Sunday, November 25, 2018

October’s durable goods, new housing starts, and existing home sales

Widely watched reports released this week included the Advance Report on Durable Goods for October and the October report on New Residential Construction, both from the Census bureau, and the Existing Home Sales Report for October from the National Association of Realtors (NAR)...

October Durable Goods: New Orders Down 4.4%, Shipments Down 0.6%, Inventories Unchanged

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for October (pdf) from the Census Bureau reported that the value of the widely followed new orders for manufactured durable goods decreased by $11.5 billion or 4.4 percent to $248.5 billion in October, after September's new orders were revised from the $262.1 billion reported last month to $260.0 billion, now a 0.1% decrease from August, rather than the 0.8% increase previously reported...year to date new orders are still 8.7% above those of 2017, down from the +8.9% year over year change we saw in this report last month....the volatile monthly change in new orders for transportation equipment was responsible for the October orders drop, as new transportation equipment orders fell $11.7 billion or 12.2 percent to $84.7 billion, on a 59.3% decrease to $4,710 million in new orders for defense aircraft and a a 21.4% decrease to $10,499 million in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders rose 0.1%, while excluding just new orders for defense equipment, new orders fell 1.2%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell by a statistically insignificant $31 million to $69,356 million...

At the same time, the seasonally adjusted value of October shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for any changes in prices, decreased by $1.4 billion or 0.6 percent to $254.5 billion, after September shipments were revised from $256.8 billion to $255.9 billion, now up just 1.0% from August...shipments of transportation equipment were down $1.6 billion or 1.8 percent to $87.6 billion, while all other durable goods shipments showed a 0.1% increase...of those, shipments of nondefense capital goods less aircraft rose 0.3% to $68.8 billion, after September capital goods shipments were revised 0.3% lower..

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, fell for the 2nd time in 3 months, but only by $0.1 billion to $410.9 billion, after September inventories were revised from $410.7 billion to $411.0 billion, now up 0.8% from August...a $0.4 billion or 1.0 percent decrease to $43.1 billion in inventories of computers and electronic products was responsible for the inventories decrease, while the value of transportation equipment inventories rose 0.4% to $131.0 billion...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, decreased for the first time in 9 months, falling by $2.0 billion or 0.2 percent to $1,183.0 billion, after September unfilled orders were revised from $1,186.1 billion to $1,185.051 billion, now a 0.7% increase from August....a $2.9 billion or 0.4 percent decrease to $815.1 billion in unfilled orders for transportation equipment was responsible for the October decrease, as unfilled orders excluding transportation equipment orders were up 0.2% to $367,943 million...compared to a year earlier, the unfilled order book for durable goods is still 4.8% above the level of last October, with unfilled orders for transportation equipment still 4.7% above their year ago level, largely on a 10.5% increase in the backlog of orders for defense aircraft.... 

Little Change in Housing Starts and Building Permits in October

The October report on New Residential Construction(pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,228,000 units during the month, which was 1.5 percent (±12.9 percent)* above the revised September estimated annual rate of 1,210,000 housing unit starts, but was still 2.9 percent (±10.4 percent)* below last October's pace of 1,265,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell from September or even from those in October a year ago, with the figures in parenthesis the most likely range of the change indicated; in other words, in other words, October's housing starts could have been down by 11.4% or up by as much as 14.4% from those of September, with even larger revisions possible after a number of months...with this report, the annual rate for September housing starts was revised from the 1,201,000 reported last month to 1,210,000, and the annual rate for August housing starts, which was revised from 1,282,000 to 1,268,000 last month, was revised back up to 1,280,000 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 canvassing Census field agents, which estimated that 107,300 housing units were started in October, up from the 106,900 units that were started in September...of those housing units started in October, an estimated 74,600 were single family homes and 30,900 were units in structures with more than 5 units, down from the revised 75,300 single family starts in September, and down from the 31,000 units started in structures with more than 5 units in September...

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 October, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,263,000 housing units, which was 0.6 percent (±2.4 percent)* below the September rate of 1,270,000 permits, and was 6.0 percent (±1.6 percent) below the rate of building permit issuance in October a year earlier...the annual rate for housing permits issued in September was revised from 1,241,000 to 1,270,000....again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates provided monthly by canvassing census agents, which indicated that permits for 112,500 housing units were issued in October, up from the revised estimate of 99,400 new permits issued in September...the October permits included 74.200 permits for single family homes, up from 65,000 single family permits issued in September, and 34,800 permits for housing units in apartment buildings with 5 or more units, up from 31,100 such multifamily permits a month earlier...

For more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Increased to 1.228 Million Annual Rate in October and Comments on October Housing Starts..

Existing Home Sales Rose 1.4% in October

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 1.4% from September to October, the first increase in 7 months, projecting that 5.22 million existing homes would sell over an entire year if the October home sales pace were extrapolated over that year, a pace that was still 5.1% below the 5.50 million annual sales rate projected in October of a year ago...September sales, indicated at a 5.15 million annual rate, were revised but were statistically unchanged from last month's report...the NAR also reported that the median sales price for all existing-home types was $255,400 in October, 3.8% higher than in October a year earlier, which they report as "the 80th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Increase for the First Time in Six Months" even though it was the first time in seven months, is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 446,000 homes sold in October, up by 5.9% from the 421,000 homes that sold in September, but down by 2.6% from the 458,000 homes that sold in October of last year, so we can see that the seasonal adjustment reduced the sales increase reported in the annualized published figures......that same pdf indicates that the median home selling price for all housing types fell 0.6%, from a revised $256,900 in September to $255,400 in October, while the average home sales price was $294,200, down 0.6% from the $296,000 average sales price in September, but up 2.3% from the $287,600 average home sales price of October a year ago...regionally, average home sales prices ranged from a low of $226,300 in the Midwest to a high of $403,900 in the West, with all regions showing a decrease in the average sales price for the month...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 5.22 million in October and Comments on October 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 picked from the aforementioned GGO posts, contact me…)      

Sunday, November 18, 2018

October’s consumer prices, retail sales, industrial production; September’s business inventories..

Major reports released this week included Retail Sales Report for October and the Business Sales and Inventories Report for September from the Census Bureau, the October Consumer Price Index and the October Import-Export Price Index from the Bureau of Labor Statistics, and the October report on Industrial Production and Capacity Utilization from the Fed...in addition, the BLS also released the Regional and State Employment and Unemployment for October on Friday, which breaks down the establishment survey and household survey data from the monthly jobs report released two weeks ago by region and by state...

This week also saw the release of three regional Fed manufacturing surveys for November: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a suburban NYC county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +21.1 in October to +23.3 in November, suggesting stronger growth of First District manufacturing; the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions moved lower, from a reading of +22.2 in October to +12.9 in November, suggesting a somewhat slower expansion of that the region's manufacturing, while the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to +15 in November, up from +8 in October and +13 in September, suggesting an ongoing expansion in that region's manufacturing for the twenty-fourth month in a row...

October CPI up 0.3% on Higher Fuel, Electricity, Used Car Costs

The consumer price index increased by 0.3% in October, as higher prices for gasoline, electricity, and used vehicles were only partially offset by lower food prices...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index rose 0.3% in October after it had risen 0.1% in September, 0.2% in August, 0.2% in July, 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, and by 0.1% last  October...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, rose from 252.439 in September to 252.885 in October, which left it statistically 2.522% higher than the 246.663 index reading in October of last year, which is reported as a 2.5% increase....with higher prices for energy driving the CPI increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, with the unadjusted core price index rising from 258.429 to 259.063, which left the core index 2.139% ahead of its year ago reading of 253.638, which is reported as a 2.1% year over year increase, down from the 2.2% annual increase reported a month ago..

The volatile seasonally adjusted energy price index rose by 2.4% in October, after falling by 0.5% in September, rising by 1.9% in August, falling by 0.3% in July and by 0.3% in June, rising by 0.9% in May and by 1.4% in April, falling by 2.8% in March, rising by 0.1% in February and by 3.0% in January, and hence is now 8.9% higher than in October a year ago...prices for energy commodities were 2.9% higher in October, while the index for energy services rose by 1.7%, after falling by 0.8% in September...the energy commodity index was higher due to a 3.0% increase in price of gasoline, the largest component, and a 3.7% increase in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.8% lower...within energy services, the index for utility gas service fell by 0.6% after falling by 1.7% in September and is now 2.1% lower than it was a year ago, while the electricity price index was up 2.3%, after it was down 0.5% in September....energy commodities are now 16.3% higher than their year ago levels, with gasoline prices averaging 16.1% higher than they were a year ago, while the energy services price index is now 0.1% higher than last October, as electricity prices have now increased by 0.7% over that period…

The seasonally adjusted food price index was 0.1% lower in October, after being unchanged in September, rising 0.1% in August, 0.1% in July, 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, and rising 0.1% last September, as the index for food purchased for use at home fell 0.2% in October, while prices for food bought to eat away from home was 0.1% higher, as prices at fast food outlets fell 0.1%, prices at full service restaurants rose 0.2%, and food prices at employee sites and schools rose 1.0%...

In the food at home categories, the price index for cereals and bakery products was 0.6 lower even though bread prices rose 0.4%, because prices for flour and prepared flour mixes fell 2.7% and the index for rice, pasta, and cornmeal prices fell 2.8%...meanwhile, the price index for the meats, poultry, fish, and eggs group was unchanged, as the fish and seafood price index rose 1.4% while prices for beef roasts fell 3.8% and ham prices were 1.8% lower....at the same time, the index for dairy products was 0.4% lower, mostly on a 1.1% decrease in the index for cheese and related products...in addition, the fruits and vegetables index was 0.7% lower on a 1.8% decrease in the price index for fresh fruits and a 1.0% decrease in the price index for canned fruits and vegetables....on the other hand, the beverages index was 0.2% higher, as frozen noncarbonated juices and drink prices were priced 1.1% higher and instant coffee prices rose 1.5%...lastly, the index for the ‘other foods at home’ category was unchanged, as the index for sugar and sweets fell 0.7% while prices for soups rose 1.4%....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...since last October, none of the ‘food at home’ line items have seen prices change by more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.2% in October after rising by 0.1% in September, by 0.1% in August, 0.2% in July, 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 0.3% higher, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust October retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.4%, as the index for appliances rose 1.6% and the index for window and floor coverings was 2.2% higher...at the same time, the apparel price index was 0.1% higher, as the index for men's suits, sport coats, and outerwear rose 3.9% and the index for girl's apparel was 1.1% higher, while prices for women's outerwear fell 6.4%...in addition, prices for transportation commodities other than fuel were up 0.8%, as prices for used cars and trucks rose 2.6% while new vehicle prices fell 0.2%...on the other hand, prices for medical care commodities were 0.1% lower as prescription drugs prices fell 0.6%, while the recreational commodities index fell 0.5% on 1.2% lower prices for televisions and 1.7% lower prices for sports vehicles including bicycles...in addition, the education and communication commodities index was 1.5% lower on a 1.6% decrease in the index for personal computers and peripheral equipment and a 2.5% drop in the index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.1% higher, while the price index for ‘other goods’ fell 0.3% on a 5.6% decrease in the price index for miscellaneous personal goods...

Within core services, the price index for shelter rose 0.2% on a 0.2% increase in rents and a 0.3% increase in homeowner's equivalent rent, while prices for lodging away from home at hotels and motels fell 2.4%, and the sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were on average unchanged....the price index for medical care services was also up by 0.2%, as dental services rose 0.3%, nursing homes and adult day rose 0.5%, and health insurance rose 1.1%...meanwhile, the transportation services index was up by 0.1% as car and truck rentals rose 3.3% while intercity bus fares fell 2.0%...at the same time, the recreation services index was unchanged as video discs and other media services rose 5.5% while photo processing fell 1.4%....in addition, the index for education and communication services was also unchanged as the price index for college tuition and fees rose 0.6% while prices for land-line telephone services fell 1.1%...lastly, the index for other personal services was up 0.5% as haircuts rose 0.6% and the index for tax return preparation and other accounting fees rose 0.7%...among core line items, prices for televisions, which are now 17.8% cheaper than a year ago, the price index for audio equipment, which has fallen 11.9% over the past year, the price index for toys, which is down by 10.9% since last October, and the price index for miscellaneous personal goods, which has now decreased 10.0% year over year, have all seen prices fall by more than 10% over the past year, while no line item has seen prices rise by a double digit magnitude over that span...

Retail Sales Rise 0.8% in October after Prior Months Sales Revised Lower

Seasonally adjusted retail sales increased in October after retail sales for August and September were revised lower...the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $511.5 billion during the month, which was 0.8 percent (±0.5%) higher than September's revised sales of $507.6 billion and 4.6 percent (±0.5%) above the adjusted sales in October of last year...September's seasonally adjusted sales were revised from the $509.0 billion reported last month to $507.6 billion, while August's sales were revised from $508.5 billion to $507.87 billion, and hence the August to September percent change was revised from +0.1% (±0.5 percent)* to -0.1% (±0.2 percent)*....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 4.7%, from $482,985 million in September to $505,604 million in October, while they were up 5.9% from the $477,592 million of sales in October a year ago...the total $2.03 billion downward revision to August and September's retail sales should reduce the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.15 percentage points, assuming the distribution of price adjustments in the revised figures is similar to that of those originally published...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the October Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each kind of business from the September revised figure to this month's October "advance" report in the first sub-column, and then the year over year percentage sales change since last October in the 2nd column...the second double column pair below gives us the revision of the September advance estimates (now called "preliminary") as of this report, with the new August to September percentage change under "Aug 2018 r" (revised) and the September 2017 to September 2018 percentage change as revised in the last column shown...for your reference, the table of last month’s advance estimate of September sales, before this month's revisions, is here.…

October 2018 retail sales table

To compute October's real personal consumption of goods data for national accounts from this October retail sales report, the BEA will use the corresponding price changes from the October consumer price index, which we reviewed above...to estimate what they will find, we'll first separate out the volatile sales of gasoline from the other totals...from the third line on this table, we can see that October retail sales excluding the 3.5% price-related increase in sales at gas station were only up by 0.5%...since the CPI report showed that the composite price index for all goods less food and energy goods was up 0.2% in October, we can thus approximate that real retail sales excluding food and energy will on average be 0.2% lower than the core retail sales shown above, or show an increase of roughly 0.3%...however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 1.1%, the price index for for transportation commodities other than fuel were up 0.8%, which would mean that real unit sales at auto & parts dealers was actually only the order of 0.3% higher... similarly, while sales at clothing stores were 0.5% higher in October, the apparel price index was 0.1% higher, which means that real sales of clothing rose around 0.4%.…on the other hand, while nominal sales at sporting goods, hobby, music and book stores rose 0.5%, the price index for recreational commodities fell 0.5%, so real sales of recreational goods were up on the order of 1.0%...

In addition to figuring those core retail sales, we should adjust food and energy retail sales for price changes separately…the CPI report showed that the food price index was 0.1% lower in October, with the index for food purchased for use at home 0.2% lower in October, while prices for food bought to eat away from home were 0.1% higher... hence, with nominal sales at food and beverage stores 0.3% higher, real sales of food and beverages would be roughly 0.5% higher in light of the 0.2% lower prices…on the other hand, the 0.2% decrease in nominal sales at bars and restaurants, once adjusted for 0.1% higher prices, suggests that real sales at bars and restaurants fell 0.3%...meanwhile, while sales at gas stations were up 3.5%, there was a 3.0% increase in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 0.5%, with the caveat that gasoline stations do sell more than gasoline... averaging real sales computed thusly together, we'd estimate that the income and outlays report for August will show that real personal consumption of goods rose around 0.3% in October, after rising by a revised 0.2% in September...that October increase will account for almost 8% of 4th quarter GDP…

Industrial Production Up 0.1% in October, after Prior Months Revised much higher

The Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 0.1% in October after rising by a revised 0.2% in September and by a revised 0.8% in August, as "hurricanes lowered the level of industrial production in both September and October, but their effects appear to be less than 0.1 percent per month."….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 109.1 in October from 109.0 in September, which was revised from the 108.5 index level reported last month...at the same time, the August index was revised from 108.2 to 108.8, primarily as a result of a large upward revision to mining output, and the July index was revised from 107.8 to 107.9....as a result of those revisions, industrial production is now 4.1% higher than a year ago, while third quarter output is now reported to have increased at an annual rate of 4.7 percent, appreciably above the 3.3% annualized increase reported initially....

The manufacturing index, which accounts for more than 77% of the total IP index, increased by 0.3%, from 105.1 in September to 105.4 in October, after September's manufacturing index was revised up from 104.8 to 105.1, August's index was revised up from 104.6 to 104.8, and July's index was revised up from 104.3 to 104.4....on the other hand, the mining index, which includes oil and gas well drilling, fell by 0.3%, from 126.7 in September to 126.3 in October, after the September mining index was revised up from 124.8, and the August index was revised from 124.3 to 126.9, leaving the mining index 13.1% higher than it was a year ago....meanwhile, the utility index, which often fluctuates due to above or below normal temperatures, fell 0.5% in October, from an unrevised 105.2 to 104.7, after August utility index was revised up from 105.2 to 105.4, leaving the utility index 1.7% higher than it was a year earlier..

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell to 78.4% in October from 78.5% in September, which was revised from the 78.1% utilization reported in last month’s report ...capacity utilization of NAICS durable goods production facilities rose from 76.4% in September to 76.6% in October, after September's figure was revised up from 76.3%, while capacity utilization for non-durables producers rose from 77.2% in September to 77.3% in October, after September's nondurables utilization was revised up from 77.0%...capacity utilization for the mining sector fell to 92.7% in October from 93.5% in September, which was originally reported as 92.2%, while utilities were operating at 77.3% of capacity during October, down from their 77.8% of capacity during September, which was revised from the previously reported 77.7%...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.... 

Business Sales Up 0.4% in September, Business Inventories Up 0.3%

After the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September 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 $1,468.0 billion in September, up 0.4 percent (±0.2 percent) from August's revised sales, and up 6.6 percent (±1.3 percent) from September sales of a year earlier...note that total August sales were concurrently revised up from the originally reported $1,461.9 billion to $1,462.0 billion....manufacturer's sales were up 0.9% to $509,779 million in September, and retail trade sales, which exclude restaurant & bar sales from the revised September retail sales that we reported earlier, rose 0.2% to $447,088 million, while wholesale sales rose 0.2% to $511,169 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,888.7 billion at the end of September, up 0.3% (±0.1%) from August, and 4.4  percent (±1.3 percent) higher than in September a year earlier...the value of end of August inventories were revised from the $1,960.8 billion reported last month to $1,961.0 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $680,400 million, up 0.5% from August, inventories of retailers were valued at $642,496 million, 0.1% more than in August, while inventories of wholesalers were estimated to be valued at $644,556 million at the end of September, 0.4% higher than in August...

We had previously estimated that 3rd quarter GDP was underestimated by around 0.03 percentage points based on what the wholesales report showed, and that 3rd quarter GDP was overestimated by around 0.04 percentage points based on what the factory inventories report showed... the BEA's Key source data and assumptions (xls) that accompanied the release of the advance estimate of 3rd quarter GDP indicates that they had estimated that the value of retail inventories would be unchanged in September before adjustment with the PPI, so the $0.423 billion increase that this report shows means that they underestimated the annualized 3rd quarter inventory component at an annual rate of around $1.7 billion….that would imply that the contribution of the retail inventory component of 3rd quarter GDP was underestimated by around 0.03 percentage points, so after netting out the 3 inventory changes, this report indicates an upward adjustment of around 0.02 percentage points to 3rd quarter GDP when the 2nd estimate is released at the end of November...

 

(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, November 11, 2018

October's producer price index; September's job openings & labor turnover and wholesale inventories

Major agency reports that were released the past week included the September Producer Price Index and the Job Openings and Labor Turnover Survey (JOLTS) for September, both from the Bureau of Labor Statistics, and the August report on Wholesale Trade, Sales and Inventories from the Census Bureau, a report that we watch for inventories...in addition, the Fed released the Consumer Credit Report for September, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $11.0 billion, or at a 3.3% annual rate, as non-revolving credit expanded at a 4.7% rate to $2,908.9 billion while revolving credit outstanding shrunk at a 0.4% rate to $1,041.1 billion....

Privately issued reports included the October Non-Manufacturing Report On Business from the Institute for Supply Management, which reported their NMI (non-manufacturing index) fell to 62.5% from 65.2% in September, indicating a smaller but still substantial plurality of service industry purchasing managers reported expansion in various facets of their business in October, and the Mortgage Monitor for September from Black Knight Financial Services, which indicated that 3.97% of all mortgages were delinquent in September, up from 3.50% in August but down from 4.40% in September of 2017, and that 0.52% of all mortgages were in the foreclosure process in September, down from from 0.54% in August and down from 0.70% a year ago....the September increase in mortgage delinquencies was the largest monthly increase in nearly a decade and was particularly elevated in regions of the country where properties have experienced hurricane damage, even as all 50 states saw delinquency increases in September...

Producer Prices Rose 0.6% in October on Higher Prices for Fuel, Margins for Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand was 0.6% higher in October, as prices for finished wholesale goods were 0.6% higher, while margins of final services providers increased by 0.7%...that followed a September report that indicated the PPI was 0.2% higher, with prices for finished wholesale goods 0.1% lower and margins of final services providers 0.3% higher, an August report that showed the producer price index was 0.1% lower, with prices for finished wholesale goods unchanged while margins of final services providers decreased by 0.1%, and a revised July report that indicated the PPI was unchanged, with prices for both finished wholesale goods and for margins of final services providers also unchanged....on an unadjusted basis, producer prices are now 2.9% higher than a year ago, up from the year over year increase of 2.8% that was indicated by last month's report...meanwhile, the core producer price index, which excludes food, energy and trade services, was up by 0.2% for the month, and is now 2.9% higher than in October a year ago...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.6% higher in October, after being 0.1% lower in September, being unchanged in July and August, but after rising by 0.2% in June and by 0.9% in May...the price index for wholesale energy was 2.7% higher in September after falling 0.8% in September, rising 0.4% in August, and falling a revised 0.8% in July and rising a revised 1.5% in June, while the price index for wholesale foods rose 1.0%, and the index for final demand for core wholesale goods (excluding food and energy) was unchanged....wholesale energy prices rose largely on a 7.6% increase in the wholesale price for gasoline and a 5.4% increase in wholesale prices for diesel fuel ...the wholesale food price index, meanwhile, included a 10.6% increase in wholesale prices for fresh eggs and an 9.5% increase in wholesale prices for fresh and dry vegetables....among wholesale core goods, wholesale prices for  industrial chemicals rose 3.2% while wholesale prices for electronic components and accessories fell 2.4% and wholesale prices for passenger cars fell 1.0%..

At the same time, the index for final demand for services rose 0.7%, after rising 0.3% in September, falling 0.1% in August, being unchanged in July, and rising 0.3% in June, 0.3% in May, 0.2% in April and 0.3% in March, as the October index for final demand for trade services rose 1.6%, the index for final demand for transportation and warehousing services rose 0.6%, and the core index for final demand for services less trade, transportation, and warehousing services rose 0.2%....among trade services, seasonally adjusted margins for food and alcohol retailers rose 2.8%, margins for machinery and equipment wholesalers rose 1.8%, and margins paper and plastics products wholesalers rose 5.9%... among transportation and warehousing services, margins  for airline passenger services rose 1.1% and margins for rail transportation of passengers rose 2.5%...among the components of the core final demand for services index, the index for passenger car rentals fell 5.4% while margins for membership dues, admissions and recreation facility use rose 3.0%..

This report also showed the price index for intermediate processed goods rose 0.8%, after being unchanged in August and September, but after rising a revised 0.1% in July, and a revised 0.6% in June....the price index for intermediate energy goods rose 2.6%, as refinery prices for gasoline rose 7.6% and producer prices for residual fuels rose 7.3%...prices for intermediate processed foods and feeds rose 0.4%, as the price index for meat rose 2.4% and dairy prices rose 1.2%...meanwhile, the core price index for processed goods for intermediate demand less food and energy was also 0.4% higher on a 3.8% increase in the index for basic organic chemicals and a 4.3% increase in the price index for nitrogenates....prices for intermediate processed goods are now 5.9% higher than in October a year ago, now the 23rd 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 3.6% in October, after rising 1.7% in September, falling 5.8% in August, rising a revised 2.1% in July, and falling a revised 1.0% in June....that was as the October price index for crude energy goods rose 3.6% as crude oil prices rose 7.6%, and as the price index for unprocessed foodstuffs and feedstuffs rose 5.8%, as producer prices for slaughter hogs rose 46.3% and producer prices for raw milk rose 9.4%...at the same time, the index for core raw materials other than food and energy materials was unchanged, as prices for nonferrous metal ores rose 2.6% while prices for aluminum base scrap fell 8.0%...this raw materials index is now up by 7.8% from a year ago, up from the 4.3% year over year increase that we saw in September...

Lastly, the price index for services for intermediate demand rose 0.4% in October, after rising 0.5% in September, 0.1% in August, a revised 0.2% in July and a revised 0.2% in June...the price index for intermediate trade services was 1.5% higher, as margins for intermediate metals, minerals, and ores wholesalers rose 7.8% and margins for margins for paper and plastics products wholesalers rose 5.9%…the index for transportation and warehousing services for intermediate demand rose 0.3%, as the index for air transportation of passengers (partial) rose 1.0% and the index for pipeline transportation of petroleum products rose 0.8%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was 0.2% higher, as the index for broadcast and network television advertising time sales rose 5.0% and the index for services related to securities brokerage and dealing (partial) rose 1.7%....over the 12 months ended in October, 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, Layoffs and Job Quitting all Lower in September

The Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 284,000, from 7,293,000 in August to 7,009,000 in September, after record August job openings were revised 157,000 higher, from 7,136,000 to 7,293,000...September's jobs openings were still 12.5% higher than the 6,229,000 job openings reported in September a year ago, as the job opening ratio expressed as a percentage of the employed fell from a record high 4.7% in August to 4.5% in September, while it was up from 4.1% in September a year ago...there were wide differences in job opening changes between industries, however, from the 118,000 job opening decrease to 1,256,000 openings in the broad professional and business services sector, to the 60,000 job opening increase to 961,000 openings in bars and restaurants (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in September, seasonally adjusted new hires totaled 5,744,000, down by 162,000 from the revised 5,906,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed fell to 3.8% from 4.0% in August, while it was still up from the 3.7% rate in September a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 112,000, from 5,779,000 in August to 5,667,000 in September, while the separations rate as a percentage of the employed remained unchanged at 3.6%, the  same as in September a year ago (see table 3)...subtracting the 5,667,000 total separations from the total hires of 5,744,000 would imply an increase of 77,000 jobs in September, somewhat less than the revised payroll job increase of 118,000 for September reported in the October establishment survey last week, but well within the expected +/-115,000 margin of error in these incomplete samplings...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,601,000 of us voluntarily quit our jobs in September, down from the revised 3,648,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.4% of total employment, while it was still up from 2.2% a year earlier (see job details in table 4)....in addition to those who quit, another 1,700,000 were either laid off, fired or otherwise discharged in September, down by 90,000 from the revised 1,790,000 who were discharged in August, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 365,000 in September, up from 341,000 in August, for an 'other separations rate’ of 0.2%, which unchanged from August and from September 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...

September Wholesale Sales Up 0.2%, Wholesale Inventories Up 0.4% 

The September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $511.2 billion, up 0.2 percent (±0.5 percent)* from the revised August level, and up 7.8 percent (±3.5 percent) from the wholesale sales of September 2017... the August preliminary estimate was revised down to $510.37 billion from the $511.1 billion in wholesale sales reported last month, which thus revised the July to August change in sales from +0.8% to +0.7%....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 left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $644.6 billion at month end, up 0.4 percent (±0.4 percent)* from the revised August level and 5.2 percent (±4.0 percent) higher than in September a year ago....August's inventory value was revised from $642.7 billion to $642.2 billion, which meant that the July to August percent change was revised from the advance estimate of +1.0 percent to +0.9 percent...

In the advance report on 3rd 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 $644.081 billion at the end of September, up from $641.959 billion in August....that's $0.475 billion less than the $644.556 billion for the end of the quarter that this report shows, which would imply that the quarterly change in 2nd quarter inventories was underestimated at roughly a $1.9 billion annual rate...assuming there's no revision in the inflation adjustment to those inventories, that would mean that the growth rate of 3rd quarter GDP was underestimated by around 0.03 percentage points based just on 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…)      

Sunday, November 4, 2018

October's jobs report; September's income and outlays, trade deficit, construction spending, and factory inventories

In addition to the Employment Situation Summary for October from the Bureau of Labor Statistics, this week also saw the release of four reports for September that included metrics which were either estimated or included in last week's advance estimate of 3rd quarter GDP: the September report on Personal Income and Spending from the Bureau of Economic Analysis, the Commerce Dept report on our International Trade for September, the September report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for September, both from the Census Bureau...in addition, the week also saw the last of the Fed manufacturing surveys for October: the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity index rose from +28.1 in September to +29.4 in October, indicative of an ongoing robust expansion of the Texas economy...

There were also a number of privately issued reports released this week, including the ADP Employment Report for October and the Case-Shiller Home Price Index for August, an index generated by averaging relative home sales prices from June, July and August against a January 2000 baseline, and which reported that their national home price index for those 3 months averaged 5.8% higher than the price index for the same homes that sold during the same 3 month period a year earlier, down from the 6.0% year over year increase shown in the prior report...other privately issued reports included the light vehicle sales report for October from Wards Automotive, which estimated that vehicles sold at a 17.46 million annual rate in October, up from the 17.36 million annual rate in September, but down from the 17.98 million annual rate a year ago, and the October Manufacturing Report On Business from the Institute for Supply Management (ISM), which indicated that he manufacturing PMI (Purchasing Managers Index) fell to 57.7% in October, down from 58.8% in September, which still suggests an ongoing expansion among manufacturing firms nationally..

Employers Add 250,000 Jobs in October; Labor Force Participation Rises 0.2%

The Employment Situation Summary for October was complicated by the effects of two hurricanes; Florence impacted the September report by reducing the number receiving a paycheck during the reference week, and while those returning workers would have boosted October job totals accordingly, Hurricane Michael made landfall in the Florida on October 10th, during the reference periods for both the October establishment and household surveys, possibly leaving some in that area without a paycheck that week...the BLS says "Hurricane Michael had no discernible effect on the national employment and unemployment estimates for October" and that response rates for the two surveys were within normal ranges, but that doesn't mean there was no impact; recall that employees who missed work because of the storm but who were paid anyway are counted as employed, but those who were not paid during that week are not counted as employed by the establishment survey, even if they expected to return to work the next week.…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 250,000 jobs in October, after the previously estimated payroll job change for September was revised lower, from an increase of 134,000 jobs to one of 118,000, while the payroll jobs increase for August was revised higher from 270,000 to 286,000...meanwhile, the unadjusted data shows that there were actually 1,015,000 more payroll jobs extent in October than in September, as seasonal job increases in the education and retail sectors were washed out by the seasonal adjustment...

Seasonally adjusted job increases in October were spread throughout the private goods producing and service sectors and in government, with no major sector showing a decrease in employment...the largest job increase was in the health care and social assistance sector, which saw 46,700 jobs added, including 13,000 in hospitals and 8,800 in individual and family services...the leisure and hospitality sector gained 40,000 jobs, as jobs in bars and restaurants increased by 33,500, many of those likely representing workers who missed at least one paycheck in September returned to work after their places of employment reopened in the post-hurricane recovery...the broad professional and business services sector added 35,000 jobs, with 9,100 of those performing services for buildings and dwellings...another 32,000 jobs were added in manufacturing, with 10,200 of those working with transportation equipment manufacturers...construction employment rose by 30,000, with 13,800 more employed by residential specialty trade contractors...the transportation and warehousing added 24,000 jobs over the month, with 7,600 more employed as couriers and messengers and 7,600 more employed in warehousing and storage..meanwhile, other major sectors, including mining, wholesale trade, retail trade, information, financial activities, and government all saw smaller job gains in October.

The establishment survey also showed that average hourly pay for all employees rose by 5 cents an hour to $27.30 an hour in October, after it had increased by 8 cents an hour in September; meanwhile, the average hourly earnings of production and non-supervisory employees increased by 7 cents an hour to $22.89 an hour...employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.5 hours in October, while hours for production and non-supervisory personnel was unchanged at 33.7 hours...at the same time, the manufacturing workweek decreased by 0.1 hour to 40.8 hours, while average factory overtime was unchanged at 3.5 hours...

Meanwhile, the October household survey indicated that the seasonally adjusted extrapolation of those who would report being employed rose by an estimated 600,000 to 156,562,000, while the estimated number of those unemployed and looking for work rose by 111,000 to 6,520,000; and hence the total labor force increased by a total of 711,000....since the working age population had grown by 224,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 487,000 to 95,877,000...at the same time, the increase in the labor force was enough to increase the labor force participation rate 0.2%, from 62.7% in September to 62.9% in October...in addition, the increase in number employed was also enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.2%, from 60.4% to 60.6%...however, the corresponding increase in the number unemployed meant the unemployment rate as a percentage of the labor force remained unchanged at 3.7%...meanwhile, the number of those who reported they were forced to accept just part time work fell by 21,000, from 4,642,000 in September to 4,621,000 in October, which apparently was just enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", by 0.1% to 7.4% of the labor force in October, matching the U-6 rate of August, which was the lowest since April 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.. 

​September Personal Income Rose 0.2%, Personal Spending Rose 0.4%

Monday's release of the September Income and Outlays report was actually concurrent with the GDP release on the prior Friday, and all the PCE data in that GDP report came from this report...and like that 3rd quarter GDP report, which we reviewed last week, all the dollar values reported here are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if September's adjusted income and spending were extrapolated over an entire 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 August to September....thus, when the opening of the news release for this report tell us "Personal income increased $35.7 billion (0.2 percent) in September...", they mean that the annualized figure for all types of personal income in September, $17,726.3 billion, was $35.7 billion, or roughly 0.2% greater than the annualized personal income figure of $17,690.6 billion for August; the actual increase in personal income in September over August is not given....similarly, disposable personal income, which is income after taxes, also rose by nearly 0.2%, from an annual rate of $15,631.8 billion in August to an annual rate of $15,651.0 billion in September...

Meanwhile, seasonally adjusted personal consumption expenditures (PCE) for September, which were included in the change in real PCE in the 3rd quarter GDP report, rose at a $53.0 billion annual rate to a $14,124.2 billion pace of consumer spending annually, less than 0.4% above that of August, after August‘s PCE was revised up from the previously reported annual rate of $14,050.1 billion to $14,071.2 billion...the current dollar increase in September spending included a $25.1 billion annualized increase to an annualized $9,714.1 billion in spending for services, a $20.5 billion increase to $1,496.0 billion in annualized spending for durable goods, and a $7.4 billion increase to $2,914.2 billion in annualized spending for non durable goods...total personal outlays for September, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $132.5 billion to $14,675.3 billion, which left personal savings, which is disposable personal income less total outlays, at a $975.7 billion annual rate in September, down from the revised $1,004.4 billion in annualized personal savings in August...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 6.2%, down from 6.4% in August, and the lowest savings rate since December of 2017... 

While our personal consumption expenditures accounted for 69.6% of our third quarter GDP, before they were included in that 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 the goods and services that were produced for that consumption.....that adjustment is made using the price index for personal consumption expenditures, also included in this report, which is a chained price index based on 2012 prices = 100....from Table 9 in the pdf for this report, we find that that index rose from 108.471 in August to 108.602 in September, giving us a month over month inflation rate of 0.1208%, which BEA reports as an increase of +0.1%....at the same time, Table 11 gives us a year over year PCE price index increase of 2.0%, and a core price increase, excluding food and energy, also of 2.0% for the year, both in line the Fed's inflation target...applying the September inflation adjustment to the change in September PCE shows that real PCE was up 0.2556%, which BEA reports as a 0.3% increase in their summary table...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....those results are shown in tables 7 and 8 of the report PDF, where the quarterly figures given are identical to those shown in table 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...

September Trade Deficit Up 1.3% on Higher Imports of a Variety of Capital and Consumer Goods

Our trade deficit rose by 1.3% in September as the value of both our exports and our imports increased, but our imports increased by more....the Commerce Dept report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit rose by $0.7 billion to $54.0 billion in September from a revised August deficit of $53.3 billion...the value of our September exports rose by a rounded $3.1 billion to $212.6 billion on a $2.9 billion increase to $141.9 billion in our exports of goods and a $0.3 billion increase to $70.7 billion in our exports of services, while our imports rose by a rounded $3.8 billion to $266.6 billion on a $3.5 billion increase to $219.1 billion in our imports of goods and a $0.4 billion increase to $47.5 billion in our imports of services...export prices were unchanged in September, so the relative real change in September exports would be the same as the nominal change, while import prices were 0.5% higher, meaning the increase in real imports was smaller than the nominal dollar change reported here by that percentage....

The increase in our September exports of goods resulted from higher exports of industrial supplies and materials and of capital goods, which were partly offset by a decrease in exports of food, feed, and beverages...referencing the Full Release and Tables for September (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $2,771 million to $46,911 million on a $1,061 million increase in our exports of petroleum products other than fuel oil, a $1,031 million increase in our exports of nonmonetary gold, and a $735 million increase in our exports of crude oil, and that our exports of capital goods rose by $1,080 million to $47,496 million on a $1,180 million increase in our exports of civilian aircraft, a $447 million increase in our exports of computer accessories, and a $220 million increase in our exports of engines for civilian aircraft, which were partially offset by a $335 million decrease in our exports of telecommunications equipment....at the same time, our exports of automotive vehicles, parts, and engines rose by $163 million to $12,948 million on a $263 million increase in our exports of vehicle parts and accessories other than engines, chassis, and tires, and our exports of consumer goods rose by $146 million to $17,762 million on a $505 million increase in our exports of pharmaceuticals...partially offsetting the increases in those export categories, our exports of foods, feeds and beverages fell by $958 million to $11,010 million on a $744 million decrease in our exports of soybeans, and our exports of other goods not categorized by end use fell by $417 million to $5,177 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of capital goods and consumer goods were responsible for the $3.5 billion increase in our goods imports, even as our imports of vehicles, parts, and engines decreased....our imports of capital goods rose by $2,381 million to $60,063 million on a $528 million increase in our imports of telecommunications equipment, a $494 million increase in our imports of engines for civilian aircraft, a $362 million increase in our imports of computers and a $369 million increase in our imports of computer accessories, while our imports of consumer goods rose by $1,964 million to $55,435 million on a $470 million increase in our imports of textiles and apparel other than those of wool or cotton, a $400 million increase in our imports of toys, games, and sporting goods, a $313 million increase in our imports of cell phones, a $253 million increase in our imports of TVs and video equipment, and a $246 million increase in our imports of cotton apparel...in addition, our imports of other goods not categorized by end use rose by $284 million to $9,334 million.....partially offsetting those increases, our imports of automotive vehicles, parts and engines fell by $604 million to $31,107 million on a $520 million decrease in our imports of trucks, buses, and special purpose vehicles and a $270 million decrease in our imports of of new and used passenger cars, our imports of industrial supplies and materials fell by $184 million to $49,471 million on a $300 million decrease in our imports crude oil and a $216 million decrease in our imports of petroleum products other than fuel oil, and our imports of foods, feeds, and beverages fell by $146 million to $12,143 million on small decreases in imports of several line items...

In last week's advance report on 3rd quarter GDP, the contribution of September trade was estimated based on the sketchy Advance Report on our International Trade in Goods which was released last week, just before the GDP release...that report estimated that our seasonal adjusted September goods trade deficit was at $76,036 million on a Census basis, up from the $75,456 million goods deficit in August, on goods exports of $140,952 million and goods imports of $216,988 million...this report revises that and shows that our actual goods trade deficit in September was $77,226 billion on a balance of payments basis, and $76,251 billion on a Census basis, on Census adjusted goods imports of $217,554 billion and Census adjusted goods exports of $141,303 billion...in addition, the Census basis August goods trade deficit was revised ~$0.1 billion lower at $75,357 million...together, those revisions from the previously published data mean that the 3rd quarter trade deficit in goods was on the order of $0.1 billion more than was included in last week's GDP report, or roughly $0.4 billion on an annualized basis, which could subtract 0.01 percentage point from 3rd quarter GDP when the 2nd estimate is released at the end of November...

Construction Spending Little Changed in September After August Revised 0.8% Higher

The Census Bureau's report on construction spending for September (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,329.5 billion annually if extrapolated over an entire year, which was less than 0.1 percent (±1.5%)* above the revised annualized August estimate of $1,328.8 billion and also 7.2 percent (±1.8 percent) above the estimated annualized level of construction spending in September of last year...the annualized August construction spending estimate was revised 0.8% higher, from $1,318.5 billion to $1,328.85 billion, while the annual rate of construction spending for July was revised fractionally higher, from $1,317.4 billion to $1,317.7 billion...

Quoting further details on construction spending from the Census release: "Spending on private construction was at a seasonally adjusted annual rate of $1,020.4 billion, 0.3 percent (±1.0 percent)* above the revised August estimate of $1,016.9 billion. Residential construction was at a seasonally adjusted annual rate of $556.4 billion in September, 0.6 percent (±1.3 percent)* above the revised August estimate of $553.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $463.9 billion in September, 0.1 percent (±1.0 percent)* above the revised August estimate of $463.5 billion.  In September, the estimated seasonally adjusted annual rate of public construction spending was $309.1 billion, 0.9 percent (±2.6 percent)* below the revised August estimate of $312.0 billion. Educational construction was at a seasonally adjusted annual rate of $74.6 billion, 1.2 percent (±3.1 percent)* above the revised August estimate of $73.7 billion. Highway construction was at a seasonally adjusted annual rate of $95.2 billion, 1.1 percent (±6.9 percent)* below the revised August estimate of $96.2 billion."

The BEA's key source data and assumptions (xls) accompanying last week's 3rd quarter GDP report indicates that they had estimated that September's residential construction would increase by an annualized $1.3 billion from previously published figures, that nonresidential construction would decrease by an annualized $2.5 billion from last month's report, and that September's public construction would also decrease by an annualized $2.5 billion from last month's report....this report indicates that residential construction increased at a $3.05 billion rate in September after August's annualized residential construction was revised $7.5 billion higher, that nonresidential construction increased at a $0.4 billion rate after August's figure was revised $10.7 billion higher, and that public construction fell by $2.85 billion after August's public construction was revised $7.6 billion lower...netting those figures, that means the BEA had underestimated September's construction spending by an annualized $14.9 billion...thus, for the 3rd quarter as a whole, the advance GDP release unreported nominal construction spending by an annualized $8.5 billion... assuming that the inflation adjustments to those figures remain the same, that would suggest that 3rd quarter GDP will be revised 0.20 percentage points higher to account for what this report shows...

Factory Shipments Up 0.9% in September, Factory Inventories Up 0.5%

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for September from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $3.4 billion or 0.7 percent to $515.3 billion in September, following an increase of 2.6% to $512.0 billion in August, which was revised from the 2.3 percent increase to $510.5 billion reported for August 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 revised updates to the September advance report on durable goods we reported on last week...on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary New orders for manufactured goods in September, up four of the last five months, increased $3.4 billion or 0.7 percent to $515.3 billion, the U.S. Census Bureau reported today.  This followed a 2.6 percent August increase.  Shipments, up sixteen of the last seventeen months, increased $4.6 billion or 0.9 percent to $509.8 billion.  This followed a 0.7 percent August increase.  Unfilled orders, up ten of the last eleven months, increased $9.7 billion or 0.8 percent to $1,186.5 billion.  This followed a 0.9 percent August increase.  The unfilled orders‐to‐shipments ratio was 6.64, down from 6.67 in August.  Inventories, up twenty‐three consecutive months, increased $3.7 billion or 0.5 percent to $680.4 billion.  This followed a 0.1 percent August increase.  The inventories‐to‐shipments ratio was 1.33, down from 1.34 in August.
  • New orders for manufactured durable goods in September, up three of the last four months, increased $1.8 billion or 0.7 percent to $262.0 billion, down from the previously published 0.8 percent increase.  This followed a 4.7 percent August increase.  Transportation equipment, also up three of the last four months, drove the increase, $1.9 billion or 1.9 percent to $97.4 billion.  New orders for manufactured nondurable goods increased $1.6 billion or 0.6 percent to $253.3 billion.
  • Shipments of manufactured durable goods in September, up four of the last five months, increased $3.0 billion or 1.2 percent to $256.5 billion, down from the previously published 1.3 percent increase.  This followed a 0.9 percent August increase.  Transportation equipment, up three of the last four months, led the increase, $2.8 billion or 3.3 percent to $89.4 billion.  Shipments of manufactured nondurable goods, up fifteen of the last sixteen months, increased $1.6 billion or 0.6 percent to $253.3 billion.  This followed a 0.6 percent August increase.  Petroleum and coal products, up fourteen of the last fifteen months, led the increase, $1.4 billion or 2.4 percent to $57.9 billion.
  • Unfilled orders for manufactured durable goods in September, up ten of the last eleven months, increased $9.7 billion or 0.8 percent to $1,186.5 billion, unchanged from the previously published increase.  This followed a 0.9 percent August increase.  Transportation equipment, up seven of the last eight months, led the increase, $8.0 billion or 1.0 percent to $818.8 billion. 
  • Inventories of manufactured durable goods in September, up twenty of the last twenty‐one months, increased $3.0 billion or 0.7 percent to $410.9 billion, unchanged from the previously published increase.   This followed a 0.2 percent August decrease.  Transportation equipment, up two of the last three months, led the increase, $1.2 billion or 0.9 percent to $130.5 billion.  Inventories of manufactured nondurable goods, up fifteen consecutive months, increased $0.7 billion or 0.2 percent to $269.5 billion.  This followed a 0.5 percent August increase.  Petroleum and coal products, up five of the last six months, led the increase, $0.3 billion or 0.8 percent to $43.2 billion.  By stage of fabrication, September materials and supplies increased 0.8 percent in durable goods and decreased 0.3 percent in nondurable goods.  Work in process increased 0.7 percent in durable goods and increased 2.2 percent in nondurable goods.  Finished goods increased 0.7 percent in durable goods and decreased 0.2 percent in nondurable goods.

The BEA's key source data and assumptions (xls) for 3rd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $1.3 billion in September before they estimated the 3rd quarter’s output, so the actual $0.7 billion increase would indicate that they overestimated the end of 3rd quarter GDP inventory component by about $0.6 billion, or ~$2.4 billion on an annualized basis, which would imply that 3rd quarter GDP will have to be revised downwards by about 0.04 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…)