Sunday, September 15, 2019

August’s consumer prices, producer prices, and retail sales; July’s business inventories and JOLTS

Major reports released this past week included the August Consumer Price Index, the August Producer Price Index, the August Import-Export Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) report for July, all from the Bureau of Labor Statistics; the Retail Sales Report for August, Wholesale Trade, Sales and Inventories for July and Business Sales and Inventories for July, all from the Census Bureau; and the Consumer Credit Report for July from the Fed...that Fed report indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $23.3 billion in July, or at a 6.8% annual rate, as non-revolving credit expanded at a 5.3% rate to $3,041.6 billion while revolving credit outstanding expanded at a 11.2% rate to $1,081.2 billion, its largest jump since November 2017....

Consumer Prices Up 0.1% in August on Higher Housing & Health Care Costs

The consumer price index was 0.1% higher in August, as higher prices for housing, used vehicles, and health care were mostly offset by lower prices for energy & groceries ...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in August after rising 0.3% in July, 0.1% in June, 0.1% in May, 0.3% in April, 0.4% in March, 0.2% in February, and after they had been unchanged in January, in December and in November, and had risen 0.3% in October, 0.1% in September, and 0.1% last August...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 256.571 in July to 256.558 in August, which left it statistically 1.7498% higher than the 252.146 index reading of August of last year, which is reported as a 1.7% year over year increase....with prices for groceries and most forms of energy being lower, seasonally adjusted core prices, which exclude food and energy, rose by 0.3% for the month, as the unadjusted core price index rose from 263.566 to 264.169, which left the core index 2.3863% ahead of its year ago reading of 258.012, which is reported as a 2.4% year over year increase, up from the 2.2% year over year increase reported for July...

The volatile seasonally adjusted energy price index fell 1.9% in August, after rising 1.3% in July, falling 2.3% in June, falling 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, rising by 2.1% in October, and falling by 1.0% last September, and hence is now 4.4% lower than in August a year ago...the price index for energy commodities was 3.3% lower in August, while the index for energy services was 0.2% lower, after being unchanged in July....the energy commodity index was down 3.3% due to a 3.5% decrease in the price of gasoline, the largest component, and a 0.6% decrease in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.8% lower...within energy services, the price index for utility gas service rose 0.1% after falling 1.8% in July and is now 3.5% lower than it was a year ago, while the electricity price index fell 0.3% after rising 0.6% in July....energy commodities are now 7.1% lower than their year ago levels, with gasoline prices also averaging 7.1% lower than they were a year ago, while the energy services price index is 0.8% lower than last August, as even electricity prices are 0.1% lower than a year ago…

The seasonally adjusted food price index was unchanged in August, after being unchanged in June and July, rising 0.3% in May, falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3% in December, 0.2% in November, being unchanged in October, rising 0.1% in September, and by 0.1% last August, as the price index for food purchased for use at home fell 0.2% in August, while the index for food bought to eat away from home was 0.2% higher, as prices at fast food outlets and prices at full service restaurants both rose 0.2% while food at employee sites and schools were on average 0.6% lower...

In the food at home categories, the price index for cereals and bakery products was 0.3% lower as average bread prices fell 0.7%, breakfast cereal prices fell 1.5%, and the price index for flour and prepared flour mixes fell 0.8%...at the same time, the price index for the meats, poultry, fish, and eggs group was 0.7% lower, as the beef and veal price index fell 0.8%, average pork prices fell 1.0%, and egg prices were 2.6% lower...on the other hand, the seasonally adjusted index for dairy products was 0.2% higher, as average prices for milk rose 0.3% and cheese prices rose 0.6%...however, the fruits and vegetables index was 0.5% lower on a 1.4% decrease in the price index for fresh fruits and a 1.2% decrease in the price index for frozen fruits and vegetables...meanwhile, the beverages index was unchanged, as prices for beverage materials including tea fell 1.1% while carbonated drink prices were 0.6% higher....lastly, the index for the ‘other foods at home’ category was 0.3% higher, as prices for olives, pickles, relishes rose 2.6%, baby food prices rose 0.6%, and the snack food index rose 0.5%....the itemized list for price changes of over 100 separate food items is included at the beginning of  Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last July, only prices for eggs, which are down 15.9% from a year ago, have seen a price change of more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.3% in August after rising by 0.3% in July, 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for each of  the five months prior to that, the composite price index of all goods less food and energy goods was 0.2% higher, while the more heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was down 0.2%, as the price index for living room, kitchen, and dining room furniture fell 1.5%, the index for other furniture fell 4.0%, the price index for nonelectric cookware and tableware fell 3.3%, and the price index for laundry appliances was 4.2% lower....on the other hand, the apparel price index was 0.2% higher on a 3.0% increase in the price index for men's suits, sport coats, and outerwear, a 2.5% increase in the index for boy's apparel, and a 2.3% increase in the price index for men's footwear... in addition, the price index for transportation commodities other than fuel was 0.2% higher even though prices for new cars and trucks fell 0.1%, because prices for used cars and trucks rose 1.1%, and the price index for parts and equipment other than tires rose 0.9%... meanwhile, prices for medical care commodities averaged 0.3% higher as nonprescription drugs prices rose 1.6%....at the same time, the recreational commodities index was 0.2% higher despite a 1.7% decrease in TV prices because the price index for sporting goods rose 0.8%, the price index for newspapers and magazines rose 1.4% and the price index for toys, games, hobbies and playground equipment rose 1.3%....in addition, the education and communication commodities index was 0.9% higher on a 1.2% increase in the price index for computers, peripherals, and smart home assistant devices and a 2.1% price increase for college textbooks...lastly, a separate price index for alcoholic beverages was 0.1% higher, while the price index for ‘other goods’ rose 0.7% on a 3.4% increase 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, a 0.2% increase in homeowner's equivalent rent, which were offset by a 2.3% decrease in prices for lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.1% lower....at the same time, the price index for medical care services was 0.9% higher, as outpatient hospital services rose 1.5% and health insurance rose 1.9%...meanwhile, the transportation services price index was 0.4% higher as the price index for vehicle maintenance and servicing rose 1.2%, airline fares rose 1.7%, and intercity bus fares rose 2.3%....in addition, the recreation services price index was 0.6% higher as cable and satellite television service rose 1.0% and admission to sporting events rose 0.9%....on the other hand, the index for education and communication services was 0.1% lower as the index for technical and business school tuition and fees fell 2.2%....lastly, the index for other personal services was up 0.2% as the price index for personal care services such as haircuts rose 0.4% and laundry and dry cleaning services were 0.3% higher...

Among core line items, prices for televisions, which now average 20.2% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.8% since last August, and the price index for women's dresses, which is down 11.6% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 18.6% over the past year, the price index for infants' furniture, which has increased 12.2% year over year, and intercity bus-fare, which has increased by 21.8% since last August, are the only line items to have increased by a double digit magnitude over that span....

Retail Sales Up by 0.4% in August after June and July Sales Revised Higher

Seasonally adjusted retail sales rose 0.4% in August after retail sales for June and July were revised higher...the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $526.1 billion during the month, which was up 0.4 percent (±0.5%)* from July's revised sales of $524.2 billion and 4.1 percent (±0.7 percent) above the adjusted sales in August of last year...July's seasonally adjusted sales were revised from the $523.5 billion reported last month to $524.2 billion, while June sales were also revised higher, from $519.9 billion to $520.055  billion, with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 2.4%, from $533,058 million in July to $545,940 million in August, while they were up 4.2% from the $523,933 million of sales in August a year ago...the revision to June’s sales means that 2nd quarter sales were a bit more than $0.6 billion higher at an annual rate than previously reported, which should be enough to add 0.01 percentage point to 2nd quarter GDP when the 3rd estimate is published at the end of the month…

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the June to July change under "Jun 2019 (r)evised", and the revised July 2018 to July 2019 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance July sale estimates, before this month's revision, is here....

August 2019 retail sales table

To compute August's real personal consumption of goods data for national accounts from this August retail sales report, the BEA will use the corresponding price changes from the August consumer price index, which we reviewed earlier….to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals...from the third line on the above table, we can see that August retail sales excluding the 0.9% drop in sales at gas stations were up by 0.5%....then, subtracting the figures representing the 0.2% decrease in grocery & beverage sales and the 1.2% decrease in food services sales from that total, we find that core retail sales were up by a bit more than 0.9% for the month...since the August CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% higher in August, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show an increase of about 0.7% for the month...however, the actual adjustment in national accounts 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 1.8%, the August price index for transportation commodities other than fuel was 0.2% higher, which would suggest that real sales at auto & parts dealers were 1.6% higher once price increases are taken into account... similarly, since sales at drug stores were up 0.7% while prices for medical care commodities were 0.3% higher, that suggests that real sales at drug stores rose 0.4%…on the other hand, while nominal sales at furniture stores were 0.5% lower in August, the home furniture price index was 0.2% lower, which means that real sales of clothing probably fell by about 0.3%...and while nominal sales at clothing stores were 0.9% lower in August, the apparel price index was 0.2% higher, which means that real sales of clothing probably fell by about 1.1%…

In addition to figuring those core retail sales, to make a complete estimate of real July PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the August CPI report showed that the food price index was unchanged, as the price index for food purchased for use at home fell 0.2% while the index for food bought away from home was 0.2% higher...thus, while nominal sales at food and beverage stores were 0.2% lower in August, prices were also 0.2%, which means the sales decline was price related and real sales of food at groceries would be unchanged.…on the other hand the 1.2% nominal decrease in sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests real sales at bars and restaurants fell by 1.4% for the month...meanwhile, while sales at gas stations were down 0.9%, there was a 3.5% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 2.6% higher, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for August will show that real personal consumption of goods rose by about 0.7% in August, after rising by a revised 0.9% in July and by a revised 0.5% in June, after rising by 0.6% in May and by 0.6% in April, after rising 1.9% in March, falling by 0.9% in February and rising by 1.7% in January...at the same time, the 1.4% decrease in real sales at bars and restaurants will have a substantial negative impact on August's real personal consumption of services...

Producer Price Index Rose 0.1% August On Greater Demand for Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.1% in August, even as prices for finished wholesale goods fell by 0.5%, because the more heavily weighted margins of final services providers increased by 0.3%...that followed a July report that indicated the PPI rose 0.2%, as prices for finished wholesale goods increased 0.4%, while margins of final services providers decreased by 0.1%, a June report that indicated the PPI rose 0.1%, as prices for finished wholesale goods decreased 0.4%, while margins of final services providers increased by 0.4%, a revised May report that now shows the PPI was 0.1% lower, as prices for finished wholesale goods averaged 0.3% lower while average margins of final services providers were unchanged, and a revised April report that now has the PPI 0.5% higher, with prices for finished wholesale goods up 0.4% and margins of final services providers now up 0.6%....on an unadjusted basis, producer prices are 1.8% higher than a year ago, up from the 1.7% year over year change indicated by last month's report...meanwhile, the core producer price index, which excludes food, energy and trade services, was up 0.4% for the month, and is now 1.9% higher than in August a year ago, up from the 1.7% YoY increase shown in July...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.5% lower in August, after being 0.4% higher in July, 0.4% lower in June, 0.3% lower in May, 0.4% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, 0.6% lower in December, 0.5% lower in November, 0.8% higher in October, and 0.1% lower in September of 2018....the finished goods index fell in July because the wholesale price index for energy was 2.5% lower, after rising by 2.3% in July, but after falling by 3.1% in June and by a revised 1.1% in May, and because the price index for wholesale foods fell 0.6% in August after rising 0.2% in July and 0.6% in June, and while the index for final demand for core wholesale goods (excluding food and energy) was unchanged after rising 0.1% in July....wholesale energy prices were lower on a 6.6% decrease in wholesale prices for gasoline, a 7.7% drop in wholesale prices for liquefied petroleum gas, and 12.1% lower wholesale prices for home heating oil, while the wholesale food price index fell on a 12.0% decrease in the wholesale price index for grains and a 11.8% increase in the wholesale price index for fresh and dry vegetables, even as wholesale egg prices rose 21.6%....among wholesale core goods, wholesale prices for iron and steel scrap rose 8.3% and wholesale prices for mobile homes rose 8.4%, while wholesale prices for industrial chemicals fell 2.9%..

At the same time, the index for final demand for services rose 0.3% in August, after falling 0.1% in July, rising 0.4% in June, being unchanged in May, rising a revised 0.6% in April, as the index for final demand for trade services rose 0.2% in August and the index for final demand for transportation and warehousing services rose 0.3%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.5% higher.... among trade services, seasonally adjusted margins for fuels and lubricants retailers rose 16.8%, margins for auto parts and tire retailers rose 6.2%, margins for apparel, footwear, and accessories retailers rose 3.5%, and margins for chemicals and allied products wholesalers rose 2.8%, while margins for machinery and vehicle wholesalers fell 4.2%... among transportation and warehousing services, margins for air transportation of freight fell 1.3% while margins for airline passenger services rose 1.4%...among the components of the core final demand for services index, margins for guestroom rentals rose 6.4%, margins for arrangement of vehicle rentals and lodging rose 5.0%, and margins for wireless telecommunication services rose 2.3%..

This report also showed the price index for intermediate processed goods fell 0.7% in August, after rising 0.2% in July, falling 1.1% in June and a revised 0.3% in May, after rising a revised 0.1% in April....the price index for intermediate energy goods fell 2.2%, as refinery prices for gasoline fell 6.6%, refinery prices for diesel fuel fell 5.7%, and prices for natural gas sold to electric utilities fell 2.2%...however, prices for intermediate processed foods and feeds rose 0.3%, as the producer price index for prepared animal feeds rose 1.2% and producer prices for meats rose 3.0%... meanwhile, the core price index for intermediate processed goods less food and energy fell 0.4% as producer prices for primary nonferrous metals decreased 1.9% and producer prices for plywood fell 2.7%... prices for intermediate processed goods are now 2.8% lower than in August a year ago, the fourth consecutive year over year decrease following 29 months of year over year increases, which had been preceded by 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 1.0% in August, after rising 1.6% in July, falling 3.3% in June, falling a revised 3.8% in May, but after rising a revised 1.7% in April...that was as the August price index for crude energy goods fell 2.2% as crude oil prices fell 10.9% and unprocessed natural gas prices fell 4.5%, while the price index for unprocessed foodstuffs and feedstuffs fell 0.5% on a 9.7% decrease in producer prices for wheat and a 13.2% decrease in producer prices for corn....at the same time, the index for core raw materials other than food and energy materials rose 0.1%, as wastepaper prices rose 4.7% and prices for unprocessed iron and steel scrap rose 8.3%...this raw materials index is still 7.8% lower than a year ago, as the year over year change on this index has been negative all year...

Lastly, the price index for services for intermediate demand rose 0.5% in August, after falling 0.2% in July, rising 0.2% in June, falling a revised 0.2% in May, rising a revised 0.4% in April, and 0.5% in March...the price index for intermediate trade services was 0.6% higher, as margins for intermediate paper and plastic product wholesalers rose 2.2% and margins for intermediate chemicals wholesalers rose 2.8%…at the same time the index for transportation and warehousing services for intermediate demand rose 0.5%, as the price index for intermediate arrangement of freight and cargo transportation rose 4.8% and the price index for services related to water transportation rose 1.5%...in addition, the core price index for intermediate services less trade, transportation, and warehousing also rose 0.5%, as the price index for nonresidential real estate services rose 3.3% and the index for traveler accommodation services rose 5.8% while the price index for television advertising time sales fell 2.0%....over the 12 months ended in June, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.5% higher than it was a year ago...

July Business Sales Up 0.3%, Business Inventories Up 0.4%

After the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July (pdf), which incorporates the revised July retail data from that August report and the earlier published July wholesale trade report and last week’s July 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 $1,462.9 billion in July, up 0.3 percent (±0.1%) from June revised sales, and up 1.3 percent (±0.3 percent) from July sales of a year earlier...note that total June sales were concurrently revised down from the originally reported $1,460.1 billion to $1,458.6 billion....manufacturer's sales were down by 0.2% to $504,021 million in July, while retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, rose 0.8% to $459,298 million, and wholesale sales rose 0.3% to $499,596 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,042.6 billion at the end of July, up 0.4% (±0.1%) from June, and 4.8 percent (±0.4 percent) higher than in July a year earlier...the value of end of June inventories was revised down from the $2,035.7 billion reported last month to $2,035.2 billion, still statistically unchanged from May...seasonally adjusted inventories of manufacturers were estimated to be valued at $696,484 million, 0.2% higher than in June, inventories of retailers were valued at $667,077 million, 0.8% more than in June, while inventories of wholesalers were estimated to be valued at $679,084 million at the end of July, up 0.2% from June...

In national accounts, all types of business inventories are adjusted for inflation with an item-appropriate component of the producer price index...the July producer price index reported that prices for finished goods were on average 0.4% higher, that prices for intermediate processed goods were on average 0.2% higher, while prices for unprocessed goods were 1.6% higher...those increases suggest that the 0.4% July inventory increase was largely price related, and that real (inflation adjusted) inventories were probably a bit lower....since real private inventories grew at an inflation adjusted $69.0 billion annual rate in the 2nd quarter, any real inventory decrease in the 3rd quarter will reverse that and correspondingly subtract from GDP by whatever percentage of GDP that real change in inventory ends the 3rd quarter at...

Job Openings Down in July, Hiring and Firing Up; Job Quitting at a Record High

The Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 31,000, from 7,248,000 in June to 7,217 ,000 in July, after June job openings were revised 100,000 lower, from 7,348,000 to 7,248,000...July's jobs openings were also 3.0% lower than the 7,442,000 job openings reported for July a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.6% in June to 4.5% in July, and was down from 4.8% in July a year ago....the 55,000 job opening decrease to 158,000 openings in the wholesale trade sector appears to be the largest percentage decrease for the month, while the increase from 129,000 to 171,000 information sector job openings looks to be the largest percentage increase... (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in July, seasonally adjusted new hires totaled 5,953,000, up by 237,000 from the revised 5,716,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed rose from 3.8% in June to 3.9% in July, while it was the same as in July a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 246,000, from 5,513,000 in June to 5,759,000 in July, while the separations rate as a percentage of the employed rose from 3.6% to 3.8%, which was unchanged from the separations rate in July a year ago (see table 3)...subtracting the 5,759,000 total separations from the total hires of 5,953,000 would imply an increase of 194,000 jobs in July, somewhat higher than the revised payroll job increase of 159,000 for July reported by the August establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings.....

Breaking down the seasonally adjusted job separations, the BLS finds that a record 3,592,000 of us voluntarily quit our jobs in July, up by 130,000 from the revised 3,462,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, rose to 2.4% of total employment, up from 2.3% in June and up from 2.3% in July a year earlier (see details in table 4)....in addition to those who quit, another 1,799,000 were either laid off, fired or otherwise discharged in July, up by 88,000 from the revised 1,711,000 who were discharged in June, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, while it was unchanged from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 368,000 in July, up from 340,000 in June, for an 'other separations’ rate of 0.2%, which was the same rate as in June and as in July of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

 

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

Sunday, September 8, 2019

August’s jobs report; July’s trade deficit, construction spending & factory inventories

In addition to the Employment Situation Summary for August from the Bureau of Labor Statistics, this week also saw the release of three July reports that provide us with inputs to 3rd quarter GDP, and in some cases suggest revisions to 2nd quarter GDP: the July report on our International Trade from the Bureau of Economic Analysis, and the July report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for July, both from the Census Bureau...

The week’s major privately issued reports included the ADP Employment Report for August; the light vehicle sales report for August from Wards Automotive, which estimated that vehicles sold at a 16.99 million annual rate in August, up from the 16.82 million annual rate in July, and up from the 16.66 million annual rate in August a year ago; and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the August Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 49.1% in August, down from 51.2% in July, and the lowest reading since January 2016, and the August Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) rise to 56.4% in August, up from 53.7% in July, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in August than in July...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...   

Employers Add 130,000 Jobs in August; Employment Rate at a 10 Year High as 590,000 Find Work

The Employment Situation Summary for August reported weak job creation despite a boost from Census hiring, but that those who reported they were employed jumped by the most in over a year, resulting in the highest employment rate since December 2008….estimates extrapolated from the establishment survey data indicated that employers added a seasonally adjusted 130,000 jobs in August, after the payroll job increase for July was revised down from 164,000 to 159,000, and the payroll jobs increase for June was revised down from 193,000 to 178,000…those revisions mean that this report represents a total of just 110,000 more seasonally adjusted payroll jobs than were reported last month, less than the increase in the working age population and far less than the 174,000 monthly average job gain over the last 12 months...the unadjusted data shows that there were actually 348,000 more payroll jobs in August, after July had seen an end of the school year related decrease of 1,074,000 jobs, so large seasonal adjustments continue to impact the monthly headline job count...

Seasonally adjusted job increases were spread throughout the private goods producing and service sectors and government, which were offset by decreases of 11,100 jobs in the retail sector, 5,400 jobs in private education, 5,000 jobs in mining, 1,400 utility jobs, and 500 jobs in transportation and warehousing....the broad professional and business services category added 37,000 jobs, as 10,200 more were added by computer systems design services and 15,400 more workers found work with temporary employment services....employment in health care and social assistance rose by 36,800, with the addition of 17,100 jobs with individual and family services and 8,800 jobs in hospitals....federal government payrolls increased by 28,000, with the initial hiring of 25,000 for the decennial census, and another 15,000 found jobs in the financial sector, with 7,500 of those in insurance......employment in construction increased by 14,000, with 7,000 of those working on residential buildings, while the leisure and hospitality sector added a seasonally adjusted 12,000 jobs, by virtue of the addition of 11,900 more jobs in bars and restaurants...meanwhile, the other major sectors, including manufacturing, wholesale trade, and state and local government all saw increases of less than 10,000 in payroll employment over the month, while employment in the information sector was unchanged....

The establishment survey also showed that average hourly pay for all employees rose by 11 cents an hour to $28.11 an hour, after it had increased by a revised 9 cents an hour in July; at the same time, the average hourly earnings of production and non-supervisory employees increased by 11 cents to $23.59 an hour, after July's pay figure was also revised a penny higher....employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.4 hours in August, while hours for production and non-supervisory personnel increased by 0.1 hour to 33.6 hours...meanwhile, the manufacturing workweek increased by 0.2 hours to 40.6 hours, while average factory overtime fell by a tenth of an hour to  3.2 hours...

At the same time, the seasonally adjusted extrapolation from the August household survey indicated that the number of those who would self-report being employed rose by an estimated 590,000 to 157,878,000, the biggest jump in the employed since February of last year, while the similarly estimated number of those who would report unemployment fell by 19,000 to 6,044,000; which together meant that August saw a net increase of 571,000 in the total labor force.…since the working age population had grown by 207,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 364,000 to 95,510,000, while the labor force participation rate increased by 0.2% to 63.2%....at the same time, the jump in number employed vis-a-vis the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.2% to 60.9%, the highest since December 2008...on the other hand, the decrease in count of those unemployed as a percentage of the labor force was not enough to change the unemployment rate, as it remained at 3.7%.....meanwhile, the number who reported they were involuntarily working part time rose by 397,000 to 4,381,000 in August, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.0% in July to 7.2% in August.....

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.. 

July Trade Deficit Down 2.7% After 2nd Quarter Deficits Revised Higher

Our trade deficit fell by 2.7% in July as the value of our exports increased and the value of our imports decreased....the Census report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit decreased by $1.519 billion to $53,989 billion in July from a revised June deficit of $55,508 billion, which had previously been reported at $55.154 billion...trade figures going back to January were revised with this report, which on net left the 2nd quarter trade deficit more than $1.6 billion higher than was previously reported, suggesting a downward revision to 2nd quarter GDP, the magnitude of which depends on the 1st quarter revisions…after rounding, the value of our July exports rose by $1.2 billion to $207.4 billion on a $1.2 billion increase to $138.2 billion in our exports of goods, which was slightly offset by a decrease of less than $0.1 billion to $69.2 billion in our exports of services, while our imports fell by $0.4 billion to $261.4 billion on a $0.4 billion decrease to $211.8 billion in our imports of goods and less than a $0.1 billion increase to $49.6 billion in our imports of services...export prices were on average 0.2% higher in July, so the month's change in real exports was less than their nominal change by that percentage, while import prices were also 0.2% higher, meaning that our real imports were likewise smaller than their nominal value by that percentage..

The increase in our July exports was due to greater exports of consumer goods, capital goods and automobiles, which were partially offset by a drop in our exports of industrial supplies and materials....referencing the Full Release and Tables for July (pdf), in Exhibit 7 we find that our exports of consumer goods rose by $1,549 million to $17,720 million on a $1190 million increase in our exports of pharmaceutical preparations and a $251 million increase in our exports of artwork, antiques, and other collectibles, and that our exports of capital goods rose by $831 million to $45,690 million on a $598 million increase in our exports of drilling & oilfield equipment and a $257 million increase in our exports of civilian aircraft, and that our exports of automotive vehicles, parts, and engines rose by $615 million to $13,901 million on a $676 million increase in our exports of new and used passenger cars...in addition, our exports of other goods not categorized by end use rose by $124 million to $5,682 million...partially offsetting those increases, our exports of industrial supplies and materials fell by $1,417 million to $42,837 million on a $510 million decrease in our exports of crude oil, a $231 million decrease in our exports of metallurgical grade coal, a $226 million decrease in our exports of fuel oil, and a $217 million decrease in our exports of petroleum products other than fuel oil, and our exports of foods, feeds and beverages fell by $244 million to $11,779 million on a $76 million decrease in our exports of soybeans...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that a drop in our imports of capital goods was responsible for the $0.4 billion decrease in our goods imports, while their drop was partially offset by increased imports of industrial supplies and materials and consumer goods...our imports of capital goods fell by $1,506 million to $55,408 million on a $1,406 million decrease in our imports of computers and a $203 million decrease in our imports of semiconductors, and our imports of other goods not categorized by end use fell by $697 million to $9,797 million...mostly offsetting those decreases, our imports of industrial supplies and materials rose by $860 million to $44,008 million on an increase of $953 million in our imports of petroleum products other than fuel oil, an increase of $270 million in our imports of fuel oil, an increase of $265 million in our imports of fertilizers and an increase of $219 million in our imports of organic chemicals, which were in turn themselves offset by a decrease of $1153 million in our imports of crude oil...in addition, our imports of consumer goods rose by $604 million to $55,344 million on an increase of $514 million in our imports of cellphones, a $490 million increase in our imports of toys, games, and sporting goods, and a $231 million increase in our imports of furniture, offset by a $326 million decrease in our imports of artwork, antiques, and other collectibles and $304 million decrease in our imports of televisions, while our imports of automotive vehicles, parts and engines rose by $106 million to $32,738 million as a $543 million decrease in our imports of passenger cars was more than offset by a $391 increase in our imports of vehicle parts and accessories, and increased imports of trucks, buses, and special purpose vehicles, engines, and tires....in addition. our imports of foods, feeds, and beverages rose by $72 million to $12,770 million...

The Full Release and Tables pdf for this month's report also summarizes Exhibit 19, which gives us surplus and deficit details on our goods trade with selected countries:

The July figures show surpluses, in billions of dollars, with South and Central America ($3.7), Hong Kong ($2.4), Brazil ($0.7), United Kingdom ($0.3), OPEC ($0.3), and Singapore ($0.1). Deficits were recorded, in billions of dollars, with China ($29.6), European Union ($15.9), Mexico ($8.9), Germany ($6.2), Japan ($5.9), Italy ($3.1), Canada ($3.1), India ($2.1), Taiwan ($2.0), France ($1.9), South Korea ($1.5), and Saudi Arabia (less than $0.1).

  • • The balance with members of OPEC shifted from a deficit of $0.3 billion to a surplus of $0.3 billion in July. Exports decreased $0.3 billion to $3.6 billion and imports decreased $0.8 billion to $3.3 billion.
  • • The deficit with China decreased $0.5 billion to $29.6 billion in July. Exports decreased $0.3 billion to $9.3 billion and imports decreased $0.8 billion to $39.0 billion.
  • • The surplus with South and Central America decreased $1.1 billion to $3.7 billion in July. Exports decreased $0.9 billion to $13.0 billion and imports increased $0.2 billion to $9.3 billion.

To gauge the impact of July trade in goods on 3rd 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, except they are not annualized here....from that table, we can compute that 2nd quarter real exports of goods averaged 148369.7 million monthly in 2012 dollars, while inflation adjusted July exports were at 148,740 million in that same 2012 dollar quantity index representation... annualizing the change between the two figures, we find that July's real exports are running at a 1.00% annual rate above those of the 2nd quarter, or at a pace that would add about 0.12 percentage points to 3rd quarter's GDP if they were continued through August and September.....in a similar manner, we find that our 2nd quarter real imports averaged 233,235 million monthly in chained 2012 dollars, while inflation adjusted July imports were at 234,249 million...that would indicate that so far in the 3rd quarter, our real imports have grown at annual rate of roughly 1.75% from those of the 2nd 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 1.75% rate would subtract about 0.27 percentage points from 3rd quarter GDP....hence, if the July trade deficit is maintained throughout the 3rd quarter, our deteriorating balance of trade in goods over that of the 2nd quarter would subtract 0.15 percentage points from the growth of 3rd 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 adjust for all their price changes...

Construction Spending Rose 0.1% in July after 2nd Quarter Spending was Revised Lower

The Census Bureau report on construction spending for July (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,288.8 billion annually if extrapolated over an entire year, which was less than 0.1 percent (±1.3 percent)* above the revised annualized estimate of $1,288.1 billion of construction spending in June but 2.7 percent (±1.6 percent) below the estimated annualized level of construction spending in July of last year....the June construction spending estimate was revised 0.1% higher, from $1,287.0 billion to $1,288.1 billion, while the annual rate of construction spending for May was revised nearly 0.5% lower, from $1,303.4 billion to $1,297.464 billion....on net, those revisions would suggest a downward revision of 0.03 percentage points to 2nd quarter GDP when the third estimate is released at the end of September, assuming the net impacts from the inflation adjustments are similar to those we saw in the 2nd estimate...

A further breakdown of the different subsets of construction spending is provided in a Census summary, which precedes the detailed spreadsheets:

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $963.1 billion, 0.1 percent (±0.7 percent)* below the revised June estimate of $963.7 billion. Residential construction was at a seasonally adjusted annual rate of $506.7 billion in July, 0.6 percent (±1.3 percent)* above the revised June estimate of $503.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $456.4 billion in July, 0.8 percent (±0.7 percent) below the revised June estimate of $460.2 billion.
  • Public Construction: In July, the estimated seasonally adjusted annual rate of public construction spending was $325.7 billion, 0.4 percent (±2.5 percent)* above the revised June estimate of $324.3 billion. Educational construction was at a seasonally adjusted annual rate of $73.3 billion, 1.6 percent (±2.8 percent)* above the revised June estimate of $72.1 billion. Highway construction was at a seasonally adjusted annual rate of $97.0 billion, 2.7 percent (±6.4 percent)* below the revised June estimate of $99.7 billion.

Construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of July spending reported in this release on 3rd 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…the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for each of the various components of non-residential investment, so in lieu of trying to adjust for all of those price indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an approximate estimate...

That price index showed that aggregate construction costs were up 0.6% in July, after rising 0.2% in June but after being unchanged from April to May...on that basis, we can estimate that July construction costs were roughly 0.8% more than those of May and those of April, and obviously 0.6% more than those of June...we then use those percentages to inflate the lower priced spending figures for each of those months, which is arithmetically the same as deflating July construction spending, for comparison purposes...annualized construction spending in millions of dollars for the second quarter is given as 1,288,070 for June, 1,297,464 for May, and 1,307,136 for April, while it was at 1,288,794 million in July ...thus to compare July's inflation adjusted construction spending to that of the first quarter, our arithmetic formula becomes: 1,288,794 / (((1,288,070 * 1.006) + (1,297,464 *1.008) + (1,307,136 * 1.008)) / 3) = 0.98601, meaning real construction spending in July was down 1.4% vis a vis the 2nd quarter, or down at a 5.6% annual rate...to figure the effect of that change on GDP,  we take the difference between the second quarter spending average and that of July and take that result as a fraction of 2nd quarter GDP, and find that aggregate July construction spending is falling at a rate that would subtract approximately 0.42 percentage points from 3rd quarter GDP should we see no improvement from July's adjusted figures in August or September…

Factory Shipments Down 0.2% in July, Factory Inventories Up 0.2%

The July Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $6.9 billion or 1.4 percent to $500.3 billion in July, following an increase of 0.5% to $493.4 billion in June, which was revised from the 0.6% increase to $493.8 billion reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the July advance report on durable goods we reported on last week...on those revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that  here:

  • Summary: New orders for manufactured goods in July, up two consecutive months, increased $6.9 billion or 1.4 percent to $500.3 billion, the U.S. Census Bureau reported today. This followed a 0.5 percent June increase. Shipments, down following two consecutive monthly increases, decreased $0.9 billion or 0.2 percent to $504.0 billion. This followed a 0.1 percent June increase. Unfilled orders, up following three consecutive monthly decreases, increased $0.6 billion or virtually unchanged to $1,161.5 billion. This followed a 0.6 percent June decrease. The unfilled orders‐to‐shipments ratio was 6.67, up from 6.55 in June. Inventories, up ten of the last eleven months, increased $1.2 billion or 0.2 percent to $696.5 billion. This followed a 0.1 percent June increase. The inventories‐to‐shipments ratio was 1.38, unchanged from June.
  • New orders for manufactured durable goods in July, up two consecutive months, increased $5.0 billion or 2.0 percent to $250.2 billion, down from the previously published 2.1 percent increase. This followed a 1.8 percent June increase. Transportation equipment, also up two consecutive months, drove the increase, $5.7 billion or 7.0 percent to $86.4 billion. New orders for manufactured nondurable goods increased $2.0 billion or 0.8 percent to $250.1 billion.
  • Shipments of manufactured durable goods in July, down following two consecutive monthly increases, decreased $2.9 billion or 1.1 percent to $253.9 billion, unchanged from the previously published decrease. This followed a 0.9 percent June increase. Transportation equipment, also down following two consecutive monthly increases, led the decrease, $1.8 billion or 2.0 percent to $86.5 billion. Shipments of manufactured nondurable goods, up following two consecutive monthly decreases, increased $2.0 billion or 0.8 percent to $250.1 billion. This followed a 0.7 percent June decrease. Petroleum and coal products, also up following two consecutive monthly decreases, led the increase, $1.3 billion or 2.4 percent to $53.4 billion.
  • Unfilled orders for manufactured durable goods in July, up following three consecutive monthly decreases, increased $0.6 billion or virtually unchanged to $1,161.5 billion, down from the previously published 0.1 percent increase. This followed a 0.6 percent June decrease. Fabricated metal products, up two consecutive months, led the increase, $0.4 billion or 0.5 percent to $86.5 billion.
  • Inventories of manufactured durable goods in July, up twelve of the last thirteen months, increased $1.4 billion or 0.3 percent to $427.1 billion, down from the previously published 0.4 percent increase. This followed a 0.3 percent June increase. Transportation equipment, also up twelve of the last thirteen months, led the increase, $1.4 billion or 1.0 percent to $141.1 billion. Inventories of manufactured nondurable goods, down four consecutive months, decreased $0.2 billion or 0.1 percent to $269.4 billion. This followed a virtually unchanged June decrease. Chemical products, down following two consecutive monthly increases, drove the decrease, $0.2 billion or 0.3 percent to $90.7 billion.. 

To estimate the effect of those July factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased by 0.3% at $243,670 million; the value of work in process inventories rose 0.5% to $214,950 million, and materials and supplies inventories were valued 0.2% lower at $237,864 million.…meanwhile, the July producer price index reported that prices for finished goods were on average 0.4% higher, that prices for intermediate processed goods were on average 0.2% higher, while prices for unprocessed goods were 1.6% higher....assuming similar valuations for like types of inventories, that would suggest that July's real finished goods inventories were about 0.1% lower, that real inventories of intermediate processed goods were 0.3% higher, and real raw material inventory inventories were about 1.8% lower...since real NIPA factory inventories were somewhat higher in the 2nd quarter, the fact that this report appears to indicate a real decrease in aggregate July factory inventories will therefore have a corresponding negative impact on the growth rate of 3rd 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…)      

Sunday, September 1, 2019

2nd estimate of 2nd quarter GDP; July’s income and outlays, durable goods

The key economic reports that were released this week were the 2nd estimate of 2nd quarter GDP and the July report on Personal Income and Spending, both from the Bureau of Economic Analysis ....the week also saw the release of the July advance report on durable goods from the Census Bureau, the S&P CoreLogic Case-Shiller Home Price Index for June from S&P, which is an index derived from the relative average of April, May and June home prices, and which reported that home prices nationally for those 3 months averaged 3.1% higher than the prices for the same homes that sold during the same 3 month period a year earlier, and the Chicago Fed National Activity Index (CFNAI) for July, a weighted composite index of 85 different economic metrics, which fell to -0.36 in July, down from a revised +0.03 in June...however, the 3 month average of the CFNAI rose to –0.14, up from –0.30 in June, but was still a negative, which would indicate national economic activity has been below the historical trend over those recent months...

In addition, this week saw the release of the last two regional Fed manufacturing surveys for August: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose from −12 in July to +1 in August, suggesting that the region's manufacturing has stopped shrinking, and the Dallas Fed Texas Manufacturing Outlook Survey for August,  which also includes southeast New Mexico and northeast Louisiana as well as Texas, and which indicated its general business activity index rose from -6.3 in July to +2.7 in August, indicating a return to a slow expansion in manufacturing within the region's energy focused economy, after 3 months of contraction... 

2nd Quarter GDP Revised to Indicate Growth at a 2.0% Rate

The Second Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.0% rate in the quarter, revised from the 2.1% growth rate reported in the advance estimate last month, as fixed investment, growth of inventories, and exports all shrunk more than previously estimated, the impact of which more than offset an upward revisions to personal consumption expenditures.....In current dollars, our second quarter GDP grew at a 4.63% annual rate, increasing from what would work out to be a $21,098.8 billion a year rate in the 1st quarter to a $21,339.1 billion annual rate in the 2nd quarter, with the headline 2.0% annualized rate of increase in real output arrived at after annualized GDP inflation adjustments averaging 2.4% were applied to the current dollar change of the GDP components...

As we review this month's revisions, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit more than 4 times of the change  that actually occurred from one 3 month period to the next, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes now 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 a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the Full Release & Tables for the second estimate of 2nd quarter GDP, which is linked to on the BEA's main GDP page...specifically, we’ll be using table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 3rd quarter of 2015; 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 full pdf for the 1st quarter advance estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 4.3% growth rate reported last month to a 4.7% growth rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 7.05% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated dollar weighted consumer inflation grew at a 2.3% annual rate in the 2nd quarter...real consumption of durable goods grew at a 13.0% annual rate, which was revised from the 12.9% growth rate shown in the advance report, and added 0.87 percentage points to GDP, as real consumption of both motor vehicles and recreational goods and vehicles grew at rates in excess of 16% to boost durables consumption....real consumption of nondurable goods by individuals rose at a 6.8% annual rate, revised from the 6.0% increase rate reported in the 1st estimate, and added 0.91 percentage points to 2nd quarter economic growth, as real growth in clothing & footwear consumption at a 14.4% annual rate accounted for more than a third of the non-durables growth….at the same time, consumption of services grew at a 2.8% annual rate, revised from the 2.5% growth rate reported last month, and added 1.32 percentage points to the final GDP tally, with a 3.2% real growth rate in health care services providing the largest services contribution...

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 6.1% annual rate in the 2nd quarter, revised from the 5.5% investment contraction reported last month, as real private fixed investment shrunk at a 1.1% rate, rather than at the 0.8% contraction rate reported in the advance estimate, while the previously reported contraction in inventory growth was greater than previously estimated....real investment in non-residential structures was revised from a contraction at a 10.6% rate to shrinking at a 9.4% rate, while real investment in equipment grew at a 0.7% rate, statistically unrevised from the previous estimate....at the same time, the quarter's investment in intellectual property products was revised from growth at a 4.7% rate to growth at a 3.7% rate, while the contraction rate of residential investment was revised from -1.5% to -2.9% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.30 percentage points from the 2nd quarter's growth rate, the increase in investment in equipment added 0.04 percentage points to the quarter's growth, greater investment in intellectual property added 0.17 percentage points, while the decrease in investment in residential structures subtracted 0.11 percentage points from the 2nd quarter's GDP growth...

At the same time, the growth in real private inventories was revised from the originally reported $71.7 billion in inflation adjusted dollars to show inventory grew at an inflation adjusted $69.0 billion rate...this came after inventories had grown at an inflation adjusted $116.0 billion rate in the 1st quarter, and hence the revised $47.0 billion decrease in real inventory growth from that of the 1st quarter subtracted 0.91 percentage points from the 2nd quarter's growth rate, revised from the 0.86 percentage point subtraction from inventory growth shown in the advance estimate....however, since growth in inventories would indicate that more of the goods produced during the quarter were left "sitting on the shelf” or in a warehouse, their decrease by $47.0 billion meant that real final sales of GDP were actually greater by that much, and therefore the BEA found that real final sales of GDP grew at a 3.0% rate in the 2nd quarter, same as the real final sales rate shown in the advance estimate due to rounding..

The previously reported decrease in real exports was revised to a larger decrease with this estimate, while at the same time the previously reported small increase in real imports was statistically unrevised, and as a result our foreign trade was an even greater subtraction from GDP than was reported in the advance estimate...our real exports shrunk at a 5.8% rate rather than the 5.2% rate reported in the first 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 0.71 percentage points from the 2nd quarter's growth rate, somewhat more than the 0.63 percentage point subtraction shown in the previous report....meanwhile, the previously reported 0.1% increase in our real imports was unchanged, and since imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been because it was not produced domestically, their increase subtracted 0.01 percentage point more from 2nd quarter GDP...thus, our deteriorating trade balance subtracted a net 0.72 percentage points from 2nd quarter GDP, revised from the rounded 0.65 percentage point subtraction that had been indicated in the advance estimate…

Finally, there was also net downward revision to real government consumption and investment in this 2nd estimate, as the entire government sector grew at a 4.5% rate, revised from the 5.0% growth rate previously reported...real federal government consumption and investment was seen to have grown at a 8.1% rate from the 1st quarter in this estimate, which was revised from the 7.9% growth rate in the 1st estimate...real federal outlays for defense were revised to show growth at a 3.1% rate, rather than the 2.8% growth rate previously reported, and added 0.12 percentage points to 2nd quarter GDP, while all other federal consumption and investment grew at a 16.0% rate, up from the 15.9% rate previously reported, and added 0.40 percentage points to 2nd quarter GDP....meanwhile, real state and local consumption and investment grew at a 2.3% rate in the quarter, which was revised from the 3.2% growth rate reported in the 1st estimate, and added 0.25 percentage points to 2nd 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, thus indicating there was an increase in the output of those goods or services...

July Personal Income Up 0.1%, Personal Spending Up 0.6%, PCE Price Index Up 0.2%

The monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is one of the most important regular economic release we see monthly, since each monthly report on personal consumption expenditures (PCE) accounts for roughly 23% of its quarter's GDP by itself...moreover, this report also computes 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, and reports monthly personal income data, disposable personal income, which is income after taxes, and our monthly national savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, the figure are seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much income and spending would change over a year if July's change in seasonally 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 June to July..

Thus, when the opening line of the press release for the July report tell us "Personal income increased $23.9 billion (0.1 percent) in July", they mean that the annualized figure for seasonally adjusted personal income in July, $18,703.4 billion, was $23.9 billion, or more than 0.1% greater than the annualized personal income figure of $18,679.5 billion extrapolated for June; the actual, unadjusted change in national personal income from June to July, which is an order of magnitude lower, is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by less than 0.3%, from an annual rate of $16,454.0 billion in June to an annual rate of $16,498.4 billion in July....the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in July, the largest contributors to the $23.9 billion annual rate of increase in personal income were an annualized $19.3 billion increase in wages and salaries and an annualized $13.2 billion increase in personal current transfer receipts from government programs such as social security, which were partially offset by an annualized $24 billion drop in interest and dividend income…

For the personal consumption expenditures (PCE) that will be included in 3rd quarter GDP, BEA reports that they increased at $93.1 billion rate, or by somewhat more than 0.6% from June, as the annual rate of PCE rose from $14,568.0 billion in June to $14,661.1 billion in July....June PCE was revised from $14,549.6 billion annually to $14,568.0 billion, while PCE for the months going back to April were also revised as well, all of which were already included in the revised 2nd estimate of 2nd quarter GDP which we reviewed earlier (data in this report, although usually released a business day later than the GDP release, is concurrent with the GDP data)....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $96.4 billion to $15,229.2 billion annually in July, which left total personal savings, which is disposable personal income less total outlays, at a $1,269.2 billion annual rate in July, down from the revised $1,321.2 billion in annualized personal savings in June...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 7.7% in July from the June savings rate of 8.0%...

As you know, before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is a chained price index now based on 2012 prices = 100, which is included in Table 9 in the pdf for this report...that index rose from 109.618 in June to 109.848 in July, a month over month inflation rate that's statistically 0.2098%, which BEA reports as an increase of 0.2 percent, following a rounded increase of 0.1 percent in the PCE price index reported for June...note that when the PCE 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 the real goods and services produced in one month or one quarter to the real goods and services produced in another....that result is shown in table 7 of the PDF, where we see that July's chained dollar consumption total works out to 13,347.3 billion annually, 0.4281% more than June's 13,290.4 billion, a difference in real PCE that the BEA reports as +0.4%...

However, to estimate the impact of the change in PCE on the change in GDP, that month over month change in PCE doesn't help us much, since GDP is reported quarterly....thus we have to compare July's real PCE to the the real PCE of the 3 months of the second quarter....while this report shows real PCE for those three months at an annual rate monthly, the BEA also provides the quarterly 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 2nd quarter was represented by 13,253.4 billion in chained 2012 dollars..(note, that's the same as is shown in table 3 of the pdf for the 2nd quarter GDP report)....when we compare July's inflation adjusted PCE of 13,347.3 billion to the 2nd quarter’s real PCE of 13,253.4 billion, we find that July’s real PCE has grown at a 2.86% annual rate from the 2nd quarter....that means that even if July’s real PCE growth does not improve from the July level during August and September, growth in PCE would still add 1.89 percentage points to the growth rate of 3rd quarter GDP... 

July Durable Goods: New Orders Up 2.1%, Shipments Down 1.1%, Inventories Up 0.4%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $5.0 billion or 2.1 percent to $250.4 billion in July, following a revised increase of 1.8% to $245.3 billion in June's new orders, which had been originally reported as a 2.0% increase to $246.0 billion of new orders...despite the back to back increases, however, year to date new orders are only running 0.3% above those of 2018, a slight increase from the unchanged year to date new orders we saw in this report last month...as is usually the case, the volatile monthly change in new orders for transportation equipment was the reason for the July headline change, as those transportation equipment orders rose $5.7 billion or 7.0 percent to $86.3 billion, on a 47.8% increase to $10,613 million in new orders for commercial aircraft and a 34.4% increase to $3,527 million in new orders for defense aircraft....excluding new orders for such ‘transportation’ equipment, other new orders were down 0.4% in July, but new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, rose 0.4% to $69,658 million...

The seasonally adjusted value of July's shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, fell by $2.9 billion or 1.1 percent to $254.0 billion, after June shipments had increased by 1.0% to $256.97 billion, revised from the 1.4% increase to $258.2 billion reported last month....a 2.1% drop in shipments of transportation equipment drove the July decrease, as they fell $1.8 billion to $86.4 billion, on a 16.2% decrease in shipments of commercial aircraft…excluding shipments of transportation equipment, shipments of other durable goods still fell 0.4%, as shipments of nondefense capital goods excluding aircraft fell 0.7%…

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the twelfth time in the last thirteen months, increasing by $1.5 billion or 0.4 percent to $427.3 billion, after end of June durables goods inventories were revised but statistically unchanged at $425.8 billion, a 0.3% increase from May...an increase in inventories of transportation equipment accounted for most of the July inventory increase, as they rose $1.4 billion or 1.0 percent to $141.1 billion, on a 1.4% increase to $ 73,131 million in inventories of commercial aircraft...excluding the increase in inventories of transportation equipment, the value of all other durable goods inventories were up fractionally at $286,212 million...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, rose for the first time in four months, but by just $0.7 billion or less than 0.1 percent to $1,161.6 billion...that followed a June decrease of 0.6% to $1,160.95 billion that was was revised from the previously reported 0.7% decrease $1,160.4 billion.....a fractional decrease of $65 million to $793,219 million in unfilled orders for transportation equipment limited the overall increase, as unfilled orders excluding transportation equipment were up 0.2% to $368,420 million....compared to a year earlier, the unfilled order book for durable goods is still 0.4% below the level of last July, as unfilled orders for transportation equipment are now 1.1% below their year ago level, largely due to a 3.3% decrease in the backlog of orders for defense aircraft... 

 

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

Sunday, August 25, 2019

New and existing home sales for July

The only widely watched reports released this week were the July report on new home sales from the Census bureau and the Existing Home Sales Report for July from the National Association of Realtors (NAR)....this week saw the release of the Kansas City Fed manufacturing survey for August, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico; they reported their broadest composite index fell to -6 in August, down from readings of -1 in July and 0 in June, suggesting a mild contraction of that region's manufacturing industries....in addition, this week also saw a preliminary annual benchmark revision of employment data from the Bureau of Labor Statistics, which estimated there were 501,000 fewer payroll jobs in March of 2019 than had previously been reported...however, this estimate will not be applied to the monthly employment reports until the annual revision is finalized with the January 2020 employment report on the first Friday of February 2020, when the national employment survey figures are benchmarked to state tax records.....

New Home Sales Reported Lower in July After June Sales Revised Much Higher

The Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 635,000 new homes a year, which was 12.8 percent (±16.2 percent)* below the revised June rate of 728,000 new single family home sales a year, but 4.3 percent (±14.0 percent)* above the estimated annual rate that new homes were selling at in July of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June or even from those in July a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales new single family homes in June were revised from the annual rate of 646,000 reported last month to a 728,000 a year rate, post recession high, while home sales in May, initially reported at an annual rate of 626,000 and revised down to a 604,000 a year rate last month, were revised down to a 602,000 annual rate with this report, and while April's annualized home sales rate, initially reported at 673,000 and revised from a rate of 679,000 down to 658,000 last month, were also revised a bit lower, to a 656,000 rate with this release..

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which showed that approximately 53,000 new single family homes sold in July, down from the 66,000 new homes that sold in June and the 58,000 that sold in May....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in July was $312,800, up from the median sale price of $306,000 in June but down from the median price of $327,500 in July a year ago, while the average July new home sales price was $388,000, up from $354,500 average sales price in June, but down from the average sales price of $392,300 in July a year ago....a seasonally adjusted estimate of 337,000 new single family houses remained for sale at the end of July, which represents a 6.4 month supply at the July sales rate, up from the revised 5.0 month supply of unsold homes in June, which was originally reported as a 6.3 month supply....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales decreased to 635,000 Annual Rate in July, Sales in June revised up to New Cycle High and A few Comments on June New Home Sales...

Existing Home Sales Rise 2.5% in July After June Sales Revised Higher

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sold rose 2.5% from June to July, projecting that 5.42 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was also 0.6% above the annual sales rate projected in July of a year ago….June home sales at a 5.29 million annual rate were revised from the 5.27 million annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $280,800 in July, 4.3% higher than in July a year earlier, which they report as "the 89th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Climb 2.5% in July", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release....since sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 540,000 homes sold in July, up by 2.3% from the 528,000 homes that sold in June, and up 3.3% from the estimated 523,000 homes that sold in July of last year, so we can see there wasn't much of a seasonal adjustment to bring the annualized published figures up to the level reported...that same pdf indicates that the median home selling price for all housing types fell 1.6%, from a revised record high of $285,300 in June to $280,800 in July, while the average home sales price was $317,100, down 1.3% from the $321,400 average selling price in June, but up 3.0% from the $307,600 average home sales price of July a year ago, with the regional average home sales prices ranging from a low of $253,300 in the Midwest to a high of $421,700 in the West...for additional commentary with long term graphs on this report, see "NAR: Existing-Home Sales Increased to 5.42 million in July" and "Comments on July Existing Home Sales" from Bill McBride at Calculated Risk...

 

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

Sunday, August 18, 2019

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

Major economic reports released this past week were the July Consumer Price Index from the Bureau of Labor Statistics, the Retail Sales Report for July and the Business Sales and Inventories report for June, both from the Census bureau, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau...other reports released this week included Regional and State Employment and Unemployment for July and the July Import-Export Price Index, both from the Bureau of Labor Statistics, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +4.3 in July to +4.8 in August, suggesting a slight pickup in the otherwise slow growth of First District manufacturing, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions fell from +21.8 in July to +16.8 in August, still suggesting ongoing growth of that region's manufacturing industries, as any positive index reading would...

Consumer Prices Up 0.3% in July on Higher Housing & Fuel Costs

The consumer price index was 0.3% higher in July, as higher prices for gasoline, rent, clothing, used vehicles, and most medical services were only partially offset by lower prices for groceries ...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.3% in July after rising 0.1% in June, 0.1% in May, 0.3% in April, 0.4% in March, 0.2% in February, and after they had been unchanged in January, in December and in November, and had risen 0.3% in October, 0.1% in September, 0.1% in August, and 0.2% last July...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 256.143 in June to 256.571 in July, which left it statistically 1.811% higher than the 252.006 index reading of June of last year, which is reported as a 1.8% year over year increase....with flat prices for food partially offsetting higher energy prices, seasonally adjusted core prices, which exclude food and energy, also rose by 0.3% for the month, as the unadjusted core price index rose from 263.177 to 263.566, which left the core index 2.2100% ahead of its year ago reading of 257.867, which is reported as a 2.2% year over year increase, up from the 2.1% year over year increase shown in June...

The volatile seasonally adjusted energy price index rose 1.3% in July, after falling 2.3% in June, 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, rising by 2.1% in October, and falling by 1.0% in September, and hence is still 2.0% lower than in June a year ago...the price index for energy commodities was 2.4% higher in July, while the index for energy services was unchanged, after falling by 0.7% in June....the energy commodity index was up 2.4% due to a 2.5% increase in the price of gasoline, the largest component, and a 0.6% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average unchanged...within energy services, the price index for utility gas service fell 1.8% after falling 0.3% in June and is now 2.9% lower than it was a year ago, while the electricity price index rose 0.6% after falling 0.8% in June....energy commodities are still 3.4% lower than their year ago levels, with gasoline prices averaging 3.3% lower than they were a year ago, while the energy services price index is 0.2% lower than last July, as electricity prices are now 0.5% higher than a year ago…

The seasonally adjusted food price index was unchanged in July, after being unchanged in June, rising 0.3% in May, falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3% in December, 0.2% in November, being unchanged in October, rising 0.1% in September, 0.1% in August, and 0.1% last July, as the price index for food purchased for use at home fell 0.1% in June, while the index for food bought to eat away from home was 0.2% higher, as prices at fast food outlets and prices at full service restaurants both rose 0.2% while food at employee sites and schools were on average 0.8% higher...

In the food at home categories, the price index for cereals and bakery products was 0.3% higher as average bread prices rose 0.7% and cookie prices rose 1.3%, while the price index for fresh biscuits, rolls, & muffins fell 0.5%...at the same time, the price index for the meats, poultry, fish, and eggs group was 0.1% higher, as the beef and veal price index rose 0.5% and ham prices rose 1.8%, while poultry prices averaged 1.1% lower...meanwhile, the seasonally adjusted index for dairy products was 0.3% lower, as prices for both fresh whole milk and cheese fell 0.2%...on the other hand, the fruits and vegetables index was 0.3% higher on a 0.6% increase in the price index for fresh fruits and a 1.3% increase in the price index for fresh vegetables, led by a 9.5% jump in prices for lettuce....however, the beverages index was 0.4% lower, as roast coffee prices fell 1.4% and carbonated drink prices were 0.5% lower....lastly, the index for the ‘other foods at home’ category was 0.7% lower, as prices for salad dressing fell 2.3%, peanut butter prices fell 1.6%, and the snack food index fell 1.5%....the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last July, only prices for lettuce, which have now risen by 14.2% year over year, and prices for eggs, which are down 14.1% from a year ago, are only line items in the ‘food at home’ category with price changes of more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.3% in July after rising by 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for the five months prior to that, after rising by 0.1% in August, and by 0.2% last July, the composite price index of all goods less food and energy goods was 0.2% higher, while the more heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was up 0.3%, as the price index for window and floor coverings rose 1.5%, the index for furniture and bedding rose 0.7%, and the price index for outdoor equipment and supplies rose 1.1%, while the price index for major appliances was 1.0% lower....at the same time, the apparel price index was 0.4% higher on a 4.7% increase in the price index for men's suits, sport coats, and outerwear, a 2.4% increase in the index for women's suits and separates, and a 2.8% increase in the price index for boys and girls footwear... in addition, the price index for transportation commodities other than fuel was 0.2% higher even as prices for new cars fell 0.2%, because prices for used cars and trucks rose 0.9%, and the price index for motor oil, coolant, and fluids rose 3.9%...meanwhile, prices for medical care commodities also averaged 0.2% higher as prescription drugs prices rose 0.4%....on the other hand, the recreational commodities index was 0.4% lower on a 1.0% decrease in TV prices, a 1.4% drop in the price index for sporting goods, and a 1.7% decrease in the price index for toys, games, hobbies and playground equipment....however, the education and communication commodities index was 1.1% higher on a 2.8% increase in the price index for computers, peripherals, and smart home assistant devices...lastly, a separate price index for alcoholic beverages was 0.4% higher, while the price index for ‘other goods’ rose 0.6% on a 1.0% increase in the price index for tobacco and smoking products...

Within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.2% increase in homeowner's equivalent rent, and a 1.0% increase in lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.6% higher on a 2.0% increase in moving expenses....at the same time, the price index for medical care services was 0.5% higher, as outpatient hospital services rose 0.7% and health insurance rose 1.7%...meanwhile, the transportation services price index was 0.3% higher as vehicle repairs rose 0.4% and airline fares rose 2.3%....the recreation services price index was 0.2% higher as veterinarian services rose 0.6% and the index for club membership for shopping clubs, fraternal organizations, or participant sports fees rose 1.0%....the index for education and communication services was also 0.2% higher as the index for internet services and electronic information providers services rose 0.6% and technical and business school tuition and fees also rose 0.6%....lastly, the index for other personal services was up 0.5% as the price index for apparel services other than laundry and dry cleaning rose 1.0% and tax preparation services were 0.6% higher...among core line items, prices for televisions, which are now 20.2% cheaper than a year ago, and the price index for telephone hardware, calculators, and other consumer information items, which is down by 15.8% since last July, have both seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 15.9% over the past year, the price index for infants' furniture, which has increased 11.6% year over year, and intercity busfare, which has increased by 12.8% since last July, are the only line items to have increased by a double digit magnitude over that span....

July Retail Sales Rose 0.7% After May Sales were Revised Higher

Seasonally adjusted retail sales were 0.7% higher in July after retail sales for May were revised higher....the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $523.5 billion during  the month, which was 0.7 percent (± 0.5 percent) higher than June's revised sales of $519.9 billion and 3.4 percent (±0.7 percent) above the adjusted sales in July of last year...June's seasonally adjusted sales were revised from the $519.885 billion reported last month to $519.860 billion, which is considered statistically unchanged, while May sales were revised from $517.682 billion to $518.131 billion, which reduced the June increase from 0.4% to 0.3%....estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually rose 2.7%, from $518,179 million in June to $532,348 million in July, while they were up 4.8% from the $508,010 million of sales in July a year ago...combined, the revisions to May and June indicate that 2nd quarter sales were roughly $0.42  billion higher than previously reported, which would add about $1.7 billion to the BEA's calculation of 2nd quarter personal consumption expenditures at an annual rate before the inflation adjustment, which should be enough to boost 2nd quarter GDP by 0.01 percentage points when the 2nd estimate is published at the end of the month…

Included below we have the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the May to June change under "May 2019 (r)evised" and the revised June 2018 to June 2019 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance June sale estimates, before this month's revision, is here....

July 2019 retail sales table

To compute July's real personal consumption of goods data for national accounts from this July retail sales report, the BEA will use the corresponding price changes from the July consumer price index, which we reviewed earlier….to estimate what they will find, we’ll first pull out the usually volatile sales of gasoline from the other totals...from the third line on the above table, we can see that July retail sales excluding the 1.8% jump in sales at gas stations were up by 0.6%....then, subtracting the figures representing the 0.6% increase in grocery & beverage sales and the 1.1% increase in food services sales from that total, we find that core retail sales were up by somewhat more than 0.5% for the month...since the July CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% higher in July, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show an increase of about 0.3% for the month...however, the actual adjustment in national accounts 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 down 0.6%, the July price index for transportation commodities other than fuel was 0.2% higher, which would suggest that real sales at auto & parts dealers were 0.8% lower once price increases are taken into account... similarly, while nominal sales at clothing stores were 0.8% higher in July, the apparel price index was 0.4% higher, which means that real sales of clothing only rose around 0.4%...

In addition to figuring those core retail sales, to make a complete estimate of real July PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the July CPI report showed that the food price index was unchanged, as the price index for food purchased for use at home fell 0.1% while the index for food bought away from home was 0.2% higher...thus, while nominal sales at food and beverage stores were 0.6% higher, real sales of food and beverages would have been around 0.7% higher in light of the 0.1% decrease in prices…meanwhile, the 1.1% increase in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants only rose around 0.9% during the month...at the same time, while sales at gas stations were up 1.8%, there was concurrently a 2.5% increase in the price of gasoline during the month, which would suggest that real sales of gasoline were actually on the order of 0.7% lower, with a caveat that gasoline stations sell more than gasoline, and we haven’t accounted for those other sales…by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for July will show that real personal consumption of goods rose by around 0.3% in July, after rising by a revised 0.3% in June, rising by a revised 0.6% in May and by 0.6% in April, after rising 1.9% in March, falling by 0.9% in February and rising by 1.7% in January...at the same time, the 0.9% increase in real sales at bars and restaurants should have a notable positive impact on June's real personal consumption of services...

Industrial Production Down 0.2% in July After Prior Months Revised Lower

The Fed's G17 release on Industrial production and Capacity Utilization for July indicated that industrial production fell by 0.2% in July after rising by a revised 0.2% in both May and in June...however, after revisions, industrial production is now up just 0.5% from a year ago, as compared to last month's 1.3% year over year increase...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 109.2 in July from 109.4 in June, which was revised from the 109.6 reported for June a month ago...at the same time, the May reading for the IP index was revised down from 109.6 to 109.2, and the April reading for the index was revised down from 109.2 to 109.0....

The manufacturing index, which accounts for more than 77% of the total IP index, decreased by 0.4% to 104.7 in July, after June's manufacturing index was revised from 105.2 to 105.1, May's manufacturing index was revised from 104.8 to 104.5, and April's manufacturing index was revised from 104.6 to 104.3, while the March and the February manufacturing indexes remained unrevised at 105.2 and 105.3 respectively...hence, the manufacturing index is down 0.5% from a year ago, having fallen 1.2% since December....meanwhile, the mining index, which includes oil and gas well drilling, fell from 133.6 in June to 131.2 in July, which was still 5.5% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 3.1 to 104.9 in July, after the June utility index was revised from 101.9 to 101.7 and the May index was revised from 105.7 to 105.2...with an equivalently hot July in 2018, the utility index is only 0.3% above its year ago reading of 104.6..

This report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell from 77.8 in June to 77.5 in July, after capacity utilization for June was revised from 77.9% to 77.8%, and after capacity utilization for April and May was revised lower as well....capacity utilization by NAICS durable goods production facilities fell from 75.9 in June to 75.6 in July, while capacity utilization for non-durables producers fell from 76.6% to 76.1% at the same time....meanwhile, capacity utilization for the mining sector fell to 89.1% in July from 91.2% in June, which was originally reported as 91.5%, while utilities were operating at 76.6% of capacity during July, up from their 74.5% of capacity during June, a figure that was originally reported at 74.6%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

New Housing Starts Reported Lower in July; Building Permits Higher

The July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,191,000, which was 4.0 percent  (±8.0 percent)* below the revised June estimated annual rate of 1,241,000 housing units started, but was 0.6 percent (±8.2 percent)* above last July's pace of 1,184,000 housing starts annually....the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, July's housing starts could have been up by 4.0% or down by as much as 12.0% from those of June, with even larger revisions eventually possible...in this report, the annual rate for June housing starts was revised down from the 1,253,000 reported last month to 1,241,000, while May starts, which were first reported at a 1,269,000 unit annual rate, were revised from last month's initial revised figure of 1,265,000 annually to an annual rate of 1,264,000 with this report....

Those annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 113,700 housing units were started in July, down from the 116,600 units started in June...of those housing units started in July, an estimated 84,800 were single family homes and 27,800 were units in structures with more than 5 units, up from the revised 83,400 single family starts in June, but down from the 32,300 units started in structures with more than 5 units in June...

As we've pointed out previously, the monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in July, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,336,000 housing units per year, which was 8.4 percent (±1.1 percent) above the revised June annual rate of 1,232,000 permits, and was 1.5 percent (±1.4 percent) above the rate of building permit issuance in July a year earlier...the annual rate for housing permits issued in June was revised from 1,220,000 to 1,232,000....

Again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 120,600 housing units were issued in July, up from the revised estimate of 111,000 new permits issued in June...the July permits included 79,000 permits for single family homes, up from 75,100 single family permits in June, and 37,400 permits for housing units in apartment buildings with 5 or more units, up from 31,900 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 decline to 1.191 Million Annual Rate in July and Comments on July Housing Starts.

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

Following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June(pdf), which incorporates the revised June retail data from that July retail report and the earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,460.1 billion in June, up 0.1 percent (±0.2%)* from May revised sales, and up 1.3 percent (±0.4 percent) from June sales of a year earlier...note that total May sales were revised from the originally reported $1,461.4 billion to $1,458.2 billion, now down 0.1% from April, rather than up 0.2% as had previously been reported....manufacturer's adjusted sales were up 0.4% to $506,153 million in June, and retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, were up 0.3% to $455,392 million, while wholesale sales fell 0.3% to $498,539 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,035.7 billion at the end of June, virtually unchanged (±0.1 percent)* from May, but 5.2 percent (±0.4 percent) higher than in June a year earlier...the value of end of May inventories was revised down from the $2,036.4 billion reported last month to $2,035.8 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $695,585 million at the end of June, 0.2% higher than those at the end of May, inventories of retailers were valued at $661,444 million, 0.3% less than in May, while inventories of wholesalers were estimated to be valued at $678,669 million at the end of June, statistically unchanged from May...

The Key source data and assumptions that accompanied the release of the advance estimate of 2nd quarter GDP indicates that the BEA had assumed that total seasonally adjusted June manufacturing and trade inventories (on a Census basis) would increase by $3.1 billion from the previously published May figures...since this report shows that total June inventories increased by $0.1 billion while May inventories were revised down by $0.6 billion at the same time, that means that the advance estimate of 2nd quarter GDP overestimated end of June inventories by $3.6 billion, or at an annual rate of $14.4...assuming there is no major change relating to the inflation adjustment on those inventories, a revision to reflect these new figures would be enough to subtract about 0.28 percentage points from 2nd quarter GDP, when the 2nd estimate is released at the end of August...

 

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