force greater than the increase in the civilian noninstitutional population, the labor force participation rate ticked up from 62.9% in January to 63.0% in February....at the same time, the increase in number employed as a percentage of the increase in the population was great enough to lift the employment to population ratio, which we could think of as an employment rate, 0.1% to 60.0%...at the same time, the decrease in the number unemployed was also large enough to decrease the unemployment rate from 4.8% to 4.7%....meanwhile, the number who reported they were involuntarily working part time fell by 136,000 to 5,704,000 in February, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 9.4% in January to 9.2% in February, matching its lowest since April 2008....

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..   

January Trade Deficit Rises 9.6% on Higher Imports of Oil, Cars and Consumer Goods

our trade deficit rose by 9.6% January, as the value of both our exports and our imports increased, but our imports increased by much more....the Census report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by $4.2 billion to $48.5 billion in January, the highest in 5 years, from a December deficit which was revised but statistically unchanged at $44.3 billion...the value of our January exports rose by $1.1 billion to $192.1 billion on a $1.1 billion increase to $128.0 billion in our exports of goods and a decrease of less than $0.1 billion to $61.1 billion in our exports of services, while our imports rose $5.3 billion to $240.6 billion on a $5.1 billion increase to $197.6 billion in our imports of goods and a $0.2 billion increase to $42.9 billion in our imports of services...export prices averaged 0.2% higher in January, so the real growth in exports was less than the nominal dollar value by that percentage, while import prices were 0.6% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage..... 

the increase in our January exports of goods was mostly a result of higher exports of industrial supplies and of automotive products, offset by a decrease in our exports of capital goods...referencing the Full Release and Tables for January (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $2,082 million to $37,961 million on a $697 million increase in our exports of crude oil and a $548 million increase in our exports of petroleum products other than crude or fuel oil, and that our exports of automotive vehicles, parts, and engines rose by $1329 million to $13,616 million on a $874 million increase in our exports of new and used passenger cars and a $306 million increase in our exports of trucks, buses, and special purpose vehicles...in addition, our exports of foods, feeds and beverages rose by $594 million to $11,204 million on a $407 million increase in our exports of soybeans.. offsetting those increases, our exports of capital goods fell by $1,889 million to $43,482 million on a $611 million decrease in our exports of civilian aircraft, a $575 million decrease in our exports of engines for civilian aircraft, and a $306 million decrease in our exports of telecommunication equipment, our exports of consumer goods fell by $11 million to $16,476 million, and our exports of other goods not categorized by end use fell by $1,738 million to $4,202 million..

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods, industrial supplies and materials, and automotive vehicles, parts, and engines were responsible for the increase in January imports...our imports of consumer goods rose by $2,406 million to $52,061 million on a $1019 million increase in our imports of cellphones, a $281 million  increase in our imports of nonwool or cotton clothing and textiles, a $236 million increase in our imports of TVs and video equipment, a $208 million increase in our imports of toys, games and sporting goods, and a $205 million increase in our imports of gem diamonds...our imports of industrial supplies and materials rose by $1,001 million to $42,015 million as our imports of crude oil rose by $1,672 million, our imports of fuel oil rose by $436 million and our imports of other petroleum products rose by $493 million, while our imports of coal fell by $306 million and our imports of fertilizers fell by $370 million....our imports of automotive vehicles, parts and engines rose by $899 million to $31,763 million on a $688 million increase in our imports of new and used passenger cars and a $383 million increase in our imports of trucks, buses, and special purpose vehicles...in addition, our imports of capital goods rose by $688 million to $51,091 million on a $374 million increase in our imports of semiconductors...meanwhile, our imports of foods, feeds, and beverages fell by $57 million to $11,250 million, and our imports of other goods not categorized by end use fell by $76 million to $7,601 million...

to gauge the impact of January trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2009 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, albeit they are not annualized here....from that table, we can figure that 4th quarter real exports of goods averaged 121.037.7 million monthly in chained 2009 dollars, while inflation adjusted January goods exports were at 124,015 million in that same 2009 dollar quantity index representation... annualizing the change between the two figures, we find that January's real exports of goods are running at a 10.2% annual rate above those of the 4th quarter, or at a pace that would add about 0.83 percentage points to 1st quarter GDP if continued through February and March...in a similar manner, we find that our 4th quarter real imports of goods averaged 183.210.3 million monthly in chained 2009 dollars, while inflation adjusted goods imports in January were at 189,361 million...that would indicate that so far in the 1st quarter, we have seen our real imports increase at a 14.1% annual rate from those of the 4th 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 14.1% rate would subtract 1.61 percentage points from 1st quarter GDP....hence, if the January trade deficit is maintained at the same level throughout the 1st quarter, our deteriorating balance of trade in goods would subtract about 0.78 percentage points from the growth of 1st quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to the details on their price changes...  

Factory Shipments Up 0.2%, Inventories Up 0.2%

the Full Report on Manufacturers' Shipments, Inventories, & Orders for January (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $5.5 billion or 1.2 percent to $470.2 billion, the sixth increase in seven months, following an increase of 1.3% in December, which was unrevised from last month's reported figure....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the January advance report on durable goods we reported on a week ago...this report now shows that new orders for manufactured durable goods rose by $4.5 billion or 2.0% to $230.7 billion in January, revised from the 1.8% increase to $230.4 billion figure that was published a week ago....

this report also indicated that the seasonally adjusted value of January factory shipments rose by $1.1 billion or 0.2 percent to $478.3 billion, following a 2.5% increase in December....shipments of durable goods were statistically unchanged from December at $238.8 billion, revised from the 0.1% decrease reported by the durables report last week...meanwhile, the value of shipments (and hence of "new orders") of non-durable goods were up by $1.0 billion or 0.4 percent to $239.5 billion, after December shipments were revised 0.3% higher to show a 3.4% increase, as January's increase was again driven by a  2.4% increase in the value of shipments of petroleum and coal products...

meanwhile, the aggregate value of January factory inventories rose for the 7th time in 8 months, increasing by $1.0 billion or 0.2 percent to $627.9 billion, after a December increase of 0.3%...January inventories of durable goods increased in value by $0.3 billion or 0.1 percent to $384.1 billion, revised up from last week's published "virtually unchanged increase”, following a 0.1% decrease in December durable inventories.....the value of non-durable goods' inventories rose by $0.8 billion or 0.3 percent to $243.8 billion, following a revised 0.9% increase in December non-durable inventories...to gauge the effect of these January inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was up 0.1% to $224.96 billion in January; the value of work in process inventories was up 0.2% to $194.5 billion, and materials and supplies inventories were valued 0.2% higher at $208.46 billion...the January producer price index reported prices for finished goods increased 0.2%, prices for intermediate processed goods inventories were 1.1% higher, and prices for unprocessed goods were 3.8% higher..that would suggest that real finished goods inventories were 0.1% lower, real inventories of intermediate processed goods were 0.9% lower, and raw material inventory inventories were 3.6% lower..

January Wholesale Sales Down 0.1%, Wholesale Inventories Down 0.2%

the January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $463.6 billion, down 0.1 percent (+/-0.5%)* from the revised December level, but 8.4 percent (±0.9 percent) higher than wholesale sales of January 2016... the December preliminary estimate of wholesale sales was revised down $0.8 billion or 0.2 percent to $464.1, which meant December's sales were 2.4% above the November level... January wholesale sales of durable goods rose 0.1% percent (+/-1.1%) from December and were up 7.4% percent (+/-1.8%) from a year earlier, with a 3.2% increase in wholesale sales of motor vehicles and motor vehicle parts and supplies leading the increase ...wholesale sales of nondurable goods were down 0.3 percent (+/-0.9%)* from December but were up were 9.3 percent (+/-1.6%) from last January, with wholesale sales petroleum and petroleum products down 1.3% the largest drag...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....

on the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this January report estimated that wholesale inventories were valued at $600.0 billion at month end, a decrease of 0.2 percent (+/-0.2%)* from the revised December level but still 2.2 percent (±0.9 percent) higher than January a year ago, with the December preliminary inventory estimate revised downward by $0.2 billion or 0.1%....inventories of durable goods were valued 0.2 percent (+/-0.2%)* lower than December but were valued 1.1 percent higher than January a year earlier, with wholesale inventories of motor vehicle and motor vehicle parts and supplies 3.1% lower while inventories of computers, computer peripheral equipment and software were up 3.5%...meanwhile, the value of wholesale inventories of nondurable goods was down 0.1 percent (+/-0.2%) from December but was up 4.0 percent (+/-0.9%) from last January, as a 2.1% decrease in the value of wholesale inventories of petroleum and petroleum products offset a 2.3% increase in the value of wholesale farm products...with the January producer price index for finished goods up by 1.0% and producer prices for intermediate goods up by 1.1%, most additions to January inventories look to be a negative for 1st quarter GDP growth... 

 

(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, March 5, 2017

4th quarter GDP revision, January income and outlays, construction spending, and durable goods

the key economic releases of the past week were the 2nd estimate of 4th quarter GDP and the January report on Personal Income and Spending from the Bureau of Economic Analysis; other widely watched releases included the advance report on durable goods for January and the January report on Construction Spending, both from the Census bureau....this week also saw the release of the last two regional Fed manufacturing surveys for February: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +24.5 from last month's +22.1, an 11 year high, suggesting a boom like expansion in the Texas oil patch economy, while the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to +17 in February from +12 in January, also suggesting an accelerating expansion in that region's manufacturing...

privately issued reports released this week included the light vehicle sales report for February from Wards Automotive, which estimated that vehicles sold at a 17.47 rate in February, virtually unchanged from the 17.48 million annual rate in January, and also little changed from the 17.43 million annual sales rate in February a year ago; the Case-Shiller Home Price Index for December from S&P Case-Shiller, which reported that home prices nationally during October, November and December averaged 5.8% higher than prices for the same homes that sold during the same 3 month period a year earlier, and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the February Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 57.7% in February, up from 56.0 in January,  which suggests a stronger expansion in manufacturing firms nationally, and the February Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 57.6%, up from 56.5% in January, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in February...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally... 

4th Quarter GDP Growth Remains at a 1.9% Rate

the Second Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 1.9% rate in the 4th quarter, unrevised from the advance estimate reported last month, as personal consumption expenditures were greater than initially estimated, but both private and state and local investment grew less than was first estimated.....in current dollars, our fourth quarter GDP grew at a 3.9% annual rate, increasing from what would work out to be a $18,675.3 billion a year output rate in the 3rd quarter to a $18,855.5 billion annual rate in the 4th quarter, with the headline 1.9% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.0%, aka the GDP deflator, was applied to the current dollar change...

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

real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 3.0% annual rate in the 4th quarter, up from the 2.5% growth rate reported last month…that growth rate was arrived at by deflating the annualized dollar amount of consumer spending with the PCE price index, which indicated consumer inflation at a 1.9% annual rate in the 4th quarter, which was revised from the 2.0% inflation rate that was applied to PCE in the first estimate...real consumption of durable goods grew at a 11.5% annual rate, which was revised from the 10.9% growth indicated in the advance report, and added 0.83  percentage points to GDP, as real output of motor vehicles rose at a 16.0% annual rate and accounted for 0.39 of that growth.....real consumption of nondurable goods by individuals rose at a 2.8% annual rate, revised from the 2.3% increase reported in the 1st estimate, and added 0.40 percentage points to 4th quarter economic growth, as lower consumption of energy goods was the only drag on the quarter’s non-durables growth...in addition, consumption of services rose at a 1.8% annual rate, revised from the 1.3% rate reported last month, and added 0.81 percentage points to the final GDP tally, as an increase in the real output of health care services at a 5.8% rate accounted for three-fourths of the 4th quarter increase in services...

seasonally adjusted real gross private domestic investment grew at a 9.2% annual rate in the 4th quarter, revised from the 10.7% growth estimate made last month, as real private fixed investment was revised from growth at a 4.2% rate to growth at a 3.2% rate, while real inventory growth was smaller than previously estimated...investment in non-residential structures was revised from shrinking at rate of 5.0% to shrinking at a 4.5% rate, while real investment in equipment was revised to show growth at a 1.9% rate, revised from the 3.1% growth rate previously reported...in addition, the 4th quarter's investment in intellectual property products was revised from growth at a 6.4% rate to growth at a 4.5% rate, and the growth rate of residential investment was revised from 10.2% to 9.6% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.12 percentage points from the economy's growth rate, investment in equipment added 0.11 percentage points, investment in intellectual property added 0.18 percentage points , and growth in residential investment added 0.35 percentage points to the change in 4th quarter GDP...

meanwhile, the growth in real private inventories was revised from the originally reported $48.7 billion in inflation adjusted growth to show inventory growth at an inflation adjusted $46.2 billion rate, which came after inventories had grown at an inflation adjusted $7.1 billion rate in the 3rd quarter, and hence the $39.1 billion positive change in real inventory growth from the 3rd quarter added 0.94 percentage points from the 4th quarter's growth rate, revised from the 1.00 percentage point addition from inventory growth reported in the advance estimate....since growth in inventories indicates that more of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their increase by $39.1 billion meant that real final sales of GDP were actually smaller by that much, and hence real final sales of GDP grew at a 0.9% rate in the 4th quarter, which was statistically unchanged from the advance estimate, compared to the real final sales increase at a 3.0% rate in the 3rd quarter, when the change in inventories was smaller....

the previously reported decrease in real exports was revised lower with this estimate, but the reported increase in real imports was revised higher, and as a result our net trade was little changed from what was previously reported...our real exports fell at a 4.0% rate rather than the 4.3% 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 shrinkage subtracted 0.50 percentage points from the 4th quarter's growth rate....meanwhile, the previously reported 8.3% increase in our real imports was revised to an 8.5% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 1.20 percentage points from 4th quarter GDP....thus, our weakening trade balance subtracted a net 1.70 percentage points from 4th quarter GDP, the same GDP subtraction resulting from foreign trade that was indicated in the advance estimate..

finally, there was also a downward revision to real government consumption and investment in this 2nd estimate, as the real growth rate for the entire government sector went from a 1.2% rate to a 0.4% rate...real federal government consumption and investment was statistically unchanged, however, as real federal spending for defense shrunk at a 3.4% rate and subtracted 0.14% percentage points from 4th quarter GDP, while all other federal consumption and investment grew at a 2.3% rate and added 0.06 percentage points to GDP.....note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...meanwhile, real state and local consumption and investment was revised from growth at a 2.6% rate in the first estimate to growth at a 1.3% rate in this estimate, as state and local investment spending grew at a 7.7 rate and added 0.14 percentage points to 4th quarter GDP, while state and local consumption spending was little changed and had no statistical impact on GDP...

our FRED bar graph for GDP below has been updated to reflect these latest GDP revisions...each color coded bar shows the real inflation adjusted change, expressed in billions of chained 2009 dollars, in one of the major components of GDP over each quarter since the beginning of 2013...in each quarterly grouping of seven bars on this graph, the quarterly changes in real personal consumption expenditures are shown in blue, the changes in real gross private investment, including structures, equipment and intangibles, are shown in red, the quarterly change in real private inventories is in yellow, the real change in imports are shown in green, the real change in exports are shown in purple, while the real change in state and local government spending and  investment is shown in pink, and the real change in Federal government spending and investment is shown in  grey...those components of GDP that contracted in a given quarter are shown below the zero line and subtract from GDP, those that are above the line grew during that quarter and added to GDP; the exception to that is imports in green, which subtract from GDP, and which are therefore shown on this chart as a negative, so that when imports shrink, they will appear above the line as an addition to GDP, and when they increase, they'll appear below the zero line.....it's clear that the drop in exports and the surge in imports were the major negatives in the 4th quarter, and that with the increases in personal consumption expenditures, investment and inventories, the 4th quarter could have topped the third had our trade deficit merely remained flat..

4th quarter 2016 GDP 2nd estimate

Personal Income up 0.4% in January, Personal Spending up 0.2%, PCE Price Index up 0.4%

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

thus, when the opening line of the press release for this report tell us "Personal income increased $63.0 billion (0.4 percent) in January", they mean that the annualized figure for personal income in January, $16,370.8 billion, was $63.0 billion, or a bit less than 0.4% greater than the annualized  personal income figure of $16,307.8 billion for December; the actual change in personal income from December to January is not given...similarly, annualized disposable personal income, which is income after taxes, rose by almost 0.3%, from an annual rate of an annual rate of $14,305.3 billion in December to an annual rate of $14,345.4 billion in January...the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in January, the largest contributors to the $63.0 billion annual rate of increase in personal income were a $33.7 billion increase in wages and salaries and a $11.4 billion increase in proprietors’ income….

for the January personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased by $22.2 billion, or 0.2%, which means the rate of personal consumption expenditures rose from $13,043.5 billion annually in December to $13,065.8 billion annually in January; at the same time, the December PCE figure was revised up from the originally reported $13,032.1 billion annually, a revision that was already incorporated into this week's GDP estimate...and as you know, before January's personal consumption expenditures are used in the 1st quarter GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is included in Table 9 in the pdf for this report, which is a chained price index based on 2009 prices = 100....that PCE price index rose from 111.598 in December to 109.956 in January, giving us a month over month inflation rate of 0.434%, which BEA rounds to a 0.4% increase in reporting it here....applying that 0.434% inflation adjustment to the smaller increase in January PCE means that real PCE actually fell by 0.2616% in January, which the BEA reports as a 0.3% decrease...comparing the annualized January real PCE of 11,657.5 in chained 2009 dollars that we get from from Table 7 of this release to the annualized real PCE of 11,655.0 in chained dollars that was reported in table 3 of the 4th quarter GDP revision, we find that real PCE is barely growing at a 0.02% annual rate so far in the 1st quarter, or at a pace that would be considered statistically unchanged, and thus would add nothing to the growth of 1st quarter GDP...

with our disposable personal income up by 0.3% and our personal consumption expenditures up by 0.2%, there was thus an increase in our personal savings rate for January from a month earlier...to arrive at the figures for that, the BEA takes total personal outlays, which is the sum of PCE, personal interest payments, and personal current transfer payments, and which came in at a $13,549.7 billion annual rate in January, and subtracts that from the annual rate of disposable personal income, to show personal savings growing at a $795.7 billion annual rate in January, up from the $779.5 billion that we would have ‘saved"’ over a year at December's savings pace...this small increase left the personal savings rate, or personal savings as a percentage of disposable personal income, at 5.5% in January, up from the savings rate of 5.4% in December...

Construction Spending Fell 1.0% in January after December and November Revised Higher

the Census Bureau's report on January construction spending (pdf)  estimated that January's seasonally adjusted construction spending would work out to $1,180.3 billion annually if extrapolated over an entire year, which was 1.0 percent (±1.0%)* below the revised annualized estimate of $1,192.2 billion for construction spending in December but 3.1 percent (±1.5%) above the estimated annualized level of construction spending of January last year...the December spending estimate was revised 0.9% higher, from $1,181.5 billion to $1,192.2 billion, while November's construction spending was revised from $1,184.4 billion to $1,191.5 billion, which together would suggest an upward revision of 0.16 percentage points to 4th quarter GDP when the third estimate is released at the end of March...

private construction spending was at a seasonally adjusted annual rate of $911.6 billion in January, 0.2 percent (±0.8 percent)* above the revised December estimate, with residential spending of $476.4 billion up 0.5% (±1.3 percent)* from the upwardly revised annual rate of $433.1 billion in December, while private non-residential construction spending of $435.3 billion was statistically unchanged  (±0.8 percent)* from the revised December estimate of $435.4 billion....meanwhile, public construction spending was estimated to be at an annual rate of $268.7 billion, 5.0 percent (±1.8%) below the revised December estimate, with spending for water utilities down 12.1% (±8.7%) to an annual rate of $10,368 million and spending for public safety down 16.8% (±2.3%) to an annual rate of $7,181 million...

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, gauging the impact of the January spending that's reported here on GDP is difficult because all figures given here are nominal and as you know, data used to compute the change in GDP must be adjusted for changes in price...moreover, the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, making an accurate estimate a real chore to undertake manually...so in lieu of trying to adjust for all of those indices, we've opted to just 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 0.3% in January, after they had fallen 0.1% in December and increased by 0.1% in November...on that basis, we can estimate that January construction costs were roughly 0.2% more than those of November, and 0.3% more than October...we then use those percentages to inflate lower priced spending figures for each of the 4th quarter  months, which is arithmetically the same as deflating January construction spending, for purposes of comparison....this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,192,150 in December, $1,191,468 in November, and $1,173,749 in October...thus to compare January's nominal construction spending of $1,180,333 million to inflation adjusted figures of the fourth quarter, our formula becomes: (1,180,333 / (((1,192,150 *1.003)+( 1,191,468 * 1.002) + (1,173,749 *1.003)) / 3) = 0.992753, meaning real construction spending in January was down 0.625% vis a vis that of the 4th quarter, or down at a 2.87% annual rate...to figure the potential effect of that change on GDP,  we take the difference between the 4th quarter inflation adjusted average and January's spending as a fraction of 4th quarter GDP, and find that January construction spending is falling at a rate that would subtract 0.21 percentage points from 4th quarter GDP, if there is no improvement in real constrctuion over the next two months..

January Durable Goods: New Orders Up 1.8%, Shipments Down 0.1%, Inventories Unchanged

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $4.0 billion or 1.8 percent to $230.4 billion in January, after December's new orders were revised from the  $227.0 billion reported last month to $226.3 billion, now 0.8% less than November's new orders...January's new orders were also up by 1.4% from those of January 2016...the volatile monthly new orders for transportation equipment were responsible for the increase, as new transportation equipment orders rose $4.3 billion or 6.0 percent to $76.4 billion, on a 69.9% increase to $7,978 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders fell 0.2%, while excluding just new orders for defense equipment, new orders rose 1.5%.... at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $237 million or 0.4% to $64,573 million...

meanwhile, the seasonally adjusted value of January shipments of durable goods, which will included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, decreased by $0.2 billion or 0.1 percent to $238.3 billion, after the value of December shipments was revised from from $238.0 billion to $238.564 billion, now up 1.6% from November...lower shipments of machinery drove the January decrease, falling $0.5 billion or 1.6 percent to $30.7 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by just $0.1 billion to $383.8 billion, after December inventories were revised from $384.351 billion to $383.742 billion, now down 0.1% from November....a $0.27 billion or 2.4 percent increase to $11,269 billion in inventories of defense aircraft was the largest inventory increase, while a $0.56 billion or 1.6 percent decrease to $34 billion in inventories of motor vehicles was the largest decrease...

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, fell for the seventh time in 8 months, decreasing by $4.0 billion or 0.4 percent to $1,114.3 billion, following a December decrease of 0.7% to $1,118.3 billion, which was revised from the previously reported 0.6% decrease to $1,119.4 billion...a $5.6 billion or 0.7 percent drop to $752.9 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment orders were up 0.4% to $361,417 million...the unfilled order book for durable goods is now 2.0% below the level of last January, with unfilled orders for transportation equipment now 3.9% below their year ago level, mostly on a 4.5% decrease in the backlog of orders for motor vehicles...    

 

(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…)