Sunday, August 26, 2018

July's durable goods, new and existing home sales

This week's widely watched releases included the July advance report on durable goods and the July report on new home sales, both from the Census bureau, and the Existing Home Sales Report for July from the National Association of Realtors (NAR).....in addition, this week saw the release of the Kansas City Fed manufacturing survey for August, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico...they reported their broadest composite index fell to +14 in August, down from readings of +23 in July and +28 in June, suggesting a slower pace of expansion in that region's manufacturing industries..

July Durable Goods: New Orders Down 1.7%, Shipments Down 0.2%, Inventories Up 1.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $4.3 billion or 1.7 percent to $246.9 billion in July, following a revised increase of 0.7% to $251.1 billion in June new orders, which had been originally reported as a 1.0% increase to $251.9 billion of new orders...despite the July decrease, however, year to date new orders are now running 8.6% above those of 2017, a slight increase from the 8.4% year over year change we saw in this report last month...as is usually the case, the volatile monthly change in new orders for transportation equipment drove the July headline change, as those transportation equipment orders fell $4.6 billion or 5.3 percent to $82.8 billion, on a 35.4% decrease to $9,213 million in new orders for commercial aircraft and a 34.6% decrease to $4,289 million in new orders for defense aircraft....excluding new orders for ‘transportation’ equipment, other new orders were up 0.2% in July, as new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 1.4% to $69,683 million...

The seasonally adjusted value of July's shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, fell by $0.5 billion or 0.2 percent to $250.8 billion, after June shipments had increased by 1.6% from those of May....a 1.9% drop in shipments of transportation equipment was the reason for the July decrease, as they fell $1.6 billion to $83.9 billion, on a 25.4% decrease in shipments of commercial aircraft…excluding shipments of transportation equipment, shipments of other durable goods rose 0.6%…

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the eighteenth time in the last nineteen months, increasing by $5.0 billion or 1.3 percent to $408.3 billion, after end of June durables inventories were revised from $402.8 billion to $403.2 billion, now statistically unchanged from May...an increase in inventories of transportation equipment were the major factor in the inventory increase, as they rose $4.4 billion or 3.5 percent to $131.3 billion, on a 6.7% increase to $67,061 million in inventories of commercial aircraft...excluding the increase in inventories of transportation equipment, all other durable goods inventories still increased 0.2% to $276,919 million...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, rose for the eighth time in nine months, but by just $0.1 billion to $1,164.7 billion, which is considered statistically unchanged...that followed a June increase of 0.3% to $1,164.66 billion that was was revised from the previously reported 0.4% increase to $1,165.1 billion.....a $1.1 billion or 0.1 percent decrease to $800,775 million in unfilled orders for transportation equipment limited the overall increase, as unfilled orders excluding transportation equipment were up 0.3% to $363,951 million....compared to a year earlier, the unfilled order book for durable goods is now 3.9% above the level of last July, as unfilled orders for transportation equipment are still 3.3% above their year ago level, despite a 2.2% decrease in the backlog of orders for defense aircraft...  

New Home Sales Reported Lower in July

The Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 627,000 new homes a year, which was 1.7 percent (±14.7 percent)* below the revised June rate of 638,000 new single family home sales a year, but 12.8 percent (±15.7 percent)* above the estimated annual rate that new homes were selling at in July of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June or even from those in July a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales new single family homes in June were revised from the annual rate of 631,000 reported last month to a 638,000 a year rate, and home sales in May, initially reported at an annual rate of 689,000 and revised down to a 666,000 a year rate last month, were revised further down to a 654,000 annual rate with this report, while April's annualized home sales rate, initially reported at 662,000 and revised from 646,000 to 641,000 last month, were also revised lower, to a 633,000 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 showed that approximately 53,000 new single family homes sold in July, down from the 58,000 new homes that sold in June and the 62,000 that sold in May....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in July was $328,700, up from the median sale price of $310,000 in June and up from the median price of $322,900 in July a year ago, while the average July new home sales price was $394,300, up from $369,500 average sales price in June, and up from the average sales price of $372,400 in July a year ago....a seasonally adjusted estimate of 309,000 new single family houses remained for sale at the end of July, which represents a 5.9 month supply at the July sales rate, up from the reported 5.7 month supply of unsold homes in June....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales decrease to 627,000 Annual Rate in July and A few Comments on June New Home Sales...

Existing Home Sales Fall 0.7% in July to Slowest Pace in 2 Years

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales fell 0.7% from June to July, projecting that 5.34 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was also 1.5% below the annual sales rate projected in July of a year ago, and the slowest pace in two years….June home sales at a 5.38 million annual rate were unrevised from last month's report...the NAR also reported that the median sales price for all existing-home types was $269,600 in July, 4.5% higher than in July a year earlier, which they report as "the 77th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Slip 0.7 Percent in July", 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....since 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…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 522,000 homes sold in July, down by 14.5% from the 570,000 homes that sold in June, but up 1.8% from the estimated 513,000 homes that sold in July of last year, so we can see there was a sizable seasonal adjustment just to bring the annualized published figures up to the level reported...that same pdf indicates that the median home selling price for all housing types fell 1.5%, from a revised $273,800 in June to $269,600 in July, while the average home sales price was $307,800, down 1.3% from the $311,900 average selling price in June, but up 3.0% from the $298,800 average home sales price of July a year ago, with the regional average home sales prices ranging from a low of $240,400 in the Midwest to a high of $410,600 in the West...for additional commentary with long term graphs on this report, see "NAR: Existing-Home Sales Decline in July" and "A Few Comments on June Existing Home Sales" from Bill McBride at Calculated Risk...

 

(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 picked from the aforementioned GGO posts, contact me…)     

Sunday, August 19, 2018

July’s retail sales, industrial production, and new home construction; June’s business inventories

The past week's key reports were the Retail Sales for July and Business Sales and Inventories for June, both from the Census bureau, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau...other reports released this week included Regional and State Employment and Unemployment for July and the July Import-Export Price Index, both from the Bureau of Labor Statistics, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +22.6 in July to +25.6 in August, suggesting a broad based expansion of First District manufacturing, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from +26.7 in July to +11.9 in August, still suggesting ongoing growth of that region's manufacturing industries, as any positive reading would...

July Retail Sales Rose 0.5% After May and June Sales were Revised Lower

Seasonally adjusted retail sales were 0.5% higher in July after retail sales for May and June were revised lower....the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $507.5 billion during  the month, which was 0.5 percent (± 0.4 percent) higher than June's revised sales of $504.9 billion and 6.4 percent (±0.5 percent) above the adjusted sales in July of last year...June's seasonally adjusted sales were revised from the $506.8 billion reported last month to $504.9 billion, while May sales were revised from $504.3 billion to $503.955 billion with this release....estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually fell 0.7%, from $510,929 million in June to $507,575 million in July, while they were up 6.4% from the $476,983 million of sales in July a year ago...combined, the revisions to May and June indicate that 2nd quarter sales were roughly $2.25 billion lower than previously reported, which would subtract about $9.0 billion from the BEA's calculation of 2nd quarter personal consumption expenditures at an annual rate before the inflation adjustment, which should be enough to reduce 2nd quarter GDP by 0.06 percentage points when the 2nd estimate is published at the end of the month…

Included below we have the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the May to June change under "May 18 (r)evised" and the revised June 2017 to June 2018 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance June sale estimates, before this month's revision, is here.... 

July 2018 retail sales table

In computing the real personal consumption of goods data for national accounts from this July retail sales report, the BEA will use corresponding price changes from the July consumer price index, which we reviewed last week...since that report showed that the composite price index for all goods less food and energy goods was up 0.1% in July, we can thus figure that real retail sales excluding food and energy will on average be 0.1% lower than core retail sales shown above...however, the impact of price changes for different types of sales will vary considerably; for instance, while nominal sales at car dealers were up 0.2%, the price index for transportation commodities other than fuel was up 0.7%, as prices for new cars and trucks rose 0.3% and prices for used cars and trucks rose 1.3%...that means that real unit sales at auto dealers was actually on the order of 0.5% lower...for sales of goods for which prices fell, the impact will be the opposite; ie, while sales at clothing stores were 1.3% higher in July, the apparel price index was down 0.3%, meaning that real sales of clothing probably rose around 1.6%...in addition to those core sales, adjusting food and energy sales for price changes must be done separately; the CPI report showed that the food price index rose 0.1% in July, with the index for food purchased for use at home 0.2% higher, while prices for food bought for eating away from home were 0.1% higher, hence, with nominal sales at food and beverage stores up 0.6% in July. that 0.2% price increase means that real volume sales of food were up about 0.4%…likewise, the 1.3% nominal increase in sales at bars and restaurants would be adjusted to a real sales increase of about 1.2%...meanwhile, while sales at gas stations were up 0.8%, there was a 0.6% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 1.4%, with the caveat that gasoline stations do sell more than gasoline...averaging real sales computed thusly together, we'd estimate that income and outlays report for July will show that real personal consumption of goods rose 0.4% in July... the single month of that metric will account for 8% of 3rd quarter GDP…

Industrial Production Up 0.1% in July After Prior Months Manufacturing Revised Higher

The Fed's G17 release on Industrial production and Capacity Utilization for July indicated that industrial production rose by 0.1% in July after rising by 1.0% in June but after falling 0.8% in May...however, after revisions, industrial production is now up 4.2% from a year ago, as compared to last month's 3.8% year over year increase...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 108.0 in July from 107.9 in June, which was revised from the 107.7 reported for June a month ago...at the same time, the May reading for the IP index was revised up from 107.1 to 106.8, the April reading for the index was revised up 107.6 to 107.7, and the March index reading was revised from 106.4 to 106.5...

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3% to 103.4 in July, after June's manufacturing index was revised from 103.9 to 104.3, May's manufacturing index was revised from 103.1 to 103.4, April's manufacturing index was revised from 104.2 to 104.4, the March manufacturing index was revised up from 103.6 to 103.7, and the February manufacturing index was revised from 103.7 to 103.8.... meanwhile, the mining index, which includes oil and gas well drilling, slipped from 123.7 in June to 123.4 in July, which, after 5 consecutive months of strong growth, is still 12.9% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 0.5% to 104.5 in July, after the June utility index was revised from 106.2 to 105.0, the May index was revised from 107.8 to 105.7, and prior months were revised lower as well...nonetheless, the utility index still remains 2.3% above its year ago reading of 102.1..

This report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry was unchanged at 78.1% in July, after capacity utilization for June was revised from 78.0% to 78.1%, and after capacity utilization for the prior 4 months was revised as well....capacity utilization by NAICS durable goods production facilities rose from 75.7 in June to 75.9 in July, as capacity utilization of motor vehicles and parts manufacturers rose from 78.6% to 79.3%, while capacity utilization for non-durables producers rose from 76.9% to 77.0% at the same time....on the other hand, capacity utilization for the mining sector fell to 92.0% in July from 92.8% in June, which was originally reported as 92.7%, while utilities were operating at 77.5% of capacity during July, down from their 78.0% of capacity during June, a figure that was originally reported at 78.9%...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....

New Housing Starts and Building Permits are Reportedly Higher in July

The July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,168,000, which was 0.9 percent (±11.5 percent)* above the revised June estimated annual rate of 1,158,000 housing units started, but was 1.4 percent (±11.7 percent)* below last July's pace of 1,185,000 housing starts annually...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, July's housing starts could have been down by 10.6% or up by as much as 12.4% from those of June, with even larger revisions eventually possible...in this report, the annual rate for June housing starts was revised from the 1,173,000 reported last month to 1,158,000, while May starts, which were first reported at a 1,350,000 annual rate, were revised down from last month's initial revised figure of 1,337,000 annually to an annual rate of 1,329,000 with this report....those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 110,400 housing units were started in July, down from the 110,600 units started in June...of those housing units started in July, an estimated 81,800 were single family homes and 28,300 were units in structures with more than 5 units, down from the revised 83,900 single family starts in June, but up from the 25,800 units started in structures with more than 5 units in June...

As we've pointed out previously, 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 July, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,311,000 housing units per year, which was 1.5 percent (±1.3 percent) above the revised June annual rate of 1,292,000 permits, and was 4.2 percent (±1.7 percent) above the rate of building permit issuance in July a year earlier...the annual rate for housing permits issued in June was revised from 1,273,000 to 1,292,000 ....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 114,000 housing units were issued in July, down from the revised estimate of 121,600 new permits issued in June...the July permits included 77,600 permits for single family homes, down from 81,700 single family permits in June, and 33,500 permits for housing units in apartment buildings with 5 or more units, down from 36,600 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts at 1.168 Million Annual Rate in July and Comments on July Housing Starts... 

June Business Sales Up 0.3%, Business Inventories Up 0.1%, Lower than Estimated by the BEA

Following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June(pdf), which incorporates the revised June retail data from that July retail report and the earlier published 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 $1,452.2 billion in June, up 0.3 percent (±0.1%) from May revised sales, and up 8.2 percent (±1.2 percent) from June sales of a year earlier...note that total May sales were revised from the originally reported $1,449.7 billion to $1,447.55 billion, now up 1.3% from April, rather than up 1.4% as had previously been reported....manufacturer's sales were up 1.0% to $501,383 million in June, while retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, were statistically unchanged at $444,154 million, while wholesale sales fell 0.1% to $506,658 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,937.2 billion at the end of June, up 0.1 percent (±0.1%) from May, and 4.0 percent (±1.3%)* higher than in June a year earlier...the value of end of May inventories was revised down from the $1,936.9 billion reported last month to $1,935.563 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $669,270 million at the end of June, 0.1% higher than those at the end of May, inventories of retailers were valued at $635,510 million, 0.1% more than in May, while inventories of wholesalers were estimated to be valued at $632,402 million at the end of June, also up 0.1% from May...

The Key source data and assumptions that accompanied the release of the advance estimate of 2nd quarter GDP indicates that the BEA had assumed that total seasonally adjusted June manufacturing and trade inventories (on a Census basis) would increase by $1.5 billion from the previously published May figures...while this report shows that total June inventories increased by $1.6 billion, May inventories were revised down by about $1.3 billion at the same time...that means that the advance estimate of 2nd quarter GDP overestimated end of June inventories by about $1.2 billion...assuming there is no major change relating to the inflation adjustment on those inventories, a revision to reflect these new figures would be enough to subtract about 0.05 percentage points from 2nd quarter GDP, when the 2nd estimate is released at the end of August...

 

(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 picked from the aforementioned GGO posts, contact me…)     

Sunday, August 12, 2018

July’s consumer and producer prices, June’s wholesale inventories & JOLTS

Government agency issued reports released this past week included the the July Consumer Price Index and the July Producer Price Index from the Bureau of Labor Statistics, and the June report on Wholesale Trade, Sales and Inventories from the Census Bureau...the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for June, while the Fed released the Consumer Credit Report for June, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $10.2 billion, or at a 3.1% annual rate, as non-revolving credit expanded at a 4.4% rate to $2,868.8 billion and revolving credit outstanding contracted at a 0.2% rate to $1,038.8 billion....

Consumer Prices Up 0.2% in July on Higher Prices for Shelter, Vehicles

The consumer price index was 0.2% higher in July, as higher prices for shelter, new & used cars and trucks, and most services were only partially offset by lower prices for energy and apparel...the Consumer Price Index  Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.2% in July after rising 0.1% in June, 0.2% in May, 0.2% in April but after falling 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% last July....the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 251.989 in June to 252.006 in July, which left it statistically 2.9495% higher than the 244.786 index reading in July of last year, which is reported as a 2.9% increase....with lower prices for energy offsetting somewhat higher prices for food, seasonally adjusted core prices, which exclude food and energy, also rose by 0.2% for the month, with the unadjusted core price index rising from 257.697 to 257.867, which left the core index 2.354% ahead of its year ago reading of 251.936, which is reported as a 2.4% annual increase, the largest YoY core price index increase since September 2008....

The volatile seasonally adjusted energy price index fell by 0.3% in July, after it had decreased by 0.3% in June, increased by 0.9% in May and by 1.4% in April, decreased by 2.8% in March, increased by 0.1% in February and by 3.0% in January, and is now 12.1% higher than in July a year ago...prices for energy commodities were 0.6% lower in July, while the index for energy services fell by 0.4%, after falling 1.5% in June...the energy commodity index was lower despite a 1.2% increase in the index for fuel oils because the price of gasoline, the largest component, was down 0.6%, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.1% higher...within energy services, the index for utility gas service fell by 0.5% after falling by 1.7% in June and is now priced 1.3% lower than it was a year ago, while the electricity price index was down 0.4%, after it fell 1.4% in June....energy commodities are now 25.4% higher than their year ago levels, with gasoline prices also averaging 25.4% higher than they were a year ago, while the energy services price index is now 1.0% lower than last July, as even electricity prices have decreased by 0.8% over that period…

The seasonally adjusted food price index rose 0.1% in July, after rising 0.2% in June, being unchanged in May, rising 0.3% in April, 0.1% in March, 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, and 0.2% last July, as the index for food purchased for use at home was 0.2% higher in July, while prices for food bought for eating away from home were 0.1% higher, as prices at fast food outlets were unchanged while prices at full service restaurants rose 0.2% and food prices at at employee sites and schools were up 1.8%...

In the food at home categories, the price index for cereals and bakery products fell 0.2% as cookies prices fell 1.7%, prices for rice fell 0.7%, and prices for breakfast cereals fell 0.4%...at the same time, the price index for the meats, poultry, fish, and eggs group was up 0.3%, after falling 0.6% in June, as beef and veal prices rose 0.5% and the poultry index was 0.6% higher....meanwhile, the index for dairy products was 0.6% lower on a 0.8% decrease in the price of fresh whole milk and 1.0% lower cheese prices...on the other hand, the fruits and vegetables index was 1.0% higher on a 1.9% increase in the price index for fresh vegetables and a 1.7% increase in prices for apples....at the same time, the beverages index was unchanged, as frozen juice and drink prices rose 0.7% while carbonated drink prices were priced 1.1% lower...lastly, the index for the ‘other foods at home’ category was up 0.1%, as the index for fats and oils rose 0.6% and prices for salad dressing rose 0.8%....among food at home line items, only prices for eggs, which are still up 16.7% since last July, have seen prices increase greater than 10% over the past year, while no food item has fallen in price by more 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 for this release, 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 July after rising by 0.2% in June, 0.2% in May, 0.1% in April, 0.1% in March, 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 was up 0.1% in July, 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 June retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.3%, as the index for major appliances rose 3.5%, and the index for housekeeping supplies was 0.6% higher...on the other hand, the apparel price index was 0.3% lower, as prices for women's suits and separates fell 2.9% and the index for boy's apparel was 3.0% lower...at the same time, prices for transportation commodities other than fuel were up 0.7%, as prices for new cars and trucks rose 0.3% and prices for used cars and trucks rose 1.3%...however, prices for medical care commodities were 1.1% lower as prescription drugs prices fell 1.0%...meanwhile, the recreational commodities index rose 0.2% on 0.6% higher prices for audio equipment and 2.2% higher prices for sports vehicles including bicycles, while the education and communication commodities index was 0.9% lower for the second month in a row on a 2.0% decrease in prices for personal computers...lastly, a separate price index for alcoholic beverages was down 0.1% on 0.3% lower priced beer at home, while the price index for ‘other goods’ was unchanged...

Within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.3% increase in homeowner's equivalent rent, and a 0.4% increase in costs for lodging away from home at hotels and motels, while the sub-index for water, sewers and trash collection rose 0.2%, and other household operation costs were on average 0.4% higher....at the same time, the index for medical care services was up by 0.1%, as hospital services rose 0.4%, while the transportation services index was up by 0.5% as car and truck rentals rose 1.7% and airline fares rose 2.7%....meanwhile, the recreation services index rose 0.1% as cable and satellite television service rose 0.2% and video disc rentals rose 0.4%....in addition, the index for education and communication services rose 0.4%, as internet and electronic information services rose 1.3%...lastly, the index for other personal services was up 0.1% as tax return preparation and other accounting fees rose 0.6%...among core line items, prices for televisions, which are still 18.4% cheaper than a year ago, the price index for audio equipment, which has fallen 12.7% over the past year, the price index for toys, games, hobbies and playground equipment, which is down by 10.4% from a year ago, and the price index for dishes and flatware, which is now 11.2% lower than last June, have all seen prices fall by more than 10% over the past year, while only prices for laundry equipment, which have risen 15.4% over the past year, have seen prices rise by a double digit magnitude over that span...

Producer Prices Flat in July As Lower Margins for Trade Services Offset Higher Core Prices

The seasonally adjusted Producer Price Index (PPI) for final demand was unchanged in July, as prices for finished wholesale goods increased 0.1%, while margins of final services providers decreased by 0.1%...that followed a June report that indicated the PPI rose 0.3%, as prices for finished wholesale goods averaged 0.1% higher, while margins of final services providers increased by 0.4%, and a May report that indicated the PPI was up 0.5%, with prices for finished wholesale goods up 1.0%, while margins of final services providers increased by 0.3% ....on an unadjusted basis, producer prices are still 3.3% higher than a year ago, down from the year over year increase of 3.4% that was indicated in last month's report, which had been the largest one year increase in the PPI since November 2011...meanwhile, the core producer price index, which excludes food, energy and trade services, was up by 0.3% for the month, and is now 2.8% higher than in July a year ago...

As noted, the price index for final demand for goods, aka 'finished goods', was up 0.1% in July, after rising by 0.1% in June and by 1.0% in May, but after falling a revised 0.1% in April, and rising a revised 0.3% in March....the price index for wholesale energy was down 0.5% in July after rising 0.8% in June, 4.6% in May, being unchanged in April, and falling 2.0% in March, while the price index for wholesale foods fell 0.1%, and the index for final demand for core wholesale goods (ex food and energy) was 0.3% higher for the 6th month out of the last seven....the largest wholesale energy price change was a 5.3% increase in wholesale prices for LP gas, which was more than offset by wholesale price decreases of 3.9% home heating oil and 0.8% for residential electricity, while wholesale gasoline prices were 0.1% lower...the wholesale food price index, meanwhile, saw a 49.3% increase in wholesale prices for fresh eggs offset by a 15.0% decrease in wholesale prices for oilseeds....among wholesale core goods, wholesale prices for pharmaceutical preparations increased 0.7%, as did wholesale prices for passenger cars…

At the same time, the index for final demand for services fell 0.1% in July, after rising 0.4% in June, 0.3% in May, and a revised 0.2% in April and 0.3% in March, as the July index for final demand for trade services fell 0.8%, while the index for final demand for transportation and warehousing services rose 0.3%, as did the core index for final demand for services less trade, transportation, and warehousing services....among trade services, seasonally adjusted margins for fuels and lubricants retailers fell 12.7% and margins for machinery and equipment parts and supplies wholesalers fell 4.6%... among transportation and warehousing services, margins for truck transportation of freight rose 0.7% and margins for air transportation of freight rose 2.8%...among the components of the core final demand for services index, the index for guestroom rental rose 3.9% while margins for tax preparation and planning services services rose 2.6%..

This report also showed the price index for intermediate processed goods was unchanged in July, after rising 0.7% in June, 1.5% in May and a revised 0.3% in April....the price index for intermediate energy goods fell 1.3%, as refinery prices for jet fuel fell 3.2% and producer prices for commercial electric power fell 2.4%, while prices for intermediate processed foods and feeds fell 0.9%, as the intermediate price index for meats fell 3.0%...meanwhile, the core price index for processed goods for intermediate demand less food and energy was 0.3% higher on a 2.1% increase in the index for basic organic chemicals and a 3.9% increase in prices for building paper and board....prices for intermediate processed goods remain 6.8% higher than in July a year ago, now the 20th consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods rose 2.7% in July, after falling 1.0% in June, rising 2.5% in May, falling a revised 0.1% in April, and falling a revised 3.5% in March....that was as the July price index for crude energy goods rose 8.6% as crude oil prices rose 14.1%, while the index for unprocessed foodstuffs and feedstuffs fell 2.0%, as producer prices for oilseeds fell 15.0%, prices for wheat fell 9.1%, and producer prices for alfalfa hay fell 9.0%...at the same time, the index for core raw materials other than food and energy materials was 1.2% lower, as prices for aluminum base scrap fell 3.5% and prices for copper base scrap fell 2.1%...this raw materials index is now up by 8.2% from a year ago, up from the 5.8% year over year increase that we saw in June...

lastly, the price index for services for intermediate demand rose 0.2% in July, after rising 0.1% in June, 0.3% in May, 0.3% in April, 0.3% in March and 0.3% in February...the price index for intermediate trade services was down 0.7%, as margins for intermediate machinery and equipment parts and supplies wholesalers fell 4.6% and margins for chemicals and allied products wholesalers fell 0.4%…the index for transportation and warehousing services for intermediate demand rose 0.2%, as the index for air transportation of freight rose 2.8% and the index for water transportation of freight rose 1.9%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was 0.3% higher, as the index for securities brokerage, dealing, investment advice rose 1.5% while the index for intermediate traveler accommodation services rose 3.5%....over the 12 months ended in July, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 3.0% higher than it was a year ago... 

June Wholesale Sales Down 0.1%, Inventories Up 0.1%

The June report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $506.7 billion, down 0.1 percent (+/-0.4%) from the revised May level, but still up 10.2 percent (±3.3%) from wholesale sales of June 2017... the May preliminary estimate was revised down $2.0 billion or 0.4% to $507.0 billion from the $509.0 billion sales reported last month, which is still 2.1% more than April's sales ... since June wholesale sales were down across a broad array of non-durable goods, the June decrease, the first since January, does not appear to be price related, but rather a pullback from the unusually elevated sales activity in May...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this June report estimated that wholesale inventories were valued at a seasonally adjusted $632.4 billion at month end, an increase of 0.1 percent (+/-0.2%)* from the revised May level and 5.1 percent (±3.9 percent) higher than in June a year ago, with the May preliminary estimate revised lower, from $633.5 billion to $632.0 billion at the same time, now just a 0.3% increase from April....

In the advance report on 2nd quarter GDP of two weeks ago, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted wholesale inventories were valued at $632.54 billion at the end of June, up from $632.45 billion in May....that's $0.14 billion more than the $632.40 billion that this report shows, which would imply that the quarterly change in 2nd quarter inventories was overestimated at roughly a $0.6 billion annual rate...assuming there's no revision in the inflation adjustment to those inventories, that would mean that the growth rate of 2nd quarter GDP was overestimated by a bit more than 0.01 percentage point based on what this report shows...

We'd also note that Reuters made a common mistake in their coverage of this report, which was headlined US June wholesale inventories revised higher...what they did was look at the percentage change from May to June in the Advance Report on Wholesale and Retail Inventories, which showed a 0.0% percentage increase in June inventories, and assumed that because this report showed a 0.1% increase, June inventories had been revised higher....but as we have just illustrated, once the downward revision to May inventories was accounted for, June inventories were actually revised lower...

Job Openings Little Changed in June, Hiring and Job Quitting Down, Layoffs Up

The Job Openings and Labor Turnover Survey (JOLTS) report for June from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 3,000, from 6,659,000 in May to 6,662,000 in June, after May job openings were revised higher, from 6,638,000 to 6,659,000...June jobs openings were also 8.7% higher than the 6,125,000 job openings reported in June a year ago, as the job opening ratio expressed as a percentage of the employed remained unchanged at 4.3% in June, but was up from 4.0% a year ago...while job openings in some sectors such as financial activities increased by 35,000 or 10% to 385,000, those were mostly offset by decreased openings in sectors such as transportation, warehousing, and utilities, where the number of openings fell from 332,000 to 248,000 (see table 1 for more details)...like most BLS releases, the press release for 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 June, seasonally adjusted new hires totaled 5,651,000, down by 96,000 from the revised 5,747,000 who were hired or rehired in May, as the hiring rate as a percentage of all employed fell from 3.9% to 3.8%, while it remained higher than the 3.7% hiring rate in June a year earlier (details of hiring by industry since January are in table 2)....meanwhile, total separations increased by 83,000, from 5,419,000 in May to 5,502,000 in June, as the separations rate as a percentage of the employed rose from 3.6% to 3.7%, which was also up from the 3.6% separations rate of June a year ago (see table 3)...subtracting the 5,502,000 total separations from the total hires of 5,651,000 would imply an increase of 149,000 jobs in June, somewhat less than the revised payroll job increase of 248,000 for June reported by the July establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,402,000 of us voluntarily quit their jobs in June, down from the revised 3,480,000 who quit their jobs in May, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.3% of total employment, up from the 2.2% quits rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,723,000 were either laid off, fired or otherwise discharged in June, up by 105,000 from the revised 1,618,000 who were discharged in May, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, which was the same as the discharges rate of 1.2% a year earlier (see table 5)...meanwhile, other separations, which includes retirements and deaths, were at 378,000 in June, up from 321,000 in May, for an 'other separations rate’ of 0.3%, which was up from 0.2% in May and also up from 0.2% in June 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 picked from the aforementioned GGO posts, contact me…)     

Sunday, August 5, 2018

July’s jobs report; June’s income and outlays, trade deficit, construction spending and factory inventories

The major economic releases from the past week included the Employment Situation Summary for July from the Bureau of Labor Statistics and four June reports that included metrics which were either estimated or included in last week's release of 2nd quarter GDP: the June report on Personal Income and Spending from the Bureau of Economic Analysis, the BEA report on our International Trade for June, and the June report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for June, both from the Census Bureau...the week’s privately issued reports included the ADP Employment Report for July, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 16.68 million annual rate in July, down from the 17.38 million annual rate in June, but not much changed from the 16.69 million annual rate in July a year ago, and the Case-Shiller house price indexes for May from S&P Case-Shiller, wherein their national home price index was reported as 6.4% higher than in the same month's report a year ago...

This week also saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the July Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 58.1% in July, down from 60.2% in June, suggesting a somewhat slower expansion in manufacturing firms nationally, and the July Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 55.7% in July, from 59.1% in June, also indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in July...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 157,000 Jobs in July, Unemployment Rate Down 0.1% on Employment Increase

The Employment Situation Summary for July from the Bureau of Labor Statistics indicated that payroll job growth was somewhat below average, while the unemployment rate fell because hundreds of the unemployed found work…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 157,000 jobs in July, after the payroll job increase for May was revised up from 244,000 jobs to 268,000, and the June jobs increase was revised up from 213,000 jobs to 248,000, and hence the combined number of jobs created over those two months was 59,000 more than was previously reported....the unadjusted data shows that there were actually 1,156,000 fewer payroll jobs extant in July than in June, as the large seasonal job cutbacks associated with the end of the school year were normalized by the seasonal adjustments…

Seasonally adjusted job increases were widespread through throughout the private goods producing and service sectors, with only the government sector seeing a significant loss of 13,000 jobs, as both local government and school districts shed more employees than they normally do at this time of year...the broad professional and business services category added 51,000 jobs, as 27,900 more workers found work with temporary employment services and 8,300 were added in computer systems design and related services....the leisure and hospitality sector added a seasonally adjusted 40,000 jobs, with the addition of 26,200 more jobs in bars and restaurants....meanwhile, employment in manufacturing increased by 37,000, mostly in the manufacture of durable goods, with 13,100 of those jobs in transportation equipment factories....employment in health care and social assistance rose by 33,500, with the addition of 15,900 jobs in Individual and family social services and 6,800 jobs in hospitals....construction employment was higher by 19,000 in July, with the addition of 8,600 jobs with nonresidential specialty trade contractors....in addition, the retail sector added 7,000 jobs despite the loss of 31,800 in sporting goods, hobby, book, and music stores, reflecting job losses in hobby, toy, and game stores associated with the Toys R Us bankruptcy, due to the addition of 14,200 jobs in general merchandise stores, 10,000 jobs in clothing stores, and 8,200 jobs in foods stores...meanwhile, the other major sectors, including mining and logging, wholesale sales, transportation and warehousing, utilities, financial activities, and information all saw smaller changes in payroll employment over the month…

The establishment survey also showed that average hourly pay for all employees rose by 7 cents an hour to $27.05 an hour, after it had increased by a revised 4 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 3 cents to $22.65 an hour...employers also reported that the average workweek for all private payroll employees decreased by a tenth of an hour to 34.5 hours, while hours for production and non-supervisory personnel remained at 33.8 hours for the fourth consecutive month....meanwhile, the average manufacturing workweek was unchanged at 40.9 hours, while factory overtime was also unchanged at 3.5 hours..

Meanwhile, the seasonally adjusted extrapolation from the July household survey estimated that the number of those employed rose by an estimated 389,000 to 155,965,000, while the similarly estimated number of those unemployed fell by 284,000 to 6,280,000; which therefore meant that July saw a net increase of 105,000 in the total labor force...however, since the working age population had grown by 201,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 96,000 to 95,598,000....therefore, the 105,000 increase of those in the labor force was not enough to raise the labor force participation rate, which remained unchanged at 62.9%....at the same time, the increase in number employed vis-a-vis the increase in the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.5%...in addition, the increase in the total labor force combined with the drop in those unemployed was enough to lower the unemployment rate from 4.0% to 3.9%....meanwhile, the number who reported they were involuntarily working part time fell by 176,000 to 4,567,000 in July, which was enough to change the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.8% in June to 7.5% in July, the lowest since May 2001..

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.. 

June Personal Income and Personal Spending Both Up 0.4%; Savings Doubles

Like the GDP report last week, the June Income and Outlays report also went through a Comprehensive Update, with revisions from 1929 through May 2018 for all of the metrics it reports, including personal consumption expenditures (PCE), the personal income and disposable personal income data, our savings and savings rate, and the PCE price index, the inflation gauge the Fed targets....since all the revisions made to personal consumption expenditures had already been incorporated into the GDP revisions that we looked at last week, today we'll only consider those revisions from recent months that are relevant to putting the June change in perspective...

Also like the GDP report, all the dollar values reported in this release are seasonally adjusted and at an annual rate, ie, they tell us what income, spending and saving would be for an entire year if June's adjusted income and spending were extrapolated over a whole year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from  May to June....thus, when the opening line of the press release for this report tell us "Personal income increased $71.7 billion (0.4 percent) in June..", they mean that the annualized figure for all types of personal income in June, $17,572.4 billion, was $71.7 billion, or bit more than 0.4% more than the $17,500.7 billion annualized personal income figure for May; the actual increase in personal income in June over May is not given....similarly, disposable personal income, which is income after taxes, also increased by more than 0.4%, from an annual rate of $15,455.1 billion in May to an annual rate of $15,520.4 billion in June...the contributors to the June increase in personal income and disposable personal income can be viewed in table 1 of the Full Release & Tables (pdf) for this release, also as annualized amounts, and were led by a $31.5 billion increase to $8,834.9 billion annually wages and salaries and a $19.5 billion increase to $2,768.9 billion annually in interest and dividend income….with the comprehensive revision, the annualized figure for May personal income was revised from $17,005.4 billion up to $17,500.7 billion, and disposable personal income was revised from the originally reported $14,929.8 billion annually to $15,455.1 billion...

Meanwhile, seasonally adjusted personal consumption expenditures (PCE) for June, which were included in the change in real PCE in 2nd quarter GDP, rose at a $57.1 billion annual rate to a level of $13,937.1 billion in consumer spending annually, an increase of a bit more than 0.4% from May's PCE, which itself was revised from the previously reported annual rate of $13,920.7 billion to $13,880.0  billion....total personal outlays for June, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $62.7 billion to $14,470.8 billion, which left personal savings, which is disposable personal income less total outlays, at a $1,049.7 billion annual rate in June, up from the revised $1,047.1 billion in personal savings in May...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, was at 6.8% in June, same as in May...we should note that as a result of the large upward revision to personal income and the slight downward revision to personal consumption expenditures, that savings rate has more than doubled from what had previously been published....in May's report (pdf), before the rebenchmarking, personal savings were at a $482.0 annual rate, and the savings rate was at 3.2%..

While our personal consumption expenditures accounted for 69.4% of our second quarter GDP, before they were included in the national measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption.....that's done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2012 prices = 100....from Table 9 in the pdf for the June release, we find that that index rose from 108.049 in May to 108.160 in June, giving us a month over month inflation rate of 0.10273%, which BEA reports as an increase of +0.1%; at the same time, Table 11 gives us a year over year PCE price index rounded to an increase of 2.2%, and a core price increase, excluding food and energy, of 1.9% for the past year, both pretty close to the Fed's inflation target....applying the June inflation adjustment to the change in June PCE shows that real PCE was up 0.308% in June, which BEA reports as a 0.3% change in their rounded tables...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2012 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another’s....those results are shown in tables 7 and 8 of the PDF, where you'll see the quarterly figures given are identical to those shown in table 3B of last week's GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP.. 

June Trade Deficit Up 7.3% on Rising Imports of Oil & Pharmaceuticals, Falling Exports

Our trade deficit increased by 7.3% in June as the value of our exports decreased and the value of our imports increased....the Commerce Department report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit rose by $3.2 billion (rounded) to $46.3 billion in June from a revised May deficit of $43.2 billion, which had previously been reported as $43.1 billion...the value of our June exports fell by $1.5 billion to $213.8 billion on a $1.7 billion decrease to $143.2 billion in our exports of goods offset by a $0.2 billion increase to $70.6 billion in our exports of services, while our imports rose $1.6 billion to $260.2 billion on a $1.4 billion increase to $212.0 billion in our imports of goods and a $0.2 billion increase to $48.1 billion in our imports of services...export prices were on average 0.3% higher in June, so the relative real growth in exports for the month was less than the nominal dollar growth by that percentage, while import prices were 0.4% lower, meaning growth in real imports would be that percentage higher that the nominal dollar growth reported here...

The decrease in our June exports resulted from lower exports of consumer goods, capital goods, and automotive vehicles, which were partially offset by an increase in our exports of industrial supplies and materials....referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $1433 million to $16,362 million on a $619 million decrease in our exports of pharmaceuticals, a $436 million decrease in our exports of jewelry, and a $276 million decrease in our exports of gem diamonds, that our exports of capital goods fell by $893 million to $47,280 million on decreases of $361 million in our exports of civilian aircraft engines and $209 million in our exports of civilian aircraft, and that our exports of automotive vehicles, parts, and engines fell by $709 million to $12,850 million on a $864 million decrease in our exports of new and used passenger cars...in addition, our exports of foods, feeds and beverages fell by $43 million to $14,063 million, and our exports of other goods not categorized by end use fell by $205 million to $5,399 million....partially offsetting those decreases, our exports of industrial supplies and materials rose by $1,961 million to $46,335 million on a $535 million increase in our exports of petroleum products other than fuel oil, a $472 million increase in our exports of nonmonetary gold, a $453 million increase in our exports of fuel oil, and a $385 million increase in our exports of crude oil...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of pharmaceuticals and crude oil were the major reasons for the June increase in our imports...our imports of consumer goods rose by $1,966 million to $53,390 million on a $1,511 million increase in our imports of pharmaceuticals, a $319 million increase in our imports of cellphones, and a $209 million increase in our imports of toys, games, and sporting goods, while our imports of industrial supplies and materials increased by $896 million to $48,751 million on a $1,199 million increase in our imports of crude oil and a $363 million increase in our imports of organic chemicals...in addition, our imports of automotive vehicles, parts and engines rose by $510 million to $30,211 million on a $343 million increase in our imports of trucks, buses, and special purpose vehicles....partially offsetting the increases in those three categories, our imports of capital goods fell by $1482 million to $57,494 million on $835 million lower imports of computers and $477 million lower imports of telecommunications equipment, our imports of foods, feeds, and beverages fell by $205 million to $12,175 million, and our imports of other goods not categorized by end use fell by $180 million to $8,380 million..

In the advance report on 2nd quarter GDP released last week, our June trade deficit was estimated based on the Advance Report on our International Trade in Goods which was also released last week, just before the GDP release...that report estimated that our June goods trade deficit was at $68,332 million on a Census basis, up from the $64,767 million goods deficit reported in May...this report revises those figures and shows that our actual goods trade deficit in June was $68,813 million on a balance of payments basis, and $67,920 million on a Census basis..at the same time, the May goods deficit was revised to $64,688 million on a Census basis...together, those revisions from the previously published data mean that the 2nd quarter goods trade deficit was roughly $491 million less than was included in last week's GDP report, or roughly $2.0 billion more at an annual rate, which would indicate a upward revision of roughly 0.04 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August, assuming there is no revision to the price adjustment...

Construction Spending Fell 1.1% in June after Prior Months Were Revised Higher

The Census Bureau report on construction spending for June (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,317.2 billion annually if extrapolated over an entire year, which was 1.1 percent (±1.0 percent) below the revised annualized estimate of $1,332.2 billion of construction spending for May but still 6.1 percent (±1.6 percent) above the estimated annualized level of construction spending in June of last year...the May annualized construction spending estimate was revised nearly 1.0% higher, from $1,309.5 billion to $1322.2 billion, while the annual rate of construction spending for April was revised nearly 0.8% higher, from $1,304.5 billion to $1,314.7 billion....

Further details on different subsets of construction spending are provided by the Census release summary:

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,019.8 billion, 0.4 percent (±0.8 percent)* below the revised May estimate of $1,023.9 billion. Residential construction was at a seasonally adjusted annual rate of $568.3 billion in June, 0.5 percent (±1.3 percent)* below the revised May estimate of $570.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $451.5 billion in June, 0.3 percent (±0.8 percent)* below the revised May estimate of $453.0 billion.
  • Public Construction: In June, the estimated seasonally adjusted annual rate of public construction spending was $297.4 billion, 3.5 percent (±2.0 percent) below the revised May estimate of $308.3 billion. Educational construction was at a seasonally adjusted annual rate of $67.9 billion, 11.0 percent (±2.1 percent) below the revised May estimate of $76.3 billion. Highway construction was at a seasonally adjusted annual rate of $93.9 billion, 1.3 percent (±5.6 percent)* below the revised May estimate of $95.1 billion.

Construction spending for April and May was higher than what was reported by the BEA in the advance report for 2nd quarter GDP last week, while construction spending for June was lower...as we saw above, annualized construction spending for April was revised $10.2 billion higher, and annualized construction spending for May was revised $12.7 billion higher...in reporting 2nd quarter GDP, the Excel file with key source data and assumptions accompanying the report indicated on line 84 that they had estimated that the value of June nonresidential construction would be $0.1 billion greater than that of the previously reported May figure, that June residential construction on lines 110 and 111 would be $1.4 billion greater than that of the reported May figure, and that the value of June public construction shown on line 200 would be $0.7 billion lower than the previously published May figure...hence, the figures used by the BEA for total June construction in the 2nd quarter GDP report were $0.8 billion greater than the previously published May figure...with June construction now reported down $15.0 billion from a May figure which was revised $12.7 billion higher, that means that they had overestimated annualized June construction spending by $3.1 billion...thus, after averaging the revision to the three months, the total revised annualized figure for 2nd quarter construction spending would thus be $6.6 billion more than the figures used by the BEA when computing 2nd quarter GDP, implying an upward revision of roughly 0.15 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August..

Factory Shipments Up 1.0% in June, Factory Inventories Up 0.1%

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $3.3 billion or 0.7 percent to $501.7 billion in June, following an increase of 0.4% to $498.4 billion in May, which was revised from the 0.4 percent increase to $498.2 billion reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the advance report on durable goods we reported on last week...for those revisions, the Census Bureau's summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that here:

  • Summary: New orders for manufactured goods in June, up four of the last five months, increased $3.3 billion or 0.7 percent to $501.7 billion, the U.S. Census Bureau reported today. This followed a 0.4 percent May increase. Shipments, up thirteen of the last fourteen months, increased $4.9 billion or 1.0 percent to $501.4 billion. This followed a 0.6 percent May increase. Unfilled orders, up seven of the last eight months, increased $4.4 billion or 0.4 percent to $1,165.2 billion. This followed a 0.5 percent May increase. The unfilled orders-to shipments ratio was 6.64, down from 6.67 in May. Inventories, up twenty consecutive months, increased $0.7 billion or 0.1 percent to $669.3 billion. This followed a 0.2 percent May increase. The inventories-to shipments ratio was 1.33, down from 1.35 in May.
  • New orders for manufactured durable goods in June, up following two consecutive monthly decreases, increased $2.1 billion or 0.8 percent to $251.5 billion, down from the previously published 1.0 percent increase. This followed a 0.3 percent May decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $1.8 billion or 2.1 percent to $87.7 billion. New orders for manufactured nondurable goods increased $1.2 billion or 0.5 percent to $250.2 billion.
  • Shipments of manufactured durable goods in June, up ten of the last eleven months, increased $3.7 billion or 1.5 percent to $251.1 billion, down from the previously published 1.7 percent increase. This followed a 0.2 percent May increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $3.1 billion or 3.7 percent to $85.3 billion. Shipments of manufactured nondurable goods, up twelve of the last thirteen months, increased $1.2 billion or 0.5 percent to $250.2 billion. This followed a 1.1 percent May increase. Chemical products, up three of the last four months, led the increase, $0.5 billion or 0.8 percent to $65.4 billion.
  • Unfilled orders for manufactured durable goods in June, up seven of the last eight months, increased $4.4 billion or 0.4 percent to $1,165.2 billion, unchanged from the previously published increase. This followed a 0.5 percent May increase. Transportation equipment, also up seven of the last eight months, led the increase, $2.4 billion or 0.3 percent to $802.3 billion.
  • Inventories of manufactured durable goods in June, down following seventeen consecutive monthly increases, decreased $0.5 billion or 0.1 percent to $402.9 billion, unchanged from the previously published decrease. This followed a 0.3 percent May increase. Transportation equipment, down following two consecutive monthly increases, drove the decrease, $1.9 billion or 1.4 percent to $126.9 billion. Inventories of manufactured nondurable goods, up twelve consecutive months, increased $1.1 billion or 0.4 percent to $266.3 billion. This followed a virtually unchanged May increase. Chemical products, up eight of the last nine months, led the increase, $0.7 billion or 0.8 percent to $88.7 billion.

The BEA's key source data and assumptions (xls) for the advance estimate of second quarter GDP indicates on line 130 that they had estimated that the value of non-durable goods inventories would increase by $2.1 billion before any inflation adjustment in June, while this report indicates that total non-durable goods inventories actually increased in value by $1.1 billion, and since the June inventory change is one-third of the quarterly change, that would indicate that they overestimated the change in the 2nd quarter GDP inventory component by about $1.3 billion on an annualized basis, which would seem to imply that 2nd quarter GDP would have to be revised downwards by 0.03 percentage points to account for what this report shows..

 

(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 picked from the aforementioned GGO posts, contact me…)