Sunday, April 29, 2018

1st Quarter GDP, March durable goods, new and existing home sales

the key economic report of the past week was the advance estimate of 1st quarter GDP from the Bureau of Economic Analysis, which was released on Friday; other widely watched releases included the March advance report on durable goods and the March report on new home sales, both from the Census bureau, the Existing Home Sales Report for March from the National Association of Realtors (NAR), and the February Case-Shiller Home Price Index from S&P Case-shiller, which actually is a relative average of December, January and February home prices...Case Shiller’s report indicated that home prices nationally for those 3 months averaged 6.3% higher than prices for the same homes that sold during the same 3 month period a year earlier….also released this week was the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, which fell to +0.10 in March from +0.98 in February, after February's index was revised from the +0.88 reported last month...as a result, the 3 month average of that index fell to +0.27 in February, down from a revised +0.31 in February, still  a positive number which thus indicates that national economic activity has remained above the historical trend over recent months...

the week also saw the release of two more regional Fed manufacturing surveys for April:  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 -3, following last month's reading of +15, indicating the first slight slowing of that region's manufacturing since September 2016, while the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +26 in April, up from readings of +17 in both March and in February, indicating a somewhat faster pace of growth in that region's manufacturing....

1st Quarter Growth Slows to a 2.3% Rate Despite Weakest Goods Consumption Since Q2 2009

our economy grew at a 2.3% rate in the 1st quarter, somewhat slower than the growth rate of the fourth quarter, as slower growth in personal consumption, fixed investment, and state and local government spending was only partially offset by greater growth of inventories...the Advance Estimate of 1st Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 2.3% annual rate from the output of the 4th quarter of 2016, when our real output grew at a 2.9% real rate...in current dollars, our first quarter GDP grew at a 4.3% annual rate, increasing from what would work out to be a $19,754.1 billion a year output rate in the 4th quarter of last year to a $19,965.3 billion annual rate in the 1st quarter of this year, with the headline 2.3% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 2.0%, aka the GDP deflator, was computed and applied to the current dollar change...

as is usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.6% in either direction before the third estimate for the quarter is released, which will be two months from now....also note that March construction and non-durables inventory data have yet to be reported, and that the BEA assumed a small increase in nonresidential construction, an increase in residential construction, and a small decrease in nondurable manufacturing inventories for March before they estimated 1st quarter output (see their Key source data and assumptions Excel file for more details)..

remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times 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 advance estimate of 1st quarter GDP, which we find linked to on the sidebar of the BEA press release, along with other references ...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2014, table 2, which shows the contribution of each of the components to the GDP figures for those months and years, table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components, table 4, which shows the change in the price indexes for each of the components, and table 5, which shows the quantity indexes for each of the components, which are used to convert current dollar figures into units of output represented by chained dollar amounts...

personal consumption expenditures (PCE), which accounts for nearly 69% of GDP, grew at a 3.8% rate in current dollars in the 1st quarter, which worked out to a 1.1% real growth rate of consumed goods and services after an annualized 2.7% PCE price index increase was used to adjust that personal spending for inflation....however, consumer outlays for durable goods actually fell at a 4.9% rate in current dollars while prices of those durable goods were on average 1.6% lower, and thus the BEA found real growth in output of consumer durables fell at a 3.3% rate, as a drop in real consumption of automobiles at a 16.1% rate more than offset increases in real consumption of recreational goods and vehicles and other durable goods....the BEA also found that real output of consumer non-durable goods grew at a 0.1% rate after increased consumer spending for non-durable goods at a 4.0% rate was adjusted for higher non-durable prices at a 3.9% rate, with decreased consumption of clothing and energy goods barely offset by greater growth of real consumption of other nondurables... meanwhile, the 5.2% nominal growth in consumer outlays for services was deflated by a 3.1% increase in prices for services to show real output of consumer services grew at a 2.1% annual rate, led by real growth of financial services and health care....as a result of these changes in growth from the 4th to the 1st quarter, the decrease in outlays for durable goods subtracted 0.24 percentage points from GDP, largely on a 0.42 percentage point hit from automotives, while the incremental increased consumption of non-durable goods added just 0.01 percentage points to the growth of GDP, and while increased consumption of services added 0.97 percentage points to the growth rate of the 1st quarter economy..

the real change in other components of the change in GDP are computed by the BEA in the same manner as PCE; ie, the actual annualized increase in current dollar spending for the quarter is adjusted with an inflation factor for that component, yielding the change in real units of goods or services produced in the quarter at an annual rate...thus, after that inflation adjustment, real gross private domestic investment, which had grown at a 4.7% annual rate in the 4th quarter of 2017, grew at a 7.3% annual rate from there in the 1st quarter...however, real growth in fixed investment grew at a 4.6% annual rate in the 1st quarter, after growing at a 8.2% rate in the 4th quarter, as real non-residential fixed investment grew at a 6.2% rate while real residential investment was statistically unchanged...real investment in non-residential structures grew at a 12.3% rate and added 0.34 percentage points to 1st quarter GDP, real investment in equipment grew at a 4.7% rate and added 0.27 percentage points to GDP, and real investment in intellectual property grew at 3.6% rate and added 0.14 percentage points to GDP, while real residential investment had no impact....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...

however, greater growth in inventories boosted gross investment and hence GDP, as real private inventories grew by an inflation adjusted $33.1 billion in the quarter, up from the $15.6 billion of inflation adjusted inventory growth that we saw in the 4th quarter, and as a result the $17.5 billion greater real inventory growth added 0.43 percentage points to the 1st quarter's growth rate, after $22.9 billion slower real inventory growth in the 4th quarter had subtracted 0.53 percentage points from that quarter's GDP....however, since greater growth in inventories indicates that more of the goods produced during the quarter were left in storage or "sitting on the shelf”, the $17.5 billion increase in their growth in turn meant that real final sales of GDP were actually smaller by that much, and hence real final sales of GDP rose at a 1.9% rate in the 1st quarter, after real final sales had increased at a 3.4% rate in the 4th quarter, when the change in inventories was negative, hence meaning real final sales of GDP was greater…

meanwhile, our real exports of goods and services grew at a 4.8% rate in the 1st quarter, after growing at a 7.0% rate in the 4th quarter of 2017, while our real imports grew at a 2.6% rate in the 1st quarter, after rising at a 14.1% rate in the 4th quarter...as you'll recall, real increases in 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 in GDP elsewhere), so the increase in 1st quarter exports added .59 percentage points to 1st quarter GDP....on the other hand, real 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 in our country and hence is not part of our national product….hence the 2.6% increase in real imports in the 1st quarter subtracted 0.39 percentage points from GDP...as a result, our improving trade balance added a net 0.20% percentage points to 1st quarter GDP, after a big increase in our trade deficit had subtracted 1.16% percentage points from GDP in the fourth quarter of last year...

finally, real consumption and investment by all branches of government grew at a 1.2% annual rate in the 1st quarter, after increasing at a 3.0% rate in the 4th quarter, as federal government consumption and investment grew at a 1.7% rate, while state and local consumption and investment grew at a 0.8% rate.....inflation adjusted federal spending for defense grew at a 1.8% rate and added 0.07 percentage points to 1st quarter GDP growth, while real non-defense federal consumption and investment rose at a 1.6% rate and added 0.04 percentage points to GDP...note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of goods or services....meanwhile, state and local government investment and consumption expenditures grew at an 0.8% annual rate and added 0.09 percentage points to the quarter's growth rate, as shrinkage in real state and local investment at an 0.4% rate subtracted 0.01 percentage points from the quarter's growth...

March Durable Goods: New Orders Up 0.7%, Shipments Up 0.2%, Inventories Up 0.1%

the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $6.4 billion or 2.6 percent to $254.9 billion in March, after February's new orders were revised from the $247.7 billion reported last month to $248.6 billion, now 3.5% more than January's new orders…as a result, year to date new orders are now up by 8.7% from those of 2017...the volatile monthly new orders for transportation equipment were responsible for the month’s increase, as new transportation equipment orders rose $6.4 billion or 7.6 percent to $91.4 billion, on a 44.5% increase in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders were statistically unchanged, while excluding just new orders for defense equipment, new orders rose 2.8%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell 0.1% to $67,238 million...

meanwhile, the seasonally adjusted value of March shipments of durable goods, which were ultimately included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.7 billion or 0.3 percent to $250.0 billion, after the value of February shipments increased 0.7% from January...higher shipments of transportation equipment were responsible for the March increase, as those shipments increased by $1.5 billion or 1.8 percent to $83.4 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $0.3 billion or 0.1 percent to $411.0 billion, after the value of end of February inventories was revised from $410.6 billion to $410.7 billion, still up 0.4% from January....

finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but somewhat volatile new orders, rose for the 6th time in the past 7 months, increasing by $9.3 billion or 0.8 percent to $1,154.0 billion, after the February increase was revised from $2.3 billion to $3.7 billion, now a 0.3% increase...a $8.0 billion or 1.0 percent increase to $782.8 billion in unfilled orders for transportation equipment led the overall increase, while unfilled orders excluding transportation equipment orders were up 0.2% to $371,153 million...the unfilled order book for durable goods is now 3.0% above the level of last March, with unfilled orders for transportation equipment now 2.3% above their year ago level, mostly on a 8.9% increase in the backlog of orders for motor vehicles...

New Home Sales Reported Higher in March

the Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 694,000 homes annually during the month, which was 4.0 percent (±18.6 percent)* above the revised February annual sales rate of 667,000 new home sales and 8.8 percent (±17.0 percent) above the estimated annual rate that new homes were selling at in March of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether March new home sales rose or fell from those of February, 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 February were revised up from the annual rate of 618,000 reported last month to an annual rate of 667,000, and new home sales in January, initially reported at an annual rate of 593,000 and revised to a 622,000 rate last month, were further revised up to a 644,000 a year rate with this report, while December's annualized new home sales rate, initially reported at an annual rate of 625,000 and revised from the initial revision of 643,000 to a 653,000 a year rate last month, were revised back down to a 644,000 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 58,000 new single family homes sold in March, up from the estimated 56,000 new homes that sold in February and up from the 48,000 that sold in January .....the raw numbers from Census field agents were further used to estimate that the median sales price of new houses sold in March was $337,200, up from the median sale price of $325,800 in February and up from the median sales price of $321,600 in March a year ago, while the average new home sales price was $369,900, down from the $370,800 average sales price in February, and down from the average sales price of $384,400 in March a year ago....a seasonally adjusted estimate of 301,000 new single family houses remained for sale at the end of March, which represents a 5.2 month supply at the March sales rate, down from the 5.8 months of new home supply reported in February...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increase to 694,000 Annual Rate in March and A few Comments on March New Home Sales..

Existing Home Sales Increase 1.1% in March

the National Association of Realtors (NAR) reported that existing home sales rose at a 1.1% rate from February to March on a seasonally adjusted basis, projecting that 5.60 million existing homes would sell over an entire year if the March home sales pace were extrapolated over that year, a pace that was still 1.2% below the annual sales rate projected in March of a year ago....the NAR also reported that the median sales price for all existing-home types was $250,400 in March, up from the revised $240,900 in February, and 5.7% higher than in March a year earlier, which they report as "the 73rd straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Climb 1.1 Percent in March", 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 during the month...this unadjusted data indicates that roughly 434,000 homes sold in March, up 36.1% from the 319,000 homes that sold in February, but down by 4.3% from the 455,000 homes that sold in March of last year, so we can see the effect of a large month to month seasonal adjustment....that same pdf indicates that the median home selling price for all housing types rose by 3.9%, from a revised $240,900 in February to $250,400 in March, while the average home sales price rose 3.4% to $290,100 from the $280,600 average sales price in February, while it was up 4.1% from the $278,700 average home sales price of March a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, again see the following two posts from Bill McBride at Calculated Risk: NAR: "Existing-Home Sales Climb 1.1 Percent in March" and A Few Comments on March 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, April 22, 2018

March retail sales, industrial production, & new home construction; February's business inventories

major monthly reports released this week included the Retail Sales report for March and the Business Sales and Inventories report for February from the Census Bureau, the March report on Industrial Production and Capacity Utilization from the Fed, and the March report on New Residential Construction from the Census Bureau…the week also saw the release of the Regional and State Employment and Unemployment Summary for March from the BLS and the first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell to +15.8, down from +22.5 in March, suggesting a slower growth rate for 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 rose to +23.2 in April from +22.3 in March, indicating a significant plurality of the region's manufacturing firms reported increases in their activity again this month...

Retail Sales Rose 0.6% in March after February and January Sales Revised Lower

seasonally adjusted retail sales increased by 0.6% in March after retail sales for January and February were both revised a bit lower...the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $494.6 billion during the month, which was up by 0.6 percent (±0.5%) from February's revised sales of $491.8 billion and 4.5 percent (±0.5%) above the adjusted sales in March of last year...February's seasonally adjusted sales were revised from $492.0 billion down to $491.8 billion, while January's sales were revised down from $492.3 billion to $492,169 million; as a result, the change from January to February remained at -0.1 percent (±0.2%)*.....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were up 16.5%, from $437,340 million in February to $509,362 million in March, while they were up 5.1% from the $484,550 million of sales in March of a year ago...

below we include the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf...to once again explain what this table shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2018 r" (revised) and the February 2017 to February 2018 percentage change as revised in the 2nd column of that pair...(for your reference, our copy of this same table from last month’s advance February estimates, before this month's revisions, is here).... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter a year ago....

March 2018 retail sales table

as we can see from this table, the increase in seasonally adjusted March sales was underpinned by a 2.0% increase to $101,295 million in sales at motor vehicle and parts dealers, without which nominal sales would have only increased by 0.2%...but remember, to determine real sales, all these nominal amounts and percentage changes must be adjusted for change in price....as we saw in last week's release of the March consumer price index, the composite price index for all goods less food and energy goods fell by 0.1%, and gasoline prices fell 4.9%, while both restaurant and grocery prices rose 0.1%...that means we'll see higher real sales than the nominal sales change for most retail categorizes except for food, and much higher real sales of gasoline...to make a more precise estimate we would have to take each type of retail sales and adjust it with the appropriate change in price to determine real sales...that would mean, for instance, that March's clothing store sales, which fell by 0.8% in dollars, should be adjusted with the price index for apparel, which indicated clothing prices were down by 0.6%, to show us that real retail sales of clothing were only down 0.2% in March...then, to get a GDP relevant quarterly change, we'd have to compare such adjusted real clothing sales for the 3 months of the first quarter, January, February and March, with real clothing consumption for the months of October, November and December, and then repeat that process for each other type of retailer...

however, we can more easily get an idea of what GDP quarterly change would show by checking the 5th column of the table above, which shows the percentage change of January thru March sales vis a vis those of October thru December...as you can see, 1st quarter retail sales were up by just 0.2% from those of the 4th quarter, largely due to a 1.6% drop in sales at motor vehicle and parts dealers...over the same period, the composite price index for all goods less food and energy goods rose by 0.4% in January and by 0.1% in February before falling 0.1% in March....hence, the inflation adjustment for the majority of first quarter sales strongly suggests that real retail sales were actually lower in the first quarter than in the last quarter of last year...so despite the apparent jump in March sales, it appears that real retail sales will be a small drag on first quarter GDP…

February Business Sales Up 0.4%, Business Inventories Up 0.6%

after the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February 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 $1,430.4 billion in February, up 0.4 percent (±0.2 percent)* from January's revised sales, and up 5.8 percent (±0.3 percent) from February sales of a year earlier...note that total January sales were concurrently revised down from the originally reported $1,426.0 billion to $1,424,953 million, now a 0.3% decrease from December....manufacturer's sales rose 0.2% to $500,514 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 0.1% to $434,004 million, while wholesale sales rose 1.0% to $495,873 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,928.8 billion at the end of February, up 0.6 percent (±0.1%) from the end of January, and 4.0 percent (±0.3%) higher than in February a year earlier...at the same time, the value of end of January inventories was revised up from the $1,917.0 billion reported last month to $1,918.0 billion, still 0.6% higher than January....seasonally adjusted inventories of manufacturers were estimated to be valued at $675,200 million, up 0.3% from January, and inventories of retailers were valued at $628,049 million, 0.4% more than in January, while inventories of wholesalers were estimated to be valued at $625,577 million at the end of February, 1.0% higher than in January... 

Industrial Production Up 0.5% in March on Return to More Normal Temperatures

industrial production increased in March on a jump in the seasonally adjusted output of utilities, which saw greater than normal demand on cooler weather in March, after warmer than normal temperatures had reduced demand across much of the US in February...the Fed's G17 release on Industrial production and Capacity Utilization for March reported that industrial production rose 0.5% in March after rising by a revised 1.0% in February, which left production 4.5% higher than a year ago...however, this month’s data now reflects the results of an annual revision on March 23rd which left the IP indexes for most months around 1.6% lower than the previously published numbers....hence, the industrial production index, with the benchmark set for average 2012 production to equal to 100.0, was at 107.2 in March, after the February index, which had been published at 108.2 a month ago, was revised up from 106.5 to 106.6, the revised January index was revised up from 105.5 to 105.6, and the revised December index was revised from 105.7 to 105.8...

the manufacturing index, which accounts for more than 77% of the total IP index, rose to 104.2 in March, after the February index was revised from 105.9 to 104.1 in the annual revision and then unrevised in this report....on the other hand, the January manufacturing index was revised from the revised 102.7 to 102.6, and the revised December index was revised from 102.9 to 103.0...taking into account all revisions, the manufacturing index now stands 3.0% above its year ago level, while first quarter manufacturing has grown at a 3.1% annual rate over that of the 4th quarter of 2016....meanwhile, the mining index, which includes oil and gas well drilling, rose 1.0%, from 117.0 in February to 118.2 in March, after the February index was revised down from last month's reported 117.4, which left the mining index 10.8% higher than it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, rose by 3.0% in March, from 102.8 to 106.6, after the February utility index was revised from 103.7 to 102.8, down 5.0% from January...

this report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 78.0% in March from 77.7% in February, which was revised from the 78.1% reported in the annual revision ...capacity utilization of NAICS durable goods production facilities rose from a revised 75.7% in February to 75.9% in March, while capacity utilization for non-durables producers fell from a revised 77.3% to 77.0%...capacity utilization for the mining sector rose to 90.1% in March from 89.6% in February, which had been reported as 87.6% last month, while utilities were operating at 79.0% of capacity during March, up from their 76.8% of capacity during February, which was previously reported at 76.9%...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..

March Housing Starts and Building Permits Reported Higher

the March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were started at a seasonally adjusted annual rate of 1,319,000 in March, which was 1.9 percent (±12.4 percent)* above the revised estimated annual rate of 1,295,000 in February, and 10.9 percent (±10.0 percent) above last March's rate of 1,189,000 housing starts a year....the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during March, with the figures in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been down by 10.5% or up by as much as 14.3% from those of February, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for February housing starts was revised from the 1,236,000 reported last month to 1,295,000, while January starts, which were first reported at a 1,326,000 annual rate, were revised from last month's initial revised figure of 1,329,000 annually to a 1,339,000 annual rate with this report....these annual rates of housing 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 106,900 housing units were started in March, up from the 90,200 units that were started in February and the 91,300 units that were started in January...

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 March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,354,000, which was 2.5 percent (±1.4 percent) above the revised February rate of 1,321,000 permits, and was 7.5 percent (±1.4 percent) above the rate of building permit issuance in March a year earlier...the annual rate for housing permits issued in February 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 115,300 housing units were issued in March, up from the revised estimate of 92,100 new permits issued in February.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.319 Million Annual Rate in March and Comments on March 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, April 15, 2018

March consumer and producer prices, February’s wholesale sales and JOLTS

regular monthly reports released this week included all three major indexes used by the BEA to adjust goods and services for inflation: March Consumer Price Index, the March Producer Price Index, and the March Import-Export Price Index, all of which were released by the Bureau of Labor Statistics...in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for February, while the Census Bureau released the February report on Wholesale Trade, Sales and Inventories...that report estimated that the seasonally adjusted value of wholesale sales was at $495.9 billion, up 1.0 percent (+/-0.5%) from January, after January sales were revised from $492.6 billion down to $490.9 billion, and that the adjusted value of wholesale inventories at the end of February was at $625.6 billion, also up 1.0% from January, after the value of wholesale inventories at the end of January was revised up from $619.05 billion to $619.6 billion…

Consumer Prices Slide 0.1% in March on Lower Prices for Energy and Clothing

the consumer price index decreased by 0.1% in March, as lower prices for energy and clothing more than offset higher prices for shelter and medical services....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers fell by 0.1% in March after it had risen by 0.2% in February, 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, actually rose from 248.991 in February to 249.554 in March, which left it statistically 2.236% higher than the 243.603 index reading of last March, which is reported as a 2.4% year over year increase...with lower priced energy being the major reason for the drop in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, with the unadjusted core index rising from 255.783 to 256.610, which put it 2.117% ahead of its year ago reading of 251.143, which is reported as a 2.1% increase...

the volatile seasonally adjusted energy price index fell by 2.8% in March, after it had risen by 0.1% in February, 3.0% in January, fallen by 0.2% in December, risen by 3.2% in November and by 2.0% in October, and is still 7.0% higher than in March a year ago....prices for energy commodities were 4.7% lower for the month, while the index for energy services decreased by 0.2%, after increasing by 1.4% in February....the decrease in the energy commodity index was due to a 4.9% decrease in the retail price of gasoline, the largest component, while the price of fuel oil fell 0.7%, whereas prices for other fuels, including propane, kerosene and firewood, rose by an average of 0.5%…however, the energy commodities index is still 11.3% above its year ago levels, with gasoline prices averaging 11.1% higher than they were a year ago…within energy services, the index for utility gas service fell 1.2% after rising by 4.7% in February, leaving utility gas priced 3.4% higher than it was a year ago, while the electricity price index was unchanged, after rising by 0.4% in February...the energy services price index is now 2.5% higher than last March, as electricity prices have also increased by 2.2% over that period...

the seasonally adjusted food price index rose 0.1% in March, after being unchanged in February, 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, and 0.3% last March, as the index for food purchased for use at home was 0.1% higher in March while prices for food bought to eat away from home were also 0.1% higher, as prices at both fast food outlets and at full service restaurants rose 0.1%, while food prices at elementary and secondary schools were unchanged...

in the food at home categories, the price index for cereals and bakery products increased by 0.4%, as prices for bread rose 2.0% and prices for breakfast cereal rose 0.4%...the price index for the meats, poultry, fish, and eggs group was up 0.8% as egg prices rose 3.8% and processed fish and seafood prices rose 2.0%, while at the same time the index for dairy products was 0.3% higher despite a 1.3% decrease in the index for milk, as prices for ice cream rose 2.0% and cheese price rose 0.8%...on the other hand, the fruits and vegetables index was 0.7% lower on a 1.2% decrease in the price index for fresh fruits, a 1.1% decrease in the index for fresh vegetables and 2.6% drop in canned fruit prices....meanwhile, the beverages index was up 0.4% as coffee prices rose 1.0% and noncarbonated juices and drink prices rose 0.4%....lastly, prices in the ‘other foods at home’ category was 0.1% lower, as prices for fats and oils other than butter and margarine fell 1.2% and soup prices fell 3.0%....among food at home line items, only prices for eggs, which have risen 16.3% since last March, have seen a 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 March after rising by 0.2% in February, 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 fell by 0.1%, 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 March retail sales for inflation in national accounts data, the index for household furnishings and supplies fell 0.1% as a 3.2% decrease in prices for window coverings and a 4.2% decrease in prices for infants furniture was mostly offset by a 3.0% increase in prices for cookware and tableware and a 1.7% increase for non-major appliances...the apparel price index was 0.6% lower after rising 1.5% in February and 1.7% in January on a 4.0% decrease in prices for women's suits and separates and a 2.7% decrease in the index for men's shirts and sweaters....at the same time, prices for transportation commodities other than fuel were 0.1% lower, as prices for new cars were unchanged while prices for used cars were down 0.3%...on the other hand, prices for medical care commodities were 0.1% higher on a 0.9% increase in non-prescription drug prices, while the recreational commodities index was 0.3% higher on a 2.1% jump the index for photographic equipment and supplies and a 1.3% increase in the index for sporting goods....meanwhile, the education and communication commodities index was 0.4% lower, on a 2.1% decrease in the index for telephone hardware, calculators, and other consumer information items and a 1.4% decrease in prices for computer software and accessories...lastly, a separate price index for alcoholic beverages was up 0.1%, while the price index for ‘other goods’ was down 0.2% on a 0.8% decrease in the index for miscellaneous personal goods..

within core services, which rose by 0.3%, the price index for shelter rose 0.4% on a 0.4% increase in rents and a 0.3% increase in homeowner's equivalent rent, while costs for lodging away from home at hotels and motels jumped 2.3%, the sub-index for water, sewers and trash collection rose 0.2%, and other household operation costs were on average 0.2% higher....meanwhile, the index for medical care services was up 0.5%, as dentists services rose 1.2% and hospital services were priced 0.6% higher...at the same time, the transportation services index was 0.2% higher on a 3.0% increase in car and truck rentals and 1.0% higher automobile service club fees....on the other hand, the recreation services index fell 0.1% as admissions to sporting events fell 3.4%, while the index for education and communication services was 0.2% lower, as landline telephone services fell 0.8% internet and electronic information services fell 1.0%...lastly, the index for other personal services was up 0.7% as the index for checking and other bank services rose 4.7%...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 14.3% cheaper than a year ago, and the index for audio equipment, which is now 17.6% lower than last March, 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...

Producer Prices Up 0.3% in March on Higher Wholesale Foods, Core Services

the seasonally adjusted Producer Price Index (PPI) for final demand rose 0.3% in March, as prices for both finished wholesale goods and margins of final services providers increased by 0.3%...this followed a February that indicated the PPI was 0.2% higher, with prices for finished wholesale goods down 0.1%, while margins of final services providers increased by 0.3%, and a 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%....on an unadjusted basis, producer prices are now 3.0% higher than a year earlier, with the core producer price index, which excludes food, energy and trade services, 2.9% higher for the year, up from the year over year figures of 2.8% for the PPI and 2.7% for core that were indicated last month....

as noted, the price index for final demand for goods, aka 'finished goods', was up 0.3% in March, after being down 0.1% in February, up 0.4% in January, and rising a revised 0.1% in December, and 0.8% in November...the price index for wholesale energy was down 2.1% in January after falling 0.5% in February but rising 3.4% in January, while the price index for wholesale foods rose 2.2%, and the index for final demand for core wholesale goods (ex food and energy) was 0.3% higher...driving the wholesale energy price index lower was a 3.7% decrease in the wholesale price of gasoline and 10.1% lower wholesale prices for home heating oil, while wholesale residential natural gas prices were unchanged...wholesale foods prices, meanwhile, rose on 31.5% higher prices for fresh and dry vegetables, a 39.9% jump in wholesale prices for fresh eggs, and 13.4% higher wholesale dairy prices....among wholesale core goods, prices for household appliances rose 0.9% while the wholesale price index for mining machinery and equipment rose 2.4%…

at the same time, the index for final demand for services rose 0.3% for the third month in a row, after being unchanged in December, rising a revised 0.1% in November, 0.5% in October, and by 0.2% in both August and September, as the March index for final demand for trade services rose 0.2%, the index for final demand for transportation and warehousing services rose 0.6%, and the index for final demand for services less trade, transportation, and warehousing services was 0.3% higher....among trade services, seasonally adjusted margins for computer hardware, software, and supplies retailers rose 5.2% and margins for machinery, equipment, parts, and supplies wholesalers rose 2.9%... among transportation and warehousing services, margins for rail transportation of freight and mail were 1.3% higher and margins for air transportation of passengers rose 1.6%...in the core final demand for services index, the index for cable and satellite subscriber services rose 3.5% while the index for arrangement of cruises and tours rose 3.0%..

this report also showed the price index for intermediate processed goods was 0.3% lower in March, after rising 0.7% in both January and February, and by a revised 0.3% in December, and a revised 0.8% in November....the price index for intermediate energy goods fell 1.3%, as prices for industrial natural gas fell 5.6% and prices for natural gas sold to electric utilities fell 18.0%, while prices for intermediate processed foods and feeds rose 1.4% as the processed meat index rose 2.3%...meanwhile, the core price index for processed goods for intermediate demand less food and energy was 0.3% higher on a 4.4% increase in the index for building paper and board and a 2.6% increase in prices for secondary nonferrous metals....prices for intermediate processed goods are now 4.6% higher than in March a year ago, now the 16th consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

meanwhile, the price index for intermediate unprocessed goods fell 4.8% in March, after rising 2.8% in February, 0.9% in January, and a revised 1.5% in December and 2.6% in November...that was as the price index for crude energy goods fell 11.6% as raw natural gas prices dropped 32.1% even as crude oil prices rose 5.0%, while at the same time the index for unprocessed foodstuffs and feedstuffs fell 1.0%, as prices for slaughter hogs fell 14.7% and prices for slaughter steers and heifers fell 5.0%...on the other hand,  the index for core raw materials other than food and energy materials rose 1.5%, as prices for iron and steel scrap rose 4.3%...this raw materials index is still up by 4.2% from a year ago, in contrast to the year over year increase of 13.4% that we saw last March...

lastly, the price index for services for intermediate demand rose 0.3% in March after rising 0.5% in February, 0.1% in January, and rising a revised 0.1 in December and 0.2% in November....the index for trade services for intermediate demand was up 1.7%, as margins for machinery and equipment parts and supplies wholesalers rose 3.6% while margins for intermediate wholesalers of building materials, paint, and hardware rose 2.6%…the index for transportation and warehousing services for intermediate demand rose 0.5%, as the intermediate index for rail transportation of freight and mail rose 1.3%...meanwhile, the core price index for services less trade, transportation, and warehousing for intermediate demand was 0.1% higher, as the index for legal services rose 0.8% while the index for radio advertising sales rose 5.8%....over the 12 months ended in March, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 3.2% higher than it was a year ago...

Job Openings, Hiring, and Layoffs Fall in February; Hiring, Job Quitting Inches Up

the Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 176,000, from 6,228,000 in January to 6,052,000 in February, after January job openings were revised down from the originally reported 6,312,000 ...however, February's jobs openings were still 7.7% higher than the 5,618,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.0% in January to 3.9% in February, which was still up from the 3.7% rate of February 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 February, seasonally adjusted new hires totaled 5,507,000, down by 67,000 from the revised 5,574,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed fell from 3.8% in January to 3.7% in February, which was still up from the 3.6% hiring rate in February a year earlier (details of hiring by sector since October are in table 2)....meanwhile, total separations fell by 127,000, from 5,319,000 in January to 5,192,000 in February, as the separations rate as a percentage of the employed fell from 3.6% to 3.5%, which was also up from 3.4% in February a year ago (see details in table 3)...subtracting the 5,192,000 total separations from the total hires of 5,507,000 would imply an increase of 315,000 jobs in February, a bit less than the revised payroll job increase of 326,000 for February reported in the March establishment survey last week and well within the expected +/-115,000 margin of error in these incomplete samplings...

breaking down the seasonally adjusted job separations, the BLS founds that 3,210,000 of us voluntarily quit our jobs in February, up from the revised 3,191,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.2% of total employment, which was up from 2.1% year earlier (see details in table 4)....in addition to those who quit, another 1,647,000 were either laid off, fired or otherwise discharged in February, down by 137,000 from the revised 1,784,000 who were discharged in January, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, while it was unchanged from the discharges rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 334,000 in February, down from 344,000 in January, for an 'other separations rate’ of 0.2%, the same as in January and as in February 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, April 8, 2018

March jobs report; February’s trade deficit, construction spending, & factory inventories

in addition to the Employment Situation Summary for March from the Bureau of Labor Statistics, this week's economic releases included three reports that will input into 1st quarter GDP:  the BEA report on our International Trade for February, the February report on Construction Spending, and the Full Report on Manufacturers' Shipments, Inventories and Orders for February, all from the Census Bureau....in addition, the Fed released the Consumer Credit Report for February, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $10.6 billion, or at a 3.3% annual rate, as non-revolving credit expanded at a 4.4% annual rate to $2,836.6 billion and revolving credit outstanding grew at a 0.2% rate to $1,030.9 billion...

privately issued reports released this week included  the ADP Employment Report for March, the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 17.40 annual rate in March, up from the 16.96 annual sales rate in February, and up from the 16.53 million rate a year earlier, and the Mortgage Monitor for February from Black Knight Financial Services….that report indicated that 4.30% of US mortgages were delinquent in February, down from 4.31% in January but up from 3.62% in February a year ago, and that 0.65% of all mortgages were in the foreclosure process at the end of the month, down from 0.66% of mortgages in January and down from the 0.93% of mortgages that were in foreclosure in February a year ago...in addition, the week saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the March Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 59.3% in March, from 60.8% in February, which still suggests an ongoing expansion in manufacturing firms nationally, and the March Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 58.8% in March, down from 59.5% in February, indicating a slightly smaller plurality of service industry purchasing managers reported expansion in various facets of their business in March...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 103,000 Jobs in March, Labor Force Participation Rate Falls to 62.9%

the Employment Situation Summary for March showed the weakest payroll job growth in 7 months, while the labor force participation rate fell because a number of the unemployed stopped looking for work…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 103,000 jobs in March, after the previously estimated payroll job increase for January was revised down from 239,000 to 176,000 and the payroll jobs increase for February was revised up from 313,000 up to 326,000…including those revisions, this report thus represents a total of just 53,000 more seasonally adjusted payroll jobs than were reported last month, well below the past year's average of 188,000 jobs per month...the unadjusted data shows that there were actually 665,000 more payroll jobs extant in March than in February, as normal seasonal job increases in sectors such as construction, administrative and waste services, and leisure and hospitality were smoothed over by the seasonal adjustments…

seasonally adjusted job increases in March were weak but still spread through through both the goods producing and the service sectors, with only construction and the retail sector showing job losses a seasonally adjusted basis, while both of those sectors actually added jobs on an unadjusted basis...adjusted construction employment was down 15,000 after increasing 65,000 in February, as it appears that those workers who would have been added in March were brought on early due to the mild February weather, meaning the March job additions were short of normal...meanwhile, the retail sector showed a seasonally adjusted 4,400 job decrease, as general merchandise stores cut 12,600 employees, probably due to store closings...meanwhile, the broad professional and business services sector added 33,000 jobs, as 9,600 more were employed by accounting and bookkeeping services....employment in health care rose by 22,400, with the addition of 9,900 jobs in hospitals...in addition, the manufacturing sectors saw the addition of 22,000 jobs, with metal fabrication factories adding 8,800....and there was also a 11,400 payroll job increase in social assistance sector, with the addition of 11,800 jobs in individual and family services....however, all the other major sectors, including resource extraction, wholesale trade, transportation and warehousing, utilities, information, financial services, education, leisure and hospitality, and government, all saw smaller increases in payroll employment over the month…

the establishment survey also showed that average hourly pay for all employees rose by 8 cents an hour to $26.82 an hour in March, after it had increased by a revised 3 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $22.42 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in March, while hours for production and non-supervisory personnel slipped by 0.1 hour to 33.7 hours...in addition, the manufacturing workweek was down 0.1 hours at 40.9 hours, and average factory overtime decreased by 0.1 hours to 3.6 hours...

meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 37,000 to 155,178,000, while the similarly estimated number of those qualified as unemployed fell by 121,000 to 6,585,000; which thus meant a decrease of 158,000 in the total labor force...since the working age population had grown by 163,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 323,000 to 95,335,000....with the number of those in the labor force decreasing while the civilian noninstitutional population was increasing, the labor force participation rate fell by 0.1% to 62.9%....at the same time, the small decrease in number employed as a percentage of the increase in the population was not enough to change the employment to population ratio, as it remained at 60.4%...likewise, the decrease in the number unemployed was also not large enough to impact the unemployment rate, which remained at 4.1%....meanwhile, the number who reported they were involuntarily working part time fell by 141,000 to 5,019,000 in March, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 8.2% in February to 8.0% in March, the lowest since November...

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

February Trade Deficit Rose 1.6% on Cost of Rights to Broadcast the Winter Olympics

our trade deficit grew by 1.6% February, as the value of our imports increased more than the value of our exports did....the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit rose by $926 million to $57.59 billion in February, from a January deficit that was revised from the originally reported $56.601 billion to $56.665 billion...in rounded figures, the value of our February exports rose by $3.5 billion to $204.4 billion on a $3.0 billion increase to $137.2 billion in our exports of goods and an increase of $0.5 billion to $67.3 billion in our exports of services, while our imports rose $4.4 billion to $262.0 billion on a $3.3 billion increase to $214.2 billion in our imports of goods and a $1.1 billion increase to $47.8 billion in our imports of services...the latter reflected a one-time $1.0 billion increase in charges for the use of intellectual property for the rights to broadcast the 2018 Winter Olympic Games...export prices averaged 0.2% higher in February, so the real growth in exports was less than the nominal dollar growth by that percentage, while import prices were 0.4% higher, meaning real imports were smaller than the nominal dollar values reported here by that percentage...

the increase in our February exports of goods came about as a result of higher exports of industrial supplies, capital goods, and of automotive products, which was partially offset by a decrease in our exports of consumer goods...referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $2,022 million to $43,468 million on a $602 million increase in our exports of nonmonetary gold, a $293 million increase in our exports of crude oil, a $280 million increase in our exports of natural gas, and a $279 million increase in our exports of coal and other fuels, while our exports of automotive vehicles, parts, and engines rose by $925 million to $14,825 million on a $680 million increase in our exports of passenger cars...in addition, our exports of capital goods rose by $658 million to $45,549 million, led by a $227 million increase in our exports of civilian aircraft, while our exports of foods, feeds and beverages rose by $9 million to $10,746 million, and our exports of other goods not categorized by end use rose by $341 million to $5,009 million....partially offsetting those increases, our exports of consumer goods fell by $480 million to $17,077 million on a $562 million decrease in our exports of pharmaceuticals and a $453 decrease in our exports of jewelry....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that higher imports of capital goods, industrial supplies and materials, and foods, feeds and beverages were largely responsible for the increase in our February imports...our imports of capital goods rose by $1,823 million to $57,782 million on a $450 million increase in our imports of civilian aircraft, a $282 million increase in our imports of materials handling equipment, a $252 million increase in our imports of computers, a $240 million increase in our imports of telecommunications equipment, and a $230 million increase in our imports of industrial machines other than those listed separately...in addition, our imports of industrial supplies and materials rose by $783 million to $48,091 million, as our imports of crude oil rose by $740 million and our imports of organic chemicals rose by $290 million, and our imports of foods, feeds, and beverages rose by $767 million to $12,643 million on a $306 million increase in foods other than those itemized separately...also, our imports of consumer goods rose by $555 million to $55,122 million on a $999 million increase in our imports of pharmaceuticals, a $423 million increase in our imports of furniture, and a $212 million increase in our imports of nonwool or cotton clothing and textiles, which were partially offset by a $1,007 million decrease in our imports of cellphones, and our imports of automotive vehicles, parts and engines rose by $146 million to $31,088 million...partially offsetting those increases, our imports of other goods not categorized by end use fell by $528 million to $7,822 million...

to gauge the impact of January and February 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 1st quarter goods exports were at 126,884 million and 129,401 million for January and February respectively in that same 2009 dollar quantity index representation...averaging January and February goods exports and then computing the annualized change between that average and the average of the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 0.12% annual rate above those of the 4th quarter, or at a pace that would add a bit less than 0.01 percentage point to 1st quarter GDP.....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 January and February imports were at 196,842 million and 198,507 million respectively, after that same 2009 chained dollars inflation adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have increased at a 5.79% 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 5.79% rate would thus subtract 0.66 percentage points from 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to subtract 0.65 percentage points from 1st quarter GDP...

note that we have not computed the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, but that we can still approximate that the $1.0 billion increase in our imports of services relating to the broadcast rights for Winter Olympic Games would subtract another 0.10 percentage points from 1st quarter GDP at the same time...

Construction Spending Rose 0.1% in February after January & December Revised Much Higher

the Census Bureau's report on February construction spending (pdf) reports that "Construction spending during February 2018 was estimated at a seasonally adjusted annual rate of $1,273.1 billion, 0.1 percent (±1.2 percent)* above the revised January estimate of $1,272.2 billion. The February figure is 3.0 percent (±1.5 percent) above the February 2017 estimate of $1,235.7 billion. During the first two months of this year, construction spending amounted to $176.3 billion, 4.4 percent (±1.3 percent) above the $168.9 billion for the same period in 2017."...the January annualized spending estimate was revised 0.7% higher, from $1,262.8 billion to $1,272.2 billion, while December's construction spending was revised from $1,262.7 billion to $1,272.65 billion annually, which would suggest a major upward revision to 4th quarter GDP when the annual revisions are released later this summer...

details on different subsets of construction spending are provided by the Census release summary: Spending on private construction was at a seasonally adjusted annual rate of $982.0 billion, 0.7 percent (±1.6 percent)* above the revised January estimate of $974.8 billion. Residential construction was at a seasonally adjusted annual rate of $533.4 billion in February, 0.1 percent (±1.3 percent)* above the revised January estimate of $532.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $448.6 billion in February, 1.5 percent (±1.6 percent)* above the revised January estimate of $441.9 billion. In February, the estimated seasonally adjusted annual rate of public construction spending was $291.1 billion, 2.1 percent (±1.6 percent) below the revised January estimate of $297.4 billion. Educational construction was at a seasonally adjusted annual rate of $74.6 billion, 0.5 percent (±2.6 percent)* below the revised January estimate of $75.0 billion. Highway construction was at a seasonally adjusted annual rate of $88.5 billion, 0.2 percent (±5.4 percent)* below the revised January estimate of $88.7 billion.

as you can see from that excerpt, 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, gauging the impact of the February spending that's reported here on 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...adding to the problem, the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators for the various components of non-residential investment, making an accurate estimate a real chore to undertake manually...so in lieu of trying to adjust for all of those different indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment...

that price index showed that aggregate construction costs were up 0.1% in February, after they had increased by 0.8% in January, decreased by 0.1% in December and were unchanged in November...on that basis, we can estimate that February construction costs were roughly 0.9% more than those of December, 0.8% more than those of November, and 0.8% more than those of October...we then use those relative percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison....this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,272,648 in December, $1,252,144 in November, and $1,237,649 in October, while annualized construction costs were at $1,273,085 in February and $1,272,178 in January....thus to compare January's nominal construction spending of $1,183,840 and February's figure of $1,192,822  to inflation adjusted figures of the fourth quarter, our formula becomes: ((1,273,085 +1,272,178 * 1.001) / 2 ) / ((1,272,648 * 1.009 + 1,252,144 * 1.008 + 1,237,649 * 1.008)/ 3) = 1.00685, which tells us that real construction spending over January and February was up by 0.685% from that of the 4th quarter period, or up at a 2.77% 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 that of January's & February's adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add about 0.20 percentage points to 1st quarter GDP, assuming there is little change in real construction in March..

February Factory Shipments Up 0.2%, Factory Inventories 0.3% Higher

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

  • New orders for manufactured goods in February, up six of the last seven months, increased $6.0 billion or 1.2 percent to $498.0 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent January decrease. Shipments, up fourteen of the last fifteen months, increased $1.0 billion or 0.2 percent to $500.5 billion. This followed a 0.7 percent January increase. Unfilled orders, up five of the last six months, increased $1.9 billion or 0.2 percent to $1,142.8 billion. This followed a 0.3 percent January decrease. The unfilled orders-to-shipments ratio was 6.49, down from 6.52 in January. Inventories, up fifteen of the last sixteen months, increased $2.3 billion or 0.3 percent to $675.2 billion. This followed a 0.4 percent January increase. The inventories-to-shipments ratio was 1.35, unchanged from January.
  • New orders for manufactured durable goods in February, up three of the last four months, increased $7.2 billion or 3.0 percent to $247.3 billion, down from the previously published 3.1 percent increase. This followed a 3.6 percent January decrease. Transportation equipment, also up three of the last four months, led the increase, $5.5 billion or 7.0 percent to $83.5 billion. New orders for manufactured nondurable goods decreased $1.2 billion or 0.5 percent to $250.7 billion.
  • Shipments of manufactured durable goods in February, up nine of the last ten months, increased $2.2 billion or 0.9 percent to $249.8 billion, unchanged from the previously published increase. This followed a 0.5 percent January increase. Machinery, up six of the last seven months, led the increase, $0.6 billion or 1.7 percent to $33.3 billion. Shipments of manufactured nondurable goods, down following eight consecutive monthly increases, decreased $1.2 billion or 0.5 percent to $250.7 billion. This followed a 1.0 percent January increase. Petroleum and coal products, down following seven consecutive monthly increases, drove the decrease, $2.0 billion or 3.7 percent to $50.5 billion.
  • Unfilled orders for manufactured durable goods in February, up five of the last six months, increased $1.9 billion or 0.2 percent to $1,142.8 billion, unchanged from the previously published increase. This followed a 0.3 percent January decrease. Transportation equipment, up two of the last three months, led the increase, $1.4 billion or 0.2 percent to $773.3 billion. 
  • Inventories of manufactured durable goods in February, up nineteen of the last twenty months, increased $1.8 billion or 0.4 percent to $410.8 billion, unchanged from the previously published increase. This followed a 0.4 percent January increase. Transportation equipment, up three consecutive months, led the increase, $0.7 billion or 0.5 percent to $132.7 billion. Inventories of manufactured nondurable goods, up nine consecutive months, increased $0.4 billion or 0.2 percent to $264.4 billion. This followed a 0.4 percent January increase. Petroleum and coal products, up eight consecutive months, led the increase, $0.2 billion or 0.5 percent to $42.8 billion.

to gauge the effect of February 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 0.1% to $211,892 million; the value of work in process inventories was up 0.4% at $211,337 million, and materials and supplies inventories were valued 0.6% higher at $229,586 million...meanwhile, the producer price index for February indicated that prices for finished goods decreased 0.1%, that prices for intermediate processed goods were 0.7% higher, and that prices for unprocessed goods were on average 2.8% higher....assuming similar valuations for like inventories, that would suggest that February's real finished goods inventories were 0.4% greater than January’s, that real inventories of intermediate processed goods were 0.3% smaller, and that real raw material inventory inventories were 2.2% smaller…since real factory inventories in the 4th quarter were a bit higher, any real inventory decreases over the 1st quarter will subtract from growth of 1st quarter GDP...

 

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

Sunday, April 1, 2018

4th quarter GDP Revision, February’s Personal Income and Outlays

the key economic releases this week were the 3rd estimate of 4th quarter GDP and the February report on Personal Income and Spending from the Bureau of Economic Analysis...we also saw the release of the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, which rose to +0.88 in February from +0.02 in January, after January's index was revised down from the +0.12 reported last month...as a result, the 3 month average of that index rose to +0.37 in February, up from a revised +0.16 in January, which indicates that national economic activity has been somewhat above the historical trend over recent months...in addition, the Case-Shiller Home Price Index for January from S&P Case-Shiller reported that home prices during November, December and January averaged 6.2% higher nationally than prices for the same homes that sold during the same 3 month period a year earlier...

this week also saw the release of the last two regional Fed manufacturing surveys for March: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to +21.4 from last month's twelve year high of +37.2, still suggesting a strong expansion in the Texas energy centered 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 fell to +15 in March, down from a near record +28 in February, but up from +14 in January, also suggesting an ongoing expansion in that region's manufacturing...

4th Quarter GDP Revised to Indicate Growth at a 2.9% Rate

the Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.9% rate in the 4th quarter, revised from the 2.5% growth rate indicated by the second estimate reported last month, as both personal consumption expenditures and inventory investment were greater than was previously estimated, while losses from trade were a bit more than was previously estimated.....in current dollars, our fourth quarter GDP grew at a 5.3% 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 $19,754.1 billion annual rate in the 4th quarter, with the headline 2.9% 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....

remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times 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 3rd 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 2nd estimate, which this estimate revises, is here...

seasonally adjusted real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 4.0% annual rate in the 4th quarter, rather than the 3.8% growth rate reported last month, as growth of consumer spending in dollars at a 6.9% annual rate was deflated with the PCE price index, which indicated consumer inflation grew at a 2.7% annual rate in the 4th quarter, which was unrevised from the second estimate....real consumption of durable goods grew at a 13.7% annual rate, revised from 13.8% in the second estimate, and added 0.98 percentage points to GDP, as real output of motor vehicles grew at a 19.0% annual rate and accounted for 0.45 percentage points of that growth....real consumption of nondurable goods by individuals rose at a 4.8% annual rate, revised from the 4.3% increase reported in the 2nd estimate, and added 0.69 percentage points to 4th quarter growth, as all categories of non-durables saw output grow in the quarter....in addition, real consumption of services grew at a 2.3% annual rate, revised from the 2.1% rate reported last month, and added 1.08 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...

meanwhile, real gross private domestic investment grew at a 4.7% annual rate in the 4th quarter, revised from the 3.5% growth estimate made last month, as real private fixed investment was revised from growth at a 8.1% rate to growth at a 8.2% rate, while real inventory growth was much greater than previously estimated...investment in non-residential structures was revised from growth at a 2.5% rate to growth at a 6.3% rate, while real investment in equipment was revised to show growth at a 11.6% rate, revised from the 11.8% growth rate previously reported...in addition, the 4th quarter's investment in intellectual property was revised from growth at a 2.4% rate to growth at a 0.8% rate, and the growth rate of residential investment was revised from 13.0% to 12.8% annually…after those revisions, the increase in investment in non-residential structures added 0.18 percentage points to the economy's growth rate, investment in equipment added 0.63 percentage points, investment in intellectual property added 0.03 percentage points , and growth in residential investment added 0.46 percentage points to the change in the growth rate of 4th quarter GDP...

at the same time, the inflation adjusted growth of real private inventories was revised from the previously reported $8.0 billion to show inventories had grown at an $15.6 billion rate, which came after inventories had grown at an inflation adjusted $38.5 billion rate in the 3rd quarter, and hence the $22.9 billion negative change in real inventory growth from the 3rd quarter to the 4th subtracted 0.53 percentage points from the 4th quarter's growth rate, revised from the 0.70 percentage point subtraction from GDP due to the even slower inventory growth reported in the second estimate....however, since a decrease in the 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 $22.9 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 3.4% rate in the 4th quarter, revised from the 3.3% growth rate shown in the second 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....

the previously reported increase in real exports was revised a bit lower with this estimate, while the reported increase in real imports was revised a bit higher, and hence our net trade was a greater subtraction from GDP than was previously reported...our real exports grew at a 7.0% rate, rather than at the 7.1% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 0.83 percentage points to the 4th quarter's growth rate....meanwhile, the previously reported 14.0% rate of increase in our real imports was revised to an 14.1% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 1.99 percentage points from 4th quarter GDP....thus, our weakening trade balance subtracted a net 1.16 percentage points from 4th quarter GDP, revised from the 1.13 percentage point GDP subtraction resulting from foreign trade that was indicated in the second estimate..

finally, there was also a small upward revision to real government consumption and investment in this 3rd estimate, as the real growth rate for the entire government sector was revised from growth at a 2.9% rate to growth at a 3.0% rate...real federal government consumption and investment was seen to have grown at a 3.2% rate in this estimate, the same growth rate shown in the second estimate, but real federal outlays for defense grew at a 5.5% rate and added 0.21 percentage points to 4th quarter GDP, revised from the 5.6% growth rate shown previously, while growth in all other federal consumption and investment was revised from a statistically unchanged rate to a contraction at a 0.1% rate, which nonetheless was still too small a change to impact 4th quarter GDP...meanwhile, real state and local consumption and investment was revised from growth at a 2.7% rate in the first estimate to growth at a 2.9% rate in this estimate, as state and local investment spending grew at a 15.4% rate and added 0.25 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 February, Personal Spending up 0.2%, PCE Price Index up 0.2%

since our personal consumption expenditures account for nearly 70% of GDP, they are usually the key metric for determining the ultimate trajectory of GDP each quarter, and hence the key monthly release that inputs into GDP each quarter is the report on Personal Income and Outlays from the Bureau of Economic Analysis…. this report 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 February's case, this report tells us what income and spending would be for a year if February's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, and in the case of this month's report they give us the percentage change in each annual metric from January to February...

thus, when the opening line of the press release for this report tell us "Personal income increased $67.3 billion (0.4 percent) in February", that means that the annualized figure for US personal income in February, $16,861.2 billion, was $67.3 billion, or a bit more than 0.4% greater than the annualized  personal income figure of $16,793.9 billion for January; the actual change in personal income from January to February is not given...similarly, annualized disposable personal income, which is income after taxes, rose by a bit less than 0.4%, from an annual rate of an annual rate of $14,740.9 billion in January to an annual rate of $14,794.7 billion in February...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 February, the largest contributors to the $67.3 billion annual rate of increase in personal income were a $41.1 billion increase in wages and salaries and a $15.3 billion increase in proprietors’ income…

for the personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased at a $27.7 billion rate, or a tad more than 0.2 percent, as the annual rate of PCE rose from $13,749.3 billion in January to $13,777.0 in February, after the January PCE figure was revised down from the originally reported $13,743.1 billion annually...the current dollar increase in February spending resulted from a $31.6 billion annualized increase to $9,252.5 billion in annualized in spending for services, which was partially offset by a $3.9 billion decrease to $4,401.8 billion in spending for goods, as we saw in the earlier February retail sales report....total personal outlays for February, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $28.7 billion to $14,297.3 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $497.4 billion annual rate in February, up from the revised $471.3 billion in annualized personal savings in January... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 3.4% in February from January's savings rate of 3.2%... 

before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2009 prices = 100, which is included in Table 9 in the pdf for this report....that index rose from 114.082 in January to 114.299 in February, a month over month inflation rate that's statistically 0.1902%, which BEA reports as an increase of 0.2 percent, following the PCE price index increase of around 0.4% in January...applying that inflation adjustment to the nominal change in personal spending left real PCE statistically unchanged in February, after a January's real PCE decrease of 0.2%...note that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in the BEA's familiar chained 2009 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that February's chained dollar consumption total works out to 12,054.2 billion annually, just a bit more than January's 12,052.8 billion...

finally, to estimate the impact of the change in PCE on the change in GDP, we have to compare real PCE from January and February to the the real PCE of the 3 months of the fourth quarter....while this report shows PCE for all those months on a monthly basis, the BEA also provides the annualized chained dollar PCE on a  quarterly basis in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3 months of the 4th quarter was represented by 12,035.2 billion in chained 2009 dollars...(note that's the same figure shown in table 3 of the pdf for the 4th quarter GDP report)...next, by averaging the annualized chained 2009 dollar figures for January and February, 12,052.8 billion and 12,054.2 billion, we get an equivalent annualized PCE for the two months of the 1st quarter that we have data for so far....when we compare that average of 12,053.3 to the 4th quarter real PCE of 12,035.2, we find that 1st quarter real PCE has grown at a 0.6096% annual rate for the two months of the 4th quarter we have (note the math to get that annual rate: (((12,052.8 + 12,054.2)/ 2 )  / 12,035.2 ) ^ 4 = 1.006096...that means that if March real PCE does not improve from the average of January and February, growth in PCE would add just 0.42 percentage points to the growth rate of the 1st quarter, which would be the weakest contribution from PCE since the second quarter of 2012... 

 

(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…)