Sunday, March 25, 2018

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

widely followed reports that were released this past week included 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, putting that monthly report back on a normal schedule, after the January report was released 3 weeks late last week (due to annual revisions)...meanwhile, 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 came in at +17 in March, the same as in February and up from +16 in January, indicating an ongoing expansion in that region's manufacturing...

February Durable Goods: New Orders Up 3.1%, Shipments Up 0.9%, Inventories Up 0.4%

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 $7.4 billion or 3.1 percent to $247.7 billion in February, after January's new orders were revised from the $239.7 billion reported last month to $240.3 billion, now 3.5% less than December's new orders…nonetheless, year to date new orders are  now up by 9.1% from those of 2017...the volatile monthly new orders for transportation equipment were responsible for most of the month’s increase, as new transportation equipment orders rose $5.5 billion or 7.1 percent to $83.5 billion, on a 25.5% increase to $13,113 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders still rose 1.2%, while excluding just new orders for defense equipment, new orders rose 2.5%....new orders for nondefense capital goods less aircraft, a proxy for equipment investment, were also strong, rising $1,172 million or 1.8% to $67,831 million...

meanwhile, the seasonally adjusted value of February shipments of durable goods, which will ultimately be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $2.2 billion or 0.9 percent to $249.7 billion, after the value of January shipments was revised from $498.8 billion to $499.2 billion, now up 0.5% from December....higher shipments of machinery led the February increase, as they increased by $0.6 billion or 1.8 percent to $33.4 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $1.6 billion or 0.4 percent to $410.6 billion, after January inventories were revised from $672.4 billion to $672.6 billion, now up 0.4% from December....

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but very volatile new orders, rose for the fifth time in six months, increasing by $2.3 billion or 0.2 percent to $1,143.3 billion, following a January decrease of 0.3% to $1,141.0 billion, which was revised from the previously reported $1,141.2 billion...a $1.4 billion or 0.2 percent increase to $773.2 billion in unfilled orders for transportation equipment was responsible for more than half the increase, while unfilled orders excluding transportation equipment orders were also up 0.2% to $370,048 million...the unfilled order book for durable goods is now 2.3% above the level of last February, with unfilled orders for transportation equipment just 1.2% above their year ago level, mostly due to a 2.4% decrease in the backlog of orders for defense aircraft...

February New Home Sales Little Changed

the Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 618,000 homes annually during the month, which was 0.6 percent (±13.3 percent)* below the revised January annual sales rate of 622,000 new home sales, but 0.5 percent (±16.6 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 from February sales of a year ago, with the figures in parenthesis representing the 90% confidence range for the 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 593,000 reported last month to an annual rate of 622,000, and new home sales in December, initially reported at an annual rate of 625,000 and revised to a 643,000 rate last month, were revised up to a 653,000 a year rate with this report, while November's annualized new home sales rate, initially reported at an annual rate of 733,000 and revised from a 689,000 rate to a 696,000 a year rate last month, were revised back up to a 711,000 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 51,000 new single family homes sold in February, up from the estimated 47,000 new homes that sold in January and up from the 46,000 that sold in December, but unchanged from February a year ago...the raw numbers from Census field agents further estimated that the median sales price of new houses sold in February was $326,800, up from the median sale price of $324,900 in January and up from the median sales price of $298,000 in February a year ago, while the average February new home sales price was $376,700, down from the $377,100 average sales price in January, but up from the average sales price of $370,500 in February a year ago....a seasonally adjusted estimate of 305,000 new single family houses remained for sale at the end of February, which represents a 5.9 month supply at the February sales rate, up from the revised 5.8 months months of new home supply in January...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales at 618,000 Annual Rate in February and A few Comments on February New Home Sales..

February Existing Home Sales Rose 3.0%

the National Association of Realtors (NAR) reported that existing home sales increase by 3.0% from January to February on a seasonally adjusted basis, projecting that 5.54 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 just 1.1% above the annual sales rate projected in February of a year ago....the January home sales pace was unrevised at a 5.38 million annual rate...the NAR also reported that the median sales price for all existing-home types was $241,700 in February, 5.9% higher than in February a year earlier, which they report as "the 72nd straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Rebound 3.0 Percent 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 happened with home sales during the month...this unadjusted data indicates that roughly 319,000 homes sold in February, up 1.9% from the 313,000 homes that sold in January, and up by 1.3% from the 315,000 homes that sold in February of last year....that same pdf indicates that the median home selling price for all housing types rose by four-tenths of a percent, from a revised $240,800 in January to $241,700 in February, while the average home sales price slipped half a percent to $281,200 from the $282,600 average sales price in January, while it was still up 4.3% from the $269,600 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 Rebound 3.0 Percent 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 18, 2018

February’s consumer and producer prices, retail sales, industrial production, & new home construction: January’s business inventories and JOLTS

major monthly reports released over the past week included the Retail Sales report for February and Business Sales and Inventories for January from the Census Bureau, the February Consumer Price Index, the February Producer Price Index and the February Import-Export 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 released both the Job Openings and Labor Turnover Survey (JOLTS) for January and the Regional and State Employment and Unemployment Report for January during this 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 NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose to +22.5, up from +13.1 in February, suggesting an acceleration of the ongoing 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 to +22.3 in March from +25.8 in February, still indicating a large plurality of the region's manufacturing firms reported increases in their activity this month...

February Consumer Prices Rise 0.2% on Higher Utilities, Clothing, and Transportation Services

the consumer price index increased by 0.2% in February, as higher prices for utilities, clothing and transportation services were partially offset by lower prices for fuel and groceries….the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.2% in February after it had risen by 0.5% in January, 0.1% in December, 0.4% in November, 0.1% in October, 0.5% in September, 0.4% in August, and 0.1% in July....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 247.867 in January to 248.991 in February, which left it statistically 2.212% higher than the 243.603 index reading of last January, which is reported as a 2.2% year over year increase...with higher food and energy services offsetting lower priced groceries and fuel, seasonally adjusted core prices, which exclude food and energy, also rose by 0.2% for the month, with the unadjusted core index rising from 254.638 to 255.783, which put it 1.848% ahead of its year ago reading of 251.143, which is reported as a 1.8% increase...

the volatile seasonally adjusted energy price index rose by 0.1% in February, after it had risen by 3.0% in January, fallen by 0.2% in December, risen by 3.2% in November and by 2.0% in October, and is now 7.7% higher than in February a year ago....prices for energy commodities were 0.9% lower for the month, while the index for energy services increased by 1.4%, after falling by 0.8% in January....the decrease in the energy commodity index was due to a 0.9% decrease in the retail price of gasoline, the largest component, while the price of fuel oil fell 3.6% and prices for other fuels, including propane, kerosene and firewood, fell by an average of 0.6%…however, energy commodities are still priced 12.8% above their year ago levels, with gasoline prices averaging 12.6% higher than they were a year ago…within energy services, the index for utility gas service rose 4.7% after falling by 2.6% in January, leaving utility gas priced 3.8% higher than it was a year ago, while the electricity price index rose by 0.4%, after falling by 0.2% in January...the energy services price index is now 2.6% higher than last February, as electricity prices have also increased by 2.2% over that period...

the seasonally adjusted food price index was unchanged in February, after rising 0.2% in January, 0.2% in December, 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, and 0.2% last February, as the index for food purchased for use at home was 0.2% lower in February, while prices for food bought to eat away from home were 0.2% higher, as prices at fast food outlets rose 0.3% and prices at full service restaurants rose 0.2%, while food prices at work and schools rose 0.7%...

in the food at home categories, the price index for cereals and bakery products decreased by 0.1%, as prices for bread fell 0.6% and prices for breakfast cereal fell 1.5%...the price index for the meats, poultry, fish, and eggs group was down 0.2% as pork prices fell 0.8% and beef and veal prices fell 0.7%, while at the same time the index for dairy products was 0.3% lower on a 0.2% decrease in the price of fresh whole milk and a 2.3% drop in prices for ice cream...the fruits and vegetables index was 0.5% lower on a 0.7% decrease in prices for fresh fruits and 8.7% drop in tomato prices....meanwhile, the beverages index was down 0.1% as beverage materials including coffee and tea fell 0.4% and noncarbonated juices and drink prices fell 1.0%....lastly, prices in the ‘other foods at home’ category was also 0.1% lower, as sugar and sweeteners prices fell 1.2% while peanut butter prices were 3.4% higher....among food at home line items, only eggs, which have risen 10.5% since last February, 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 0.2% in February after rising by 0.3% in January, 0.3% in December, 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 0.1%, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust February retail sales for inflation in national accounts data, the index for household furnishings and supplies was unchanged as a 2.4% increase in prices for window coverings and and a 2.2% increase in prices for floor coverings was offset by a 5.9% decrease in prices for laundry equipment...the apparel price index was 1.5% higher after rising 1.7% in January on a 4.8% increase in the index for women's outerwear, a 4.3% increase in the index for men's shirts and sweaters, and a 3.6% increase in the price index for boys' apparel....on the other hand, prices for transportation commodities other than fuel were 0.4% lower, as prices for new cars were down 0.6% and prices for oil, coolant, and fluids fell 0.9%...at the same time, prices for medical care commodities were 0.3% lower on a 0.4% decrease in prescription drug prices, while the recreational commodities index was 0.3% lower on another 3.3% drop in TV prices and a 1.5% decrease in the index for sports equipment....meanwhile, the education and communication commodities index was 0.5% lower, on a 1.2% decrease in the index for personal computers and peripheral equipment and a 3.2% decrease in prices for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.2%, while the price index for ‘other goods’ was down 0.1% on a 1.1% decrease in the index for miscellaneous personal goods..

within core services, which rose by 0.2%, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.2% increase in homeowner's equivalent rent, while costs for lodging away from home at hotels and motels fell 0.1%, the sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were on average 1.5% higher....meanwhile, the index for medical care services was unchanged, as dentists services rose 1.3% while hospital services were priced 0.5% lower...at the same time, the transportation services index was 1.0% higher on a 1.3% increase in car and truck leasing, 1.7% higher prices for motor vehicle insurance, and 1.0% higher parking and other auto fees....the recreation services index rose 0.1% as admission to sporting events rose 2.8%, while the index for education and communication services was fell 0.2% as wireless telephone services fell 0.5% internet and electronic information services fell 1.0%...lastly, the index for other personal services was up 0.4% as the index for legal services rose 2.6% and checking and other bank services rose 1.1%...among core line items, the index for clocks, lamps, and decorator items, which has fallen 10.2% over the past year, prices for televisions, which are now 13.6% cheaper than a year ago, and the index for audio equipment, which is now 18.2% lower than last February, 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 Down 0.1% in February after Revisions to December and January

seasonally adjusted retail sales decreased 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 $492.0 billion during the month, which was 0.1 percent (±0.5%) lower than January's revised sales of $492.3 billion but still 4.0 percent (±0.7 percent) above the adjusted sales in February of last year...January's seasonally adjusted sales were revised up from $492.0 billion to $492.3 billion, while December's sales were revised from $493.3 billion down to $492,915 million; as a result, the December to January change was revised up from down 0.3 percent (±0.5%) to down 0.1 percent (±0.2%)...the downward revisions to December sales would indicate that 4th quarter personal consumption expenditures will be revised lower at about a $1.5 billion annual rate, which would thereby reduce 4th quarter GDP by about 0.03 percentage points...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down 1.9%, from $445,661 million in January to $437,407 million in February, while they were up 4.1% from the $420,352 million of sales in 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 2017 (r)" (revised) and the January 2017 to January 2018 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 2018 retail sales table

despite the negative headline print, this February report is better than it appears, because much of the weakness was due to lower prices...for instance, while there was a 0.9% drop to $92,274 million in sales at motor vehicle dealers, prices for both new cars and new trucks were down 0.6%, which means real unit sales of vehicles were only down on the order of 0.3%...without that decrease in vehicle sales, other retail sales rose 0.2%...likewise, we see that sales at gasoline stations were down 1.2%, while the CPI report we reviewed earlier indicated gasoline prices had fallen 0.9% over the same period, which would suggest that real consumption of gasoline was down by just 0.3%...a similar dynamic plays out for sales at groceries, which were down 0.2% for the month, which can entirely be accounted for by a 0.2% drop in grocery store prices...ex cars, gasoline, and groceries, other sales were up by 0.3%, which would be deflated to a 0.2% increase by the 0.1% increase in the composite price index for all goods less food and energy goods...

Industrial Production Up 1.1 in February on 1.2% Jump in Manufacturing

the Fed's February G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 1.1% in February after falling by a revised 0.3% in January, which still left industrial output 4.4% 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 108.2 in February, after the January index was revised down from 107.2 to 107.1, the December index was revised up from 107.3 to 107.4, and the September index was revised from the 104.8 reported last month to 104.9, while the October and November indexes remained unchanged at 106.6 and 106.9 respectively..

the manufacturing index, which accounts for more than 77% of the total IP index, rose to 105.9 in February, after the January index was revised down from 104.8 to 104.6, and December index was revised up from 104.7 to 104.8...with other prior months unrevised, the manufacturing index now stands 2.5% above its year ago level....meanwhile, the mining index, which includes oil and gas well drilling, rose 4.5%, from 112.5 in January to 117.4 in February, after the January index was revised up from 112.4, which left the mining index 9.7% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, fell by 4.7% in our warm February, from 108.8 to 103.7, after the January utility index was revised from 109.2 to 108.8, still up 1.3% from December...however, with this winter's temperatures well below the record levels seen across much of the US last winter, the utility index is now 10.5% 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 78.1% in February from 77.4% in January, which was revised down from the 77.5% reported last month ...capacity utilization of NAICS durable goods production facilities rose from a revised 76.5% in January to 77.4% in February, while capacity utilization for non-durables producers rose from an upwardly revised 77.5% to 78.0%...capacity utilization for the mining sector rose to 87.6% in February from 84.3% in January, which was originally reported as 84.2%, while utilities were operating at 76.9% of capacity during February, down from their 80.8% of capacity during January, which was previously reported at 81.1%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories..

Producer Prices Up 0.2% in February on Wider Margins of Service Providers

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.2% in February, as prices for finished wholesale goods decreased 0.1%, while margins of final services providers increased by 0.3%...this followed a revised January report that indicated the PPI was 0.4% higher, with prices for finished goods up 0.7% while final demand for services rose 0.3%, and a December report that indicated the overall PPI was on average unchanged, as prices for finished goods rose by 0.1%, while margins of final services providers decreased by 0.1%....on an unadjusted basis, producer prices are now 2.8% higher than a year earlier, with the core producer price index 2.7% higher for the year, up from the year over year figures of 2.7% for the PPI and 2.5% for core that were indicated last month....

as noted, the price index for final demand for goods, aka 'finished goods', was down 0.1% in February, after being up 0.4% in January, unchanged in December, and rising a revised 0.8% in November and 0.3% in October...the price index for wholesale energy was down 0.5% in January after rising 3.4% in January and 0.5% in December, while the price index for wholesale foods fell 0.4% and the index for final demand for core wholesale goods (ex food and energy) was 0.2% higher...driving the wholesale energy price index decrease was a 1.6% decrease in the wholesale price of gasoline and 4.1% lower wholesale prices for diesel fuel, while wholesale residential natural gas prices rose 3.7%...for wholesale foods, 27.1% lower prices for fresh and dry vegetables were only partially offset by a 33.6% jump in wholesale prices for fresh eggs....among wholesale core goods, prices for primary basic organic chemicals jumped 7.2% while the wholesale price index for light trucks was down 1.2%…

at the same time, the index for final demand for services rose 0.3% in February, after rising 0.3% in January, falling 0.1% in December, rising 0.2% in November, 0.5% in October, and by 0.2% in both August and September, as the February index for final demand for trade services fell 0.2%, the index for final demand for transportation and warehousing services rose 0.9%, while the index for final demand for services less trade, transportation, and warehousing services was 0.3% higher....among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers fell 2.1% and margins for machinery, equipment, parts, and supplies wholesalers fell 1.4%... among transportation and warehousing services, margins for traveler accommodation services were 3.7% higher and margins for air transportation of freight rose 1.5%...in the core final demand for services index, the index for bundled wired telecommunications access services rose 3.5% while the index for arrangement of vehicle rentals and lodging fell 3.5%..

this report also showed the price index for intermediate processed goods was 0.7% higher, after rising 0.7% in January, 0.5% in December, and a revised 0.6% in November, October, and in September....the price index for intermediate energy goods rose 0.8% as refinery prices for jet fuel rose 2.4% and prices for natural gas sold to electric utilities rose 23.2%, while prices for intermediate processed foods and feeds rose 1.2% as the prepared animal feeds index rose 5.8%...meanwhile, the core price index for processed goods for intermediate demand less food and energy was 0.7% higher on a 7.2% increase in the index for primary basic organic chemicals and a 5.6% increase in prices for softwood lumber....prices for intermediate processed goods are now 4.8% higher than in February a year ago, now the fifteenth 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 2.8% in February, after rising 0.9% in January, 1.9% in December, and a revised 2.5% in November and 0.5% October....the price index for crude energy goods rose 5.4% as raw natural gas prices rose 23.5% while crude oil prices fell 7.3%, while the index for unprocessed foodstuffs and feedstuffs rose 2.1%, as prices for slaughter cattle rose 7.7% and prices for wheat rose 5.4%...on the other hand, the index for core raw materials other than food and energy materials fell 0.3%, as prices for corrugated wastepaper fell 12.5% and prices for aluminum base scrap fell 3.4%...this raw materials index is now up by 5.6% from a year ago, in contrast to the year over year increase of 19.2% that we saw last February...

lastly, the price index for services for intermediate demand rose 0.5% in February after rising 0.1% in January, being unchanged in December, rising a revised 0.6% in November, 0.3% in October, and 0.2% in September...the index for trade services for intermediate demand was up 0.1%, as margins for chemicals and allied products wholesalers rose 1.9% while margins for intermediate wholesalers of machinery and equipment parts and supplies fell 1.0%…the index for transportation and warehousing services for intermediate demand rose 0.5%, as the intermediate index for air transportation of freight rose 1.5%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was also 0.5% higher, as the index for legal services rose 1.4% while the index for advertising sales in print fell 3.0%....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 still 2.9% higher than it was a year ago...

January Business Sales Down 0.2%, Business Inventories Up 0.6%

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 $1,426.0 billion in January, down 0.2 percent (±0.2%)* from December's revised sales, but up 5.7 percent (±0.4 percent) from January sales of a year earlier...note that total December sales were concurrently revised up from the originally reported $1,431.3 billion to 1,429.453 billion, now just a 0.5% increase from November....manufacturer's sales rose 0.6% to $498,766 million in January; retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, fell 0.1% to $434,711 million, while wholesale sales fell 1.1% to $492,558 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,917.0 billion at the end of January, up 0.6 percent (±0.1%) from the end of December, and 3.7 percent (±0.3 percent) higher than in January a year earlier...at the same time, the value of end of December inventories was revised from the $1,902.2 billion reported last month to $1,905.7 billion, which would imply an upward revision of about 0.08 percentage points to 4th quarter GDP....seasonally adjusted inventories of manufacturers were estimated to be valued at $672,434 million, up 0.3% from December, and inventories of retailers were valued at $625,557 million, 0.7% more than in December, while inventories of wholesalers were estimated to be valued at $627,417 million at the end of January, 0.8% higher than in December...considering the 0.7% increase in the producer price index in January, it appears that most of the month's inventory growth is price related...

Housing Starts, Permits Reported Lower in February

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 1,236,000, which was 7.0 percent (±16.7 percent)* below the revised estimated January annual rate of 1,329,000, and was 4.0 percent (±12.2 percent)* below last February's rate of 1,288,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell 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 up by 9.7% or down by as much as 23.7% from those of January, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for January housing starts was revised from the 1,326,000 reported last month to 1,329,000, while December starts, which were first reported at a 1,192,000 annual rate, were revised from last month's initial revised figure of 1,209,000 annually to a 1,207,000 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 89,500 housing units were started in February, down from the 90,200 units that were started in January but up from the 81,400 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 1,298,000, which was 5.7 percent (±0.7 percent) below the revised January rate of 1,377,000 permits, but was 6.5 percent (±2.4 percent) above the rate of building permit issuance in February a year earlier...the annual rate for housing permits issued in January was revised down from the originally reported 1,396,000....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 90,500 housing units were issued in February, down from the revised estimate of 96,700 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 decreased to 1.236 Million Annual Rate in February and Comments on February Housing Starts... 

Job Openings at a Record High In January, Hiring, Retirements, and Layoffs Up, Quits Down

the Job Openings and Labor Turnover Survey (JOLTS) report for January from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 645,000, from 5,667,000 in December to a record high of 6,312,000 in January, after December job openings were revised 144,000 lower, from 5,811,000 to 5,667,000, as part of an annual revision of all 2017 job openings and labor turnover data...January's jobs openings were also 15.9% higher than the revised 5,444,000 job openings reported for January a year ago, as the job opening ratio expressed as a percentage of the employed increased to 4.1 from the 3.7% logged in December, also up from the 3.6% 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 5,583,000, up by 59,000 from the revised 5,524,000 who were hired or rehired in December, as the hiring rate as a percentage of all employed rose from 3.7% in December to 3.8% in January, and was also up from the 3.7% hiring rate in January a year earlier (details of hiring by sector since September are in table 2)....meanwhile, total separations rose by 95,000, from 5,314,000 in December to 5,409,000 in January, as the separations rate as a percentage of the employed rose from 3.6% to 3.7%, which was also up from 3.6% in January a year ago (see table 3)...subtracting the 5,409,000 total separations from the total hires of 5,583,000 would imply an increase of 174,000 jobs in January, somewhat less than the revised payroll job increase of 239,000 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 3,271,000 of us voluntarily quit our jobs in January, down from the revised 3,340,000 who quit their jobs in December, while the quits rate, widely watched as an indicator of worker confidence, fell by 0.1% to 2.2% of total employment, while it remained the same as the 2.2% quits rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,762,000 were either laid off, fired or otherwise discharged in January, up by 107,000 from the revised 1,655,000 who were discharged in December, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, which was also up from the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 375,000 in January, up from 318,000 in December, for an 'other separations rate’ of 0.3%, up from 0.2% in December but the same as 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 11, 2018

February’s 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 major releases included three reports that will input into 1st quarter GDP: the Commerce Dept report on our International Trade for January, the Full Report on Manufacturers' Shipments, Inventories and Orders for January from the Census Bureau, 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 $13.9 billion, or at a 4.2% annual rate, as non-revolving credit expanded at a 5.6% annual rate to $2,825.2 billion and revolving credit outstanding expanded at a 0.8% rate to $1,029.8 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 indicated that 4.31% of US mortgages were delinquent in January, down from 4.71% in December but up from 4.25% in January a year ago, and that 0.66% of all mortgages were in the foreclosure process at the end of the month, up from 0.65% of mortgages in December but down from the 0.94% of mortgages that were in foreclosure in January a year ago...in addition, the Institute for Supply Management (ISM) released the February Non-Manufacturing Report On Business, which saw the NMI (non-manufacturing index) slip to 59.5%, down from 59.9% in January, indicating a slightly smaller plurality of service industry purchasing managers reported expansion in various facets of their business in February...

Employers Add 313,000 Jobs in February, Employment Rate and Labor Force Participation Rate Both Up 0.3%

the Employment Situation Summary for February reported the largest payroll job increase in 19 months and an even larger increase in the employed labor force…estimates extrapolated from the seasonally adjusted establishment survey projected that employers added 313,000 jobs in February, after the previously estimated payroll job increase for January was revised up from 200,000 to 239,000 and the payroll jobs increase for December was revised from 160,000 up to 175,000…that means that this report represents a total of 367,000 more seasonally adjusted payroll jobs than were reported last month, more than double the 2017 average increase of 176,000 jobs per month...the unadjusted data shows that there were actually 1,224,000 more payroll jobs extant in February than in January, as large seasonal job increases in sectors such as professional & business 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 information sector dropping 12,000 jobs on a seasonally adjusted basis, as motion picture and sound recording industries cut 9,700 employees...the construction sector saw a seasonally adjusted increase of 61,000 jobs, with specialty trade contractors adding 37,600 workers, largely because of warmer than normal temperatures through most of the US during the reference week....the retail sector saw a seasonally adjusted gain of 50,300 jobs, with an increase of 17,700 employees in general merchandize stores and another 14,900 in clothing and accessories stores...the broad professional and business services sector added 50,000 jobs, as temporary help services employed 26,500 more than in January...employment in manufacturing rose by 31,000, with the addition of 8,200 jobs by transportation equipment manufacturers...local governments also added 31,000 jobs over the month, with 26,500 of those in education....employment in health care and social assistance rose by 29,100, with the addition of 10,400 jobs in individual and family services and 9,300 in hospitals...financial services added another 28,000 jobs, with 7,600 of those in credit intermediation and related activities and 7,500 more with insurance carriers...meanwhile, employment in other major sectors, including resource extraction, wholesale trade, transportation and warehousing, leisure and hospitality, and the federal government, all saw smaller job gains over the month....

the establishment survey also showed that average hourly pay for all employees rose by 4 cents an hour to $26.75 an hour in February, after it had increased by 7 cents an hour in January, revised from the 9 cent increase reported last month; at the same time, the average hourly earnings of production and non-supervisory employees increased by 6 cents an hour to $22.40 an hour...employers also reported that the average workweek for all private payroll employees increased by a tenth of an hour to 34.5 hours in February, while hours for production and non-supervisory personnel increased by 0.2 hour to 33.8 hours...in addition, the manufacturing workweek also increased by 0.2 hour to 41.0 hours, while average factory overtime increased by 0.1 hour to 3.6 hours...

meanwhile, the February household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 785,000 to 155,215,000, while the similarly estimated number of those unemployed rose by 22,000 to 6,706,000; which together meant there was a rounded 806,000 increase in the total labor force...since the working age population had grown by 154,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 653,000 to 95,012,000...with the increase of those in the labor force much greater than the increase in the civilian noninstitutional population, the labor force participation rate rose from 62.7% in January to 63.0% in February....meanwhile, 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, by 0.3% to 60.4%...at the same time, the increase in the number unemployed was still enough to keep the unemployment rate unchanged at 4.1%....meanwhile, the number who reported they were involuntarily working part time rose by 171,000 to 5,160,000 in February, which also left the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", unchanged at 8.2% in February....

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 5.0% on Higher Imports of Oil, Lower Exports of Aircraft

our trade deficit rose by 5.0% January, as both the value of our exports and our imports decreased, but the decrease in our imports was comparatively minuscule....the Commerce Dept report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by $2.7 billion to $56.6 billion in January, the highest in more than 9 years, from a December deficit which was revised from $53.1 billion to $53.9 billion.....the value of our January exports fell by $2.7 billion to $200.9 billion on a $3.0 billion decrease to $134.2 billion in our exports of goods and an increase of $0.3 billion to $66.7 billion in our exports of services, while our imports fell by less than $0.1 billion to $257.5 billion on a $0.2 billion decrease to $210.7 billion in our imports of goods and a $0.2 billion increase to $46.8 billion in our imports of services...export prices averaged 0.8% higher in January, so the real drop in exports was greater than the nominal change by that percentage, while import prices were 1.0% higher, meaning that the contraction in real imports was greater than the nominal decrease reported here by that percentage.....

the decrease in our January exports of goods was mostly a result of big drops in our exports of capital goods and industrial supplies, which were partially offset by a increase in our exports of consumer goods...referencing the Full Release and Tables for January (pdf), in Exhibit 7 we find that our exports of capital goods fell by $2,554 million to $44,887 million on a $1,818 million decrease in our exports of civilian aircraft, a $505 million decrease in our exports of industrial machines other than those itemized separately, and a $203 million decrease in our exports of industrial engines, and that our exports of industrial supplies and materials fell by $1326 million to $41,495 million led by a $471 million decrease in our exports of fuel oil and a $216 million decrease in our exports of crude oil....in addition, our exports of foods, feeds and beverages fell by $77 million to $10,737 million and our exports of other goods not categorized by end use fell by $1,014 million to $4,740 million...partially offsetting those decreases, our exports of consumer goods increased by $1,171 million to $17,909 million on a $481 million increase in our exports of art, antiques and other collectibles, a $425 million increase in our exports of pharmaceuticals, and a $324 million increase in our exports of jewelry...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our January goods imports and shows that higher imports of crude oil were more than offset by lower imports of capital goods and consumer goods...our imports of capital goods fell by $1,333 million to $55,930 million on a $1,818 million decrease in our imports of civilian aircraft, a $462 million decrease in our imports of semiconductors and a $250 million decrease in our imports of industrial machines other than those itemized separately, and our imports of consumer goods fell by $879 million to $54,601 million on a $1,198 million decrease in our imports of cellphones...in addition,  our imports of foods, feeds, and beverages fell by $16 million to $11,871 million, our imports of automotive vehicles, parts and engines fell by $6 million to $30,913 million as a $273 million increase in our imports of vehicle parts and accessories was offset by lower imports of passenger cars, engines and tires, and our imports of other goods not categorized by end use fell by $59 million to $8,343 million...offsetting those decreases, our imports of industrial supplies and materials rose by $1952 million to $47,275 million as the value of our imports of crude oil rose by $2,184 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 for inflation in chained 2009 dollars, the same inflation adjustment that’s 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 figure that 4th quarter real exports of goods averaged 128,106 million monthly in chained 2009 dollars, while inflation adjusted January goods exports were at 126,904 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 3.7% annual rate below those of the 4th quarter, or at a pace that would subtract about 0.28 percentage points from 1st quarter GDP growth if continued through February and March...in a similar manner, we find that our 4th quarter real imports of goods averaged 194,913.3 million monthly in chained 2009 dollars, while inflation adjusted goods imports in January were at 196,628 million...that would indicate that so far in the 1st quarter, we have seen our real imports increase at a 3.566% 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 3.6% rate would subtract 0.41 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 0.68 percentage points from the growth of our 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... 

January Factory Shipments and Inventories Both 0.3% Higher

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

  • New orders for manufactured goods in January, down following five consecutive monthly increases, decreased $6.9 billion or 1.4 percent to $491.7 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent December increase. Shipments, up thirteen of the last fourteen months, increased $2.8 billion or 0.6 percent to $498.8 billion. This followed a 0.7 percent December increase. Unfilled orders, down following four consecutive monthly increases, decreased $2.9 billion or 0.3 percent to $1,141.2 billion. This followed a 0.6 percent December increase. The unfilled orders-to-shipments ratio was 6.54, down from 6.58 in December. Inventories, up fourteen of the last fifteen months, increased $2.1 billion or 0.3 percent to $672.4 billion. This followed a 0.7 percent December increase. The inventories-to-shipments ratio was 1.35, unchanged from December.
  • New orders for manufactured durable goods in January, down following two consecutive monthly increases, decreased $9.0 billion or 3.6 percent to $240.0 billion, up from the previously published 3.7 percent decrease. This followed a 2.7 percent December increase. Transportation equipment, also down following two consecutive monthly increases, led the decrease, $8.6 billion or 10.0 percent to $77.9 billion. New orders for manufactured nondurable goods increased $2.1 billion or 0.8 percent to $251.7 billion.
  • Shipments of manufactured durable goods in January, up eight of the last nine months, increased $0.7 billion or 0.3 percent to $247.1 billion, up from the previously published 0.2 percent increase. This followed a 0.5 percent December increase. Transportation equipment, up two of the last three months, led the increase, $0.6 billion or 0.7 percent to $81.5 billion. Shipments of manufactured nondurable goods, up nine of the last ten months, increased $2.1 billion or 0.8 percent to $251.7 billion. This followed a 0.9 percent December increase. Petroleum and coal products, up seven consecutive months, led the increase, $1.8 billion or 3.5 percent to $52.5 billion.
  • Unfilled orders for manufactured durable goods in January, down following four consecutive monthly increases, decreased $2.9 billion or 0.3 percent to $1,141.2 billion, unchanged from the previously published decrease. This followed a 0.6 percent December increase. Transportation equipment, down three of the last four months, drove the decrease, $3.6 billion or 0.5 percent to $771.9 billion. 
  • Inventories of manufactured durable goods in January, up eighteen of the last nineteen months, increased $1.3 billion or 0.3 percent to $408.8 billion, unchanged from the previously published increase. This followed a 0.5 percent December increase. Transportation equipment, up two consecutive months, led the increase, $0.7 billion or 0.6 percent to $131.9 billion. Inventories of manufactured nondurable goods, up eight consecutive months, increased $0.7 billion or 0.3 percent to $263.6 billion. This followed a 0.9 percent December increase. Petroleum and coal products, up seven consecutive months, drove the increase, $0.7 billion or 1.7 percent to $42.4 billion..

to gauge the effect of January factory 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 increased 0.3% to $232,905 million; the value of work in process inventories was up 0.4% at $211,337 million, and materials and supplies inventories were valued 0.2% higher at $228,192 million...the producer price index for January indicated that prices for finished goods increased 0.7%, that prices for intermediate processed goods were also 0.7% higher, and that prices for unprocessed goods were on average 0.9% higher....assuming similar valuations for like inventories, that would suggest that January's real finished goods inventories were 0.4% smaller, that real inventories of intermediate processed goods were 0.3% smaller, and that real raw material inventory inventories were 0.5% smaller…since real factory inventories in the 4th quarter were a bit larger, any real inventory decreases in the 1st quarter will subtract from growth of 1st quarter GDP...

January Wholesale Sales Down 1.1%, Wholesale Inventories Up 0.8% 

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 $492.6 billion, down 1.1 percent (+/-0.7%) from the revised December level, but 6.7 percent (±1.2 percent) higher than wholesale sales of January 2017... the December preliminary estimate of wholesale sales was revised down from $500.2 billion to $498.15 billion, which meant December's sales were 0.9% above the November level, rather than 1.2% as was reported last month... January wholesale sales of durable goods fell 1.4% from December but were up 6.6% percent (+/-1.8%) from a year earlier, while wholesale sales of nondurable goods were down 0.8 percent from December but were up were 6.7 percent (+/-1.6%) from last January...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 $619.05 billion at month end, an increase of 0.8 percent (+/-0.4%) from the revised December level and 4.8 percent (±0.7) percent higher than January a year ago, with the December preliminary inventory estimate concurrently revised upward from $612.1 billion to $613.9 billion, now up 0.7% from November...inventories of durable goods were valued 0.2 percent higher than December and were valued 5.1 percent higher than January a year earlier, while the value of wholesale inventories of nondurable goods was up 1.1 percent (+/-0.2%) from December and was 4.4 percent higher than last January...with the January producer price index for finished goods up by 0.7%, and producer prices for intermediate goods also up by 0.7%, it appears that the nominal 0.8% increase in wholesale inventories is mostly price related, and hence these additions to January inventories will most likely have a negligible impact on 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 4, 2018

4th quarter GDP revision, January’s income and outlays, construction spending, durable goods, & new home sales

the key economic reports released 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, the January report on Construction Spending, and the January report on new home sales, all from the Census bureau....we also had the release of the Chicago Fed National Activity Index (CFNAI) for January, a weighted composite index of 85 different economic metrics, which fell to +0.12 in January from +0.14 in December, which was revised from the +0.27 reported for December last month...after revisions to the CFNAI over the past 6 months, the 3 month average of that index fell to to +0.17 in January from a revised +0.43 in December, which still indicates that national economic activity has been slightly above the historical trend over recent months...

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 +37.2 from last month's +33.4, a 12 year high, suggesting a boom like expansion in the energy industry dominated Texas 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 +28 in February from +14 in January, the second highest reading on record, also suggesting an accelerating robust 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 16.96 annual rate in February, down 0.6% from the 17.07 million annual sales rate in January, and down 2.9% from the 17.47 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 6.3% higher than prices for the same homes that sold during the same 3 month period a year earlier, and the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the February Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 60.8% in February, up from 59.1% in January, which suggests a stronger expansion in manufacturing firms nationally..

4th Quarter GDP Revised to Show Growth at a 2.5% 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 2.5% rate in the quarter, revised down from the 2.6% growth rate reported in the advance estimate last month, as growth of investment in inventories was revised lower and federal government spending was revised down from the prior estimate.... the revision to two decimal places, however, shows the change was statistically insignificant, from growth of just over 2.55% in the first estimate, to growth of 2.54% in this estimate…in current dollars, our fourth quarter GDP grew at a 4.9% 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 $19,736.5 billion annual rate in the 4th quarter, with the headline 2.5% annualized rate of increase in real output arrived at after annualized inflation adjustments averaging 2.3%, known in aggregate as the GDP deflator, were applied to the current dollar change...

as we review this month's revisions, recall that the press release for the GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times the change that actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2009, and then that all percentage changes in this report are calculated from those 2009 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 2nd estimate of 4th quarter GDP, which is linked to on the sidebar of the BEA press release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 1st quarter of 2014; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components for the most recent quarters; table 4, which shows the change in the price indexes for each of those components; and table 5, which shows the quantity indexes for each of the GDP components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...the pdf for the 4th quarter advance estimate, which this estimate revises, is here...

real personal consumption expenditures (PCE), the largest component of GDP, were revised but continued to show their aggregate growth at a 3.8% annual rate in the 4th quarter, the same as was 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 grew at a 2.7% annual rate in the 4th quarter, which was revised from the 2.8% inflation rate that was applied to PCE in the first estimate...real consumption of durable goods grew at a 13.8% annual rate, which was revised from the 14.2% growth rate indicated in the advance report, and added 0.99 percentage points to GDP, as real output of motor vehicles grew at a 18.9% annual rate and accounted for 0.45 percentage points of that durable goods growth.....real consumption of nondurable goods by individuals rose at a 4.3% annual rate, revised from the 5.2% increase reported in the 1st estimate, and added 0.62 percentage points to 4th quarter economic growth, as lower consumption of energy goods was the only drag on the quarter’s non-durables growth...meanwhile, consumption of services grew at a 2.1% annual rate, revised from the 1.8% rate reported last month, and added 0.97 percentage points to the final GDP tally, as increases in the real output of housing and utilities and health care services accounted for more than half of the 4th quarter increase in services...

seasonally adjusted real gross private domestic investment grew at a 3.5% annual rate in the 4th quarter, revised from the 3.6% growth estimate made last month, as real private fixed investment was revised from growth at a 7.9% rate to growth at a 8.1% rate, while real inventory growth was smaller than previously estimated...investment in non-residential structures was revised from growth at a 1.4% rate to growth at a 2.5% rate, while real investment in equipment was revised to show growth at a 11.8% rate, revised from the 11.4% growth rate previously reported...meanwhile, the 4th quarter's investment in intellectual property products was revised from growth at a 4.5% rate to growth at a 2.4% rate, and the growth rate of residential investment was revised from 11.6% to 13.0% annually…after those revisions, the increase in investment in non-residential structures added 0.07 percentage points to the economy's growth rate, investment in equipment added 0.64 percentage points, investment in intellectual property added 0.10 percentage points , and growth in residential investment added 0.47 percentage points to the change in the growth rate of 4th quarter GDP...

meanwhile, the growth in real private inventories was revised from the originally reported $9.2 billion in inflation adjusted growth to show that inventory grew at an inflation adjusted $8.0 billion rate….that came after inventories had grown at an inflation adjusted $38.5 billion rate in the 3rd quarter, and hence the $30.5 billion negative change in real inventory growth from the 3rd quarter to the 4th subtracted 0.70 percentage points from the 4th quarter's growth rate, revised from the 0.67 percentage point subtraction from GDP due to the slower inventory growth reported in the advance estimate....since a smaller growth of inventories indicates that less of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their decrease at a $30.5 billion rate conversely meant that real final sales of GDP were actually greater by that much, and hence real final sales of GDP grew at a 3.3% rate in the 4th quarter, revised from the 3.2% growth rate shown in the advance estimate, compared to the real final sales increase at a 2.4% rate in the 3rd quarter, when the greater increase in inventory growth meant that the quarter’s growth in real final sales was lower....

both our imports and exports were revised higher by similar amounts in this estimate, and as a result our net trade was little changed from what was previously reported...our real exports grew at a 7.1% rate rather than the 6.9% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that is not included in GDP domestic consumption or investment metrics, their growth added 0.84 percentage points to the 4th quarter's growth rate....meanwhile, the previously reported 13.9% growth rate of our real imports was revised to an 14.0% growth, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 1.97 percentage points from 4th quarter GDP....thus, our weakening trade balance subtracted a net 1.13 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 was revised from a 3.0% rate to a 2.9% rate...real federal government consumption and investment was seen to have grown at a 3.2% rate in this estimate, revised from the 3.5% growth rate shown in the advance estimate, as real federal outlays for defense grew at a 5.6% rate and added 0.21 percentage points to 4th quarter GDP, revised from the 6.0% growth rate shown previously, while all other federal consumption and investment was revised from a 0.1% growth rate to statistically unchanged and hence had no impact on 4th quarter GDP...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 2.7% rate in this estimate, as state and local investment spending grew at a 13.9% rate and added 0.23 percentage points to 4th quarter GDP, while state and local consumption spending grew at a 0.6% rate and added 0.06 percentage points to GDP...note that government outlays for social insurance are not included in this government GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...

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

at nearly 70% of GDP, our personal consumption expenditures is 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 is 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 metrics is not the current monthly change; rather, the amounts are seasonally adjusted and at an annual rate, ie, in January's case those metrics 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 $64.7 billion (0.4 percent) in January", they mean that the annualized figure for personal income in January, $16,783.6 billion, was $63.0 billion, or a bit less than 0.4% greater than the annualized  personal income figure of $16,718.9 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 more than 0.9%, from an annual rate of an annual rate of $14,596.0 billion in December to an annual rate of $14,730.8 billion in January, largely due to the recent changes in the tax code...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 $64.7 billion annual rate of increase in personal income were a $45.2 billion increase in wages and salaries and a $36.1 billion increase in personal current transfer receipts, mostly social security, while at the same time interest and dividend income fell $9.0 billion...

for the January personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased by $31.2 billion, or 0.2%, which means that personal consumption expenditures rose from a $13,711.9 billion annual rate in December to a $13,743.1 billion annual rate in January; at the same time, the December PCE figure was revised up from the originally reported $13,717.2 billion annually, a revision that was already incorporated into this week's 4th quarter GDP estimate (this report, although usually released a business day later than the GDP release, is computed concurrently)....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $38.7 billion to $14,266.4 billion annually in January, which left total personal savings, which is disposable personal income less total outlays, at a $464.4 billion annual rate in January, up from the revised $363.2 billion in annualized personal savings in December... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 3.2% in January from the December savings rate of 2.5%, which had been a post recession low...

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 113.646 in December to 114.064 in January, giving us a month over month inflation rate of 0.3678%, which BEA rounds to a 0.4% increase in reporting it here....then, applying that 0.3678% inflation adjustment to the smaller increase in January PCE means that real PCE actually fell by 0.13995% in January, which the BEA reports as a 0.1% decrease...note that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it gives us that month's annualized real PCE in our familiar chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to that of another....that result is shown in table 7 of the PDF, where we see that January's chained dollar consumption total works out to 12,049.2 billion annually, 0.14% less than December's 12,066.2 billion, statistically the same as the real PCE decrease we just computed..

however, to estimate the impact of the change in January PCE on the change in GDP, the change from December doesn't help us much, since GDP is reported quarterly...thus we have to compare January's real PCE to the the real PCE of the 3 months of the third quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 of the pdf for this report, where we find that the annualized real PCE for the 4th quarter was represented by 12,027.9 billion in chained 2009 dollars..(ie, that's the same as what's shown in table 3 of the pdf for the 4th quarter GDP report)....when we compare January's real PCE representation of 12,049.2 billion to the 4th quarter real PCE figure of 12,027.9 billion, we find that real PCE is growing at a 0.7% annual rate so far in the 1st quarter....that’s a rate that would mean that if January real PCE does not improve during February and March, growth in PCE would just add 0.48 percentage points to the growth rate of the 1st quarter...

Construction Spending Unchanged 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 $1,262.8 billion annually if extrapolated over an entire year, which was statically unchanged (±1.0%)* from the revised annualized estimate of $1,262.7 billion for construction spending in December, but 3.2 percent (±1.3 percent) above the estimated annualized level of construction spending of January last year...the December spending estimate was revised 0.75% higher, from $1,253.3 billion to $1,262.7 billion, while November's annualized construction spending was revised from $1,245.1 billion to $1,252,144 million...the combined upward revisions of $16.44 billion to annualized November and December construction spending figures would be averaged over the 3 months of the 4th quarter and therefore increase the quarter's annualized construction spending by around $5.5 billion, and would thus imply an upward revision of about 0.15 percentage points to fourth quarter GDP when the third estimate is released at the end of March...

quoting details on types of construction spending directly from the Census release: Spending on private construction was at a seasonally adjusted annual rate of $962.7 billion, 0.5 percent (± 0.7 percent)* below the revised December estimate of $967.9 billion. Residential construction was at a seasonally adjusted annual rate of $523.2 billion in January, 0.3 percent (±1.3 percent)* above the revised December estimate of $521.8 billion. Nonresidential construction was at a seasonally adjusted annual rate of $439.6 billion in January, 1.5 percent (± 0.7 percent) below the revised December estimate of $446.2 billion.   In January, the estimated seasonally adjusted annual rate of public construction spending was $300.1 billion, 1.8 percent (±1.8 percent)* above the revised December estimate of $294.8 billion. Educational construction was at a seasonally adjusted annual rate of $76.7 billion, 2.1 percent (±3.8 percent)* above the revised December estimate of $75.2 billion. Highway construction was at a seasonally adjusted annual rate of $92.6 billion, 4.4 percent (±4.6 percent)* above the revised December estimate of $88.8 billion.

as you can see from that, construction spending would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of January’s construction spending reported in this release on 1st quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to 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 0.8% in January, after they had fallen 0.1% in December and by 0.2% in November...

on that basis, we can thus estimate that January construction costs were roughly 0.7% more than those of November, and 0.5% more than October, and of course, 0.8% more than December...we then use those percentages to inflate the lower priced spending figures for each of the 4th quarter months and compare them to January, 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 $1,262,701 in December, $1,252,144 in November, and $1,237,649 in October...thus to compare January's nominal construction spending of $1,262,784 million to inflation adjusted figures of the fourth quarter, our formula becomes: (1,262,784 / (((1,262,701 *1.008)+( 1,252,144 * 1.007) + (1,237,649 *1.005)) / 3) = 1.0028598, that adjusted for inflation, construction spending in January was up 0.286% vis a vis that of the 4th quarter, or up at a 1.15% annual rate...then, to figure the potential effect of that change on GDP, we take the difference between the 4th quarter inflation adjusted average and January's inflation adjusted spending as a fraction of inflation adjusted 4th quarter GDP, and find that January construction spending is rising at a rate that would add about 0.09 percentage points to 1st quarter GDP, if there is no improvement in real construction over the next two months..

January Durable Goods: New Orders Down 3.7%, Shipments Up 0.2%, Inventories Up 0.3%

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 fell by $9.2 billion or 3.7 percent to $239.7 billion in January, after December's new orders were revised from the $249.4 billion reported last month to $248.9 billion, now 2.6% greater than November's new orders, revised from the 2.9% previously reported...however, January's new orders were still 8.9% higher than those of January 2017...the volatile monthly new orders for transportation equipment were responsible for the January decrease, as new transportation equipment orders fell $8.6 billion or 10.0 percent to $77.7 billion, on a 28.4% decrease to $10,376 million in new orders for commercial aircraft and a a 45.6% decrease to $2,760 million in new orders for defense aircraft....excluding orders for transportation equipment, new orders fell 0.3%, while excluding just new orders for defense equipment, new orders fell 2.7%.... at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $146 million or 0.2% to $66,695 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, increased by $0.6 billion or 0.2 percent to $247.2 billion, after the value of December shipments was revised from from $246.8 billion to $246.4 billion, now up 0.5% from November...greater shipments of transportation equipment led the January increase, as they rose $0.4 billion or 0.5 percent to $81.3 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $1.3 billion or 0.3 percent to $408.5 billion, after December inventories were revised from $406.5 billion to $407.3 billion, now up 0.5% from November....once again, it was inventories of transportation equipment that led the increase, as they rose $0.7 billion or 0.5 percent to $131.9 billion...

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile monthly new orders, fell for the first time in 5 months, decreasing by $3.1 billion or 0.3 percent to $1,140.9 billion, following a December increase of 0.6% to $1,143,957 million, which was previously reported as a 0.6% increase to $1,144.1 billion...a $3.6 billion or 0.5 percent drop to $771.8 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment orders were up 0.1% to $369,089 million...the unfilled order book for durable goods is still 1.9% above the level of last January, with unfilled orders for transportation equipment now 0.7% above their year ago level, mostly on a 7.6% increase in the backlog of orders for motor vehicles... 

January New Home Sales Reported Lower Than in December and a Year Ago

the Census report on New Residential Sales for January (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 593,000 homes annually, which was 7.8 percent (±19.0 percent)* below the revised December annual sales rate of 643,000 new homes and 1.0 percent (±16.4 percent)* below the estimated 599,000 annual rate that new single family homes were selling at in January of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether January new home sales rose or fell from those of December, or even from January 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 December were revised from the annual rate of 625,000 reported last month to an annual rate of 643,000, and new home sales in November, initially reported at an annual rate of 733,000 and revised to a 689,000 rate last month, were revised back up to a 696,000 a year rate with this report, while October's annualized new home sales rate, initially reported at an annual rate of 685,000 and revised down to a 624,000 a year rate last month, were revised further down to a 616,000 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 44,000 new single family homes sold in January, down from the estimated 45,000 new homes that sold in December and the 49,000 that sold in November....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in January was $323,000, down from the median sale price of $336,700 in December but up from the median sales price of $315,200 in January a year ago, while the average January new home sales price was $382,700, down from the $394,600 average sales price in December, but up from the average sales price of $357,700 in January a year ago....a seasonally adjusted estimate of 299,000 new single family houses remained for sale at the end of January, which represents a 6.8 month supply at the January sales rate, up from the 5.7 months of new home supply reported in December, and 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 593,000 Annual Rate in January and A few Comments on January New Home Sales...

 

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