Sunday, December 30, 2018

Government Shutdown Interrupts Light Holiday Release Schedule

With the major month end reports already released last week, the only widely watched agency report that was scheduled for this week was the Census report on New Residential Sales for November; however, with the government shut down by a dispute over funding for Trump's Mexican border wall, Census employees have been temporarily furloughed and therefore that report was not released...however, since the Federal Reserve is independent and self-funded, the release of the Chicago Fed National Activity Index (CFNAI) for November, a weighted composite index of 85 different economic metrics, was released this week, and indicated that the CFNAI increased to +0.22 in November from a neutral reading of 0.00 in October, which was revised from the +0.24 indicated for October a month ago....with that revision, the 3 month average of the CFNAI index fell to +0.12 in November, from a revised +0.23 in October, which still indicates that national economic activity continues at a pace slightly above the historical trend over recent months....

This week also saw the private release of the Case-Shiller Home Price Index for October from S&P Case-Shiller, which doesn’t even include homes prices, but just a index generated by averaging relative home sales prices of homes that sold in August, September and October against the sales prices of the same homes when they sold during prior 3 month periods going back to January 2000...thus the Case-Shiller report indicated that their national home price index for those 3 months averaged 5.5% higher than it did for the same homes that sold during the same 3 month period a year earlier, unchanged from the year over year index increase shown in the prior report... in addition, this week also saw the release of the Richmond Fed Survey of Manufacturing Activity, covering an area that includes  Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported its broadest composite index fell to -8 in December from +14 in November, indicating the first contraction of Fifth District manufacturing since October 2016...

 

(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, December 23, 2018

3rd quarter GDP revision, November's income and outlays, durable goods, new home construction, and existing home sales

In advance of the holidays, several of the reports that are normally released during the last week of the month were accelerated into this week...that meant that we had the 3rd estimate of 3rd quarter GDP and the November report on Personal Income and Spending, both from the Bureau of Economic Analysis, and the advance report on durable goods for November from the Census Bureau all released at the same time on Friday morning...meanwhile, earlier in the week we also had the November report on New Residential Construction from the Census bureau, and the Existing Home Sales Report for November from the National Association of Realtors (NAR)....

The week also saw the release of three regional Fed manufacturing surveys for December: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +23.3 in November to +10.9 in December, suggesting slower growth of First District manufacturing; the Philadelphia Fed Manufacturing Survey for December, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions decreased from a reading of +12.9 in November to +9.4 in December, indicating a more subdued expansion of that the region's manufacturing; and the Kansas City Fed manufacturing survey for December, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to +3 in December from +15 in November and from +8 in October, suggesting a much slower expansion of that region's manufacturing...

3rd Quarter GDP Growth Revised to a 3.4% Rate on Deflator Increase; Real Final Sales Only 1.0%

The Third Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 3.4% annual rate in the quarter, revised from the 3.5% growth rate reported in the second estimate last month, as growth in personal consumption, fixed investment, and exports were revised lower than was previously reported even as the change in our inventories was a greater addition to GDP than in the 2nd estimate...in current dollars, our third quarter GDP grew at a 4.91% annual rate, increasing from what would work out to be a $20,411.9 billion a year output rate in the 2nd quarter to a $20,658.2 billion annual rate in the 3rd quarter, with the headline 3.4% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.8%, aka the GDP deflator, was applied to the current dollar change...that GDP deflator was previously reported at 1.7% and hence its revision accounts for the revision of GDP growth by itself, other revisions notwithstanding....

Recall that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as representing quantity indexes than any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 3rd quarter GDP, which is linked to on the BEA GDP landing page...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2014; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the GDP components...the pdf for the 2nd quarter second estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 3.6% growth rate reported last month to a 3.5% rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 5.14% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation increased at a 1.6% annual rate in the 3rd quarter, which was revised from the 1.5% PCE inflation rate reported a month ago...real personal consumption of durable goods grew at a 3.7% annual rate, revised from the 3.9% growth rate shown in the 2nd estimate, and added 0.26 percentage points to GDP, as an increase in real consumption of recreational goods and vehicles at a 9.0% rate accounted for more than two-thirds of the durables goods increase...real consumption of nondurable goods by individuals grew at a 4.6% annual rate, revised from the 5.3% rate reported in the 2nd estimate, and added 0.64 percentage points to the 3rd quarter economic growth rate, as lower consumption of energy goods was more than offset by greater consumption of food, clothing and other non-durables….at the same time, consumption of services rose at a 3.2% annual rate, revised from the 3.1% growth rate reported last month, and added 1.47 percentage points to the final GDP tally, as real health care services accounted for more than a third of the growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment grew at a 15.2% annual rate in the 3rd quarter, revised from the 15.1% growth reported last month, as real private fixed investment grew at a 1.1% rate, revised from the 1.4% growth shown in the second estimate, while inventories grew more than was previously estimated....investment in non-residential structures was revised to show contraction at a 3.4% rate, double the 1.7% contraction rate previously reported, while real investment in equipment was revised from growth at a rate of 3.5% to growth at a 3.4% rate, and the quarter's investment in intellectual property products was revised from growth at a 4.3% rate to growth at a 5.6% rate...on the other hand, real residential investment was shown to be shrinking at a 3.6% annual rate, rather than the 2.6% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.11 percentage points from the 3rd quarter's growth rate, the increase in investment in equipment added 0.21 percentage points to the quarter's growth rate, lower residential investment subtracted 0.14 percentage points from GDP, while growth in investment in intellectual property added 0.25  percentage points to the growth rate of 3rd quarter GDP...

In addition, investment in real private inventories grew at a 31.9% annual rate, increasing by an inflation adjusted $89.8 billion in the 3rd quarter, revised from the previously reported $86.6 billion of real inventory growth...this came after inventories had shrunk at an inflation adjusted $36.8 billion rate in the 2nd quarter, and hence the quarter’s $126.6 billion increase in real inventory growth added 2.33 percentage points to the quarter's growth rate, revised from the 2.27 percentage point addition from inventory growth that was indicated in the second estimate....however, since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or "sitting on the shelf”, their quarter over quarter increase by $126.6 billion meant that growth of real final sales of GDP was relatively smaller by that much, and hence real final sales of GDP only rose at a rounded 1.0% rate in the 3rd quarter, down from the real final sales growth rate of 5.4% in the 2nd quarter, when the decrease in inventory growth meant that growth in real final sales was greater than the real growth in GDP...

The previously reported decrease in real exports was revised even lower with this estimate, while the previously reported increase in real imports was revised a bit higher, and as a result the change in our net trade was a greater subtraction from GDP than was previously reported....our real exports shrunk at a 4.9% rate rather than the 4.4% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their shrinkage conversely subtracted 0.62 percentage points from the 3rd quarter's growth rate, revised from the 0.55 percentage point subtraction shown in the previous report...meanwhile, the previously reported 9.2% increase in our real imports was revised to a 9.3% increase, and since imports are subtracted from GDP because they represent either consumption or investment that was not produced here, their increase subtracted 1.37 percentage points to 3rd quarter GDP, rather than the 1.36 percentage point subtraction shown last month....thus, our deteriorating trade balance subtracted a total of 1.99 percentage points from 3rd quarter GDP, rather than the 1.91 percentage point subtraction that had been indicated by the second estimate…

Finally, the entire government sector grew at a 2.6% rate, unrevised from the previous report, as growth of federal government consumption and investment was unchanged from the second estimate, as was growth of real state & local government consumption and investment...real federal government consumption and investment was seen to have grown at a 3.5% rate from the 2nd quarter in this estimate, unrevised from the growth rate shown in the second estimate, as real federal outlays for defense grew at a 4.9% rate and added 0.18 percentage points to 3rd quarter GDP, unrevised from the contribution shown previously, while all other federal consumption and investment grew at a slightly revised 1.6% rate but still added 0.04 percentage points to 3rd quarter GDP....meanwhile, real state and local consumption and investment grew at a 2.0% rate in the quarter, which was also the same growth rate reported in the 2nd estimate, and added 0.22 more percentage points to 3rd quarter GDP....note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...

November Personal Income Up 0.2%; Personal Spending up 0.4%; PCE Price Index Up < 0.1%

The November report on Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 4th quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated....this report also gives us November’s personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase in a year if November’s adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's 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 October to November....

Hence, when the opening line of the press release for this report tell us "Personal income increased $40.2 billion (0.2 percent) in November", they mean that the annualized figure for seasonally adjusted personal income in November, $17,821.7 billion, was $40.2 billion higher, or more than 0.2% higher than the annualized personal income figure of $17,781.5 billion extrapolated for October; the actual, unadjusted change in personal income from October to November is not given...at the same time, annualized disposable personal income, which is income after taxes, also rose by more than 0.2%, from an annual rate of $15,705.0 billion in October to an annual rate of $15,742.8 billion in November...those figures were arrived at after personal income for October was revised up from $17,776.0 billion annually and October's disposable personal income was revised up from $15,700.5 billion annually....the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in November, the largest contributors to the $40.2 billion annual rate of increase in personal income were a $16.3 billion increase in wages and salaries and a $15.8 billion increase in proprietors' income, $14.9 billion of which was an increase in farmer's income…

For the personal consumption expenditures (PCE) that we're interested in, BEA reports that they increased at a $54.4 billion rate, or at a bit less than a 0.4% rate, as the annual rate of PCE rose from $14,189.1 billion in October to $14,243.5 billion in November....at the same time, October PCE was revised higher, from $14,177.5 billion annually to $14,189.1 billion....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $56.6 billion to $14,798.6 billion annually in November, which left total personal savings, which is disposable personal income less total outlays, at a $944.2 billion annual rate in November, down from the revised $962.9 billion in annualized personal savings in October ... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 6.0% in November, from the October savings rate of 6.1%...

As you know, before personal consumption expenditures are used in the computation of GDP, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....the BEA does that by computing, mostly from CPI source data, a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, and which is included in Table 9 in the pdf for this report...that index rose from 108.810 in October to 108.871 in November, a month over month inflation rate that's statistically 0.05606%, which BEA reports as a 0.1% increase, following the rounded 0.2% PCE price index increase they reported for October...applying the actual November inflation adjustment to the nominal amount of spending left real PCE up 0.3% in November, after October's real PCE growth of 0.6%...notice that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in chained 2012 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that November's chained dollar consumption total works out to 13,040.8 billion annually in 2012 dollars, 0.3259% more than October's 13,083.3 billion, a difference that the BEA rounds down and reports as +0.3%...

However, to estimate the impact of the change in PCE on the change in GDP, month over month changes expressed like that don't help us much, since GDP is reported quarterly.....thus we have to compare October's and November's real PCE to the the real PCE of the 3 months of the third quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 12,953.3 billion in chained 2012  dollars...(note that's the same as what's shown in table 3 of the pdf for the revised 3rd quarter GDP report)....then, by averaging the annualized chained 2012 dollar figures for October and November, 13,040.8 billion and 13,083.3 billion, we get an equivalent annualized PCE for the two months of the 4th quarter data that we have so far....when we compare that average of 13,062.05 to the 3rd quarter real PCE of 12,953.3, we find that 4th quarter real PCE has grown at a 3.40% annual rate for the two months of the 4th quarter included in this report...(notice the math we used to get that annual growth rate: [ (((13,040.8 + 13,083.3) /2 ) /12,953.3 ) ^ 4 = 1.0340075 ]...that's a growth rate that would add 2.29 percentage points to the GDP growth rate of the 4th quarter by itself, even if there is no improvement in December PCE from that average...

November Durable Goods: New Orders up 0.8%, Shipments Up 0.7%, Inventories Up 0.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for November (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $1.9  billion or 0.8 percent to $250.8 billion in November, after October's new orders were revised from the $248.5 billion reported last month to $248.9 billion, now down 4.3% from September's new orders...year to date new orders are now 8.4% above those of 2017, down from the + 8.7% year over year change we saw in this report last month....a reversal of the volatile monthly new orders for transportation equipment was responsible for this month's increase, as new transportation equipment orders rose $2.5 billion or 2.9 percent to $87.0 billion, on a 31.5% increase to $6,813 million in new orders for defense aircraft and a 6.7% increase to $10,189 million in new orders for commercial aircraft.... excluding orders for transportation equipment, new orders actually fell 0.3%, while excluding just new orders for defense equipment, new orders fell 0.1%....worse, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell by $403 million or 0.6% to $69,288 million...

Meanwhile, the seasonally adjusted value of November shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased by $1.8 billion or 0.7 percent to $256.7 billion, after the value of October shipments was revised from from $254.5 billion to $254.9 billion, now down 0.4% from September, with the October change revised from the 0.6% decrease reported last month...shipments of transportation equipment accounted for the November increase, as they rose $1.8 billion or 2.0 percent to $89.5 billion, on a 16.8% increase to $14,975 million in shipments of commercial aircraft, while shipments of defense aircraft fell 4.3%...shipments of nondefense capital goods less aircraft fell 0.1% to $68,958 million, after September’s capital goods shipments were revised 0.5% higher...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 22nd time in the past 23 months, increasing by $1.1 billion or 0.3 percent to $412.8 billion, after October inventories were revised from $410.9 billion to $ 411.79 billion, now up 0.2% from September...inventories of primary metals led the November increase, rising $0.3 billion or 0.9 percent to $36.1 billion, while inventories of transportation equipment were up 0.1% to $131,155 million, without which all other inventories were up 0.3%…

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, decreased for the second month in a row, falling by $1.7 billion or 0.1 percent to $1,181.7 billion, after unfilled orders for October were revised from $1,183.0 billion to $1,183.352 billion, still a 0.2% decrease from September...a $2.5 billion or 0.3 percent to $812.4 billion decrease in unfilled orders for transportation equipment was responsible for the decrease, as unfilled transportation equipment orders other than transportation equipment were up 0.2% to $369,213 million...compared to a year earlier, the unfilled order book for durable goods is 4.5% higher than the level of last November, with unfilled orders for transportation equipment 4.4% above their year ago level, largely on a 15.6% increase in the backlog of orders for defense aircraft... 

November Report Shows New Housing Starts and Permits Higher

The November 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 1,256,000 units during the month, which was 3.2 percent (±9.8 percent)* above the revised October estimated annual rate of 1,217,000 housing unit starts, but was 3.6 percent (±9.4 percent)* below last November's rate of 1,303,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell 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, November housing starts could have been down by 6.6% or up by as much as 13.0% from those of October, with even larger revisions possible...in this report, the annual rate for October housing starts was revised from the 1,228,000 units reported last month to 1,217,000, while September starts, which were first reported at a 1,201,000 annual rate, were revised up from last month's initial revised figure of 1,210,000 annually up to 1,237,000 annually 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 95,600 housing units were started in November, down from the 106,100 units that were started in October...of those housing units started in November, an estimated 60,300 were single family homes and 34,000 were units in structures with more than 5 units, down from last month's revised 74,900 single family starts, but up from the 26,900 units started in structures with more than 5 units in October...

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 November, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,328,000 housing units annually, which was 5.0 percent (±1.6 percent) above the revised October annual rate of 1,265,000 permits, and was 0.4 percent (±1.7 percent)* above the rate of building permit issuance in November a year earlier...the annual rate for housing permits issued in October was revised up slightly from the originally reported 1,263,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 101,700 housing units were issued in November, down from the revised estimate of 112,600 new permits issued in October...the November permits included 60,900 permits for single family homes, down from 73,900 single family permits issued in October, and 37,700 permits for housing units in apartment buildings with 5 or more units, up from 35,400 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 Increased to 1.256 Million Annual Rate in November and Comments on November Housing Starts...

November Existing Home Sales Up 1.9% in October, Still Down 7.0 from a Year Ago

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 1.9% from October to November, the second monthly increase after seven decreases, projecting that 5.32 million existing homes would sell over an entire year if the November home sales pace were extrapolated over that year, a pace that was still 7.0% below the annual sales rate they projected for November of a year ago...October sales were at a 5.22 million annual rate, unrevised from last month's report...the NAR also reported that the median sales price for all existing-home types was $257,700 in November, up from from the revised $255,100 reported for October and 4.2% higher than in November a year earlier, which they report as "the 81st straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Increase for Second Consecutive Month", 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 that info 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 of the actual number of homes that sold each month...this unadjusted data indicates that roughly 406,000 homes sold in November, down by 9.0% from the 446,000 homes that sold in October, and down by 4.5% from the 425,000 homes that sold in November of last year, so we can see that it was a seasonal adjustment that caused the annualized published figures to indicate a month over month increase....that same pdf indicates that the median home selling price for all housing types rose 1.0%, from a revised $255,100 in October to $257,700 in November, while the average home sales price was $296,300, up 0.8% from the $293,900 average sales price in October, and up 2.3% from the $289,500 average home sales price of November a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 5.32 million in November and Comments on November 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, December 16, 2018

November’s consumer and producer prices, retail sales, & industrial production; October's business inventories and JOLTS

Major reports released this week included the the November Producer Price Index, the November Consumer Price Index, and the November Import-Export Price Index from the Bureau of Labor Statistics, Retail Sales for November and Business Sales and Inventories for October from the Census Bureau, and the November report on Industrial Production and Capacity Utilization from the Fed...in addition, the BLS also released the the Job Openings and Labor Turnover Survey (JOLTS) for October, while Black Knight Financial Services released the Mortgage Monitor for October, which indicated that 3.64% of all mortgages were delinquent in October, down from 3.97% in September and down from 4.44% in October of 2017, and that 0.52% of all mortgages were in the foreclosure process, the same percentage as were in foreclosure in September but down from the 0.68% in foreclosure year ago...

November CPI Unchanged as Higher Rents Are Offset by Lower Gasoline Prices

The consumer price index was unchanged in November, as higher rents, food and used car prices were offset by lower priced clothing and gasoline....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index was statistically unchanged in November, after it had risen 0.3% in October, 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, by 0.4% last November...the unadjusted CPI-U, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 252.885 in October to 252.038 in November, which still left it statistically 2.177% higher than the 246.669 index reading in November of last year, which is reported as a 2.2% increase....with lower gasoline prices the main reason for that small drop in the unadjusted index, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, with the unadjusted core price index rising from 259.063 to 259.105, which left the core index 2.214% ahead of its year ago reading of 253.492, which is reported as a 2.2% year over year increase, same as the annual increase reported a month ago..

The volatile seasonally adjusted energy price index fell by 2.2% in November, after rising by 2.4% in October, 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 thus is still 3.1% higher than in November a year ago...the price index for energy commodities was 4.1% lower in November, while the index for energy services rose by 0.3%, after rising by 1.7% in October...the energy commodity index was down 4.1% due to a 4.2% decrease in price of gasoline, the largest component, and a 2.9% decrease in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 1.3% lower...within energy services, the index for utility gas service rose 0.7% after falling by 0.6% in October and is still 2.1% lower than it was a year ago, while the electricity price index was 0.3% higher, after it rose 2.3% in October....energy commodities are still 5.4% higher than their year ago levels, with gasoline prices averaging 5.0% higher than they were a year ago, while the energy services price index is now unchanged from last November, as electricity prices have increased by 0.6% over that period…

The seasonally adjusted food price index was 0.2% higher in November, after falling 0.1% in October, 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 2017, and being unchanged in October and November of last year, as the price index for food purchased for use at home rose 0.2% in November, while the index for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.3%, prices at full service restaurants rose 0.2%, while food prices at employee sites and schools were 0.2% lower...

In the food at home categories, the price index for cereals and bakery products was 0.6 higher as both bread and cereal prices rose 0.6%, rice prices rose 2.7%, prices for biscuits, rolls and muffins rose 2.1%, and cake and cupcake prices rose 1.8%....at the same time, the price index for the meats, poultry, fish, and eggs group was 0.3% higher, as pork prices rose 1.8% and turkey prices were 4.6% higher....on the other hand, the index for dairy products was 0.2% lower, as fresh whole milk prices fell 1.0%...meanwhile, the fruits and vegetables index was unchanged as a 0.8% decrease in the price index for fresh fruits was offset by a 1.0% increase in the price index for fresh vegetables, which rose due to a 7.5% jump in prices for tomatoes....at the same time, the beverages index was 0.4% lower, as noncarbonated juices and drink prices were priced 0.5% lower and instant coffee prices fell 3.0%...lastly, the index for the ‘other foods at home’ category was 0.3% higher, as the index for spices, seasonings, condiments, sauces rose 0.7% while prices for baby foods rose 2.8%....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 November, 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 November after rising by 0.2% in October, 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, and by 0.1% last November, the composite price index of all goods less food and energy goods was 0.2% higher, and the composite for all services less energy services was also 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust November retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.1%, as the price index for major appliances rose 0.9% while the price index for window and floor coverings was 2.2% lower...at the same time, the apparel price index was 0.9% lower, as the index for men's shirts and sweaters fell 4.1% and prices for women's dresses fell 2.7%...on the other hand, the price index for transportation commodities other than fuel was 0.9% higher, as prices for used cars and trucks rose 2.4% while new vehicle prices were unchanged...meanwhile, prices for medical care commodities were 0.4% higher as prescription drugs prices rose 0.5%, while the recreational commodities index was unchanged as 1.5% lower prices for televisions were offset by a 0.7% increase in the index for sporting goods...however, the education and communication commodities index was 1.3% lower after falling 1.5% in October on a 1.8% decrease in the index for personal computers and peripheral equipment and a 1.3% drop in the index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ rose 0.2% on a 0.9% increase in the price index for miscellaneous personal goods...

Within core services, the price index for shelter rose 0.3% on a 0.4% increase in rents and a 0.3% increase in homeowner's equivalent rent, while prices for lodging away from home at hotels and motels rose 0.1%, and the sub-index for water, sewers and trash collection rose 1.2%, and other household operation costs were on average 0.3% higher....the price index for medical care services was up by 0.4%, as hospital outpatient services rose 1.0% and health insurance rose 1.4%...on the other hand, the transportation services index was down by 0.3% as car and truck insurance fell 0.5% while airline fares fell 2.4%...at the same time, the recreation services price index was 0.5% higher as club memberships rose 1.5% and photo processing rose 2.8%....meanwhile, the index for education and communication services was 0.4% lower as prices for wireless telephone services fell 2.2%...lastly, the index for other personal services was up 0.3% as legal services rose 1.3% and the index for tax return preparation and other accounting fees rose 0.5%...among core line items, prices for televisions, which are now 18.1% cheaper than a year ago, and the price index for toys, which is down by 10.4% since last November, have seen prices drop by more than 10% over the past year, while the price index for laundry equipment, which has now increased 15.5% year over year, and the price index for boy's apparel, which is up 11.9% since last November, have both seen prices rise by a double digit magnitude over that span...

Retail Sales Up 0.2% in November after October Sales are Revised Higher

Seasonally adjusted retail sales increased in November after retail sales for October sales were revised higher...the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $513.5 billion during the month, which was 0.2 percent (±0.5%) higher than October's revised sales of $512.4 billion and 4.0 percent (±0.9%) above the adjusted sales in November of last year.…October's seasonally adjusted sales were revised up from $511.5 billion to $512.4 billion, while September's sales were revised lower, from $507.6 billion to $506.75 billion; as a result, the September to October change was revised from up 0.8 percent (±0.5%) to up 1.1 percent (±0.2%), while the change in September's sales was revised from a decrease of 0.1% to a decrease of 0.3%...assuming a similar inflation adjustment, the $0.85 billion downward revision to September sales should reduce previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.07 percentage points.....unadjusted sales, extrapolated from surveys of a small sampling of retailers, were estimated to have risen 3.4%, from $506,859 million in October to $524,147 million in November, while they were up 4.9% from the $499,833 million of sales in November a year ago...

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

November 2018 retail sales table

To compute November's real personal consumption of goods data for national accounts from this November retail sales report, the BEA will use the corresponding price changes from the November 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 November retail sales excluding the 2.3% price-related decrease in sales at gas station were up by 0.5%....then, pulling the 0.4% increase in grocery sales and the 0.5% decrease in food services sales out from that total, we find that core retail sales were up 0.6% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was up 0.2% in November, we can thus approximate that real retail sales excluding food and energy will on average be 0.2% lower than our nominal core retail sales, or show an increase of roughly 0.4%...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 0.2%, the price index for for transportation commodities other than fuel was up 0.9%, which would mean that real unit sales at auto & parts dealers were probably on the order of 0.7% lower... on the other hand, while sales at clothing stores were 0.2% lower in November, the apparel price index was 0.9% lower, which means that real sales of clothing rose around 0.7%.…

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 0.2% higher in November, with the index for food purchased for use at home 0.2% higher, while prices for food bought to eat away from home were 0.3% higher... so while nominal sales at food and beverage stores were 0.4% higher, real sales of food and beverages would only be 0.2% higher in light of the 0.2% higher prices…meanwhile, the 0.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants fell 0.8% during the month...on the other hand, while sales at gas stations were down 2.3%, there was a 4.2% decrease in the retail price of gasoline, which would suggest that real sales of gasoline were up on the order of 1.9%, with a 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 November will show that real personal consumption of goods rose around 0.4% in November, after rising by a revised 0.8% in October...at the same time, the 0.8% drop in real sales at bars and restaurants would reduce November’s real personal consumption of services by about 0.1%...

Industrial Production Up 0.6% in November After October Production Revised Lower

The Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production rose 0.6% in November after falling by a revised 0.2% in October, as increases in the mining index and the utility index more than made up for flat manufacturing....the total industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 109.4 in November from 108.7 in October, which was revised from the 109.1 index reported last month...at the same time, the September index was revised down from 109.0 to 108.9 and the June index was revised from 107.5 to 107.4....year over year industrial production is now up 3.9%, down from last month's 4.1% year over year decrease....

The manufacturing index, which accounts for more than 77% of the total IP index, was unchanged at 104.9 in November, but only after the manufacturing index for October was revised from 105.4 to 104.9...in addition, the manufacturing index for September was revised from 105.1 to 105.0, and July's manufacturing index was revised down from 104.4 to 104.3... meanwhile, the mining index, which includes oil and gas well drilling, rose from 126.8 in October to 128.9 in November, after the October index was revised up from 126.3, which meant the mining index is now 13.2% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 3.3% in November, from a downwardly revised 104.4 in October to 107.8 in November, and is now 4.3% 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 US industry rose to 78.5% in November from 78.1% in October, which was revised from the 78.4% reported last month ...capacity utilization of NAICS durable goods production facilities rose from 76.3% in October to 76.4% in November, while capacity utilization for non-durables producers fell from 76.8% to 76.6%...at the same time, capacity utilization for the mining sector rose to 94.1% in November from 93.1% in October, which was originally reported at 92.7%, while utilities were operating at 79.4% of capacity during November, up from their 77.0% of capacity during October, which was revised down from the previously reported 77.3%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....  

Producer Prices Rose 0.1% in November as Higher Margins for Transportation Services more than Offset Lower Fuel Prices

The seasonally adjusted Producer Price Index (PPI) for final demand was 0.1% higher in November, as average prices for finished wholesale goods were 0.4% lower, while margins of final services providers increased by 0.3%...that followed an October report that showed the PPI was 0.6% higher, with prices for finished wholesale goods rising 0.6% and margins of final services providers rising 0.7%, 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, and a revised August report that showed the producer price index was 0.2% lower, with prices for finished wholesale goods unchanged while margins of final services providers decreased by 0.3%....on an unadjusted basis, producer prices are now 2.5% higher than a year ago, down from the year over year increase of 2.9% that had been indicated by last month's report...at the same time, 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 October a year ago...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.4% lower in November, after being 0.6% higher in October, 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 goods index fell because the price index for wholesale energy was 5.0% lower, after rising 2.7% higher in October 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 1.3%, and the index for final demand for core wholesale goods (excluding food and energy) was up 0.3%....wholesale energy prices fell largely on a 14.0% decrease in the wholesale price for gasoline and a 27.9% decrease in the wholesale price of liquefied petroleum gas ...the wholesale food price index, meanwhile, included a 12.2% increase in wholesale prices for fresh eggs and an 31.6% increase in wholesale prices for fresh and dry vegetables....among wholesale core goods, wholesale prices for pharmaceutical preparations rose 1.5% and wholesale prices for mining machinery and equipment rose 6.4%, while wholesale prices for industrial chemicals fell 2.8%..

At the same time, the index for final demand for services rose 0.3%, after rising 0.7% in October, 0.3% in September, falling a revised 0.3% in August, rising a revised 0.2% in July, and rising 0.3% in June, 0.3% in May, 0.2% in April and 0.3% in March, as the November index for final demand for trade services rose 0.3%, the index for final demand for transportation and warehousing services rose 1.2%, and the core index for final demand for services less trade, transportation, and warehousing services rose 0.1%....among trade services, seasonally adjusted margins for fuels and lubricants retailers rose 25.9% and margins for health, beauty, and optical goods retailers rose 3.0%, while margins for TV, video, and photographic equipment retailers fell 19.1%... among transportation and warehousing services, margins for airline passenger services rose 2.3% and margins for air transportation of freight rose 1.3%...among the components of the core final demand for services index, the index for guestroom rentals fell 3.5% while margins for cellular phone and other wireless telecommunications services rose 4.7%..

This report also showed the price index for intermediate processed goods fell 0.7% in November, after rising 0.8% in October, being unchanged in September, but after rising a revised 0.1% in August....the price index for intermediate energy goods fell 2.5%, as refinery prices for gasoline fell 14.0% while producer prices for natural gas to electric utilities rose 7.4%...prices for intermediate processed foods and feeds rose 0.4%, as the intermediate price index for meat rose 1.3% and prepared animal feeds prices rose 1.7%...meanwhile, the core price index for processed goods for intermediate demand less food and energy was 0.2% lower on a 3.1% decrease in the index for basic organic chemicals and a 3.0% decrease in the price index for softwood lumber....prices for intermediate processed goods are still 4.3% higher than in November a year ago, now the 24th consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods fell 5.3% in November, after rising 3.6% in October and 1.7% in September, falling a revised 4.4% in August, and rising a revised 0.6% in July....that was as the November price index for crude energy goods fell 11.5% as crude oil prices fell 29.5%, and as the price index for unprocessed foodstuffs and feedstuffs fell 0.1%, as producer prices for slaughter hogs fell 7.2% and producer prices for alfalfa hay fell 8.7%...on the other hand, the index for core raw materials other than food and energy materials rose 2.4%, as prices for carbon steel scrap rose 9.5% and prices for aluminum base scrap rose 1.9%...this raw materials index is now 0.7% lower than a year ago, down from the 7.8% year over year increase that we saw in October and the first negative year over year reading since October 2016...

Lastly, the price index for services for intermediate demand rose 0.2% in November, after rising 0.4% in October, 0.5% in September, falling a revised 0.2% in August, and rising a revised 0.4% in July...the price index for intermediate trade services was 0.2% lower, as margins for intermediate metals, minerals, and ores wholesalers fell 7.4% and margins for margins for chemicals and allied products wholesalers fell 2.2%…the index for transportation and warehousing services for intermediate demand rose 0.5%, as the intermediate index for air transportation of passengers rose 2.3% and the index for air transportation of freight rose 1.3%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was 0.3% higher, as the index for prices for business loans (partial) rose 4.5% and television advertising time sales rose 1.9%....over the 12 months ended in November, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 3.1% higher than it was a year ago...  

October Business Sales Up 0.3% Business Inventories Up 0.6%

After the release of the November retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for October (pdf), which incorporates the revised October retail data from that November report and the earlier published October wholesale and factory data to give us a complete picture of the business contribution to the economy for the month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,469.9 billion in October, up 0.3 percent (±0.2%) from September's revised sales, and up 6.1 percent (±0.3 percent) from October sales of a year earlier...note that total September sales were concurrently revised down from the originally reported $1,468.0 billion to $1,466.2 billion....manufacturer's sales were down 0.1% to $508,363 million in October; retail trade sales, which exclude restaurant & bar sales from the revised October retail sales reported earlier, rose 1.2% to $451,496 million, while wholesale sales fell 0.2% to $510,056 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,982.2 billion at the end of October, up 0.6 percent (±0.1%)* from September, and 5.2 percent (±1.4 percent) higher than in October a year earlier...at the same time, the value of end of September inventories was revised from the $1,967.5 billion reported last month to $1,970.6 billion, now up 0.5% from August...that $3.1 billion upward revision to September inventories should boost the previous estimate of the inventory component to 3rd quarter GDP by more than $12.4 billion annually, which would add around 0.29 percentage points to 3rd quarter GDP...seasonally adjusted inventories of manufacturers were estimated to be valued at $681,689 million at the end of October, an increase of 0.1% from September, and inventories of retailers were valued at $648,324 million, 0.8% greater than September, and inventories of wholesalers were estimated to be valued at $652,148 million at the end of October, also 0.8% greater than in September...

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for October, which was up 0.6% for finished goods...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories would have a large negative impact on 4th quarter GDP…also last week, we found that real wholesale inventories were close to unchanged and hence would also subtract from 4th quarter GDP growth….since nominal retail inventories for October have now been shown to 0.8% higher, real retail inventories for the month, after the 0.6% finished goods price adjustment, thus would have thus increased by just 0.2% from September, after a third quarter that saw total inventories increase at a 29.6% annual rate and add 2.27 percentage points to GDP, before the pending revision we noted above...therefore, any inventory increase smaller than that in the 4th quarter would necessarily subtract from the growth of 4th quarter GDP...

Job Openings and Hiring Increase in October, Job Quitting Decreases

The Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 119,000, from 6,960,000 openings in September to 7,079,000 in October, after September job openings were revised 49,000 lower, from 7,009,000 to 6,960,000...October's jobs openings were also 16.8% higher than the 6,059,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed rose to 4.5% in October from 4.4% September and from 4.0% in October a year ago...among the largest gains, job openings in information services increased from 104,000 to 149,000, and job openings in manufacturing increased from 485,000 to 522,000 (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated tables for the data cited, which are linked to 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 October, seasonally adjusted new hires totaled 5,892,000, up by 196,000 from the revised 5,696,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed rose to 3.9% from 3.8% in September, and was also up from from 3.8% in October a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 85,000, from 5,278,000 in September to 5,556,000 in October, while the separations rate as a percentage of the employed fell to 3.7%, down from 3.8% in September but up from 3.6% in October a year ago (see table 3)...subtracting the 5,556,000 total separations from the total hires of 5,892,000 would imply an increase of 336,000 jobs in October, quite a bit more than the revised payroll job increase of 237,000 for October reported in the November establishment survey last week, but still within the expected +/-115,000 margin of error for these reports...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,514,000 of us voluntarily quit our jobs in October, down by 50,000 from the 3,564,000 who quit their jobs in September, as the quits rate, widely watched as an indicator of worker confidence, fell from 2.4% to 2.3% of total employment, while it was still up from 2.2% a year earlier (see details in table 4)....in addition to those who quit, another 1,691,000 were either laid off, fired or otherwise discharged in October, down by 16,000 from the revised 1,707,000 who were discharged in September, as the discharges rate was unchanged at 1.1% of all those who were employed during the month, while it was down from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 351,000 in October, down from 369,000 in September, for an 'other separations rate’ of 0.2%, which was unchanged from September and from October 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 by 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, December 9, 2018

November’s jobs report; October’s trade deficit, construction spending, factory inventories and wholesale sales

In addition to the Employment Situation Summary for November from the Bureau of Labor Statistics, this week's economic releases included four reports that will feed into 4th quarter GDP: the Commerce Department report on our International Trade for October, the October report on Construction Spending (pdf), the Full Report on Manufacturers' Shipments, Inventories and Orders for October, and the October report on Wholesale Trade, Sales and Inventories, all from the Census Bureau...in addition, late on Friday the Fed released the Consumer Credit Report for October, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $25.4  billion, or at a 7.7% annual rate, as non-revolving credit expanded at a 6.7% rate to $2,926.3 billion and revolving credit outstanding rose at a 10.7% rate to $1,037.4 billion...

The week’s major privately issued reports included the ADP Employment Report for November; the light vehicle sales report for November from Wards Automotive, which estimated that vehicles sold at a 17.40 million annual rate in November, down from the 17.46 million annual rate in October, but up from the 17.35 million annual rate in November a year ago; and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the November Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 59.3% in November, up from 57.7% in October, and the October Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 60.7% in November, up from 60.3% in October, indicating a slightly larger plurality of service industry purchasing managers reported expansion in various facets of their business in November than in October...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 155,000 Jobs in November, Unemployment Rate and Labor Force Participation Unchanged

The Employment Situation Summary for November reported fairly weak job creation, while the employment rate, the unemployment rate and the labor force participation rate were all unchanged…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 155,000 jobs in November, after the previously estimated payroll job increase for September was revised up from up from 118,000 to 119,000, while the payroll jobs increase for October was revised down from 250,000 to 237,000…that means that this report represents a total of 143,000 more seasonally adjusted payroll jobs than were reported last month, about 60,000 less than the average increase of the past 12 months...the unadjusted data, meanwhile, shows that there were actually 475,000 more payroll jobs extent than in October, 463,600 of which were seasonal jobs additions in the retail sector...

Seasonally adjusted job increases in November were spread throughout the private goods producing and service sectors, with the 8,000 jobs lost in the information sector and the 6,000 jobs lost in government the only notable decreases...the largest job increase was seen in the health care and social assistance sector, which added 40,100 jobs, with the addition of 5,500 jobs in doctor's offices and 8,300 jobs in individual and family services.…the broad professional and business services sector added 32,000 more jobs, with 8,300 of those working for temporary employment services and 7,600 employed by computer systems design and related services...another 27,000 jobs were added in manufacturing, with 5,300 of those employed in the manufacture of transportation equipment...in addition, 25,400 jobs were added in transportation and warehousing, with 9,900 of those employed as couriers or messengers....then, after the seasonal adjustment, retail sales added 18,200 workers, with a 39,300 increase in those working in general merchandise stores offsetting a 14,100 decrease in clothing store employment...meanwhile, other sectors including mining, construction, wholesale trade, leisure and hospitality, financial activities, and private education all saw smaller job gains over the month..

The establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $27.35 an hour in November, after it had increased by a revised 4 cents an hour in October; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $22.95 an hour...employers also reported that the average workweek for all private payroll employees decreased by a tenth of an hour to 34.4 hours in November, while weekly hours for production and non-supervisory personnel was unchanged at 33.7 hours...at the same time, the manufacturing workweek was unchanged at 40.8 hours, while average factory overtime was unchanged at 3.5 hours...

Meanwhile, the November household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 233,000 to 156,795,000, while the estimated number of those unemployed and looking for work fell by 100,000 to 5,975,000, and hence the total labor force increased by a net total of 133,000....since the working age population had grown by 194,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by a rounded 60,000 to 95,937,000, which was not enough to statistically impact the labor force participation rate, which remained at 62.9% in November....meanwhile, the increase in number employed as a percentage of the increase in the population was also not enough to statistically change the employment to population ratio, which we could think of as an employment rate, as it remained at 60.6%....similarly, the decrease in the number unemployed was not enough to statistically change the unemployment rate, which remained at 3.7%...on the other hand, the number of those who reported they were forced to accept just part time work rose by 181,000, from 4,621,000 in October to 4,802,000 in November, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.4% of the labor force in October to 7.6% in November...

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

October Trade Deficit Rises to 10 Year High on Increased Drug Imports, Lower Soybean Exports

Our trade deficit rose by 1.7% in October as the value of our exports decreased while the value of our imports increased....the Commerce Dept report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $0.93 billion to $55.49 billion in October from a revised September deficit of $54.56 billion, which had previously been reported at $54.0 billion...the value of our October exports fell by a rounded $0.3 billion to $211.0 billion on a $0.4 billion decrease to $141.5 billion in our exports of goods and a $0.1 billion increase to $69.6 billion in our exports of services, while our imports rose by a rounded $0.6 billion to $266.5 billion on a $0.5 billion increase to $219.6 billion in our imports of goods and a $0.2 billion increase to $46.9 billion in our imports of services...export prices were on average 0.4% higher in October, so the relative percentage decrease in real October exports would be 0.4% greater than the nominal decrease, while import prices were 0.5% higher, meaning the increase in real imports was smaller than the nominal dollar values reported here by that percentage...

The decrease in our October exports of goods resulted from lower exports of food, feed, and beverages and of capital goods, which were partly offset by increases in exports of industrial supplies and materials and other goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages fell by $670 million to $10,340 million on a $837 million decrease in our exports of soybeans, and that our exports of capital goods fell by $533 million to $46,964 million on a $326 million decrease in our exports of engines for civilian aircraft, a $309 million decrease in our exports of civilian aircraft, and a $273 million decrease in our exports of industrial engines...in addition, our exports of automotive vehicles, parts, and engines fell by $234 million to $12,727 million on lower exports of engines, engine parts, trucks, buses and other special purpose vehicles...partially offsetting the decreases in those export categories, our exports of industrial supplies and materials rose by $291 million to $47,183 million on a $699 million increase in our exports of crude oil, a $316 million increase in our exports fuel oil, and a $273 million increase in our exports of metallurgical grade coal, which were partially offset by a $838 million decrease in our exports of nonmonetary gold and a $245 million decrease in our exports of organic chemicals...in addition, our exports of consumer goods rose by $186 million to $17,947 million and our exports of other goods not categorized by end use rose 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 consumer goods and automotive goods were responsible for the $0.5 billion increase in our goods imports, even as our imports of capital goods decreased...our imports of consumer goods rose by $1,962 million to $57,440 million on a $1485 million increase in our imports of pharmaceutical preparations, and a $306 million increase in our imports of cell phones, and our imports of automotive vehicles, parts and engines rose by $727 million to $31,839 million on a $480 million increase in our imports of new and used passenger cars...in addition, our imports of foods, feeds, and beverages rose by $155 million to $12,299 million, and our imports of other goods not categorized by end use rose by $811 million to $10,147 million.....mostly offsetting those increases, however, our imports of capital goods fell by $3,152 million to $56,907 million on a $528 million decrease in our imports of telecommunications equipment, a $761 million decrease in our imports of computers, a $747 million decrease in our imports of computer accessories, a $507 million decrease in our imports of engines for civilian aircraft, and a $341 million decrease in our imports of semiconductors, and our imports of industrial supplies and materials fell by $241 million to $49,207 million on a $341 million decrease in our imports crude oil and a $303 million decrease in our imports of petroleum products other than fuel oil..

The $0.56 billion upward revision to the September trade deficit will have the effect of increasing the annualized 3rd quarter trade deficit by about $2.25 billion, which would reduce 3rd quarter GDP by about 0.04 percentage points from previously published figures (assuming that inflation adjustments are similar)...meanwhile, to gauge the impact of October trade in goods on 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the exception that they are not annualized here....from that table, we can estimate that 3rd quarter real exports of goods averaged 149,417 million monthly in 2012 dollars, while inflation adjusted October exports were at 149,644 million in that same 2012 dollar quantity index representation... annualizing the change between the two figures, we find that October's real exports of goods are running at a 0.6% annual rate above those of the 3rd quarter, or at a pace that would add about 0.05 percentage points to 4th quarter GDP if continued through November and December.....in a similar manner, we find that our 3rd quarter real imports of goods averaged 234,772.7 million monthly in chained 2012 dollars, while inflation adjusted October goods imports were at 237,524 million...that would indicate that so far in the 4th quarter, we have seen our real imports increase at annual rate of 4.77% from those of the 3rd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 4.77 rate would subtract 0.57 percentage points from 4th quarter GDP....hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our deteriorating balance of trade in goods would subtract a net of roughly 0.52 percentage points from the growth of 4th quarter GDP.....however, note that we have not computed the impact of the less volatile change in services here because the BEA does not provide inflation adjusted data on those, and we don't have an easy way to access to all their price changes...

Construction Spending Slipped 0.1% in October after Prior Months Were Revised Much Lower

The Census Bureau's report on construction spending for October (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,308.8 billion annually if extrapolated over an entire year, which was 0.1 percent (±1.5 percent)* below the revised annualized September estimate of $1,310.8 billion but still 4.9 percent (±1.6 percent) above the estimated annualized level of construction spending in October of last year. The annualized September construction spending estimate was revised 1.4% lower, from $1,329.5 billion to $1,310.8  billion, while the annual rate of construction spending for August was revised 1.3% lower, from $1,328.85 billion to $1,311.82 billion.  The combined downward revisions of $34.1 billion to annualized August and September construction spending figures would be averaged over the 3 months of the quarter and decrease the annualized 3rd quarter construction figure by around $11.4 billion, which would thus imply a downward revision of about 0.27 percentage points to third quarter GDP when the third estimate is released on December 21st...

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 $998.7 billion, 0.4 percent (±0.8 percent)* below the revised September estimate of $1,003.0 billion. Residential construction was at a seasonally adjusted annual rate of $539.0 billion in October, 0.5 percent (±1.3 percent)* below the revised September estimate of $541.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $459.7 billion in October, 0.3 percent (±0.8 percent)* below the revised September estimate of $461.3 billion. 
  • Public Construction: In October, the estimated seasonally adjusted annual rate of public construction spending was $310.2 billion, 0.8 percent (±2.6 percent)* above the revised September estimate of $307.8 billion. Educational construction was at a seasonally adjusted annual rate of $76.9 billion, 2.6 percent (±2.3 percent)* above the revised September estimate of $75.0 billion. Highway construction was at a seasonally adjusted annual rate of $94.6 billion, 0.1 percent (±6.9 percent)* below the revised September estimate of $94.6 billion.

As you can see from the above, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of October spending reported in this release on 4th quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price.  There are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment. That index showed that aggregate construction costs were up 1.9% month over month in October, after increasing 0.1% in August and 0.1% in September... 

On that basis, we can estimate that October construction costs were roughly 2.1% more than those of July, 2.0% more than those of August, and obviously 1.9% more than September. We'll then use those percentages to inflate higher priced spending figures for each of those months, which is arithmetically the same as deflating October construction spending, for purposes of comparison.  Annualized construction spending in millions of dollars for the third quarter months is given as 1,310,806 in September, 1,311,824 in August, and 1,317,701 in July.   Thus to adjust October's nominal construction spending of $1,241,538 million for inflation and compare it to that of the third quarter, our formula would be: 1,308,848  / (((1,310,806 * 1.019) + ( 1,311,824 *1.020) + (1,317,701 * 1.021)) / 3) = 0.97696, meaning real construction in October was 2.3% lower than that of the 3rd quarter, or down at a 8.90% annual rate.   To figure the effect of that change on GDP,  we figure the difference between the third quarter inflation adjusted average and that of October and take that annualized result of that as a fraction of the inflation adjusted 3rd quarter GDP figure, and find that October construction spending is falling at a rate that would subtract 0.64 percentage points from 4th quarter GDP, assuming hypothetically that there would be no change over the next two months.  As bad as that sounds, we have reason to believe it may be worse, since nominal construction spending has now been falling for 3 months straight.. 

Factory Shipments Down 0.1% in October, Factory Inventories Up 0.1%

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for October from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $10.5 billion or 2.1 percent to $502.7 billion in October, following an increase of 0.2% to $513.2 billion in September, which was revised from the 0.7 percent increase to $515.3 billion that was reported for September 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 October advance report on durable goods we reported on two weeks ago...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 October, down following two consecutive monthly increases, decreased $10.5 billion or 2.1 percent to $502.7 billion, the U.S. Census Bureau reported today.  This followed a 0.2 percent September increase.  Shipments, down following fifteen consecutive monthly increases, decreased $0.5 billion or 0.1 percent to $508.4 billion.  This followed a 0.7 percent September increase.  Unfilled orders, down following eight consecutive monthly increases, decreased $1.7 billion or 0.1 percent to $1,183.6 billion.  This followed a 0.7 percent September increase.  The unfilled orders‐to‐ shipments ratio was 6.70, up from 6.65 in September.  Inventories, up twenty‐four consecutive months, increased $0.9 billion or 0.1 percent to $681.7 billion.  This followed a 0.6 percent September increase.   The inventories‐to‐shipments ratio was 1.34, unchanged from September.
  • New orders for manufactured durable goods in October, down three of the last four months, decreased $11.2 billion or 4.3 percent to $249.0 billion, up from the previously published 4.4 percent decrease.  This followed a virtually unchanged September decrease.  Transportation equipment, down following two consecutive monthly increases, drove the decrease, $11.6 billion or 12.0 percent to $84.8 billion.  New orders for manufactured nondurable goods increased $0.7 billion or 0.3 percent to $253.7 billion.
  • Shipments of manufactured durable goods in October, down following two consecutive monthly increases, decreased $1.2 billion or 0.5 percent to $254.6 billion, up from the previously published 0.6 percent decrease.  This followed a 0.9 percent September increase.  Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $1.5 billion or 1.7 percent to $87.6 billion.  Shipments of manufactured nondurable goods, up sixteen of the last seventeen months, increased $0.7 billion or 0.3 percent to $253.7 billion.  This followed a 0.5 percent September increase.  Petroleum and coal products, up fifteen of the last sixteen months, drove the increase, $0.9 billion or 1.6 percent to $59.1 billion.
  • Unfilled orders for manufactured durable goods in October, down following eight consecutive monthly increases, decreased $1.7 billion or 0.1 percent to $1,183.6 billion, up from the previously published 0.2 percent decrease.  This followed a 0.7 percent September increase.  Transportation equipment, down following two consecutive monthly increases, drove the decrease, $2.8 billion or 0.3 percent to $815.2 billion.
  • Inventories of manufactured durable goods in October, up twenty‐one of the last twenty‐two months, increased $0.3 billion or 0.1 percent to $411.3 billion, up from the previously published virtually unchanged decrease.  This followed a 0.8 percent September increase.  Transportation equipment, up three of the last four months, drove the increase, $0.5 billion or 0.4 percent to $131.1 billion.  Inventories of manufactured nondurable goods, up sixteen consecutive months, increased $0.6 billion or 0.2 percent to $270.3 billion.  This followed a 0.4 percent September increase.  Chemical products, up twelve of the last thirteen months, drove the increase, $0.6 billion or 0.7 percent to $90.5 billion.

To estimate the effect of those October factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories rose 0.3% to $236,517 million; the value of work in process inventories fell 0.3% to $208,424 million, and materials and supplies inventories were valued 0.3% higher at $236,748 million...the October producer price index reported that prices for finished goods were on average 0.6% higher, that prices for intermediate processed goods were on average 0.8% higher, and that prices for unprocessed goods were 3.6% higher....assuming similar valuations for like types of inventories, those price increases would suggest that October's real finished goods inventories were about 0.3% lower, that real inventories of intermediate processed goods were 1.1% lower, and that real raw material inventory inventories were about 3.3% lower...since real NIPA factory inventories were substantially higher in the 2nd quarter, the fact that this report indicates a drop in aggregate October factory inventories will therefore have a correspondingly large negative impact on the growth rate of 4th quarter GDP... 

October Wholesale Sales Down 0.2%, Wholesale Inventories Up 0.8%

The October report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$510.1 billion, down 0.2 percent (±0.5 percent)* from the revised September level, but..up 6.8 percent (±3.5 percent) from the October 2017 level. The August 2018 to September 2018 percent change was revised from the preliminary estimate of up 0.2 percent (±0.5 percent)* to up 0.1 percent (±0.5 percent)*"...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 October report estimated that wholesale inventories were valued at a seasonally adjusted "$652.1 billion at the end of October, up 0.8 percent (±0.4 percent) from the revised September level. Total inventories were up 6.9 percent (±4.2 percent) from the revised October 2017 level. The September 2018 to October 2018 percent change was revised from the advance estimate of up 0.7 percent (±0.4 percent) to up 0.8 percent (±0.4 percent)."

Like factory inventories, to estimate the effect of October wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index...although details are not broken out, we've previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...as we noted earlier, the producer price index for October indicated that prices for finished goods rose 0.6%, prices for intermediate goods intermediate goods rose 0.8%, and prices for unprocessed goods rose 3.6%;  thus the 0.8% increase in the nominal value of wholesale inventories was mostly due to rising prices...since real wholesale inventories in the 3rd quarter were higher each month, a nearly flat level of real wholesale inventories change in the 4th quarter would thus subtract from the growth of 4th quarter GDP... 

 

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