Sunday, December 29, 2019

November's reports on durable goods and new home sales

With the major month end reports already released last week, the only widely watched agency reports that were left for release this week were the advance report on durable goods for November and the new residential sales report for November, both from the Census Bureau; in addition, this week also saw the regularly scheduled release of the Chicago Fed National Activity Index (CFNAI) for November, a weighted composite index of 85 different economic metrics, which indicated that the CFNAI increased to +0.56 in November from a negative reading of -0.76 in October, which was revised from the -0.71 indicated for October a month ago....including that revision, the 3 month average of the CFNAI index rose to –0.25 in November from a revised –0.35 in October, which still indicates that national economic activity continued at a pace below the historical trend over those  recent months....this week also saw the release of the Richmond Fed Survey of Manufacturing Activity, covering an area that includes  Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported its broadest composite index fell to -5 in December from -1 in November, suggesting a modest contraction of Fifth District manufacturing...

November Durable Goods: New Orders down 2.0%, Shipments Up 0.1%, Inventories Up 0.4%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for November (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods decreased by $5.0 billion or 2.0 percent to $242.6 billion in November, after October's new orders were revised from the 0.6% increase to $248.7 billion reported last month to a 0.2% increase to $247.6 billion...year to date new orders are now 1.3% below those of 2017, down from the -0.8% year over year change we saw in this report last month....a reversal of the volatile monthly new orders for transportation equipment was responsible for this month's decrease, as new transportation equipment orders fell $4.9 billion or 5.9 percent to $79.2 billion, on a 72.7% decrease to $1,942 million in new orders for defense aircraft and a 1.8% decrease to $7,840 million in new orders for commercial aircraft.... excluding orders for transportation equipment, new orders were statistically unchanged, while excluding just new orders for defense equipment, new orders rose 0.8%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose by $82 million or by 0.1% to $69,395 million...

Meanwhile, the seasonally adjusted value of November shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased for the first time in 5 months, rising by $0.2 billion or 0.1 percent to $251.6 billion, after the value of October shipments was revised from from $251.6 billion to $251.386 billion, now down 0.1% from September, revised from the statistically insignificant increase reported last month...shipments of fabricated metal products accounted for the November increase, as they rose $0.3 billion or 1.0 percent to $34.1 billion, while the value of shipments of transportation equipment was unchanged at $83.4 billion...shipments of nondefense capital goods less aircraft fell 0.3% to $69,070 million, after September’s capital goods shipments were revised 0.1% lower to $69,295 million, now a 0.7% increase from August....

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 16th time in the past 17 months, increasing by $1.8 billion or 0.4 percent to $434.0 billion, after October inventories were revised from $432.0 billion to $432.15 billion, now up rounded to 0.4% from September, rather than the previously reported 0.3% increase...increased inventories of transportation equipment were responsible for the November increase, rising $1.8 billion or 1.2 percent to $149.3 billion on a 1.9% increase in inventories of commercial aircraft…without the increased inventories of transportation equipment, all other durable goods inventories were flat…

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, decreased for the second time in three months, falling by $4.7 billion or 0.4 percent to $1,159.0 billion, after unfilled orders for October were revised 0.1% lower, from $1,164.8 billion to $1,163.7 billion, now a "virtually unchanged increase" from September...a $4.6 billion or 0.6 percent decrease to $790.3 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled transportation equipment orders other than transportation equipment were statistically unchanged at $369,213 million...compared to a year earlier, the unfilled order book for durable goods is 2.0% below it's level of last November, with unfilled orders for transportation equipment 2.8% below their year ago level, largely on a 3.6% decrease in the backlog of orders for commercial aircraft... 

November New Home Sales Reported Higher After October Sales Revised Lower

The Census report on New Residential Sales for November (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 719,000 homes annually during the month, which was 1.3 percent (±11.0 percent)* above the revised October rate at 710,000 new single family home sales annually, and 16.9 percent (±19.4 percent)* above the estimated annual rate that new homes were selling at in November of last year...the asterisks indicate that based on their small sampling, Census could not be certain whether November new home sales rose or fell from those of October, or even from November of 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....with this report, sales new single family homes in October were revised down from the annual rate of 733,000 reported a month ago to 710,000, while home sales in September, initially reported at an annual rate of 701,000 and revised to a 738,000 a year rate with the last report, were also revised lower, to a 710,000 a year rate with this report, and while August's annualized home sale rate, initially reported at an annual rate of 713,000 and unrevised from the initially revised 706,000 a year rate with the last report, were revised to a 708,000 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 suggested that approximately 52,000 new single family homes sold in November, down from the estimated 55,000 new homes that sold in October and the 56,000 that sold in September.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in November was $330,800, up from the median sale price of $316,900 in October and up from the median sales price of $308,500 in November a year ago, while the average November new home sales price was $388,200, up from the $377,900 average sales price in October, and up from the average sales price of $367,100 in November a year ago....a seasonally adjusted estimate of 327,000 new single family houses remained for sale at the end of November, which represented a 6.3 month supply at the November sales rate, up from the revised 6.0 months of new home supply in October...for graphs and additional commentary on this report, see the following  two posts by Bill McBride at Calculated Risk: New Home Sales at 719,000 Annual Rate in November and A few Comments on November New Home Sales...

 

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

Sunday, December 22, 2019

Q3 GDP revision, November's income & outlays, industrial production, new home construction, & existing home sales; October's JOLTS

In advance of the holidays, some of the reports that are normally released during the last week of the month were accelerated into this week...that meant that we have the 3rd estimate of 3rd quarter GDP and the November report on Personal Income and Spending, both from the Bureau of Economic Analysis, in addition to the November report on Industrial Production and Capacity Utilization from the Fed, the Job Openings and Labor Turnover Survey (JOLTS) for October and the Regional and State Employment and Unemployment Summary for November, both from the Bureau of Labor Statistics, the November report on New Residential Construction from the Census bureau, and the Existing Home Sales Report for November from the National Association of Realtors (NAR)....

The week also saw the release of three regional Fed manufacturing surveys for December: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an adjacent county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +2.9 in November to +3.5 in December, still suggesting fairly sluggish growth of First District manufacturing; the Philadelphia Fed Manufacturing Survey for December, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions decreased from a reading of +10.4 in November to +0.3 in December, indicating virtual stagnation of that region's manufacturing; and the Kansas City Fed manufacturing survey for December, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to -8 in December, down from readings of -3 in both November and October, suggesting a greater contraction of that region's manufacturing than was seen in previous months...  

3rd Quarter GDP Growth Rate Remains at 2.1% in 3rd Estimate

The Third Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services increased at a 2.1% annual rate in the quarter, revised but unchanged from the 2.1% growth rate reported in the second estimate last month, as an upward revision to growth in personal consumption of services was offset by downward revisions to growth of personal consumption of goods and of inventories, and by an upward revision to imports, which subtract from GDP...in current dollars, our third quarter GDP grew at a 3.84% annual rate, increasing from what would work out to be a $21,340.3 billion a year output rate in the 2nd quarter to a $21,542.5 billion annual rate in the 3rd quarter, with the headline 2.1% annualized rate of increase in real output arrived at after annualized inflation adjustments averaging 1.8%, aka the GDP deflator, was computed and applied to the current dollar change of each of the GDP components.....

Recall that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as representing quantity indexes than any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 3rd quarter GDP, which is linked to on the BEA GDP landing page...specifically, we reference table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2015; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the components...the pdf for the 2nd quarter second estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.9% growth rate reported last month to a 3.2% rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 4.68% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation increased at a 1.5% annual rate in the 3rd quarter, which was unrevised from the PCE inflation rate reported a month ago......real personal consumption of durable goods grew at a 8.1% annual rate, revised from the 8.3% growth rate shown in the 2nd estimate, and added 0.56 percentage points to GDP, as an increase in real consumption of recreational goods and vehicles at a 17.0% rate accounted for almost two-thirds of the durables goods increase...real consumption of nondurable goods by individuals grew at a 3.9% annual rate, revised from the 4.3% rate reported in the 2nd estimate, and added 0.53  percentage points to the 3rd quarter economic growth rate, as a 5.5% growth rate in real consumption of food and beverages accounted for more than 45% of the growth in non-durables….at the same time, consumption of services rose at a 2.2% annual rate, revised from the 1.7% growth rate reported last month, and added 1.02 percentage points to the final GDP tally, as real growth of most services, other than of health care and recreation which were near stagnant, all contributed to the quarter’s growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 1.0% annual rate in the 3rd quarter, revised from the 0.1% contraction rate reported last month, as real private fixed investment contracted at a 0.8% rate, revised from the 1.0% contraction rate shown in the second estimate, while inventories grew less than was previously estimated....investment in non-residential structures was revised to show contraction at a 9.9% rate, down from the 12.0% contraction rate previously reported, and real investment in equipment contracted at a 3.8% rate, same as was indicated by the 2nd estimate...at the same time, the quarter's investment in intellectual property products was revised from growth at a 5.1% rate to growth at a 4.7% rate, while real residential investment was shown to be growing at a 4.6% annual rate, rather than the 5.1% contraction rate previously reported…after those revisions, the decrease in investment in non-residential structures subtracted 0.30 percentage points from the 3rd quarter's growth rate and the decrease in investment in equipment subtracted 0.22 percentage points from the quarter's growth rate, while growth in investment in intellectual property added 0.22 percentage points to the growth of GDP and the growth of residential investment added 0.17 percentage points to the growth rate of 3rd quarter GDP...

In addition, investment in real private inventories grew by an inflation adjusted $69.4 billion in the 3rd quarter, revised from the previously reported $79.8 billion of real inventory growth, and subtracted 0.03 percentage pointed from GDP, after the previous report showed a $10.4 billion increase in real inventory growth from the 2nd quarter had added 0.17 percentage points to the quarter's growth rate....as growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or "sitting on the shelf”, that their growth was little changed in the quarter means that growth of real final sales of GDP in the 3rd quarter was the same as growth in GDP at 2.1%, down from the real final sales growth rate of 3.0% in the 2nd quarter, when a decrease in inventory growth meant that growth in real final sales of domestic product was greater than the real growth in GDP...

The previously reported increase in real exports was revised a bit higher with this estimate, but the previously reported increase in real imports was revised upwards by more, and as a result the change in our net trade was a greater subtraction from GDP than was previously reported...our real exports grew at a 1.0% rate rather than the 0.9% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, that growth added 0.11 percentage points to the 3rd quarter's growth rate, statistically unrevised from the addition shown in the previous report....meanwhile, the previously reported 1.5% increase in our real imports was revised to indicate a 1.8% increase, and since imports are subtracted from GDP because they represent either consumption or investment that was added to an other GDP component that was not produced domestically, their increase subtracted 0.26 percentage points from 3rd quarter GDP, rather than the 0.22 percentage point subtraction shown last month....thus, our deteriorating trade balance subtracted a rounded total of 0.14 percentage points from 3rd quarter GDP, rather than the 0.11 percentage point subtraction that had been indicated by the second estimate…

Finally, the entire government sector grew at a 1.7% rate, revised from the 1.6% growth rate previously reported, as federal government consumption and investment grew a bit less than was indicated by the second estimate, while growth of real state & local government consumption and investment was greater than previously reported...real federal government consumption and investment was seen to have grown at a 3.3% rate from the 2nd quarter in this estimate, revised from the 3.4% growth rate shown in the second estimate, as real federal outlays for defense grew at a 2.2% rate and added 0.09 percentage points to 3rd quarter GDP, unchanged from the contribution shown previously, while all other federal consumption and investment grew at a downwardly revised 5.0% rate but still added 0.13 percentage points to 3rd quarter GDP, same as was shown last month.... meanwhile, real state and local consumption and investment grew at a 0.7% rate in the quarter, which was revised from the 0.5% growth rate reported in the 2nd estimate, and added 0.08  more percentage points to 3rd quarter GDP....note that government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...

November Personal Income Up 0.5%; Personal Spending up 0.4%; PCE Price Index Up < 0.2%

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

Hence, when the opening line of the press release for this report tell us "Personal income increased $101.7 billion (0.5 percent) in November", they mean that the annualized figure for seasonally adjusted personal income in November, $18,911.2 billion, was $101.7 billion higher, or more than 0.5% greater than the annualized personal income figure of $18,809.5 billion extrapolated for October; the actual, unadjusted change in national personal income from October to November is not given...at the same time, annualized disposable personal income, which is income after taxes, also rose by more than 0.5%, from an annual rate of $16,615.0 billion in October to an annual rate of $16,702.7 billion in November...those increases were arrived at after personal income for October was revised up from $18,794.4 billion annually and October's disposable personal income was revised up from $16,592.1 billion annually....the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in November, the largest contributors to the $101.7 billion annual rate of increase in personal income were a $37.3 billion annual rate of increase in wages and salaries, a $31.5 billion annual rate of increase in proprietors' income, and a $23.1 billion annual rate of increase in interest & dividend income…

For the personal consumption expenditures (PCE) that we're interested in, BEA reports that they increased at a $64.9 billion rate, or at more than a 0.4% rate, as the annual rate of PCE rose from $14,759.2 billion in October to $14,824.1 billion in November....at the same time, October PCE was revised more than 0.1% higher, from $14,742.1 billion annually to $14,759.2 billion....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $68.6 billion to $15,388.0 billion annually in November, which thus left total personal savings, which is disposable personal income less total outlays, at a $1,314.7 billion annual rate in November, up from the revised $1,295.6 billion in annualized personal savings in October... as a result, the national personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 7.9% in November, from the October savings rate of 7.8%...

As you know, before personal consumption expenditures are used in the computation of GDP, they are first adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....the BEA does that by computing, mostly from CPI source data, a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, and which is included in Table 9 in the pdf for this report...that index rose from 110.200 in October to 110.373 in November, a month over month inflation rate that's statistically 0.15699%, which BEA reports as a 0.2% increase, following the rounded 0.2% PCE price index increase they reported for October...applying the actual November inflation adjustment to the nominal change in spending left real PCE up by a rounded 0.3% in November, after October's rounded real PCE growth of 0.1%...notice that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in chained 2012 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that November's chained dollar consumption total works out to 13,431.4 billion annually in 2012 dollars, 0.2815% more than October's 13,393.7 billion, a growth rate that the BEA rounds up and reports as +0.3%...

However, to estimate the impact of the change in PCE on the change in GDP, month over month changes expressed like that don't help us much, since GDP is reported quarterly...thus we have to compare October's and November's real PCE to the the real PCE of the 3 months of the third quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3rd quarter was represented by 13,353.1 billion in chained 2012  dollars...(note that's the same as what's shown in table 3 of the pdf for the revised 3rd quarter GDP report)....then, by averaging the annualized chained 2012 dollar figures for October and November, 13,393.7 billion and 13,431.4 billion respectively, we get an equivalent annualized PCE for the two months of the 4th quarter data that we have so far....when we compare that average of 13,412.55 to the 3rd quarter real PCE of 13,353.1, we find that 4th quarter real PCE has grown at a 1.79% annual rate for the two months of the 4th quarter that are included in this report...(notice the math we used to get that annual growth rate: [ (((13,431.4 + 13,393.7) / 2) / 13,353.1) ^ 4 = 1.017928 ] ...that's a growth rate that would add 1.25 percentage points to the GDP growth rate of the 4th quarter, even if there is no improvement in December PCE from that average... 

Industrial Production Up 1.1% in November After October Production Revised Lower

The Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production rose 1.1% in November after falling by a revised 0.9% in October, as the manufacturing index reflected the reversal the impact of the GM strike....the total industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 109.7 in November from 108.5 in October, which was revised from the 108.7 index reported last month...at the same time, the September index was revised down from 109.6 to 109.5, while the August index was revised but remained at 109.9....year over year, industrial production is still down 0.8%, but improved from last month's 1.1% year over year decrease....

The manufacturing index, which accounts for more than 77% of the total IP index, rose from 103.8 in October to 104.8 in November, partly on a 12.4% increase in the output of motor vehicles and parts, which had decreased a revised 5.8% in October due to the strike...at the same time, the manufacturing index for October was revised from 104.0 to 103.8, the manufacturing index for September was revised from 104.7 to 104.5, and the manufacturing index for August was revised from 105.2 to 105.3... meanwhile, the mining index, which includes oil and gas well drilling, slipped from 132.5 in October to 132.3 in November, after the October index was revised up from 132.1, which left the mining index 2.0% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 2.9% in November, from a downwardly revised 103.6 in October to 106.6 in November, but is still 4.1% lower than it was a year earlier..

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total US industry rose to 77.3% in November from 76.6% in October, which was revised from the 76.7% reported last month ...capacity utilization of NAICS durable goods production facilities rose from 74.1% in October to 75.6% in November as capacity utilization for motor vehicles and parts rebounded from 69.5% to 80.1%, while capacity utilization for non-durables producers fell from 75.9% to 75.8%...at the same time, capacity utilization for the mining sector fell to 88.6% in November from 89.1% in October, which was originally reported at 88.8%, while utilities were operating at 77.3% of capacity during November, up from their 75.2% of capacity during October, which was revised down from the previously reported 75.4%...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....  

Job Openings and Job Quitting Increase in October, Hiring and Firing Decreases

The Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 235,000, from 7,032,000 openings in September to 7,267,000 in October, after September job openings were revised 8,000 higher, from 7,024,000 to 7,032,000...however, October's jobs openings were still 4.9% lower than the 7,593,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed rose to 4.6% in October from 4.4% September, while it was down from 4.8% in October a year ago...among the largest gains, job openings in retail increased from 741,000 to 866,000, and job openings in durable goods manufacturing increased from 292,000 to 342,000, while job openings in the information sector fell from 162,000 to 129,000 (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated tables for the data cited, which are linked to at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in October, seasonally adjusted new hires totaled 5,764,000, down by 187,000 from the revised 5,951,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed fell to 3.8% from 3.9% in September, and was also down from from 3.9% in October a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 162,000, from 5,798,000 in September to 5,636,000 in October, while the separations rate as a percentage of the employed fell to 3.7%, down from 3.8% in September and down from 3.8% in October a year ago (see table 3)...subtracting the 5,636,000 total separations from the total hires of 5,764,000 would imply an increase of 128,000 jobs in October, a bit less than the revised payroll job increase of 156,000 for October reported in the November establishment survey of two weeks ago, but still well within the expected +/-115,000 margin of error for these reports...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,512,000 of us voluntarily quit our jobs in October, up by 41,000 from the 3,471,000 who quit their jobs in September, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, the same quits rate as a year earlier (see details in table 4)....in addition to those who quit, another 1,769,000 were either laid off, fired or otherwise discharged in October, down by 202,000 from the revised 1,971,000 who were discharged in September, as the discharges rate fell from 1.3% to 1.2% of all those who were employed during the month, same as the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 355,000 in October, down from 356,000 in September, for an 'other separations rate’ of 0.2%, which was unchanged from September and from October of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed by using the links to tables at the bottom of the press release...

Housing Starts Reported Higher in November; S/A Building Permits at a 12 Year High

The November report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,365,000 units during the month, which was 3.2 percent (±10.0 percent)* above the revised October estimated annual rate of 1,323,000 housing unit starts, and was 13.6 percent (±12.8 percent) above last November's rate of 1,202,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, November housing starts could have been down by 6.8% or up by as much as 13.2% from those of October, with even larger revisions possible...in this report, the annual rate for October housing starts was revised from the 1,314,000 units reported last month to 1,323,000, while September starts, which were first reported at a 1,256,000 annual rate, were revised but unchanged from last month's initial revised figure of 1,266,000 with this report....

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 103,500 housing units were started in November, down from the 113,700 units that were started in October...of those housing units started in November, an estimated 68,300 were single family homes and 33,200 were units in structures with more than 5 units, down from last month's revised 73,300 single family starts, and down from the 35,200 units started in structures with more than 5 units in October...

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in November, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,482,000 housing units annually, the highest rate since May 2007, which was also 1.4 percent (±1.4 percent)* above the revised October annual rate of 1,461,000 permits, and was 11.1 percent (±1.8 percent) above the rate of building permit issuance in November a year earlier...the annual rate for housing permits issued in October was revised but remained at 1,461,000, as it was originally reported....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 108,100 housing units were issued in November, down from the revised estimate of 131,700 new permits issued in October...the November permits included 65,300 permits for single family homes, down from 79,800 single family permits issued in October, and 41,700 permits for housing units in apartment buildings with 5 or more units, down from 47,700 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.365 Million Annual Rate in November and Comments on November Housing Starts...

November Existing Home Sales Down 1.7% in November, Still Up 2.7% from a Year Ago

The National Association of Realtors (NAR) reported that their seasonally a djusted count of existing home sales fell by 1.7% from October to November, projecting that 5.35 million existing homes would sell over an entire year if the November home sales pace were extrapolated over that year, a pace that was still 2.7% above the annual sales rate they projected for November of a year ago...October home sales were at a 5.44 million annual rate, revised from the 5.46 million annual rate indicated in last month's report...the NAR also reported that the median sales price for all existing-home types was $271,300 in November, up 5.4% from from the $257,400 median sales price reported for November of last year, which they report "marks 93 straight months of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Descend 1.7% in November", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find that all info in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation of the actual number of homes that sold each month...this unadjusted data indicates that roughly 404,000 homes sold in November, down by 12.6% from the 464,000 homes that sold in October, and down by 0.5% from the 406,000 homes that sold in November of last year, so we can see how the seasonal adjustment reduced the magnitude of the month over month decrease as indicated by the annualized published figures....that same pdf indicates that the median home selling price for all housing types rose by just 0.1%, from a revised $271,000 in October to $271,300 in November, while the average home sales price was $308,000, up 0.3% from the $307,200 average sales price in October, and up 4.0% from the $296,100 average home sales price of November a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 5.35 million in November and Comments on November Existing Home Sales...

 

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

Sunday, December 15, 2019

November’s consumer and producer prices, and retail sales; October's business inventories

Major reports released this week included the November Consumer Price Index, the November Producer Price Index, and the November Import-Export Price Index, all from the Bureau of Labor Statistics, and the Retail Sales report for November and the Business Sales and Inventories report for October, both from the Census Bureau....in addition, this week also saw the Mortgage Monitor for October from Black Knight Financial Services, which indicated that 3.39% of all mortgages were delinquent in October, down from 3.53% in September and down from 3.64% in October of 2018, and that 0.48% of all mortgages were in the foreclosure process, the same percentage as were in foreclosure in September but down from the 0.52% that were in foreclosure a year ago...

Consumer Prices Rose 0.3% in November on Higher Prices for Energy, Rent & Services

The consumer price index rose 0.3% in November, as higher prices for energy, rent, used cars, and health care services were only slightly offset by lower prices for fresh fruit and airline fares...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.3% in November after rising 0.4% in October, being unchanged in September, rising 0.1% in August, rising 0.3% in July, rising 0.1% in June, rising 0.1% in May, rising 0.3% in April, rising 0.4% in March, rising 0.2% in February, and after they had been unchanged in January, in December and last November...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 257.346 in October to 257.208 in November, which left it statistically 2.0513% higher than the 252.038 index reading of November of last year, which is reported as a 2.1% year over year increase....with prices for energy a major contributor to the overall index increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core price index rose from 265.059 to 265.108, which left the core index 2.3168% ahead of its year ago reading of 259.105, which is reported as a 2.3% year over year increase, same as was reported for October...

The volatile seasonally adjusted energy price index rose 0.8% in November, after rising 2.7% in October, falling 1.4% in September. falling 1.9% in August. 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, and falling by 2.8% last November, and hence is still 0.6% lower than in November a year ago...the price index for energy commodities was 1.1% higher in November, while the index for energy services was 0.4% higher, after rising 1.8% in October....the energy commodity index was up 1.1% due to a 1.1% increase in the price of gasoline, the largest component, and a 1.4% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.1% higher...within energy services, the price index for utility gas service rose 1.1% after rising 2.4% in October and is now 1.1% higher than it was a year ago, while the electricity price index rose 0.3% after rising 1.6% in October....energy commodities are still averaging 1.5% lower than their year ago levels, with gasoline prices averaging 1.2% lower than they were a year ago, while the energy services price index is now 0.6% higher than last November, as electricity prices are now 0.5% higher than a year ago…

The seasonally adjusted food price index rose 0.1% October, after rising 0.2% October, 0.1% September, being unchanged in June, July & August, 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, and by 0.2% last November, as the price index for food purchased for use at home was 0.1% higher in October, while the index for food bought to eat away from home was 0.2% higher, as prices at fast food outlets rose 0.1% and prices at full service restaurants rose 0.3% while food prices at employee sites and schools were on average 0.1% higher...

In the food at home categories, the price index for cereals and bakery products was 0.1% lower as average bread prices rose 1.3% while the price index for breakfast cereal fell 0.7%, rice prices fell 0.7% and the index for crackers and cracker products fell 2.3%...at the same time, the price index for the meats, poultry, fish, and eggs group was 0.3% higher, as average pork prices rose 1.3% while the fish and seafood price index fell 0.4%...in addition, the seasonally adjusted index for dairy products was 0.6% higher, as average prices for fresh while milk rose 0.4% and cheese prices rose 0.6%...on the other hand, the fruits and vegetables index was 0.7% lower on a 1.3% decrease in the price index for canned vegetables and a 1.6% decrease in the price index for fresh fruits, led by a 5.5% drop in orange prices...meanwhile, the beverages index was 0.6% higher, as prices for coffee rose 1.7% and carbonated drink prices were 2.3% higher....lastly, the index for the ‘other foods at home’ category was unchanged, as the price index for prepared salads rose 1.4% and peanut butter prices rose 1.2%, while prices for sauces and gravies fell 1.4% and prices of olives, pickles and relishes averaged 2.5% lower....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 November, the price of lettuce, which is now up by 14.5%, is the only food line item that has seen a price change of more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.2% November after rising by 0.2% October, 0.1% in September, 0.3% in August, 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 unchanged in November, 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 November’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.1% lower, as the price index for window and floor coverings fell 2.4% and the price index for dishes and flatware fell 4.1% while the index for laundry appliances rose 2.1%....on the other hand, the apparel price index was 0.1% higher as a 3.9% decrease in the price index for boys apparel and a 1.9% decrease in the price index for men's apparel was more than offset by a 1.2% increase in the price index for women's apparel, a 2.0% increase in the price index for girl's apparel, and a 0.5% increase in the price index for footwear.... meanwhile, the price index for transportation commodities other than fuel was 0.2% higher even as prices for new cars and trucks fell 0.1% because prices for used cars and trucks rose 0.6% and the price index for vehicle parts and equipment other than tires rose 0.5%... at the same time, prices for medical care commodities averaged 0.1% higher as non-prescription drugs prices rose 0.2% and the index for medical equipment and supplies rose 1.0%....in addition, the recreational commodities index was also 0.1% higher despite a 2.4% decrease in TV prices because the price index for sporting goods rose 0.9% and the price index for newspapers and magazines rose 0.7%....however, the education and communication commodities index was 0.1% lower even though college textbook prices rose 0.5% due to on a 2.8% decrease in the price index for computers, peripherals, and smart home assistant devices and a 0.8% decrease in the price index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.3% lower, while the price index for ‘other goods’ was 0.3% higher on an 0.4% increase in the index for hair, dental, shaving, and miscellaneous personal care products and a 1.0% increase in the price of cigarettes...

Within core services, the price index for shelter rose 0.3% as rents rose 0.3%, homeowner's equivalent rent rose 0.2%, and prices for lodging away from home at hotels and motels rose 1.2%, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.2% higher....at the same time, the price index for medical care services was 0.4% higher, as the index for inpatient hospital services rose 0.4% and health insurance rose 1.5%....meanwhile, the transportation services price index was was unchanged as the price index for car and truck rental rose 5.2% while vehicle repairs fell 0.2% and airline fares fell 0.9% and intercity bus fares fell 2.6%....on the other hand, the recreation services price index rose 0.6% as veterinarian services rose 0.5% and the index for admission to sporting events rose 3.7%...in addition, the index for education and communication services was 0.4% higher as the index for child care and nursery school rose 0.3% and land-line telephone services rose 1.3%....lastly, the index for other personal services was up 0.1% as the price index for haircuts and other personal care services was 0.5% higher...

Among core line items, prices for televisions, which now average 20.3% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 13.8% since last November, and the price index for computer software and accessories, which is down 13.0% 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 20.2% over the past year, the price index for infants' furniture, which has increased 21.2% year over year, and intercity bus-fare, which has increased by 28.0% since last November, are the only line items to have increased by a double digit magnitude over that span....

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

Seasonally adjusted retail sales increased 0.2% in November after retail sales for October sales were revised 0.1% higher...the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $528.0 billion during the month, which was 0.2 percent (±0.4%) higher than October's revised sales of $527.0 billion and 3.3 percent (±0.7 percent) above the adjusted sales in November of last year.…October's seasonally adjusted sales were revised up from $526.5 billion to $527.0 billion, while September's sales were revised lower, from $525.2 billion to $524.65 billion; as a result, the September to October change was revised from up 0.3 percent (±0.4%) to up 0.4 percent (±0.2%), while the change in September's sales was revised from a decrease of 0.1% to a decrease of 0.3%...assuming a similar inflation adjustment, the $0.55 billion downward revision to September sales should reduce previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by 0.04 or 0.05 percentage points.....unadjusted sales, extrapolated from surveys of a small sampling of retailers, were estimated to have risen 2.3%, from $525,865 million in October to $538,185 million in November, while they were up 2.9% from the $522,804 million of sales in November a year ago...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the November Census Marts pdf....the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the October revised figure to this month's November "advance" report in the first sub-column, and then the year over year percentage sales change since last November in the 2nd column...the second double column pair below gives us the revision of the October advance estimates (now called "preliminary") as of this report, with the new September to October percentage change under "Sep 2019 r" (revised) and the revised October 2018 to October 2019 percentage change in the last column shown...for your reference, the table of last month’s advance estimate of October sales, before this month's revisions, is here.…

November 2019 retail sales table

To compute November's real personal consumption of goods data for national accounts from this November retail sales report, the BEA will use the corresponding price changes from the November consumer price index, which we reviewed above...to estimate what they will find, we'll first separate out the volatile sales of gasoline from the other totals...from the third line on this table, we can see that November retail sales excluding the 0.7% price-related increase in sales at gas station were up by 0.1%....then, subtracting the figures representing the 0.3% increase in grocery & beverage sales and the 0.3% decrease in food services sales from that total, we find that core retail sales were up by almost 0.2% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was unchanged in November, we can thus approximate that real retail sales excluding food and energy will on average be close to our nominal core retail sales, or show an increase of roughly 0.2%...however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while sales at furniture stores were up 0.1%, the price index for household furnishings and supplies decreased by 0.1%, which would suggest that real sales at furniture stores rose 0.2%…on the other hand, while nominal sales at clothing stores were 0.6% lower in November, the apparel price index was 0.1% higher, which would mean that real sales of clothing fell around 0.7%.…similarly, while nominal sales at sporting goods, hobby, music and book stores fell 0.5%, the price index for recreational commodities rose 0.1%, so we can figure real sales of recreational goods were down roughly 0.6%...

In addition to figuring those core retail sales, to make a complete estimate of real November PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the CPI report showed that the food price index was 0.1% higher in November, with the index for food purchased for use at home 0.1% higher, while prices for food bought to eat away from home were 0.2% higher... hence, with nominal sales at food and beverage stores 0.3% higher, real sales of food and beverages would only be roughly 0.2% higher in light of the 0.1% higher prices…likewise, the 0.3% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell about 0.5%...meanwhile, while sales at gas stations were up 0.7%, there was a 1.1% increase in the retail price of gasoline, which would suggest real sales of gasoline were down on the order of 0.4%, 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 can estimate that the income and outlays report for November will show that real personal consumption of goods rose by nearly 0.2% for the month, after falling by a revised 0.1% in October and rising by a revised 0.3% in September...at the same time, the 0.5% drop in real sales at bars and restaurants would reduce November’s real personal consumption of services by half of 0.1%...

Producer Price Index Unchanged in November As Higher Food & Energy Prices are Offset by Lower Margins for Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand was unchanged in November, as prices for finished wholesale goods rose 0.3% while margins of final services providers fell 0.3%...that followed an October report that had the PPI 0.4% higher, with prices for finished wholesale goods 0.7% higher and margins of final services providers up by 0.3%, a September report that showed producer prices fell 0.3%, with prices for finished wholesale goods 0.4% lower while margins of final services providers decreased by 0.2%, a revised August report that showed the PPI rose 0.2%, even prices for finished wholesale goods fell by 0.3%, because the more heavily weighted margins of final services providers increased by 0.3%, and a revised July report that indicated the PPI rose 0.2%, as prices for finished wholesale goods increased 0.3%, while margins of final services providers increased by 0.2%....on an unadjusted basis, producer prices are still 1.1% higher than a year ago, same as the year over year change indicated by last month's report, which had been the lowest annual price increase since the year ended October 2016...meanwhile, the core producer price index, which excludes food, energy and trade services, was also unchanged for the month, and is now 1.3% higher than in November a year ago, down from the 1.5% YoY increase shown in October...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.3% higher in November, after being 0.7% higher in October, 0.4% lower in September, 0.5% lower in August, 0.4% higher in July, 0.5% lower in June, 0.2% 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, and 0.5% lower in November of 2018....the finished goods index rose 0.3% in November because the wholesale price index for energy was 0.6% higher, after rising by 2.8% in October, after falling by 2.5% in September and by a revised 1.7% in August, and after rising by a revised 1.0% in July, and because the price index for wholesale foods rose 1.1% in November after rising 1.3% in October and 0.3% in September, while the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher after being unchanged in October....wholesale energy prices were higher due to a 2.3% increase in wholesale prices for gasoline and 8.0% higher wholesale prices for LP gas, while the wholesale food price index rose on a 6.3% increase in the wholesale price index for fresh and dry vegetables, 5.4% increases in the wholesale prices of both beef and pork, and a 76.6% increase in the wholesale price of eggs for fresh use....among wholesale core goods, wholesale prices for cigarettes rose 2.1% and wholesale prices for iron and steel scrap rose 8.2%..

At the same time, the index for final demand for services fell 0.3% in November, after rising by 0.3% in October, falling by 0.2% in September, rising 0.3% in August and a revised 0.2% in July, as the index for final demand for trade services fell 0.6%, the index for final demand for transportation and warehousing services fell 0.3%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.1% lower....among trade services, seasonally adjusted margins for TV, video, and photographic equipment and supplies retailers fell 8.2%, margins for food and alcohol retailers fell 4.0% 2.6%, and margins for food wholesalers fell 5.0%, while margins for automobile retailers rose 3.0%... among transportation and warehousing services, margins for airline passenger services fell 2.3%...among the components of the core final demand for services index, margins for arrangement of vehicle rentals and lodging fell 5.9%, margins for securities brokerage, dealing, investment advice, and related services fell 3.7%, and margins for hospital outpatient care fell 1.1%, while margins for traveler accommodation services rose 2.6%...

This report also showed the price index for intermediate processed goods rose 0.2% in November, after rising 0.4% in October. falling by 0.4% in September,  falling by a revised 0.3% in August, and rising by a revised 0.1% in July....the price index for intermediate energy goods rose 1.3%, as refinery prices for gasoline rose 2.3%, refinery prices for No. 2 diesel fuel rose 4.3%, and prices for natural gas sold to electric utilities rose 4.9%...at the same time, prices for intermediate processed foods and feeds rose 1.4%, as the producer price index for meats rose 3.9% and producer prices for dairy products rose 1.6%... meanwhile, the core price index for intermediate processed goods less food and energy fell 0.3% as the producer price index for industrial chemicals fell 1.4% and producer prices for steel mill products decreased 1.9%... prices for intermediate processed goods are still 2.9% lower than in November a year ago, the seventh 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 rose 3.9% in November, after rising 1.0% in October, falling 1.4% in September, falling by a revised 1.8% in August, and rising by a revised 1.2% in July....that was as the November price index for crude energy goods rose 10.8% as crude oil prices rose 10.2% and unprocessed natural gas prices rose 19.5%, while the price index for unprocessed foodstuffs and feedstuffs fell 0.2% as a 3.9% derease in producer prices for corn, and a 3.9% decrease in producer prices for slaughter chickens were mostly offset by 1.7% increases in producer prices for hogs and for slaughter steers and heifers, and a 4.6% increase in producer prices for wheat....at the same time, the index for core raw materials other than food and energy materials rose 0.3%, as prices for aluminum base scrap fell 4.6% while prices for unprocessed iron and steel scrap rose 8.2%...this raw materials index is still 5.5% 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 fell 0.1 percent in November after falling 0.2 percent in October, rising 0.1 percent in September, rising a revised 0.2% in August, and rising a revised 0.1% in July...the price index for intermediate trade services was 0.2% lower, as margins for metals, minerals, and ores wholesaling fell 2.7%, margins for intermediate food wholesalers fell 5.0%, and margins for intermediate paper and plastic product wholesalers fell 1.6%…on the other hand, the index for transportation and warehousing services for intermediate demand was 0.1% higher, as the price index for intermediate air mail and package delivery services rose 0.6% and the price index for water transportation of freight rose 2.9%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing was unchanged, as the intermediate price index for securities brokerage, dealing, investment advice, and related services fell 3.7% and the price index for Internet advertising space sales fell 6.4%, while the index for intermediate accounting services rose 2.3% and margins for intermediate traveler accommodation services rose 2.6%...over the 12 months ended in October, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 1.4% higher than it was a year ago, down from 1.6% in October and from 2.4% two months ago...

October Business Sales Down 0.1% Business Inventories Up 0.2%

After the release of the November retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for October (pdf), which incorporates the revised October retail data from that November report and the earlier published October wholesale and factory data to give us a complete picture of the business contribution to the economy for the month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,456.0 billion in October, down 0.1 percent (±0.2%)* from September's revised sales, and down 0.1 percent (±0.3 percent)* from October sales of a year earlier...note that total September sales were concurrently revised down from the originally reported $1,459.4 billion to $1,457.14 billion....manufacturer's sales were statistically unchanged from September at $500,158 million in October; retail trade sales, which exclude restaurant & bar sales from the revised October retail sales reported earlier, rose 0.5% to $461,565 million, while wholesale sales fell 0.7% to $494,271 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,042.8 billion at the end of October, up 0.2 percent (±0.1%) from September, and 3.1 percent (±0.4 percent) higher than in October a year earlier...at the same time, the value of end of September inventories was revised from the $2,041.5 billion reported last month to $2,039.07 billion, now down 0.1% from August...that $2.4 billion downward revision to September inventories should reduce the previous estimate of the inventory component to 3rd quarter GDP by more than $9.6 billion annually, which would subtract around 0.15 percentage points from 3rd quarter GDP...seasonally adjusted inventories of manufacturers were estimated to be valued at $698,785 million at the end of October, an increase of 0.1% from September, and inventories of retailers were valued at $668,484 million, 0.3% greater than September, and inventories of wholesalers were estimated to be valued at $675,573 million at the end of October, 0.1% greater than in September...

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for October, which was up 0.7% for finished goods...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories would have a large negative impact on 4th quarter GDP…also last week, we found that real wholesale inventories were also substantially negative and hence would also subtract from 4th quarter GDP growth….since the nominal value of retail inventories for October has now been shown to be just 0.1% higher, real retail inventories for the month, after the 0.7% finished goods price adjustment, thus would have thus decreased by 0.6% from September, after a third quarter that saw total inventories increase at an inflation adjusted $80 billion annual rate, before the pending revision we noted above...therefore, any inventory decrease over the 4th quarter would necessarily subtract that amount, plus the amount of the decrease, from the growth of 4th quarter GDP... 

 

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

Sunday, December 8, 2019

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

In addition to the Employment Situation Summary for November from the Bureau of Labor Statistics, this week's economic releases included four reports that will feed into 4th quarter GDP: the Commerce Department report on our International Trade for October, the October report on Construction Spending (pdf), the Full Report on Manufacturers' Shipments, Inventories and Orders for October, and the October report on Wholesale Trade, Sales and Inventories, all from the Census Bureau...in addition, late on Friday the Fed released the Consumer Credit Report for October, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $18.9 billion, or at a 5.5% annual rate, as non-revolving credit expanded at a 4.3% rate to $3,076.6 billion and revolving credit outstanding increased at a 8.8% rate to $1,088.7 billion...

The week’s major privately issued reports included the ADP Employment Report for November; the light vehicle sales report for November from Wards Automotive, which estimated that such vehicles sold at a 17.09 million annual rate in November, up from the 16.55 million annual rate in October, but down from the 17.40 million annual rate in November a year ago; and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the November Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 48.1% in November, down from 48.3% in October, indicating an ongoing contraction in US manufacturing, and the October Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 53.9% in November, down from 54.7% in October, meaning a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in November than in October...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally...  

Employers Add 266,000 Jobs in November, Unemployment Rate and Labor Force Participation Rate Both Lower

The Employment Situation Summary for November reported the strongest job creation since January, while the unemployment rate and the labor force participation rate both fell…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 266,000 jobs in November, after the previously estimated payroll job increase for September was revised up from up from 180,000 to 193,000 and the payroll jobs increase for October was revised up from 128,000 to 156,000…that means that this report represents a total of 307,000 more seasonally adjusted payroll jobs than were reported last month, with the caveat that the November figures includes the return of 48,000 GM workers who were on strike during the BLS reference week for October...the unadjusted data, meanwhile, shows that there were actually 622,000 more payroll jobs extent than in October, 466,400 of which were seasonal jobs additions in the retail sector...

Seasonally adjusted job increases in November were spread throughout the private goods producing and service sectors, with the 7,000 jobs lost in the mining and logging sector and the 4,300 jobs lost in wholesale trade the only notable decreases...the largest job increase was seen in the health care and social assistance sector, which added 60,200 jobs, with the addition of 16,100 jobs in doctor's offices and 11,100 jobs in individual and family services.…another 54,000 jobs were added in manufacturing, as the end of the GM strike resulted in a 42,100 net increase of those employed in the manufacture of transportation equipment...the leisure and hospitality sector added 45,000 jobs, including 25,300 more jobs in bars and restaurants and 8,700 additional jobs in amusements, gambling, and recreation...the broad professional and business services sector added 38,000 more jobs, with 8,400 of those working in architectural and engineering services and 5,800 employed by computer systems design and related services....at the same time, 15,500 jobs were added in transportation and warehousing, with 8,000 of those employed in warehouses, and 13,800 more were employed in private education services....in addition, both the financial sector and the information sector each saw the addition of 13,000 jobs during November, while 12,000 more jobs were added in various branches of government...that leaves only the retail sector, with a 2,000 job increase after the seasonal adjustment, and construction, with a 1,000 job increase, as the only major sectors we'd consider virtually unchanged...

The establishment survey also showed that average hourly pay for all employees rose by 7 cents an hour to $28.29 an hour in November, after it had increased by an upwardly revised 10 cents an hour in October; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $23.83 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in November, while weekly hours for production and non-supervisory personnel was unchanged at 33.5 hours...at the same time, the manufacturing workweek increased by 0.1 hour to 40.5 hours, while average overtime decreased by 0.1 hour to 3.1 hours...

Meanwhile, the November household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 83,000 to 158,593,000, while the estimated number of those unemployed and looking for work fell by 44,000 to 5,811,000, and as a result the total labor force increased by a rounded total of 40,000....since the working age population had grown by 175,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by a rounded 135,000 to 95,616,000, which was enough to lower the labor force participation rate from 63.3% in October to 63.2% in November....meanwhile, the increase in number employed as a percentage of the increase in the population was not enough to statistically change the employment to population ratio, which we could think of as an employment rate, as it remained at 61.0%....on the other hand, the decrease in the number unemployed was just enough to lower the unemployment rate, which fell from 3.6% to 3.5%, matching the lowest rate since December 1969...meanwhile, the number of those who reported they were forced to accept just part time work fell by 116,000, from 4,438,000 in October to 4,322,000 in November, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.0% of the labor force in October to 6.9% in November, thus matching a 19 year low...

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

October Trade Deficit Falls 7.6% on Lower Imports of Consumer & Automotive Goods

Our trade deficit fell 7.6% in October as the value of both our exports and our imports decreased, but our imports decreased by more....the Commerce Dept report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit fell by $3.9 billion to $47.2 billion in October from a revised September deficit of $51.1 billion, which had previously been reported as a deficit of $52.5 billion...the value of our October exports fell by a rounded $0.4 billion to $207.1 billion on a $0.8 billion decrease to $136.1 billion in our exports of goods and a $0.3 billion increase to $71.1 billion in our exports of services, while our imports fell by a rounded $4.3 billion to $254.3 billion on a $4.5 billion decrease to $204.1 billion in our imports of goods, partly offset by a $0.1 billion increase to $50.2 billion in our imports of services...export prices were on average 0.1% lower in October, which means the relative real decrease in exports for the month was smaller than the nominal decrease by that percentage, while import prices were 0.5% lower, meaning the decrease in real imports was smaller than the nominal dollar change reported here by that percentage...put another way, a fraction of the decrease in the value of October trade was due to lower prices..

The decrease in our October exports of goods resulted from lower exports of consumer goods, capital goods, automotive products and soybeans, which were partly offset by increases in exports of industrial supplies and materials and other goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $744 million to $16,623 million on a $436 million decrease in our exports of pharmaceutical preparations and a $354 million decrease in our exports of gem diamonds, and that our exports of capital goods fell by $391 million to $44,718 million on a $587 million decrease in our exports of engines for civilian aircraft which was partially offset by $309 million increase in our exports of industrial machines other than those itemized separately....in addition, our exports of automotive vehicles, parts, and engines fell by $311 million to $12,966 million as a $316 million decrease in our exports of trucks, buses, and special purpose vehicles and a $250 million decrease in our exports of parts and accessories other than engines, chassis and tires was partially offset by a $374 million increase in our exports of passenger cars, while our exports of foods, feeds and beverages fell by $281 million to $10,477 million on a $794 million decrease in our exports of soybeans...partially offsetting the decreases in those export categories, our exports of industrial supplies and materials rose by $556 million to $44,562 million on a $629 million increase in our exports of crude oil, a $379 million increase in our exports of precious metals other than those itemized separately, and a $210 million increase in our exports of natural gas liquids, which were partially offset by a $364 million decrease in our exports of fuel oil, while our exports of other goods not categorized by end use rose by $464 million to $6,103 million......

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of consumer goods and of automotive goods were the largest factors in the $4.5 billion decrease in our goods imports....our imports of consumer goods fell by $2404 million to $52,314 million on a $783 million decrease in our imports of pharmaceutical preparations, a $374 million decrease in our imports of cell phones, a $338 million decrease in our imports of cotton apparel and household goods, and a $314 million decrease in our imports of toys, games and sporting goods, and our imports of automotive vehicles, parts and engines fell by $1,801 million to $29,049 million on a $768 million decrease in our imports of parts and accessories other than engines, chassis and tires, a $498 million decrease in our imports of new and used passenger cars, and a $464 million decrease in our imports of trucks, buses, and special purpose vehicles.....in addition, our imports of industrial supplies and materials fell by $528 million to $41,390 million as a $820 million decrease in our imports crude oil was offset by a $469 million increase in our imports of petroleum products other than fuel oil and a $315 million increase in our imports fuel oil, and our imports of foods, feeds, and beverages fell by $370 million to $12,403 million...slightly offsetting the decreases in those import categories, our imports of capital goods rose by $399 million to $56,563 million as a $628 million increase in our imports of semiconductors, a $620 million increase in our imports of computers, a $303 million increase in our imports of computer accessories and a $259 million increase in our imports of telecommunications equipment was offset by a $437 million decrease in our imports of engines for civilian aircraft, and a $334 million decrease in our imports of industrial machines other than those itemized separately, and our imports of other goods not categorized by end use rose by $141 million to $10,530 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 October figures show surpluses, in billions of dollars, with South and Central America ($4.7), OPEC ($1.9), Hong Kong ($1.8), Brazil ($1.2), United Kingdom ($0.8), Singapore ($0.6), and Saudi Arabia ($0.6). Deficits were recorded, in billions of dollars, with China ($27.8), European Union ($14.3), Mexico ($7.8), Germany ($5.0), Japan ($4.5), Canada ($3.4), Italy ($2.6), France ($2.0), India ($2.0), Taiwan ($1.6), and South Korea ($1.5).

  • • The deficit with Japan decreased $1.4 billion to $4.5 billion in October. Exports increased $0.6 billion to $6.4 billion and imports decreased $0.9 billion to $10.9 billion.
  • • The deficit with the European Union decreased $1.3 billion to $14.3 billion in October. Exports increased $0.5 billion to $28.7 billion and imports decreased $0.9 billion to $43.0 billion.
  • • The deficit with Canada increased $0.8 billion to $3.4 billion in October. Exports decreased $0.7 billion to $23.8 billion and imports increased $0.2 billion to $27.2 billion.

The $1.35 billion downward revision to the September trade deficit will have the effect of decreasing the annualized 3rd quarter trade deficit by about $4.4 billion, which would increase reported 3rd quarter GDP growth by about 0.06 percentage points from previously published figures (assuming that inflation adjustments are similar)...meanwhile, to estimate the impact of October trade in goods on 4th quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the exception that they are not annualized here....from that table, we can figure that 3rd quarter real exports of goods averaged 149,243.3 million monthly in 2012 dollars, while inflation adjusted October exports were at 147,801 million in that same 2012 dollar quantity index representation... annualizing the change between those two figures, we find that October's real exports of goods are running at a 3.80% annual rate below those of the 3rd quarter, or at a pace that would subtract about 0.21 percentage points from 4th quarter GDP if continued through November and December.....in a similar manner, we find that our 3rd quarter real imports of goods averaged 233,955.7 million monthly in chained 2012 dollars, while inflation adjusted October goods imports were at 226,933 million in that same 2012 dollar representation...that would indicate that so far in the 4th quarter, we have seen our real imports decrease at annual rate of 11.48% from those of the 3rd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 11.48% rate would conversely add 1.47 percentage points to 4th quarter GDP....hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our improving balance of trade in goods would add a net of roughly 1.26 percentage points to the growth of 4th quarter GDP.....however, note that we have not included the impact of the less volatile change in services in our figures 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 Fell 0.8% in October after Prior Months Were Revised Much Higher

The Census Bureau's report on construction spending for October (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,291.1 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.0 percent)* below the revised annualized September estimate of $1,301.8 billion but still 1.1  percent (±1.5 percent)* above the estimated annualized level of construction spending in October of last year. The annualized September construction spending estimate was revised 0.6% higher, from $1,293.6 billion to $1,301.8  billion, while the annual rate of construction spending for August was revised nearly 1.5% higher, from $1,287.1 billion to $1,305.986 billion.  The combined upward revisions of $27.1 billion to annualized August and September construction spending figures would be averaged over the 3 months of the quarter and increase the annualized 3rd quarter construction figure by around $9.0 billion ex any inflation adjustment, which would thus suggest a upward revision of about 0.20 percentage points to third quarter GDP when the third estimate is released on December 20th...

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 $956.3 billion, 1.0 percent (±0.7 percent) below the revised September estimate of $966.1 billion. Residential construction was at a seasonally adjusted annual rate of $508.2 billion in October, 0.9 percent (±1.3 percent)* below the revised September estimate of $512.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $448.1 billion in October, 1.2 percent (±0.7 percent) below the revised September estimate of $453.5 billion.
  • Public Construction: In October, the estimated seasonally adjusted annual rate of public construction spending was $334.8 billion, 0.2 percent (±1.6 percent)* below the revised September estimate of $335.6 billion. Educational construction was at a seasonally adjusted annual rate of $83.3 billion, 2.5 percent (±2.6 percent)* above the revised September estimate of $81.3 billion. Highway construction was at a seasonally adjusted annual rate of $95.0 billion, 2.2 percent (±3.9 percent)* below the revised September estimate of $97.1 billion.

As you can see from the above, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of October spending reported in this release on 4th quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price.  There are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment on the total. That index showed that aggregate construction costs were up 0.4% month over month in October, after increasing 0.1% in August and 0.1% in September... 

On that basis, we can estimate that October construction costs were roughly 0.6% more than those of July, 0.5% more than those of August, and obviously 0.4% more than September. We'll then use those percentages to inflate higher priced spending figures for each of those months, which is arithmetically the same as deflating October construction spending, for purposes of comparison.  Annualized construction spending in millions of dollars for the third quarter months is given as 1,301,764 in September, 1,305,986 in August, and 1,291,250 in July.   Thus to adjust October's nominal construction spending of $1,291,069 million for inflation and compare it to that of the third quarter, our arithmetic formula would be: 1,291,069  / (((1,310,806 * 1.019) + ( 1,311,824 *1.020) + (1,317,701 * 1.021)) / 3) = 0.988445, meaning real construction in October was 1.2% lower than that of the 3rd quarter, or down at a 4.54% annual rate.   To figure the effect of that change on GDP,  we figure the difference between the third quarter inflation adjusted average and that of October and take that annualized result of that as a fraction of the inflation adjusted 3rd quarter GDP figure, and find that October construction spending is falling at a rate that would subtract 0.34 percentage points from 4th quarter GDP, assuming hypothetically that there would be no change over the next two months. ...

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

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for October from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $1.4 billion or 0.3 percent to $497.0 billion in October, following a decrease of 0.8% to $495.574 billion in September, which was revised from the 0.6 percent decrease to $496.7 billion that was reported for September last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only accurate as revised updates to the October advance report on durable goods we reported on last week...on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary:  New orders for manufactured goods in October, up following two consecutive monthly decreases,  increased $1.4 billion or 0.3 percent to $497.0 billion, the U.S. Census Bureau reported today.  This followed a 0.8 percent September decrease.  Shipments, up following three consecutive monthly  decreases, increased less than $0.1 billion or virtually unchanged to $500.2 billion.  This followed a 0.4  percent September decrease.  Unfilled orders, up three of the last four months, increased $1.0 billion or  0.1 percent to $1,164.3 billion.  This followed a virtually unchanged September decrease.  The unfilled  orders‐to‐shipments ratio was 6.67, down from 6.70 in September.  Inventories, up ten of the last eleven  months, increased $0.9 billion or 0.1 percent to $698.8 billion.  This followed a 0.3 percent September  increase.  The inventories‐to‐shipments ratio was 1.40, unchanged from September.  
  • New orders for manufactured durable goods in October, up four of the last five months, increased $1.3  billion or 0.5 percent to $248.4 billion, down from the previously published 0.6 percent increase.  This  followed a 1.5 percent September decrease.  Transportation equipment, also up four of the last five  months, led the increase, $0.6 billion or 0.7 percent to $84.6 billion.  New orders for manufactured  nondurable goods increased $0.1 billion or virtually unchanged to $248.6 billion. 
  • Shipments of manufactured durable goods in October, down four consecutive months, decreased less than  $0.1 billion or virtually unchanged to $251.6 billion, down from the previously published increase.  This  followed a 0.7 percent September decrease.  Transportation equipment, also down four consecutive  months, drove the decrease, $0.3 billion or 0.4 percent to $83.7 billion.  Shipments of manufactured  nondurable goods, up following two consecutive monthly decreases, increased $0.1 billion or virtually  unchanged to $248.6 billion.  This followed a 0.1 percent September decrease.  Petroleum and coal  products, up three of the last four months, drove the increase, $0.3 billion or 0.7 percent to $51.7 billion.  
  • Unfilled orders for manufactured durable goods in October, up three of the last four months, increased  $1.0 billion or 0.1 percent to $1,164.3 billion, unchanged from the previously published increase.  This  followed a virtually unchanged September decrease.  Transportation equipment, up four consecutive  months, led the increase, $0.9 billion or 0.1 percent to $795.5 billion.  
  • Inventories of manufactured durable goods in October, up fifteen of the last sixteen months, increased  $1.6 billion or 0.4 percent to $432.2 billion, up from the previously published 0.3 percent increase.  This  followed a 0.5 percent September increase.  Transportation equipment, also up fifteen of the last sixteen  months, drove the increase, $1.9 billion or 1.3 percent to $147.4 billion.  Inventories of manufactured  nondurable goods, down seven consecutive months, decreased $0.7 billion or 0.3 percent to $266.6  billion.  This followed a virtually unchanged September decrease.  Food products, down two of the last  three months, led the decrease, $0.4 billion or 0.8 percent to $54.0 billion.  By stage of fabrication,  October materials and supplies increased 0.2 percent in durable goods and were virtually unchanged in  nondurable goods.  Work in process increased 0.8 percent in durable goods and decreased 1.3 percent in  nondurable goods.  Finished goods were virtually unchanged in both durable and nondurable goods.

To estimate the effect of those October factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was statistically unchanged at $243,268 million; the value of work in process inventories rose 0.3% to $218,161 million, and materials and supplies inventories were valued 0.1% higher at $237,356 million...the October producer price index reported that prices for finished goods were on average 0.7% higher, that prices for intermediate processed goods were on average 0.4% higher, and that prices for unprocessed goods were 1.0% higher....assuming similar valuations for like types of inventories, those price increases would suggest that October's real finished goods inventories were about 0.7% lower, that real inventories of intermediate processed goods were 0.1% lower, and that real raw material inventory inventories were about 0.9% lower...since real NIPA factory inventories were grew substantially in the 3rd quarter, the fact that this report indicates a drop in aggregate real October factory inventories will therefore have a correspondingly large negative impact on the growth rate of 4th quarter GDP... 

October Wholesale Sales Down 0.7%, Wholesale Inventories Up 0.1%

The October report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$494.3 billion, down 0.7 percent (±0.5 percent) from the revised September level and were down 1.4 percent (±0.9 percent) from the October 2018 level. The August 2019 to September 2019 percent change was revised from the preliminary estimate of virtually unchanged (±0.5 percent)* to down 0.1 percent (±0.5 percent)*"...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold...

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this October report estimated that wholesale inventories were valued at a seasonally adjusted "$675.6 billion at the end of October, up 0.1 percent (±0.4 percent)* from the revised September level. Total inventories were up 3.8 percent (±1.1 percent) from the revised October 2018 level. …they also report that: The September 2019 to October 2019 percent change was revised from the advance estimate of up 0.2 percent (±0.4 percent)* to up 0.1 percent (±0.4 percent)*. in reference to the sketchy Advance Report on Wholesale and Retail Inventories released before the release of 3rd quarter GDP revisions...September's wholesale inventories were reported down 0.4% at $676.7 billion a month ago, and were revised to down 0.7% at $674,944 million with that advance report, & this report further revises that figure to $674,897 million...

Like factory inventories, to estimate the effect of October wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index...although details are not broken out, we've previously estimated that more than 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...as we noted earlier, the producer price index for October indicated that prices for finished goods rose 0.7%, prices for intermediate goods intermediate goods rose 0.4%, and prices for unprocessed goods rose 1.0%; hence the 0.1% increase in the nominal value of wholesale inventories masks a decrease of around 0.6% in real terms...since real wholesale inventories in the 3rd quarter were somewhat higher, any decrease in real wholesale inventories in the 4th quarter would thus subtract from the growth of 4th quarter GDP...

 

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