Sunday, January 28, 2018

4th quarter GDP; December durable goods, new home sales, existing home sales

the key economic release of the past week was the 1st estimate of 4th quarter GDP from the Bureau of Economic Analysis; other widely watched releases included the advance report on durable goods for December and the December report on new home sales, both from the Census bureau, and the existing home sales report for December from the National Association of Realtors (NAR)…we also saw the release of the Chicago Fed National Activity Index (CFNAI) for December, a weighted composite index of 85 different economic metrics, which rose to +0.27 in December, up from +0.11 in November, which was revised from the +0.15 reported last month....that left the 3 month average of the index at +0.42 in December, down from a revised  +0.43  in November, which still indicates that national economic activity continued at a pace above the historical trend over the 4th quarter...in addition to those reports, the BLS also released the Regional and State Employment and Unemployment for December on Friday, which breaks down the establishment survey and household survey data from the monthly jobs report released four weeks earlier by region and by state..

  this week also saw the release of two more regional Fed manufacturing surveys for January: 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 +14 in January from +20 in December, still suggesting a modest expansion in that region's manufacturing, and the Kansas City Fed manufacturing survey for January, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to 16 in January, up from 13 in December and 15 in November, also indicating an ongoing expansion of that region's manufacturing...

4th Quarter GDP Up at 2.6% Rate as Imports & Inventory Cut Growth in Half

our economy grew at a 2.6% rate in the 4th quarter,  somewhat slower than the growth rate of the third quarter, as increasing imports and slower growth in private inventories partially offset stronger personal consumption and fixed investment growth...the Advance Estimate of 4th Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 2.6% annual rate over the output of the 3rd quarter of 2017, when our real output grew at a 3.2% real rate, as increasing imports subtracted 1.96 percentage points from 4th quarter growth and slower inventory growth subtracted another 0.67 percentage points...for the entire year, our economy grew at a 2.3% rate, 0.8 percent faster than the 1.5% growth that we saw in 2016...in current dollars, our fourth quarter GDP grew at a 5.0% annual rate, increasing from what would work out to be a $19,500.6 billion a year output rate in the 3rd quarter to a $19,738.9 billion annual rate in the 4th quarter, with the headline 2.6% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.4%, aka the GDP deflator, was applied to the current dollar change...

as usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.7% in either direction for nominal GDP, and +/- 0.6% for real (inflation adjusted) GDP before the third estimate for the quarter is released, which will be two months from now...also note that December construction and non-durables inventory data have yet to be reported, and that the BEA assumed a small decrease in nonresidential construction, an increase in residential construction, and a large increase in nondurable manufacturing inventories for December before they estimated 4th quarter output (see their Key source data and assumptions Excel file)..

while we cover the details on the 4th quarter below, remember that the press release for GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of 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 1st estimate of 4th quarter GDP, which is linked to on the sidebar of the BEA’s press release, which also offer links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 1st quarter of 2014, table 2, which shows the contribution of each of the components to the GDP growth 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, 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 GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...

personal consumption expenditures (PCE), which accounts for roughly 69% of GDP, grew at a 6.65% rate in current dollars in the 4th quarter, which was reduced to a 3.8% real growth rate of goods and services consumed for GDP purposes, after an annualized PCE price index increase of 2.8% was used to adjust that consumer spending for inflation.... consumer outlays for durable goods rose at a 12.1% rate in current dollars while prices for those durable goods fell at a 1.8% rate, and thus the BEA found real growth in output of consumer durables rose at a 14.2% rate, as real consumption of motor vehicles and parts grew at a 16.7% rate while real consumption of recreational vehicles, furniture and other durable goods all increased at a double digit rate as well...the BEA also found that real output of consumer non-durable goods grew at a 5.2% rate, after growth in consumer spending for non-durables at a 9.4% rate was adjusted for non-durable goods prices that rose at a 4.0% rate, as strong growth in real consumption of food, clothing and other non-durable goods more than offset slightly lower consumption of gasoline and other energy goods....meanwhile, the 4.9% nominal growth in consumer outlays for services was deflated by a 3.1% average increase in prices for personal services to show real output of consumer services grew at a 1.8% annual rate, as a strong real growth rate in health care services and housing and utilities offset a small pullback in use of transportation and recreational services...as a result of those changes in growth from the 3rd to the 4th quarter, the increase in real outlays for durable goods added 1.02 percentage points to the GDP growth rate, increased consumption of non-durable goods added 0.74 percentage points, and increased consumption of services added 0.82  percentage points to the growth rate of the economy in the 4th quarter..

the change in other components of the change in GDP is computed by the BEA in the same manner that we have just shown for computing PCE; ie, the actual annualized increase in current dollar spending for the quarter is adjusted with an annualized inflation factor for that component, yielding the change in real units of goods or services produced in the quarter at an annual rate...thus, real gross private domestic investment, which had grown at a real 7.3% annual rate in the 3rd quarter, grew at a real 3.6% annual rate from those levels in the 4th quarter...however, real growth in fixed investments increased,  growing at a 7.9% annual rate in the 4th quarter, after growing at a 2.4% rate in the 3rd quarter...among fixed investments, real non-residential fixed investment grew at a 6.8% rate as real investment in non-residential structures grew at a 1.4% rate and added 0.04 percentage points to 4th quarter GDP, real investment in equipment grew at a 11.4% rate and added 0.62 percentage points to 4th quarter GDP, and real investment in intellectual property grew at 4.5% rate and added 0.18 percentage points to GDP...at the same time, real residential investment grew at 11.6% rate and added 0.42 percentage points to GDP....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

meanwhile, real private inventories grew by an inflation adjusted $9.2  billion in the 4th quarter, after growing at an inflation adjusted $38.5 billion in the 3rd quarter, and as a result the $29.3 billion negative change in real inventory growth subtracted 0.67 percentage points from the 4th quarter's growth rate, after $33.0 billion in real inventory growth in the 3rd quarter had added 0.79% to that quarter's GDP....however, since smaller growth in inventories indicates that less of the goods produced during the quarter were left in storage or "sitting on the shelf”, their decrease by $29.3 billion in turn means real final sales of GDP were actually greater by that amount, and hence real final sales of GDP rose at a 3.2% rate in the 4th quarter, up from the real final sales growth rate of 2.4% in the 3rd quarter, when the greater increase in inventory growth meant that the quarter’s growth in real final sales was lower...

after an adjustment for a 5.8% growth rate in export prices, our real exports of goods and services grew at a 6.9% rate in the fourth quarter, an increase from their 2.1% 3rd quarter growth rate...however, after an adjustment for 6.0% growth rate in import prices, our real imports still grew at a 13.9% rate in the 4th quarter after falling at a 0.7% rate in the 3rd quarter....as you'll recall, exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted elsewhere in this GDP calculation), while increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been because it was not produced here....thus the 4th quarter increase in real exports added 0.82 percentage points to 4th quarter GDP, while the greater 4th quarter import increase subtracted 1.96 percentage points from 3rd quarter GDP, and thus our deteriorating trade balance subtracted a total of 1.13 percentage points from our 4th quarter GDP, after our improved trade deficit had added 0.36  percentage points to GDP in the third quarter..

finally, real consumption and investment by government increased at a 3.0% annual rate in the 4th quarter, after growing at a 0.7% rate in the 3rd quarter, as federal government consumption and investment grew at a 3.5% rate, while state and local consumption and investment grew at a 2.6% rate....inflation adjusted federal spending for defense grew at a 6.0% rate and added 0.22 percentage points to 4th quarter GDP growth, while real non-defense federal consumption and investment grew at a 0.1% rate and had no statistical impact on 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, state and local government investment and consumption expenditures grew at a 2.6% annual rate and added 0.28 percentage points to the growth of 4th quarter GDP, as real growth in state and local consumption expenditures added 0.06 percentage points while real state and local investment grew at a 13.1% annual rate and added 0.21 percentage points to GDP...

December Durable Goods: New Orders Up 2.9%, Shipments Up 0.6%, Inventories Up 0.3%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for December (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $7.0 billion or 2.9 percent to $249.4 billion in December, after November's new orders were revised from the $241.4 billion reported last month to $242.4 billion, now 1.7% more than October's new orders...for the year, 2017’s new orders were 5.8% above those of 2016, an increase from the 5.4% year over year change we saw in this report last month....a jump in the volatile monthly new orders for transportation equipment was largely responsible for the December increase, as new transportation equipment orders rose $6.0 billion or 7.4 percent to $87.2 billion, on a 55.3% increase to $5,329 million in new orders for defense aircraft and a 15,9% increase to $14,460 in new orders for commercial aircraft....excluding orders for transportation equipment, new orders still rose 0.6%, while excluding just new orders for defense equipment, new orders rose 2.2%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $207 million or 0.3% to $67,135 million...

meanwhile, the seasonally adjusted value of December shipments of durable goods, which were included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased by $1.5 billion or 0.6 percent to $246.8 billion, after the value of November shipments was revised from from $244.5 billion to $245.3 billion, now up 1.3% from October...shipments of fabricated metal products, up $0.5 billion or 1.5 percent to $33.5 billion, saw the largest percentage increase....at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 17th time in the past 18 months, increasing by $1.3 billion or 0.3 percent to $406.5 billion, after November inventories were revised from $405.2 billion to $405.239 billion, still up 0.2% from October....a $0.4 billion or 0.6 percent increase to $70.4 billion in inventories of machinery was the largest inventory increase, while a $285 million or 0.4 percent decrease to $66,912 million in inventories of commercial aircraft 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, increased for the fourth month in a row, rising by $6.9 billion or 0.6 percent to $1,144.1 billion, following a November increase of 0.1%, which was statistically unchanged from what was reported a month ago...a $6.0 billion or 0.8 percent increase to $775.9 billion in unfilled orders for transportation equipment was responsible for most of the gain, as unfilled orders excluding transportation equipment orders were up $892 million or 0.2% to $368,222 million...compared to the end of 2016, the unfilled order book for durable goods is now 1.9% above the level of last December, with unfilled orders for nondefense capital goods less aircraft now 2.8% above their year ago level, led by a 5.1% increase in the backlog of orders for machinery...   

December New Home Sales Reported Lower After Sales in Prior Months Revised Down

the Census report on New Residential Sales for December (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 625,000 homes annually during the month, which was 9.3 percent (±11.0 percent)* below the revised November annual rate of 689,000 new single family home sales, but was 14.1 percent (±13.0 percent) above the estimated annual rate that new homes were selling at in December of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether December new home sales rose or fell from those of November, 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 November were revised from the annual rate of 733,000 reported last month to an annual rate of 689,000, while home sales in October, initially reported at an annual rate of 685,000 and revised to 624,000 last month, were revised even lower, to a 599,000 a year rate with this report, and while September's annualized home sale rate, initially reported at an annual rate of 677,000 and revised from the initially revised 645,000 a year rate to a 635,000 a year rate last month, were revised up to a 639,000 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 43,000 new single family homes sold in December, down from the estimated 49,000 new homes that sold in November and the 47,000 that sold in October.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in December was $335,400, up from the median sale price of $334,900 in November and up from the median sales price of $327,000 in December a year ago, while the average December new home sales price was $398,900, up from the $383,600 average sales price in November, and up from the average sales price of $382,500 in December a year ago....a seasonally adjusted estimate of 295,000 new single family houses remained for sale at the end of December, which represents a 5.7 month supply at the December sales rate, up from the reported 4.6 months of new home supply in November...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 625,000 Annual Rate in December and A few Comments on December New Home Sales... 

December Existing Home Down 3.6% After November Sales Revised Lower

the National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell by 3.6% from November to December, projecting that 5.57 million existing homes would sell over an entire year if the December home sales pace were extrapolated over that year, a pace that was 1.1% above the annual sales rate projected in December of a year ago...November sales are now shown at a 5.78 million annual rate, revised down from the 5.81 million annual rate indicated by last month's report...total existing home sales for 2017 added up to 5.51 million, a 1.1% increase from the 5.45 million homes that were sold in 2016...the NAR also reported that the median sales price for all existing-home types was $246,800 in December, which was down from $247,200 in November, but 5.8% higher than in December a year earlier, which they report as "the 70th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Fade in December; 2017 Sales Up 1.1 Percent ", 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) to see what actually transpired during the month...this unadjusted data indicates that roughly 427,000 homes sold in December, up by 0.5% from the 425,000 homes that sold in November, but down by 2.3% from the 437,000 homes that sold in December of last year, so we can see that it was the seasonal adjustments that caused the headline figures to show a month over month decrease and a year over year increase....that same pdf indicates that the median home selling price for all housing types fell less than 0.2%, from a revised $247,200 in November to $246,800 in December, while the average home sales price was $288,200, down 0.4% from the $289,500 average sales price in November, but up 4.8% from the $274,900 average home sales price of December 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 Fade in December; 2017 Sales Up 1.1 Percent" and A Few Comments on December 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, January 21, 2018

December industrial production and new home construction

the only major reports released this week were the December report on Industrial Production and Capacity Utilization from the Fed, and the November report on New Residential Construction, from the Census Bureau... the week also saw the release of the first two regional Fed manufacturing surveys for January: 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 from +19.6 in December to +17.7 in January, still suggesting a strong expansion of 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 from a revised reading of +27.9 in December to + 22.2 in January, their lowest reading in 5 months, but still indicating a large plurality of the region's manufacturing firms reported increases in their activity this month...

Industrial Production Rises 0.9% in December After October & November Output Revised Higher

the Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production rose by 0.9% in December after falling by a revised 0.1% in November and after rising by a revised 1.8% in October, which together meant that industrial production rose at a 8.2% annual rate in the 4th quarter from the hurricane impacted levels of the 3rd quarter....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 107.5 in December from 106.5 in November, which was revised from the 106.4 reported last month, while at the same time the index for October was revised from 106.1 to 106.6, and the index for September was revised from 104.9 to 104.8....year over year industrial production is now up 3.6%, up from last month's 3.4% year over year increase....

the manufacturing index, which accounts for more than 77% of the total IP index, was unchanged at 103.2 in December but was reported 0.2% higher, after the November index was revised down to 103.0, while indices for prior months went statistically unrevised....meanwhile, the mining index, which includes oil and gas well drilling, rose from 111.8 in November to 113.6 in December, after the November index was revised down from 111.9, which lifted the mining index to a level 11.5% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 5.6% in December,  from 102.3 to 108.1, after the November utility index was revised from 101.6 to 102.3, now 3.1% lower than October...since December 2016 was also colder than normal, meaning the utility index was elevated due to more heating, the utility index is just 1.8% higher 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 rose to 77.9% in December from 77.2% in November, which was revised from the 77.0% reported last month ...capacity utilization of NAICS durable goods production facilities rose from an upwardly revised 76.0% in November to 76.1% in December, while capacity utilization for non-durables producers slipped from an unrevised 78.0% to 77.9%...capacity utilization for the mining sector rose to 86.5% in December from 84.4% in November, which was originally reported as 84.5%, while utilities were operating at 80.4% of capacity during December, up from their 76.2% of capacity during November, 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.... 

Housing Starts Down in December, Permits Little Changed

the December report on New Residential Construction (pdf) from the Census Bureau estimated that the number of new housing units started in December was at a seasonally adjusted annual rate of 1,192,000, which was 8.2 percent (±7.7 percent) below the revised November estimated annual rate of 1,299,000 housing units started, and was 6.0 percent (±11.7 percent)* below last December's annual rate of 1,268,000 housing starts...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, December housing starts could have been up by 5.7% or down by as much as 17.7% from those of last December, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for November housing starts was revised from the 1,297,000 reported last month to 1,299,000, while October starts, which were first reported at a 1,290,000 annual rate, were revised from last month's initial revised figure of 1,256,000 annually to a 1,261,000 annual rate 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 80,300 housing units were started in December, down from the 89,100 units that were started in November...of those housing units started in December, an estimated 54,300 were single family homes and 25,700 were units in structures with more than 5 units, down from the revised 69,300 single family starts in November and down from the 28,100 units started in structures with more than 5 units in November...

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 December, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,302,000, which was 0.1 percent (±1.4%)* below the revised November rate of 1,303,000 permits, but was 2.8 percent (±1.9 percent) above the rate of building permit issuance in December a year earlier...the annual rate for housing permits issued in November was revised up from the originally reported 1,298,000....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 93,200 housing units were issued in December, down from the revised estimate of 97,000 new permits issued in November...the December permits included 56,500 permits for single family homes, down from 62,000 single family permits issued in November, and 33,900 permits for housing units in apartment buildings with 5 or more units, up from 31,900 such multifamily permits a month earlier... for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.192 Million Annual Rate in December and Comments on December Housing Starts...

 

(the above is the synopsis that accompanied my regular sunday morning links emailing, which in turn was mostly selected from my weekly blog post on the global glass onion…if you’d be interested in receiving my weekly emailing of selected links, most from the aforementioned GGO posts, contact me…)   

Sunday, January 14, 2018

one cold snap burns 11.5% of US natural gas supplies; 8 more weeks like that and our gas storage will be totally empty

the cold week that we saw at the beginning of this month set quite an amazing record for US natural gas supplies, and put an exclamation point on our concerns about the natural gas that we're exporting...in the first week of the new year, or more specifically over the week that ended on January 5th, the demand for natural gas was so great that we had to use nearly eleven and a half percent of all the natural gas that was in storage in the US, in addition to everything that was produced by US wells during the week, to meet the needs of heating, industry, power generation, and contracted exports...as you know, on Thursday of every week (except on holidays), the EIA publishes the Weekly Natural Gas Storage Report, which reports on the amount of natural gas in storage in each of the 5 energy regions and in total as of the prior Friday...this week, that report showed that we had withdrawn a record 359 billion cubic feet of natural gas from storage during the week, an all time high by more than 25% over the previous record gas withdrawal...since not many of you would follow a link to it, we'll just include the lead table from that natural gas storage report here now, and explain what happened:

January 13 2018 natural gas storage report of Jan 11 for Jan 5

the above is a copy of the initial table from this week's Natural Gas Storage Report, covering the changes of natural gas in US storage for the week ending January 5th...the first column of numbers shows the amount of natural gas in billions of cubic feet that was left stored in each US region and naturally as of January 5th; the 2nd column shows the amount of natural gas in billions of cubic feet that had been stored as of a week earlier, ie as of December 29th, and the 3rd column shows the change between the two...then, in the columns on the right, we have similar totals of natural gas in storage during the same week a year ago, and the 5 year averages for this time of year....thus, we see that the US started the week with 3,126 billion of cubic feet of natural gas in storage, and by the end of the week that had fallen to 2,767 billion of cubic feet, which means we used 11.5% of all the natural gas we had in the entire country in just one short week...with just 2,767 billion of cubic feet left at the end of the week, it means quite simply that if we continue using natural gas from storage at the same 359 billion cubic feet rate that we used it this week, we'll run out of it in 8 weeks, completely. there will be no natural gas left in the entire country. period.

next, we'll show you a chart of our natural gas supplies over time so you can see how this week's drop stands out...

January 13 2018 natural gas supplies as of January 5

the above graph also comes from this week's Natural Gas Storage Report, and it shows the quantity of natural gas in storage in the lower 48 states over the period from December 2015 up to the week ending January 5th 2018 as a blue line, the average of natural gas in storage over the 5 years preceding the same dates shown as a heavy grey line, while the grey shaded background represents the range of the amount of natural gas in storage for any given time of year for the 5 years prior to the two years shown by the graph…thus the grey area also shows us the normal range of natural gas in storage as it fluctuates from season to season, with natural gas in storage underground normally building to a maximum by the end of September, falling through the winter, and usually bottoming out at the end of March, depending of course on the weather during any given year...we started the 2017-18 heating season with our supplies roughly 5% below normal, short of 3,800 billion cubic feet, and with this big drop in the first week of 2018, about half of our normal range of winter supplies are already gone, and we are now tracking the 5-year minimum of the polar vortex year of 2014, which is indicated by the bottom of the grey shading...

we can also see by the blue line above that the quantity gas we had stored throughout 2016 was at a record high for each week during the year, up until October, when US natural gas supplies topped 4 trillion cubic feet for the first time in history...gas supplies then dropped from that record to nearly normal by the end of December, at which time we felt that shouldn't have happened in a warmer than normal winter...by March of this past year, based on John Kemp's data that showed heating demand was 17% below normal for the year, we warned that we were not covering our natural gas needs from production, even while winter temperatures were above normal, and that something would have to give if we ever saw a colder than normal winter...

to the best of my knowledge, the EIA does not publish weekly natural gas production figures, or how much gas comes out of US wells each week...they do publish monthly natural gas production figures, however, with a couple month lag for the time it takes them to compile accurate data....looking at that data, we can see that over the first 10 months of 2017, US natural gas production totaled 22,113 billion cubic feet, or an average of 2,211.3 billion cubic feet per month....there are 304 days during the first ten months of the year, so that means our average daily natural gas production was 72.74 billion cubic feet during 2017...multiplying that by 7 gives us a average weekly natural gas production of 509.18 billion cubic feet for the first ten months of the year...if that average held through to the end of the year, that suggests that during the week ending January 5th, we used that 509 billion cubic feet of production, plus the 359 billion cubic feet of natural gas we took out of storage, for an approximate total of 868 billion cubic feet of natural gas for the week ending January 5th...put another way, by using 868 billion cubic feet during that week, we were using 70% more natural gas than what we were producing...

this week's record drawdown really got started on New Year's Day, when the US set a record for natural gas consumption...the EIA commemorated that record with a blog post, titled Cold weather, higher exports result in record natural gas demand which included a couple graphics which we think will be useful in explaining what happened...

January 13 2018 record nat gas demand week of  Jan 5

as we noted, the above graphic comes from the EIA post titled Cold weather, higher exports result in record natural gas demand, which explains the record natural gas usage in the US on New Year's day...on the left half of that graphic, the EIA presents a very tight graph showing US natural gas consumption daily from the beginning of 2013 to the end of 2017...of course, one can't discern any daily amounts on such a small graph, but they highlight the previous record of 143.3 billion cubic feet of natural gas that were used on January 7th, 2014, which was topped by the 150.7 billion cubic feet of natural gas that were used on New Year's day of this year....not coincidentally, that brown graph shows our natural gas exports in a darker shade across the bottom of the graphic...

on the right of that brown graph, the EIA presents a bar graph that highlights the differences in natural gas usage between the old single day record and the new one set on New Year's day...the blue part of each bar represents the portion of the day's natural gas consumption that was used for heating, and it's pretty obvious that heating use was greater on January 7th 2014 than on January 1st of this year...next, the yellow part of each bar is that portion of each day's natural gas consumption that was used for power generation, and here the 2018 record clearly tops the power usage of old record in 2014...industrial usage of natural gas, shown in green, may have also been greater on 1/1/18 than on 1/7/14, but not by much..."other" usage of gas, shown in brown, was also quite close...but the big difference, shown in cherry red and sangria at the top of the bars, is our natural gas exports, by pipeline to Mexico and as LNG by tanker to destinations world wide, that really put this week's record gas demand over the top...

from here, the shortfalls during winter will only get worse....for instance, earlier this year, the EIA projected that natural gas for power generation would increase by 8% in 2018...that would add nearly 3 billion cubic feet more to daily demand...but the real issue going forward is going to be increasing LNG exports, which, based on those liquefaction facilities already under construction, could easily triple by the end of next winter...since much of the natural gas that the power plants and the LNG exporters will be using is already under contract at the near record low prices that natural gas has been quoted at over the past few years, it will be the residential and commercial users that will be paying the higher prices that the coming shortage of natural gas will precipitate...

 

note: the above was excerpted from my weekly gas and oil synopsis at Focus on Fracking…

December's consumer & producer prices and retail sales; November's business inventories and job openings survey

reports released this past week included the the December Consumer Price Indexthe December Producer Price Index and the December Import-Export Price Index from the Bureau of Labor Statistics, and reports on Retail Sales for DecemberWholesale Trade, Sales and Inventories for November, and Business Sales and Inventories for November, all from the Census Bureau...in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for November and the Fed released the Consumer Credit Report for November...the later showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $27.9 billion, or at a 8.8% annual rate, as non-revolving credit expanded at a 7.2% rate to $2,804.5 billion and revolving credit outstanding rose at a 13.3% rate to $1,022.7 billion (NB: Zero Hedge reports the November credit expansion was a 16 year high; see their graph below)...this week's major private report was the Mortgage Monitor for November (pdf) from Black Knight Financial Services, which indicated that 4.55% of US mortgages were delinquent in November, up from 4.44% in October and up from 4.46% in November a year ago, and that 0.66% of all mortgages were in the foreclosure process at the end of the month, down from 0.68% of mortgages in October and down from the 0.98% of mortgages that were in foreclosure in November a year ago...

November 2017 consumer credit

December Consumer Prices up 0.1% as Lower Energy Costs offset Higher Rents

the consumer price index increased by just 0.1% in December, as higher prices for food and shelter were partially offset by lower prices for energy and clothing... the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.1% in December after it had risen 0.4% in November, 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, actually fell to 246.524 in December to 246.669 in November, which left it statistically 2.109% higher than the 241.432 index reading of last December, which is reported as a 2.1% year over year increase...with a large decrease in energy prices the major drag on this month's index, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, with the unadjusted core index rising from 253.492 to 253.558, which put it 1.776% ahead of its year ago reading of 249.227, which is rounded to a 1.8% increase...

the volatile seasonally adjusted energy price index fell by 1.2% in December, after it had risen by 3.9% in November, 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 2.5% lower while the index for energy services rose by 0.3%, after rising by 0.6% in November....the decrease in the energy commodity index was led by a 2.7% drop in the retail price of gasoline, the largest component, while the price of fuel oil rose 3.0%, and while prices for other fuels, including propane, kerosene and firewood, fell by an average of 0.6%…nonetheless, energy commodities are still priced 10.8% above their year ago levels, with gasoline prices averaging 10.7% higher than they were a year ago…within energy services, the index for utility gas service rose by 1.2% after rising 0.6% in November and 0.3% in October, and hence utility gas is now priced 4.7% higher than it was a year ago, while the electricity price index rose by 0.1%, after rising 0.5% in November and in October...as a result, the energy services price index is now 3.1% higher than last November, as even electricity prices have increased by 2.6% over that period.

the seasonally adjusted food price index rose 0.2% in December, after being unchanged in October and November, 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 had been unchanged in each of the prior 6 months, as the index for food purchased for use at home was 0.1% higher in December, while prices for food bought to eat away from home were 0.2% higher, as prices at fast food outlets rose 0.1% and prices at full service restaurants rose 0.2%, while food prices at schools rose 4.1%...

in the food at home categories, the price index for cereals and bakery products increased by 0.2%, as prices for bread rose 0.7%, prices for cakes and cookies rose 0.7%, and prices for biscuits, rolls and muffins rose 1.2%...the price index for the meats, poultry, fish, and eggs group was up 0.9% as egg prices rose 3.8 %, poultry prices rose 1.6%, and beef and veal prices rose 1.2%, while at the same time the index for dairy products was 0.4% lower on a 0.5% decrease in the price of fresh whole milk...the fruits and vegetables index was 0.2% lower on a 0.7% decrease in prices for fresh fruits and a 2.1% decrease in prices for canned vegetables....on the other hand, the beverages index was 1.5% higher as roast coffee prices rose 2.5% and noncarbonated juices and drink prices rose 1.7%....lastly, prices in the ‘other foods at home’ category were 0.1% lower on average, as butter prices fell 1.4% and peanut butter prices were 4.0% lower....among food at home line items, only eggs, which were up 11.6% over 2017, have seen a price change greater than 10% over the past year...the itemized list for price changes in over 100 separate food items is included at the beginning of Table 2, which gives us a line item breakdown for prices of more than 200 CPI items overall...

among the seasonally adjusted core components of the CPI, which rose by 0.3% in December after rising by 0.1% in November, 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 rose by 0.2%, 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 December retail sales for inflation in national accounts data, the index for household furnishings and supplies was 0.1% higher on a 2.2% increase in the index for major appliances, while floor covering prices fell 1.9%...the apparel price index was 0.5% lower on a 5.3% decrease in prices for women's outerwear, a 3.3% decrease in prices for men's footwear, and a 4.8% decrease in prices for watches....on the other hand, prices for transportation commodities other than fuel were up 0.9%, as prices for used cars were up 1.4% while prices for new cars rose 0.7%...at the same time, prices for medical care commodities were 1.0% higher on a 1.0% increase in prescription drug prices, while the recreational commodities index was 0.4% lower on another 1.2% drop in TV prices, a 5.4% drop in the index for audio equipment, and a 1.7% decrease in the index for toys, games, hobbies and playground equipment....meanwhile, the education and communication commodities index was down 0.6%, on a 1.2% decrease in prices for college textbooks and a 1.2% decrease in prices for computer software and accessories...lastly, a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ was down 0.6% on a 0.9% decrease in the index for cosmetics, perfume, bath, nail preparations and implements and a 1.3% decrease in the index for stationery, gift wrap and other personal paper supplies..

within core services, which rose by 0.3%, the price index for shelter rose 0.4% on a 0.4% increase in rents, a 0.3% increase in homeowner's equivalent rent, and a 0.8% increase in costs for lodging away from home at hotels and motels, while the sub-index for water, sewers and trash collection rose 0.3% and other household operation costs were on average unchanged....at the same time, the index for medical care services was up 0.2%, as prices for physicians' services rose 0.3% and hospital services were also priced 0.3% higher...meanwhile, the transportation services index was 0.3% higher on a 0.7% increase in car and truck rental and 0.6% higher motor vehicle insurance....the recreation services index rose 0.3% as video discs and other media services rose 3.4% and the index for club membership for shopping clubs, fraternal, or other organizations, or participant sports fees rose 0.9%, while the index for education and communication services rose 0.2% as delivery services rose 0.4% and land line telephone services rose 0.7%...lastly, the index for other personal services was up 0.2% as the index for financial services rose 0.9%...among core line items, only prices for audio equipment, which are now 16.2% lower than last December, 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 nothing has seen prices rise by a double digit magnitude over that span...

Retail Sales Up 0.4% in December after Prior Months Revised Higher

seasonally adjusted retail sales increased in December after retail sales for October and November were revised higher...the Advance Retail Sales Report for December (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $495.4 billion during the month, which was up 0.4 percent (±0.5%)* from November's revised sales of $493.6 billion and 5.4 percent (±0.7 percent) above the adjusted sales in December of last year...November's seasonally adjusted sales were revised up from $492.7 billion to $493.6 billion, while October's sales were also revised higher, from $488.9 billion to $489.47 billion; as a result, the October to November change was revised up from up 0.8 percent (±0.5%) to up 0.9 percent (±0.2%), and the year over year increase for the 4th quarter came in at 5.5%.....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales rose 12.8%, from $500,177 million in November to $563,953 million in December, while they were up 4.0% from the $542,055 million of sales in December a year ago, so we can see how the large seasonal adjustment to holiday sales brought the headline sales into line vis-a-vis the large holiday sales increase that one would normally expect in December...

since it's the end of the quarter and the end of the year for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what this table shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the November revised figure to this month's December "advance" report in the first sub-column, and then the year over year percentage sales change since last December in the 2nd column; the second double column pair below gives us the revision of the November advance estimates (now called "preliminary") as of this report, with the new October to November percentage change under "Oct 2017 r" (revised) and the November 2016 to November 2017 percentage change as revised in the 2nd column of the pair (for your reference, the table of last month’s advance estimate of November sales, before this month's revisions, is here).... then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (October, November and December) from the preceding three months of the 3rd quarter (July, August and September) and then from the same three months (October, November and December) of a year earlier....that first column of the last pair thus gives us a snapshot comparison of 3rd quarter sales to fourth quarter sales, which is useful in estimating the impact of this report on 4th quarter GDP after adjusting those sales for inflation….

December 2017 retail sales table

the important thing to keep in mind when viewing this table of the nominal percentage change in retail sales for each of the categories above is how much they are impacted by changes in price...for instance, although we know that seasonally adjusted sales at vehicle and parts dealers rose 0.2% to $102,064 million, we also know from the CPI report that prices for used cars rose 1.4% and prices for new cars rose 0.7%, which when combined with sales of tires and parts left the transportation commodities index 0.9% higher...applying that price increase to nominal sales would thus suggest that real sales at vehicle and parts dealers were 0.7% lower for the month...on the other hand, while we see that sales at clothing stores were down 0.3%, the apparel price index was 0.5% lower the same time, suggesting that real sales at clothing stores were 0.2% higher...for December retail sales as a whole, both the food price index and the composite price index of all goods less food and energy goods rose by 0.2%, suggesting that real retail sales, ex gasoline, rose at a 0.2% pace for the month...

Producer Prices Down 0.1% in December on Lower Gas Station Margins

the seasonally adjusted Producer Price Index (PPI) for final demand fell 0.1% in December, as prices for finished wholesale goods were on average unchanged, while margins of final services providers decreased by 0.2%...this followed a November report that indicated the overall PPI had increased by 0.4%, as prices for finished goods had increased 1.0%, while margins of final services providers increased by 0.2%, and an October report that showed the overall PPI had increased by 0.4%, as prices for finished goods increased 0.3%, while margins of final services providers increased by 0.5%....excluding food, energy and trade services, core producer prices were up 0.1% in December, after rising 0.4% in November and 0.2% in both October and September...on an unadjusted basis, producer prices thus ended 2017 2.6% higher than a year earlier, with the core producer price index 2.3% higher for the year, up from an overall PPI increase of 1.7% and a core PPI increase of 1.8% during 2016...

as we noted, the price index for final demand for goods, aka 'finished goods', was unchanged in December, after rising 1.0% in November, 0.3% in October, and by a revised 0.6% in both September and in August...the index for wholesale energy prices was unchanged after it had jumped 4.6% in November, and after it had been unchanged in October, but after rising a revised 3.6% in September and a revised 3.3% in August, while the price index for wholesale foods fell 0.7% and the index for final demand for core wholesale goods (ex food and energy) was 0.2% higher...the wholesale energy price increase was unchanged because a 3.9% decrease in the wholesale price of gasoline was offset by 13.3% higher wholesale prices for heating oil and 0.8% higher residential natural gas, while for wholesale foods, higher prices for pork and chicken were more than offset by a 6.3% drop in wholesale prices for beef and veal and a 7.8% decrease in the index for fresh and dry vegetables....among wholesale core goods, prices for basic organic chemicals rose 3.9% while the wholesale price index for household appliances was down 0.9%…

at the same time, the index for final demand for services fell 0.2% in December, after rising 0.2% in November, 0.5% in October, and a revised 0.2% in both August and September, as the December index for final demand for trade services fell 0.6%, the index for final demand for transportation and warehousing services fell 0.4%, while the index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for fuels and lubricants retailers decreased 10.7% and margins for TV, video, and photographic equipment and supplies retailers fell 5.8%, while margins for major household appliance retailers rose 5.8%... among transportation and warehousing services, margins for airline passenger services were 4.3% higher and margins for truck transportation of freight rose 0.9%...in the core final demand for services index, the index for inpatient care rose 0.7% and the index for deposit services (partial) rose 3.8%..

this report also showed the price index for intermediate processed goods was 0.5% higher, after rising 0.5% in November, 1.0% in October, and a revised 0.5% in both August and September....the price index for intermediate energy goods rose 0.8% as refinery prices for jet fuel rose 9.1% and residual fuels rose 13.4%, while prices for intermediate processed foods and feeds fell 0.1% as processed meat prices fell 2.4% while processed poultry prices rose 1.6%....the core price index for processed goods for intermediate demand less food and energy was 0.5% higher on a 3.1% increase in the index for plastic resins and materials and a 1.3 % increase in prices for plastic packaging products...prices for intermediate processed goods are now 5.1% higher than in November a year ago, now the fourteenth 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 2.1% in December, after rising 3.2% in November, being unchanged in October, but after falling a revised 0.5% in September and a revised 1.2% in August....the price index for crude energy goods rose 4.7% as raw natural gas prices rose 13.7% and crude oil prices rose 1.8%, while the index for unprocessed foodstuffs and feedstuffs rose 0.5%, as prices for slaughter hogs rose 6.0% and prices for raw milk rose 4.5%...in addition, the index for core raw materials other than food and energy materials rose 1.4%, as prices for iron and steel scrap rose 7.6% and prices for wastepaper rose 3.0%...this raw materials index is now up 5.2% from a year ago, but down by more than half from the year over year increase of 10.6% that we saw in November...

lastly, the price index for services for intermediate demand fell 0.1% in December after rising 0.7% in November, 0.3% in October, but after falling a revised 0.2% in September and rising a revised 0.4% in August...the index for trade services for intermediate demand was unchanged, as margins for metals, minerals, and ores wholesalers rose 1.5% while margins for intermediate retailers of automotive parts including tires fell 1.5%…the index for transportation and warehousing services for intermediate demand was also unchanged, as the intermediate index for transportation of passengers (partial) fell 1.4% and truck transportation of freight rose 0.9%...at the same time, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.1% higher, as margins for for loan services (partial) dropped 5.4%...over the 12 months ended in December, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 2.9% higher than it was a year ago...

November Business Sales Up 1.2% Business Inventories Up 0.4%

after the release of the December retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for November (pdf), which incorporates the revised November retail data from that December report and the earlier published November 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 $1,420.1 billion in November, up 1.2 percent (±0.2%) from October's revised sales, and up 7.9 percent (±0.3%) from November sales of a year earlier...note that total October sales were concurrently revised up from the previously reported $1,400.8 billion to $1,403.2 billion, now up 0.8% from September....manufacturer's sales rose 1.2% to $491,177 million in November; retail trade sales, which exclude restaurant & bar sales from the revised November retail sales reported earlier, rose 0.9% to $436,500 million, and wholesale sales rose 1.5% to $492,385 million.

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,895.4 billion at the end of November, up 0.4 percent (±0.1%)* from October, and 3.2 percent (±0.3%) higher than in November a year earlier...at the same time, the value of end of October inventories was revised from the $1,885.7 billion reported last month to $1887.2 billion....seasonally adjusted inventories of manufacturers were estimated to be valued at $666,149 million, up 0.4% from October, while inventories of retailers were valued at $650,235 million, 0.1% more than in October, and inventories of wholesalers were estimated to be valued at $617,721 million at the end of November, 0.8% higher than in October...

Job Openings and Hiring Decrease In November, Layoffs and Quitting Little Changed

the Job Openings and Labor Turnover Survey (JOLTS) report for November from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 46,000, from 5,925,000 in October to 5,879,000 in November, after October job openings were revised 71,000 lower, from 5,996,000 to 5,925,000...November's jobs openings were 4.4% higher than the 5,631,000 job openings reported in November a year ago, as the job openings ratio expressed as a percentage of the employed fell to 3.8% in November from 3.9% October, while it was still up from 3.7% in November a year ago....the largest decrease in November openings was a 60,000 job opening decrease to 150,000 openings in the transportation, warehousing, and utilities sector, while the retail trade sector saw openings increase by 88,000 to 711,000 (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 November, seasonally adjusted new hires totaled 5,488,000, down by 104,000 from the revised 5,592,000 who were hired or rehired in October, as the hiring rate as a percentage of all employed fell to 3.7% in November from 3.8% October, while it was still up from 3.6% in November a year ago (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 49,000, from 5,251,000 in October to 5,202,000 in November, as the separations rate as a percentage of the employed fell from 3.6% to 3.5%, which was the same rate as in November a year ago (see table 3)...subtracting the 5,202,000 total separations from the total hires of 5,488,000 would imply an increase of 282,000 jobs in November, a bit more than the revised payroll job increase of 252,000 for November reported in the December 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 3,174,000 of us voluntarily quit our jobs in November, down by 13,000 from the revised 3,187,000 who quit their jobs in October, while 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 1,686,000 were either laid off, fired or otherwise discharged in November, down by 7,000 from the revised 1,693,000 who were discharged in October, as the discharges rate still managed to slip to 1.1% of all those who were employed during the month, which was the same as the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 341,000 in November, down from 372,000 in October, for an 'other separations rate’ of 0.2%, which was down from 0.3% in October but the same as in November 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, January 7, 2018

December’s jobs report; November’s trade deficit, construction spending, and factory inventories…

in addition to the Employment Situation Summary for December from the Bureau of Labor Statistics, this week also saw the release of three November reports from the Census Bureau that will input into 4th quarter GDP: the November report on our International Trade, the November report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for November....

privately issued reports released this week included the ADP Employment Report for December and the December report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 17.76 million annual rate in December, up 2.3% from the 17.35 million annual pace of vehicle sales in November but down 2.9% from the 18.29 million vehicle rate in December of 2016...in addition, the week saw the release of both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the December Manufacturing Report On Business reported that the manufacturing PMI (Purchasing Managers Index) rose to 59.7% in December, up from 58.2% in November, which suggests a stronger expansion in manufacturing firms nationally, and the December Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) come in at 55.9%, down from 57.4% in November, indicating that a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in December than did in November...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...

Employers Add 148,000 Jobs in December, Unemployment Rate Remains at 4.1%

the Employment Situation Summary for December indicated weak job creation by employers, which was confirmed by equally weak employment figures from the household survey…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 148,000 jobs in December, after the previously estimated payroll job increase for November was revised up from 228,000 to 252,000, while the payroll jobs increase for October was revised down from 244,000 to 211,000…that means that this report represents a total of 139,000 more seasonally adjusted payroll jobs than were reported last month, below the average addition of 171,000 jobs per month we saw over the last year...the unadjusted data, however, shows that there were actually 180,000 less payroll jobs extent in December than in November, as normal seasonal layoffs in areas such as construction and recreational services were smoothed over by the seasonal adjustments..

the seasonally adjusted job changes table for December showed that retail sales was the only sector that saw relative job losses, as 20,300 fewer retail workers were added during the month than would be normal for December...on the other hand, employment in health care increased by 31,000 jobs for the month, as 12,400 more employees were added by hospitals...construction work also saw a relative job increase of 30,000, as specialty trade contractors added 23,800 more workers than normal in December, with 13,800 of those working on non-residential projects....another 29,000 seasonally adjusted jobs were added by the leisure and hospitality sector, with the addition of 25,100 jobs in bars and restaurants... 25,000 more jobs were added by manufacturers, with factories producing machinery accounting for 6,000 of those...however, the broad professional and business services sector, which usually leads in monthly job gains, only added 19,000 jobs, as there were 15,400 fewer accounting and bookkeeping jobs, while temporary help agencies only employed 7,000 more than in November... meanwhile, employment in other sectors including mining, wholesale trade, transportation and warehousing, financial activities, information, private education and government, all saw smaller job gains over the month..

with a number of the job increases in generally better paying sectors, the establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $26.63 an hour in December, after it had increased by a revised 5 cents an hour in November; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $22.30 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in December, while hours for production and non-supervisory personnel was unchanged at 33.8 hours...at the same time, the manufacturing workweek decreased by 0.1 hour to 40.8 hours, while average factory overtime remained unchanged at 3.5 hours...

meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 104,000 to 154,021,000, while the estimated number of those unemployed fell by 40,000 to 6,576,000; which thus meant there was just a 64,000 increase in the total labor force...since the working age population had grown by 160,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 96,000 to a record high of 95,512,000...with the increase of those in the labor force proportionately smaller than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 62.7% in December....meanwhile, the increase in number employed as a percentage of the increase in the population was nearly stable and left the employment to population ratio, which we could think of as an employment rate, unchanged at 60.1%...at the same time, the decrease in the number unemployed was not large enough to lower the unemployment rate, which remained unchanged at 4.1%... meanwhile, the number of those who reported they were forced to accept just part time work rose by 64,000, from 4,851,000 in November to 4,915,000 in December, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.0% of the labor force in November to 8.1% in December...

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

Deterioration of US Trade Deficit in November Will Hit 4th Quarter GDP

our trade deficit rose by 3.2% in November as the value of both our export and our imports increased, but our imports increased by more....the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit rose by $1.6 billion to $50.5 billion in November, from an upwardly revised October deficit of $48.9 billion...the value of our November exports rose by $4.4 billion to $200.2 billion on a $4.4 billion increase to $134.6 billion in our exports of goods and an increase of less than $0.1 billion to $65.7 billion in our exports of services, while the value of our imports rose $6.0 billion to $250.7 billion on a $6.0 billion increase to $205.5 billion in our imports of goods and a decrease of less than $0.1 billion to $45.3 billion in our imports of services...export prices were on average 0.5% higher in November, so our real November exports would be smaller than the nominal value of them by that percentage, while import prices were 0.7% higher, meaning real imports were less than the nominal dollar values reported here by that percentage....

the $4.4 billion increase in our November exports of goods largely resulted from greater exports of capital goods, automotive vehicles and parts, and consumer goods...referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that our exports of capital goods rose by $2,473 million to $46,325 million on a $1,172 million increase in our exports of civilian aircraft, a $440 million increase in our exports of telecommunications equipment, and a $285 million increase in our exports of industrial machines other than those listed, and that our exports of automotive vehicles, parts, and engines rose by $963 million to $13,533 million on a $561 million increase in our exports of new and used passenger cars and a $416 million increase in our exports of vehicle accessories other than bodies, engines and tires, and that our exports of consumer goods rose by $662 million to $16,993 million on a $327 million increase in our exports of cellphones and a $262 million increase in our exports of art, antiques and other collectibles...in addition, our exports of industrial supplies and materials rose by $240 million to $41,230 million as a $631 million increase in our exports of petroleum products other than fuel oil, a $281 million increase in our exports of nonferrous metals other than copper and aluminum, and a $225 million increase in our exports of organic chemicals was partially offset by a $333 million decrease in our exports of fuel oil and a $449 million decrease in our exports of nonmonetary gold…meanwhile, our exports of foods, feeds and beverages rose by $112 million to $10,668 million...slightly offsetting the increases in those export categories, our exports of other goods not categorized by end use fell by $157 million to $5,279 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 capital goods accounted for the November increase in our imports...our imports of consumer goods rose by $2,394 million to $52,406 million on a $1069 million increase in our imports of cellphones, a $360 million increase in our imports of artwork, antiques and other collectibles, a $383 million increase in our imports of gem diamonds, a $252 million increase in our cotton apparel and household goods and a $246 million increase in our imports of household appliances...our imports of industrial supplies and materials rose by $2,176 million to $45,001 million as our imports of crude oil rose by $1,137 million, our imports of fuel oil rose by $258 million and our imports of organic chemicals rose by $240 million....our imports of capital goods rose by $1,584 million to $56,513 million on a $767 million increase in our imports of semiconductors, a $578 million increase in our imports of telecommunications equipment, and a $381 million increase in our imports of computer accessories...in addition, our imports of automotive vehicles, parts and engines rose by $357 million to $29,913 million as imports of passenger cars, engines, and other parts all saw modest increases....offsetting those import increases, our imports of foods, feeds, and beverages fell by $105 million to $11,694 million, and our imports of other goods not categorized by end use rose by $371 million to $8,495 million....

the press release gives us details on our balance of trade with selected countries:

The November figures show surpluses, in billions of dollars, with Hong Kong ($2.8), South and Central America ($2.6), Singapore ($1.0), United Kingdom ($0.4), and Brazil ($0.3). Deficits were recorded, in billions of dollars, with China ($33.5), European Union ($13.5), Mexico ($5.8), Japan ($5.8), Germany ($5.3), Italy ($2.8), India ($2.4), South Korea ($1.7), OPEC ($1.3), France ($1.3), Canada ($1.1), Taiwan ($0.9), and Saudi Arabia ($0.2). 
* The deficit with the European Union increased $1.5 billion to $13.5 billion in November. Exports decreased $1.0 billion to $24.0 billion and imports increased $0.5 billion to $37.5 billion. 
* The deficit with South Korea decreased $1.0 billion to $1.7 billion in November. Exports increased $0.3 billion to $4.0 billion and imports decreased $0.7 billion to $5.7 billion.
* The deficit with China increased $1.5 billion to $33.5 billion in November. Exports increased $0.2 billion to $10.8 billion and imports increased $1.8 billion to $44.2 billion.

to gauge the impact of October and November goods trade on 4th quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted 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 3rd quarter real exports of goods averaged 125,674.3 million monthly in 2009 dollars, while similarly inflation adjusted October and November exports were at 125,453 million and 128,580 million respectively, in that same 2009 dollar quantity index representation.... annualizing the change between the average real exports of the two quarters, we find that the 4th quarter's real exports of goods are rising at a 4.3% annual rate from those of the 3rd quarter, or at a pace that would add about 0.36 percentage points to 4th quarter GDP if continued at the same pace through December.....in a similar manner, we find that our 3rd quarter real imports averaged 187,706.3 million monthly in chained 2009 dollars, while inflation adjusted October and November imports were at 191,065 million and 195,257 million in 2009 dollars respectively...that would indicate that so far in the 4th quarter, real imports have been growing at annual rate of more than 12.1% from those of the 3rd quarter...since imports subtract from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their increase at a 12.1% rate would in turn subtract about 1.49 percentage points from 4th quarter GDP....hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our worsening balance of trade in goods would subtract about 1.13  percentage points from the growth of 4th quarter GDP....(note that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the Census does not provide inflation adjusted data on those, and we don't have easy source of all their price changes..)

Construction Spending Rose 0.8% in November After Prior Months Were Revised Higher

the Census Bureau's report on construction spending for November (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,257.0 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.8%)* above the revised October annualized estimate of $1,247.1 billion and also 2.4 percent (±1.5 percent) above the estimated annualized level of construction spending in November of last year...the annualized October construction spending estimate was revised 0.5% higher, from $1,241.5 billion to $1,247.1 billion, while the annual rate of construction spending for September was revised nearly 1.0% higher, from $1,224.6 billion to $1,236.3 billion...the $11.7 billion upward revision to September construction spending would imply that the 3rd estimate of 4th quarter GDP was understated by as much as 0.29 percentage points, a change which will not be applied to published GDP figures until the annual revision is released in the middle of next summer...

a brief summary on the November changes for different types of construction spending is included with the Census release: Spending on private construction was at a seasonally adjusted annual rate of $964.3 billion, 1.0 percent (± 1.0 percent)* above the revised October estimate of $955.1 billion. Residential construction was at a seasonally adjusted annual rate of $530.8 billion in November, 1.0 percent (±1.3 percent)* above the revised October estimate of $525.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $433.5 billion in November, 0.9 percent (± 1.0 percent)* above the revised October estimate of $429.7 billion.  In November, the estimated seasonally adjusted annual rate of public construction spending was $292.7 billion, 0.2 percent (±2.0 percent)* above the revised October estimate of $292.0 billion. Educational construction was at a seasonally adjusted annual rate of $78.8 billion, 3.8 percent (±2.5 percent) above the revised October estimate of $75.9 billion. Highway construction was at a seasonally adjusted annual rate of $88.0 billion, 0.8 percent (±4.6 percent)* below the revised October estimate of $88.7 billion.

as you can tell from that summary, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and in government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of November 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 the prices changes of 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 and thereby get a rough estimate of the real change...

that index showed that aggregate construction costs were down 0.2% in November after being up 0.5% in October, up 0.2% in September and up 0.1% in August...on that basis, we can estimate that construction costs for November were up 0.3% from September, up 0.5% from August, and up 0.6% from July, while they were obviously down 0.2% from October...we then use those percentages to inflate the lower cost spending figures for each of those 3rd quarter months, which is arithmetically the same as adjusting higher priced October and November construction spending downward, for purposes of comparison...annualized construction spending in millions of dollars for the third quarter months is given as $1,236,278 for September, $1,220,897 for August, and $1,215,351 for July, while it was at 1,247,077 annually in October and 1,256,993 annually in November...thus to compare the inflation adjusted construction spending of the two recent 4th quarter months to those of the third quarter, our calculation would be ((1,256,993 + 0.998 * 1,247,077 ) / 2)/ ((1,236,278 * 1.003 + 1,220,897 * 1.006 + 1,215,351 * 1.006) /3) = 1.0166659, meaning real construction over the months of October and November was up 1.6666% vis a vis the 3rd quarter...in GDP terms, that means real construction for the 4th quarter increased at an annual rate 6.835% over that of the 3rd quarter, or at a pace that would add about 0.50 percentage points to 4th quarter GDP, should real December construction continue at the same pace as that of October and November…

November Factory Shipments Up 1.2%, Inventories 0.4% Higher

the Census Bureau's summary of the Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for November, which precedes the detailed spreadsheet, is quite complete, so we'll just quote directly from it here:

  • New orders for manufactured goods in November, up five of the last six months, increased $6.5 billion or 1.3 percent to $488.1 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent October increase. Shipments, up eleven of the last twelve months, increased $5.7 billion or 1.2 percent to $491.2 billion. This followed a 0.8 percent October increase. Unfilled orders, up three consecutive months, increased $1.2 billion or 0.1 percent to $1,137.1 billion. This followed a 0.1 percent October increase. The unfilled orders-to-shipments ratio was 6.60, down from 6.68 in October. Inventories, up twelve of the last thirteen months, increased $2.5 billion or 0.4 percent to $665.1 billion. This followed a 0.3 percent October increase. The inventories-to-shipments ratio was 1.35, down from 1.36 in October. 
  • New orders for manufactured durable goods in November, up three of the last four months, increased $3.0 billion or 1.3 percent to $241.4 billion, unchanged from the previously published increase. This followed a 0.4 percent October decrease. Transportation equipment, also up three of the last four months, drove the increase, $3.2 billion or 4.1 percent to $80.8 billion. New orders for manufactured nondurable goods increased $3.4 billion or 1.4 percent to $246.7 billion.
  • Shipments of manufactured durable goods in November, up six of the last seven months, increased $2.3 billion or 0.9 percent to $244.4 billion, down from the previously published 1.0 percent increase. This followed a 0.5 percent October increase. Transportation equipment, up two of the last three months, led the increase, $2.0 billion or 2.6 percent to $81.3 billion. Shipments of manufactured nondurable goods, up seven of the last eight months, increased $3.4 billion or 1.4 percent to $246.7 billion. This followed a 1.1 percent October increase. Petroleum and coal products, up five consecutive months, led the increase, $2.8 billion or 6.0 percent to $49.6 billion. 
  • Unfilled orders for manufactured durable goods in November, up three consecutive months, increased $1.2 billion or 0.1 percent to $1,137.1 billion, unchanged from the previously published increase. This followed a 0.1 percent October increase. Fabricated metal products, up ten of the last eleven months, led the increase, $0.5 billion or 0.6 percent to $81.3 billion. Inventories Inventories of manufactured durable goods in November, up sixteen of the last seventeen months, increased $0.9 billion or 0.2 percent to $405.3 billion, unchanged from the previously published increase. This followed a 0.2 percent October increase. Primary metals, also up sixteen of the last seventeen months, led the increase, $0.3 billion or 0.8 percent to $34.4 billion.
  • Inventories of manufactured nondurable goods, up six consecutive months, increased $1.6 billion or 0.6 percent to $259.8 billion. This followed a 0.6 percent October increase. Petroleum and coal products, up five consecutive months, led the increase, $1.1 billion or 2.7 percent to $40.0 billion.

to gauge the impact of November 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 was statistically unchanged at $229,475 million; the value of work in process inventories was 0.8% higher at $208,501 million, and materials and supplies inventories were valued 0.5% higher at $227,145 million...the producer price index for November indicated that prices for finished goods increased 1.0%, prices for intermediate processed goods were 0.5% higher, and that prices for unprocessed goods were on average 3.2% higher....assuming similar valuations for like inventories, that would suggest that November's real finished goods inventories were down 1.0%, while real inventories of intermediate processed goods were 0.3% greater, and while real raw material inventories were 2.7% smaller…those changes follow an October report that indicated finished goods inventories were little changed, while real inventories of intermediate processed goods were 0.4% smaller, and 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 the 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…)