Sunday, November 17, 2019

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

Major reports released this week included Retail Sales Report for October and the Business Sales and Inventories Report for September from the Census Bureau, the October Consumer Price Index, the October Producer Price Index, and the October Import-Export Price Index from the Bureau of Labor Statistics, and the October report on Industrial Production and Capacity Utilization from the Fed...in addition, this week also saw the release of the first regional Fed manufacturing survey for November: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a suburban NYC county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +4.0 in October to +2.9 in November, suggesting sluggish growth of First District manufacturing...

Consumer Prices Rose 0.4% in October on Higher Prices for Food, Energy & Health Care

The consumer price index rose 0.4% in October, as higher prices for food, energy, health care and used cars were only slightly offset by lower prices for clothing, new vehicles, and most consumer durable goods...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.4% in October after being unchanged in September, rising 0.1% in August, 0.3% in July, 0.1% in June, 0.1% in May, 0.3% in April, 0.4% in March, 0.2% in February, and after they had been unchanged in January, in December and in November, and had risen 0.3% last October...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 256.759 in September to 257.346 in October, which left it statistically 1.764% higher than the 252.885 index reading of October of last year, which is reported as a 1.8% year over year increase....with prices for food and energy being major contributors to the overall 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 264.522 to 265.059, which left the core index 2.3145% ahead of its year ago reading of 259.063, which is reported as a 2.3% year over year increase, down from 2.4% in September...

The volatile seasonally adjusted energy price index rose 2.7% in October, after 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, falling 2.8% in November, and rising by 2.1% last October, and hence is still 4.2% lower than in October a year ago...the price index for energy commodities was 3.5% higher in October, while the index for energy services was 1.8% higher, after falling 0.1% in September....the energy commodity index was up 3.5% due to a 3.7% increase in the price of gasoline, the largest component, and a 0.8% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.5% higher...within energy services, the price index for utility gas service rose 2.4% after falling 0.7% in September and is now 0.2% higher than it was a year ago, while the electricity price index rose 1.6% after being unchanged in September....energy commodities are still averaging 7.4% lower than their year ago levels, with gasoline prices averaging 7.3% lower than they were a year ago, while the energy services price index is now 0.4% higher than last October, as electricity prices are also 0.4% higher than a year ago…

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

In the food at home categories, the price index for cereals and bakery products was 0.1% lower as average bread prices were unchanged while the price index for flour and prepared flour fell 0.6% and the index for fresh cakes and cupcakes fell 2.5%...on the other hand, the price index for the meats, poultry, fish, and eggs group was 0.6% higher, as the beef and veal price index rose 1.3%, average pork prices rose 0.7%, and fresh fish and seafood prices averaged 1.8% higher...in addition, the seasonally adjusted index for dairy products was 0.1% higher, as average prices for milk rose 0.3%, cheese prices rose 1.2% and ice cream prices rose 1.0%...at the same time, the fruits and vegetables index was 0.9% higher on a 1.6% increase in the price index for fresh fruits and a 1.0% increase in the price index for frozen fruits and vegetables, even as tomato prices fell 1.0%...meanwhile, the beverages index was 0.3% lower, as prices for instant coffee fell 1.7% and carbonated drink prices were 1.4% lower....lastly, the index for the ‘other foods at home’ category was 0.2% higher, as the price index for sugar and sugar substitutes rose 0.5% and peanut butter prices rose 2.9%....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 October, none of the food line items have seen a price change of more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.2% October after rising by 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 0.1% lower, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was down 0.3%, as the price index for living room, kitchen, and dining room furniture fell 0.8%, the index for major appliances fell 2.6%, and the price index for window coverings fell 4.3%....in addition, the apparel price index was 1.8% lower on a 5.7% drop in the price index for women's suits and separates, a 2.9% decrease in the index for girls' apparel, and a 3.9% decrease in the price index for boys apparel... on the other hand, the price index for transportation commodities other than fuel was 0.4% higher even as prices for new cars and trucks fell 0.2% because prices for used cars and trucks rose 1.3% and the price index for vehicle parts and equipment other than tires rose 0.5%... meanwhile, prices for medical care commodities averaged 1.2% higher as prescription drugs prices rose 1.8%....at the same time, the recreational commodities index was 0.4% higher despite a 1.5% decrease in TV prices because the price index for sporting goods rose 0.5% and the price index for recreational reading materials rose 3.0%....however, the education and communication commodities index was 1.9% lower on a 2.4% decrease in the price index for computers, peripherals, and smart home assistant devices and a 2.9% 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 0.2% higher on an 0.8% increase in the index for hair, dental, shaving, and miscellaneous personal care products and a 2.3% increase in the price index for miscellaneous personal goods...

Within core services, the price index for shelter rose 0.1% as rents were unchanged and homeowner's equivalent rent rose 0.2% while prices for lodging away from home at hotels and motels fell 4.4%, while the shelter sub-index for water, sewers and trash collection rose 0.5%, and household operation costs were on average 0.4% higher....at the same time, the price index for medical care services was 0.9% higher, as the index for hospital services rose 1.4% and health insurance rose 2.2%...in addition, the transportation services price index was 0.1% higher as the price index for car and truck rental rose 5.6% and motor vehicle registration and license fees rose 0.6%, while airline fares fell 0.4% and intercity bus fares fell 2.6%....on the other hand, the recreation services price index rose 0.9% as photographer fees rose 1.5% and the index for admission to events rose 2.1%....meanwhile, the index for education and communication services was 0.2% higher as the index for elementary and high school tuition and fees rose 0.5% and land-line telephone services rose 1.1%....lastly, the index for other personal services was up 0.2% as the price index for apparel services other than laundry and dry cleaning services was 1.3% higher...

Among core line items, prices for televisions, which now average 19.6% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.2% since last October, and the price index for computer software and accessories, which is down 10.2% 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 20.1% over the past year, the price index for infants' furniture, which has increased 14.9% year over year, and intercity bus-fare, which has increased by 19.9% since last October, are the only line items to have increased by a double digit magnitude over that span....

Retail Sales Rise 0.3% in October after September Sales Revised Lower

Seasonally adjusted retail sales increased in October after retail sales for August and September were revised lower...the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that seasonally adjusted retail and food services sales totaled $526.5 billion nationally during the month, which was 0.3 percent (±0.4%)* higher than September's revised sales of $525.2 billion and 3.1 percent (±0.7 percent) above the adjusted sales in October of last year... September's seasonally adjusted sales were revised from the $525.6 billion reported last month to $525.2 billion, while August's sales were revised from $526.889 billion to $526.862 billion, and those changes managed to leave the August to September percent change unrevised at -0.3% (now ±0.2%)....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 5.2%, from $499,153 million in September to $524,989 million in October, while they were up 3.7% from the $506,360 million of sales in October a year ago...the total $0.43 billion downward revision to August and September's retail sales should reduce the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.03 percentage points, assuming the distribution of price adjustments in the revised figures is similar to that of those originally published...

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

October 2019 retail sales table

To compute October's real personal consumption of goods data for national accounts from this October retail sales report, the BEA will use the corresponding price changes from the October consumer price index, which we reviewed above...to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals...from the third line on the above table, we can see that October retail sales excluding the 1.1% jump in sales at gas stations were up by 0.2%....then, subtracting the figures representing the 0.5% 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 a bit more than 0.2% for the month....since the CPI report showed that the composite price index for all goods less food and energy goods was down 0.1% in October, we can thus approximate that real retail sales excluding food and energy were on average 0.3% higher for the month...however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at clothing stores were 1.0% lower in October, the apparel price index was 1.8% lower, which means that real sales of clothing actually rose around 0.8%....similarly, while sales at furniture stores were down 0.9%, the price index for household furnishings and supplies decreased by 0.3%, which would suggest that real sales at furniture stores only fell 0.6%…on the other hand, while nominal sales at sporting goods, hobby, music and book stores fell 0.8%, the price index for recreational commodities rose 0.4%, so real sales of recreational goods were down roughly 1.2%...

In addition to figuring those core retail sales, to make a complete estimate of real October 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 0.2% higher in October, with the price index for food purchased for use at home 0.3% higher, while prices for food bought to eat away from home were 0.2% higher... hence, with nominal sales at food and beverage stores 0.5% higher, real sales of food and beverages would only be roughly 0.2% higher in light of the 0.3% 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 0.5%...meanwhile, while sales at gas stations were up 1.1%, there was a 3.7% increase in the retail price of gasoline, which would suggest real sales of gasoline were down on the order of 2.6%, 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 October will show that real personal consumption of goods rose by 0.2% for the month, after rising by a revised 0.3% in September, and by an unrevised 0.3% in August....at the same time, the 0.5% decrease in real sales at bars and restaurants will have a small negative impact on October's real personal consumption of services..

Industrial Production was Down 0.8% in October, Partly Due to the GM Strike

The Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production fell by 0.8% in October after falling by a revised 0.3% in September and rising by a revised 0.7% in August, as all three production components registered declines in October….the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 108.7 in October from 109.6 in September, which was revised from the 109.5 index level reported last month...at the same time, the May index was revised from 109.3 to 109.2, while the index readings for June, July, & August remained unchanged at 109.3, 109.1, and 109.9 respectively...after revisions, industrial production is now 1.1% lower than a year ago...

The manufacturing index, which accounts for more than 75% of the total IP index, decreased by 0.6%, from 104.7 in September to 104.0 in October, after September's manufacturing index was revised down from 104.8 to 104.7, August's index was unchanged at 105.2, July's index was revised down from 104.7 to 104.6, and May's index was revised down from 104.5 to 104.4....the manufacturing index was impacted by a 7.1% drop in the output of motor vehicles and parts due to the strike at General Motors, but was still down 0.1% excluding that automotive figure and is now 1.5% below it's level of a year ago...meanwhile, the mining index, which includes oil and gas well drilling, fell by 0.7%, from 133.0 in September to 132.1 in October, after the September mining index was revised up from 131.8, and the August index was revised from 133.5 to 134.1, which left the mining index 2.7% higher than it was a year ago, actually higher than the 2.6% year over year gain reported last month....meanwhile, the utility index, which often fluctuates due to above or below normal temperatures, fell by 2.6% in October, from 106.6 to 103.8, after the September utility index was revised from 106.8 to 106.6, leaving the utility index 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 industry fell to 76.7% in October from 77.5% in September, same as was reported for September a month ago...capacity utilization of NAICS durable goods production facilities fell from 75.1% in September to 74.1% in October, after September's figure was revised down from 75.4%, while capacity utilization for non-durables producers fell from 76.3% in September to 76.2% in October, after September's nondurables utilization was revised up from 76.0%...capacity utilization for the mining sector fell to 88.8% in October from 89.8% in September, which was originally reported as 88.9%, while utilities were operating at 75.4% of capacity during October, down from their 77.5% of capacity during September, which was revised from the previously reported 77.7%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories.... 

Producer Price Index Rose 0.4% in October On Higher Food & Energy, Margins for Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.4% in September, as prices for finished wholesale goods rose 0.7% and margins of final services providers increased by 0.3%...that followed 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%, an August report that showed the PPI rose 0.1%, even prices for finished wholesale goods fell by 0.5%, because the more heavily weighted margins of final services providers increased by 0.3%, a revised July report that indicated the PPI rose 0.3%, as prices for finished wholesale goods increased 0.4%, while margins of final services providers increased by 0.1%, and a revised June report that now shows the PPI fell 0.3%, as prices for finished wholesale goods decreased 0.5%, while margins of final services providers were unchanged....on an unadjusted basis, producer prices are now only 1.1% higher than a year ago, down from the 1.4% year over year change indicated by last month's report, and the lowest annual increase since the year ended October 2016...meanwhile, the core producer price index, which excludes food, energy and trade services, was up 0.1% for the month, and is now 1.5% higher than in October a year ago, down from the 1.7% YoY increase shown in September...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.7% higher in October, after being 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, 0.5% lower in November, and 0.8% higher in October of 2018....the finished goods index rose in October because the wholesale price index for energy was 2.8% higher, after falling by 2.5% in both August & September, rising by 2.3% in July, but after falling by a revised 3.9% in June and by a revised 0.4% in May, while the price index for wholesale foods rose 1.3% in October after rising 0.3% in September but falling 0.6% in August, and while the index for final demand for core wholesale goods (excluding food and energy) was unchanged after falling 0.1% in September....wholesale energy prices were higher due to a 7.3% increase in wholesale prices for gasoline and 3.3% higher wholesale prices for home heating oil, while the wholesale food price index rose on a 28.6% increase in the wholesale price index for fresh and dry vegetables and a 8.5% increase in the wholesale price index for grains....among wholesale core goods, wholesale prices for computers and computer equipment rose 0.4% while wholesale prices for iron and steel scrap fell 15.7%..

At the same time, the index for final demand for services rose 0.3% in October, after falling 0.2% in September, rising 0.3% in August and a revised 0.1% in July, and after being unchanged in June, as the index for final demand for trade services rose 0.8%, the index for final demand for transportation and warehousing services rose 0.3%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for both apparel, jewelry, footwear, and accessories retailers and for food and alcohol retailers rose 2.6%, margins for lawn, garden, and farm equipment and supplies retailers rose 1.9%, and margins for automobile retailers rose 1.7%, while margins for furniture retailers fell 4.3%... among transportation and warehousing services, margins for air transportation of freight rose 0.6% and margins for airline passenger services rose 0.5%...among the components of the core final demand for services index, margins for passenger car rentals rose 2.9% and margins for hospital outpatient care rose 1.5% while margins for securities brokerage, dealing, investment advice, and related services fell 8.4%..

This report also showed the price index for intermediate processed goods rose 0.4% in October, after falling by 0.4% in September, 0.7% in August, rising a revised 0.4% in July, and falling a revised 1.2% in June....the price index for intermediate energy goods rose 1.8%, as refinery prices for gasoline rose 7.3%, refinery prices for jet fuels rose 3.1%, and prices for natural gas sold to electric utilities rose 1.4%...meanwhile, prices for intermediate processed foods and feeds rose 0.4%, as the producer price index for prepared animal feeds rose 2.7% and producer prices for refined sugar and byproducts rose 0.6%... at the same time, the core price index for intermediate processed goods less food and energy rose 0.1% as producer prices for prices for basic organic chemicals rose 4.9% and producer prices for building paper and board increased 1.0%... however, prices for intermediate processed goods are now 3.7% lower than in October a year ago, the sixth 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 1.0% in October, after falling 1.4% in September, 1.0% in August, rising a revised 0.4% in July, and falling by a revised 2.9% in June...that was as the October price index for crude energy goods fell 3.0% as crude oil prices fell 9.3% even as unprocessed natural gas prices rose 7.7%, while the price index for unprocessed foodstuffs and feedstuffs rose 6.4% on a 9.1% increase in producer prices for corn, a 8.3% increase in producer prices for slaughter chickens, and a 10.8% increase in producer prices for slaughter steers and heifers....at the same time, the index for core raw materials other than food and energy materials fell 1.3%, as prices for aluminum base scrap fell 4.1% and prices for unprocessed iron and steel scrap fell 15.7%...this raw materials index is now 12.3% 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 0.2 percent in October after rising 0.1 percent in September, 0.5% in August, but after falling a revised 0.2% in July, and being unchanged in June (revised)...however, the price index for intermediate trade services was 0.8% higher, as margins for metals, minerals, and ores wholesaling rose 4.7%, margins for intermediate food wholesalers rose 3.5%, and margins for intermediate paper and plastic product wholesalers rose 1.5% …meanwhile, the index for transportation and warehousing services for intermediate demand was 0.1% lower, as the price index for intermediate arrangement of freight and cargo transportation fell 3.8% while the price index for water transportation of freight fell 0.4%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing fell 0.5%, as the intermediate price index for securities brokerage, dealing, investment advice, and related services dropped 8.4% and the price index for television advertising time sales fell 3.0%..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 1.6% higher than it was a year ago, down from 2.4% a month ago...

Business Sales Down 0.2% in September, Business Inventories Flat

After the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,459.4 billion in September, down 0.2 percent (±0.2 percent)* from August's revised sales, but up 0.5  percent (±0.3 percent) from September sales of a year earlier...note that total August sales were concurrently revised down from the originally reported $1,463.9 billion to $1,462.6 billion, and are now only up 0.1% from July....manufacturer's sales were down 0.2% to $501,115 million in September, and retail trade sales, which exclude restaurant & bar sales from the revised September retail sales that we reported earlier, fell 0.5% to $459,640 million, while wholesale sales were statistically unchanged at $498,597 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,041.5 billion at the end of September, statistically unchanged (±0.1 percent)* from August, but 3.7 percent (±0.5 percent) higher than in September a year earlier...the value of end of August inventories were revised from the $2,042.1 billion reported last month to $2,040.5 billion, and are now down 0.1% from July, rather than unchanged...seasonally adjusted inventories of manufacturers were estimated to be valued at $697,876 million, up 0.3% from August, inventories of retailers were valued at $666,947 million, 0.2% more than in August, while inventories of wholesalers were estimated to be valued at $676,710 million at the end of September, 0.4% lower than in August...

We had previously estimated that 3rd quarter GDP was overestimated by around 0.06 percentage points based on what the wholesale inventory showed, and that 3rd quarter GDP was underestimated by around 0.14 percentage points based on what the factory inventories report showed....in the advance report on 3rd quarter GDP of two weeks ago, retail inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted retail inventories were valued at $667,130 billion at the end of September, up 0.3% from a revised $665,333 billion in August....that's $0.186 billion more than the $666,947 billion for the end of the quarter that this report shows, which would mean that the quarterly change in 3rd quarter retail inventories was overestimated at roughly a $0.75 billion annual rate...combined with our previous figures on factory and wholesale inventories, then, this report would suggest that the growth rate of 3rd quarter GDP should be revised upwards by around 0.06 percentage points when the 2nd estimate is released at the end of November...

 

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

Sunday, November 10, 2019

September's job openings & labor turnover, trade deficit, factory inventories and wholesale inventories, et al

Major agency reports that were released the past week included the Commerce Dept report on our International Trade for September, the Job Openings and Labor Turnover Survey (JOLTS) for September from the Bureau of Labor Statistics, and the Full Report on Manufacturers' Shipments, Inventories and Orders for September, and the September report on Wholesale Trade, Sales and Inventories both from the Census Bureau....in addition, the Fed released the Consumer Credit Report for September, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $9.5 billion, or at a 2.8% annual rate, as non-revolving credit expanded at a 4.2% rate to $3,072.3 billion while revolving credit outstanding shrunk at a 1.2% rate to $1,077.0  billion...

Privately issued reports included the October Non-Manufacturing Report On Business from the Institute for Supply Management, which reported their NMI (non-manufacturing index) rose to 54.7% from 52.6% in September, indicating a greater plurality of service industry purchasing managers reported expansion in various facets of their business in October, and the Mortgage Monitor for September from Black Knight Financial Services, which indicated that 3.53% of all mortgages were delinquent in September, up from 3.45% in August but down from 3.97% in September of 2018, and that 0.48% of all mortgages were in the foreclosure process in September, unchanged from August but down from 0.52% a year ago....

Job Openings at 17 Month Low, Layoffs at a 89 Month High

The Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 277,000, from 7,293,000 in August to 7,024,000 in September, after August job openings were revised 250,000 higher, from 7,051,000 to 7,301,000...September's jobs openings were the lowest since April of 2018 and also 5% lower than the 7,392,000 job openings reported for September a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.6% in August to 4.4% in September, and it was also down from 4.7% in September a year ago... job opening changes included a 124,000 job opening decrease to 1,071,000 openings in the health care sector and a 104,000 decrease to 714,000 openings in retail, while openings in the information sector rose by 25,000 to 162,000 (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 table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in September, seasonally adjusted new hires totaled 5,934,000, up by 50,000 from the revised 5,884,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed remained at 3.9% in September, while it was up from the 3.8% rate in September a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 76,000, from 5,732,000 in August to 5,808,000 in September, while the separations rate as a percentage of the employed remained unchanged at 3.8%, while it was up from 3.7% in September a year ago (see table 3)...subtracting the 5,808,000 total separations from the total hires of 5,934,000 would imply an increase of 126,000 jobs in September, somewhat less than the revised payroll job increase of 180,000 for September reported in the October establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,498,000 of us voluntarily quit our jobs in September, down from the revised 3,601,000 who quit their jobs in August, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.4% of total employment in August to 2.3% in September, same as a year earlier (see job details in table 4)....in addition to those who quit, another 1,964,000 were either laid off, fired or otherwise discharged in September, up by 152,000 from the revised 1,812,000 who were discharged in August and the highest since May 2012, as the discharges rate rose from 1.2% to 1.3% of all those who were employed during the month, which was also up from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 346,000 in September, up from 320,000 in August, for an 'other separations rate’ of 0.2%, which was unchanged from August and from September of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...

September Trade Deficit Down 4.7% on Lower Imports of Consumer Goods, Capital Goods, and Automotive Products

Our trade deficit fell by 4.7% in September 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 September indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $2.6 billion to $52.450 billion in September from a revised August deficit of $55.035 billion...the value of our September exports fell by a rounded $1.8 billion to $206.0 billion on a $1.8 billion decrease to $136.8 billion in our exports of goods and a $0.1 billion increase to $69.2 billion in our exports of services, while our imports fell by a rounded $4.4 billion to $258.4 billion on a $4.5 billion decrease to $208.6 billion in our imports of goods which was offset by a $0.1 billion increase to $49.9 billion in our imports of services...export prices were 0.2% lower in September, which means the relative real decrease in exports for the month was smaller than the nominal decrease by that percentage, while import prices were 0.2% higher, meaning the decrease in real imports was greater than the nominal dollar change reported here by that percentage....

The decrease in our September exports of goods resulted from lower exports of foods, feeds, and beverages and of automotive vehicles, parts, and engines, which were partly offset by a increase in exports of capital goods...referencing the Full Release and Tables for September (pdf), in Exhibit 7 we find that our exports of foods, feeds and beverages fell by $1506 million to $10,756 million on a $1,035 million decrease in our exports of soybeans and that our exports of automotive vehicles, parts, and engines fell by $1001 million to $13,279 million on a $339 million decrease in our new and used passenger cars and a $282 million decrease in our exports of trucks, buses, and special purpose vehicles...in addition, our exports of industrial supplies and materials fell by $270 million to $44,070 million on an $790 million decrease in our exports of fuel oil even as our exports of crude oil and natural gas were both up by more than $500 million, and our exports of other goods not categorized by end use fell by $421 million to $5,691 million...partially offsetting the decreases in those export categories, our exports of capital goods rose by $848 million to $45,104 million on a $659 million increase in our exports of civilian aircraft and a $602 million increase in our exports of engines for civilian aircraft, and our exports of consumer goods rose by $490  million to $17,366 million on a $455 million increase in our exports of pharmaceuticals...

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, capital goods, and of automotive vehicles, parts, and engines were responsible for the $4.5 billion decrease in our goods imports...our imports of consumer goods fell by $2,510 million to $54,716 million on a $809 million decrease in our imports of cellphones, a $557 decrease in our imports of toys, games, and sporting goods, a $377 decrease in our imports of artwork, antiques, and other collectibles and a $286 decrease in our imports of textiles and apparel other than those of wool or cotton, and our imports of capital goods fell by $1,105 million to $56,162 million on a $589 million decrease in our imports of semiconductors and a $232 million decrease in our imports of industrial machines other than those itemized separately, while our imports of automotive vehicles, parts and engines fell by $1,099 million to $30,851 million on a $372 million decrease in our imports of trucks, buses, and special purpose vehicles, $317 million decrease in our imports of vehicle parts and accessories other than bodies and chassis, engines and tires, and a $310 million decrease in our imports of of new and used passenger cars....in addition, our imports of industrial supplies and materials fell by $620 million to $41,923 million on a $359 million decrease in our imports non-monetary a $339 million decrease in our imports of petroleum products other than fuel oil, and a $224 million decrease in our imports of fuel oil...slightly offsetting those decreases, our imports of foods, feeds, and beverages rose by $159 million to $12,772 million on a $210 million increase in our imports of fruits and fruit juices, and our imports of other goods not categorized by end use rose by $840 million to $10,389 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 September figures show surpluses, in billions of dollars, with South and Central America ($5.0), Hong Kong ($2.1), Brazil ($1.0), OPEC ($1.0), Singapore ($0.9), United Kingdom ($0.7), and Saudi Arabia ($0.3). Deficits were recorded, in billions of dollars, with China ($28.0), European Union ($15.7), Mexico ($9.1), Japan ($5.9), Germany ($5.0), Italy ($3.0), Canada ($2.5), Taiwan ($2.1), India ($2.0), France ($1.7), and South Korea ($1.2).

  • The deficit with Germany decreased $1.9 billion to $5.0 billion in September. Exports increased $0.7 billion to $5.6 billion and imports decreased $1.2 billion to $10.7 billion. •
  • The deficit with China decreased $0.9 billion to $28.0 billion in September. Exports decreased $1.0 billion to $9.0 billion and imports decreased $1.9 billion to $37.0 billion. 
  • The deficit with Canada increased $0.9 billion to $2.5 billion in September. Exports decreased $0.3 billion to $24.5 billion and imports increased $0.6 billion to $27.0 billion.

In last week's advance report on 3rd quarter GDP, the contribution of September trade was estimated based on the sketchy Advance Report on our International Trade in Goods which was released last week, just before the GDP release...that report estimated that our seasonal adjusted September goods trade deficit was at $70,394 million on a Census basis, down from the $73,055 million goods deficit in August, on goods exports of $135,894 million and goods imports of $206,288 million...this report revises that and shows that our actual goods trade deficit in September was $71,718 billion on a balance of payments basis, and $70,547 million on a Census basis, on Census adjusted goods imports of $208,551 million and Census adjusted goods exports of $136,833 million...in addition, the Census basis August goods trade deficit was revised from $73,055 million to $73,023 million...together, those revisions from the previously published data mean that the 3rd quarter trade deficit in goods was on the order of $0.12 billion more than was included in last week's GDP report, or roughly $0.5 billion on an annualized basis, which could subtract 0.01 percentage point from 3rd quarter GDP when the 2nd estimate is released at the end of November... 

    Factory Shipments Down 0.2% in September, Factory Inventories Up 0.3%

    The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for September from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $2.9 billion or 0.6 percent to $496.7 billion in September, following an decrease of 0.1% to $499.6 billion in August, which was revised from the 0.1 percent decrease to $499.8 billion reported for August last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as revised updates to the September advance report on durable goods we reported on two weeks ago...on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

    • Summary: New orders for manufactured goods in September, down two consecutive months, decreased $2.9 billion or 0.6 percent to $496.7 billion, the  U.S. Census Bureau reported today.  This followed a 0.1 percent August decrease.  Shipments, down three consecutive months, decreased $1.1 billion or  0.2 percent to $501.1 billion.  This followed a 0.3 percent August decrease.  Unfilled orders, down following two consecutive monthly increases, decreased $0.1 billion or virtually unchanged to $1,163.3 billion.  This followed a 0.1 percent August increase.  The unfilled orders‐to‐shipments ratio was 6.69, up from 6.68 in August.  Inventories, up nine of the last ten months, increased $2.2 billion or 0.3 percent to $697.9 billion.   This followed a 0.1 percent August decrease.  The inventories‐to‐shipments ratio was 1.39, unchanged from August.
    • New orders for manufactured durable goods in September, down following three consecutive monthly increases, decreased $3.1 billion or 1.2 percent to $247.7 billion, down from the previously published 1.1 percent decrease.  This followed a 0.2 percent August increase.  Transportation equipment, also down following three consecutive monthly increases, led the decrease, $2.4 billion or 2.8 percent to $84.3 billion.  New orders for manufactured nondurable goods increased $0.1 billion or 0.1 percent to $249.0 billion.
    • Shipments of manufactured durable goods in September, down three consecutive months, decreased $1.2 billion or 0.5 percent to $252.1 billion, down from the previously published 0.4 percent decrease.  This followed a 0.2 percent August decrease.  Transportation equipment, also down three consecutive months, led the decrease, $1.2 billion or 1.3 percent to $84.4 billion.  Shipments of manufactured nondurable goods, up two of the last three months, increased $0.1 billion or 0.1 percent to $249.0 billion.  This followed a 0.4 percent August decrease.  Petroleum and coal products, also up two of the last three months, drove the increase, $0.2 billion or 0.4 percent to $51.3 billion.
    • Unfilled orders for manufactured durable goods in September, down following two consecutive monthly increases, decreased $0.1 billion or virtually unchanged to $1,163.3 billion, unchanged from the previously published decrease.  This followed a 0.1 percent August increase.  Fabricated metal products, down following three consecutive monthly increases, drove the decrease, $0.2 billion or 0.2 percent to $86.9 billion.
    • Inventories of manufactured durable goods in September, up fourteen of the last fifteen months, increased $2.0 billion or 0.5 percent to $430.3 billion, unchanged from the previously published increase.   This followed a 0.3 percent August increase.  Transportation equipment, also up fourteen of the last fifteen months, drove the increase, $2.2 billion or 1.5 percent to $145.5 billion.  Inventories of manufactured nondurable goods, up following five consecutive monthly decreases, increased $0.2 billion or 0.1 percent to $267.6 billion.  This followed a 0.6 percent August decrease.  Chemical products, up following two consecutive monthly decreases, drove the increase, $0.5 billion or 0.5 percent to $91.1 billion.  By stage of fabrication, September materials and supplies increased 0.1 percent in durable goods and decreased 0.5 percent in nondurable goods.  Work in process increased 1.2 percent in durable goods and 0.5 percent in nondurable goods.  Finished goods were virtually unchanged in durable goods and increased 0.3 percent in nondurable goods. 

    The BEA's key source data and assumptions (xls) for 3rd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would  decrease by $1.7 billion on a Census basis in September before they estimated the 3rd quarter’s output, so the actual $0.2 billion increase would indicate that they underestimated the end of 3rd quarter GDP inventory component by about $1.9 billion, or ~$7.6 billion on an annualized basis, which would imply that 3rd quarter GDP will have to be revised upwards by about 0.14 percentage points to account for what this report shows..

    September Wholesale Sales Flat, Wholesale Inventories Down 0.4%

    The September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $498.6 billion, statistically unchanged (±0.5 percent)* from the revised August level, but down 0.6 percent (±0.7 percent)* from the wholesale sales of September 2018... the August preliminary estimate was revised down to $498.1 billion from the $499.1 billion in wholesale sales reported last month, which thus revised the July to August change in sales from virtually unchanged (+/-0.4%) to down 0.1 percent (±0.4 percent)*....as an intermediate economic 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, since additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $676.7 billion at month end, down  0.4 percent (±0.2 percent)* from the revised August level but 4.8 percent (±1.2 percent) higher than in September a year ago....August's inventory value was revised from the $680.7 billion reported last month to $679.5 billion, which meant that the July to August percent change was revised from last month's estimate of up 0.2 percent (+/-0.2%)* to up 0.1 percent (±0.2 percent)..

    In the advance report on 3rd quarter GDP of last week, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted wholesale inventories were valued at $677,426 billion at the end of September, down from a revised $679,437 billion in August....that's $0.716 billion more than the $676,710 billion for the end of the quarter that this report shows, which would imply that the quarterly change in 3rd quarter inventories was overestimated at roughly a $2.9 billion annual rate...assuming there's no revision in the inflation adjustment to those inventories, that would mean that the growth rate of 3rd quarter GDP was overestimated by around 0.06 percentage points based just on what this report shows, which would thus partially offset the underestimation we saw in factory inventories...

     

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

    Sunday, November 3, 2019

    3rd quarter GDP, October's jobs report; September's income and outlays & construction spending, et al

    This week’s release schedule managed to bring us the three most important economic reports we see each month on successive days: first we had the 1st estimate of 3rd quarter GDP from the Bureau of Economic Analysis on Wednesday, then the September report on Personal Income and Spending, also from the BEA, on Thursday, followed by the Employment Situation Summary for October from the Bureau of Labor Statistics on Friday...Friday also saw the release of the September report on Construction Spending (pdf) from the Census Bureau, while earlier in the week we had the release of the Chicago Fed National Activity Index (CFNAI) for September, a weighted composite index of 85 different economic metrics, which fell to –0.45 in September from +0.15 in August, which was revised up from the +0.10 reported for August last month...that left the 3 month average of the index at -0.24 in September, down from -0.06 in August, which indicates that national economic activity has been somewhat below the historical trend over the summer months...in addition, the week also saw the last of the Fed manufacturing surveys for October: the Dallas Fed Texas Manufacturing Outlook Survey, covering Texas and adjacent counties in Louisiana and New Mexico, reported its general business activity index fell from +1.5 in September to -5.1 in October, indicative of a return to contraction of the Texas economy, after two months of feeble growth ...

    There were also a number of privately issued reports released this week, including the ADP Employment Report for October and the Case-Shiller Home Price Index for August, an index generated by averaging relative home sales prices from June, July and August against a January 2000 baseline, and which reported that their national home price index for those 3 months averaged 3.2% higher than their price index for the same 3 month period a year earlier...other privately issued reports included the light vehicle sales report for October from Wards Automotive, which estimated that vehicles sold at a 16.55 million annual rate in October, a six month low, down from a 17.17 million annual rate in September, and down from the 17.46 million annual rate a year ago, and the October Manufacturing Report On Business from the Institute for Supply Management (ISM), which indicated that the manufacturing PMI (Purchasing Managers Index) rose to 48.3% in October, up from 47.8% in September, which still suggests an ongoing contraction among manufacturing firms nationally.. 

    Employers Add 128,000 Jobs in October After Employment for August & September Revised 95,000 Higher


    The Employment Situation Summary for October indicated relatively weak job creation during the month, but this month's figures were complicated by the impact of two one-time circumstances; 48,000 GM workers were on strike during the BLS reference week, and they were not counted as employed, while the temporary hiring of 26,000 associated the Decennial Census was scheduled to end to end in mid-October, and it appears that many of these workers were let go prior to the survey reference week...given those cuts, estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added a net 128,000 jobs in October, after the previously estimated payroll job change for September was revised higher, from an increase of 136,000 jobs to one of 180,000, while the payroll jobs increase for August was also revised higher, from 168,000 to 219,000...meanwhile, the unadjusted data shows that there were actually 947,000 more payroll jobs extent in October than in September, as the normal seasonal job increases in the education and retail sectors were washed out of the headline number by the seasonal adjustment...

    Seasonally adjusted job increases in October were seen throughout the private goods producing and service sectors, which were offset by the aforementioned decreases in durable goods manufacturing and federal government employment, sectors which saw net job losses of 41,000 and 17,000 jobs respectively....October's largest job increase was in the leisure and hospitality sector, which gained 61,000 jobs, anchored by 47,500 more jobs in bars and restaurants and 15,700 additional jobs in amusements, gambling, and recreation...the health care and social assistance sector saw 34,200 more jobs in October, with the addition of 17,500 jobs in individual and family services and 4,700 jobs in nursing and residential care facilities...the broad professional and business services sector saw the addition of 22,000 jobs, with 16,500 more positions in management and technical consulting services, partially offset by a decrease of 8,100 who had been employed by temporary employment services...an additional 16,000 jobs were added in the financial sector, with 9,600 of those in real estate, while local governments added 11,000 jobs, with 9,700 more education employees than would be expected for the season...wholesale trade saw the addition of 10,800 employees, with 6,000 of those in durables goods trade, and construction employment rose by 10,000, with 6,000 more employed by heavy and civil engineering construction contractors.....meanwhile, the other major sectors, including retail, mining, nondurable goods manufacturing, and utilities all saw increases of less than 10,000 in payroll employment over the month, while there was a 4,000 job loss in the information sector...

    The establishment survey also showed that average hourly pay for all employees rose by 6 cents an hour to $28.18 an hour in October, after it had increased by a revised penny an hour in September; meanwhile, the average hourly earnings of production and non-supervisory employees increased by 4 cents an hour to $23.70 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.4 hours in October, while hours for production and non-supervisory personnel were unchanged at 33.6 hours...at the same time, the manufacturing workweek decreased by 0.2 hour to 40.3hours, while average factory overtime was unchanged at 3.2 hours...

    Meanwhile, the October household survey indicated that the seasonally adjusted extrapolation of those who would report being employed rose by an estimated 241,000 to 158,510,000, while the estimated number of those unemployed and looking for work rose by 86,000 to 5,855,000; and hence the labor force increased by a rounded total of 325,000....since the working age population had grown by 207,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 118,000 to 95,481,000...at the same time, the increase in the labor force was enough to increase the labor force participation rate 0.1%, from 63.2% in September to 63.3% in October...however, the increase in number employed was not enough to increase 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 corresponding increase in the number unemployed was enough to increase the unemployment rate as a percentage of the labor force from 3.5% to 3.6%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 88,000, from 4,350,000 in September to 4,438,000 in October, which was enough to raise the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", by 0.1% to 7.0% of the labor force in October....

    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.. 

    3rd Quarter GDP Grew at 1.9% Rate on Greater Consumer & Federal Govt Spending

    Our economy grew at a 1.9% rate in the 3rd quarter, a bit slower than the growth rate of the second quarter, as increased consumer and government spending was offset by decreased business investment and higher imports, which subtracts from other GDP components....the Advance Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 1.9% annual rate over the output of the 2nd quarter, when our real output grew at a 2.0% real rate...in current dollars, our third quarter GDP grew at a 3.52% 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 $21,525.8 billion annual rate in the 3rd quarter, with the headline 1.9% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.7%, aka the GDP deflator, was applied to the current dollar change... as is usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.6% in either direction before the third estimate for the quarter is released, which will be two months from now...also note that September construction and factory inventory data were not yet reported at the time of this release, and that the BEA assumed a $3.6 billion increase in residential construction, a $5.6 billion decrease in nonresidential construction, and a $6.0 billion decrease in nondurable manufacturing inventories for September before they estimated the 3rd quarter’s output (see Key source data and assumptions (xls)

    While we review the details for the 3rd quarter below, remember that the news release for GDP 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 indexes chained from 2012 prices, and then that all percentage changes in this report are calculated from those '2012 dollar' figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 1st estimate of 3rd quarter GDP, which we find on the BEA GDP landing page, which also offer links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2015, table 2, which shows the contribution of each of the components to the GDP growth figures for those quarters and years, table 3, which shows both the current dollar value and the inflation adjusted value in 2012 dollars of each of those components, and table 4, which shows the change in the price indexes for each of the GDP components....

    Personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, grew at a 4.4% rate in current dollars in the 3rd quarter, which worked out to a 2.9% real growth rate of consumed goods and services after the 3rd quarter annualized 1.5% PCE price index increase was used to adjust that personal spending for inflation....consumer outlays for durable goods rose at a 6.2% rate while average prices of those durable goods fell at a 1.3% rate, and hence the BEA figured that the real growth of the output of consumer durables rose at a 7.6% rate, as consumption of recreational goods and vehicles grew at a 17.5% rate and accounted for over 70% of the durable goods increase...the BEA also found that real output of consumer non-durable goods increased at a 4.4% rate, after growth in consumer spending for non-durables at a 3.9% rate was adjusted for prices that fell at a 0.5% rate, as 6.8% growth in real consumption of food and beverages accounted for more than half of the growth in non-durables....meanwhile, the quarter's 4.3% nominal growth in consumer outlays for services was deflated by a 2.6% increase in prices for personal services to show real output of consumer services grew at a 1.6% annual rate, as growth in health care, housing and utilities, and food services and accommodations led the quarter’s growth in services...as a result of these changes in growth from the 2nd to the 3rd quarter, the increase in outlays for durable goods added 0.53 percentage points to the GDP growth rate, increased consumption of non-durable goods added 0.61 percentage points, and increased consumption of services added 0.79 percentage points to the growth rate of GDP in the 3rd quarter…

    The change in other components of the change in GDP are computed by the BEA in the same manner as we have just illustrated for computing PCE; ie, the annualized increase in current dollar spending for the quarter is adjusted with the annualized inflation factor for that component, yielding the change in real units of goods or services produced during the quarter at an annual rate....thus, real gross private domestic investment, which had shrunk at a 6.1% annual rate in the 2nd quarter, shrunk at a 1.5% annual rate from those levels in the 3rd quarter, as real growth in fixed investments shrunk at a 1.3% annual rate in the 3rd quarter, after shrinking at a 1.4% rate in the 2nd quarter...among fixed investment categories, real non-residential fixed investment shrunk at a 3.0% rate, as real investment in non-residential structures shrunk at a 15.3% rate and subtracted 0.48 percentage points from 3rd quarter GDP, and as real investment in equipment shrunk at a 3.8% rate and subtracted 0.23 percentage points from GDP, while real investment in intellectual property grew at 6.6% rate and added 0.30 percentage points to GDP....meanwhile, real residential investment grew at a 5.1% rate in the 3rd quarter, after shrinking at a 3.0% rate in the 2nd quarter, and added 0.18 percentage points to 3rd quarter GDP...for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

    Meanwhile, real private inventories grew by an inflation adjusted $69.0  billion in the quarter, following the inflation adjusted inventory growth at a $69.4 billion rate we saw in the 2nd quarter, and as a result the $0.4 billion quarter over quarter decrease in real inventory growth subtracted 0.05 percentage points from GDP, after a decrease in real inventory growth at a $46.6 billion rate in the 2nd quarter had subtracted 0.91 percentage points from that quarter's GDP growth....since slower growth in inventories indicates that less of the goods produced during the quarter were left in storage or "sitting on the shelf”, their decrease by an inflation adjusted $0.4 billion in turn means that real final sales of GDP were actually greater by that amount, and hence real final sales of GDP grew at a 2.0% rate in the 3rd quarter, down from the real final sales growth rate of 3.0% in the 2nd quarter, when the larger decrease in inventory growth meant that growth in real final sales was that much greater than the real growth in GDP...

    Real exports and real imports both increased in the quarter, but imports increased by more, thus decreasing the portion of our investment and consumption that was domestically sourced...our real exports of goods and services grew at a 0.7% rate in the third quarter, after our exports had decreased at a 5.7% rate in the 2nd quarter, while our real imports grew at a 1.2% rate in the 3rd quarter after being statistically unchanged in the 2nd quarter...as you'll recall, increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted elsewhere in this GDP calculation), while increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been because it was not produced in the US....thus the 3rd quarter increase in real exports added 0.09 percentage points to 3rd quarter GDP, while the greater increase in 3rd quarter imports subtracted 0.17 percentage points from 3rd quarter GDP, and hence our trade imbalance subtracted a net of 0.08 percentage points from 3rd quarter GDP, after our worsening trade deficit had subtracted 0.68 percentage points in the second quarter…

    Finally, real consumption and investment by government increased at a 2.0% annual rate in the 3rd quarter, after growing at a 4.8% rate in the 2nd quarter, as real federal government consumption and investment grew at a 3.4% rate and real state and local consumption and investment grew at a 1.1% rate.  Inflation adjusted federal spending for defense rose at a 2.2% rate and that added 0.08 percentage points to 2nd quarter GDP growth, while real non-defense federal consumption and investment grew at a 5.2% rate and added 0.14 percentage points to GDP.   Note that federal 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.  Meanwhile, real state and local government investment and consumption expenditures, which grew at a 1.1% annual rate, added 0.12 percentage points to the quarter's growth rate, as a decrease in real state and local investment at a 1.3% rate subtracted 0.03 percentage points from that increase... 

    September Personal Income Rose 0.3%, Personal Spending Rose 0.2%

    Thursday's release of the September Income and Outlays report was concurrent with the GDP release on Wednesday, and all the PCE data in the 3rd quarter GDP report we just covered actually originated with this report...and like that GDP report, all the dollar values reported here are at an annual rate and seasonally adjusted, ie, they tell us what income, spending and saving would be for a year if September's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from August to September....thus, when the opening of the news release for this report tell us "Personal income increased $50.2 billion (0.3 percent) in September...", they mean that the annualized figure for all types of personal income in September, $18,835.1 billion, was $50.2 billion, or somewhat less than 0.3% greater than the annualized personal income figure of $18,784.9 billion for August; the actual increase in personal income from August to September is not given....similarly, disposable personal income, which is income after taxes, also rose by over 0.3%, from an annual rate of $16,585.0 billion in August to an annual rate of $16,640.7 billion in September...

    Meanwhile, seasonally adjusted personal consumption expenditures (PCE) for September, which were included in the change in real PCE in the 3rd quarter GDP report, rose at a $24.3 billion annual rate to a $14,696.2 billion pace of consumer spending annually, less than 0.2% above that of August, after August‘s PCE was revised up from the previously reported annual rate of $14,657.7 billion to $14,671.9 billion...the current dollar increase in September spending included a $22.1 billion annualized increase to an annualized $10,135.1 billion in spending for services, a $5.6 billion increase to $1,553.6 billion in annualized spending for durable goods, offset by a $3.4 billion decrease to $3,007.4 billion in annualized spending for non durable goods...total personal outlays for September, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $23.0 billion to $15,256.8 billion, which left personal savings, which is disposable personal income less total outlays, at a $1,384.0 billion annual rate in September, up from the revised $1,351.3 billion in annualized personal savings in August...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 8.3%, up from 8.1% in August, and the highest savings rate since May... 

    While our personal consumption expenditures accounted for 69.8% of our third quarter GDP, before they could be included in that measurement of the change in our output, they first needed to be adjusted for inflation, to give us the real change in consumption, and hence the real change in the goods and services that were produced for that consumption.....that adjustment was made using the price index for personal consumption expenditures, also included in this report, which is a chained price index based on 2012 prices = 100....from Table 9 in the pdf for this report, we find that that PCE price index fell from 109.949 in August to 109.943 in September, giving us a month over month inflation rate of -0.00546%, which the BEA reports as unchanged....also in this report, Table 11 gives us a year over year PCE price index increase of 1.3%, and a core price increase, excluding food and energy, of 1.7% for the past year, both below the Fed's inflation target....applying the September inflation adjustment to the change in September PCE shows that real PCE was up 0.1711%, which BEA reports as a 0.2% increase in their summary table...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2012 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....those results are shown in tables 7 and 8 of the report PDF, where the quarterly figures given are identical to those shown in table 3 in the GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP...

    Construction Spending up 0.5% in September, Will Add 9 Basis Points to GDP

    The Census Bureau's report on construction spending for September (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,293.6 billion annually if extrapolated over an entire year, which was 0.5 percent (±1.0 percent)* above the revised annualized August estimate of $1,287.1 billion but still 2.0 percent (±1.8 percent) below the estimated annualized level of construction spending in September of last year...the annualized August construction spending estimate was revised a bit lower, from $1,287.3 billion to $1,287.1 billion, while the annual rate of construction spending for July was revised 0.4% higher, from $1,285.6 billion to $1,291,250 billion...

    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 $961.7 billion, 0.2 percent (±0.7 percent)* above the revised August estimate of $959.9 billion. Residential construction was at a seasonally adjusted annual rate of $511.4 billion in September, 0.6 percent (±1.3 percent)* above the revised August estimate of $508.4 billion. Nonresidential construction was at a seasonally adjusted annual rate of $450.3 billion in September, 0.3 percent (±0.7 percent)* below the revised August estimate of $451.4 billion.
    • Public Construction: In September, the estimated seasonally adjusted annual rate of public construction spending was $331.9 billion, 1.5 percent (±1.8 percent)* above the revised August estimate of $327.2 billion. Educational construction was at a seasonally adjusted annual rate of $78.9 billion, 3.1 percent (±1.8 percent) above the revised August estimate of $76.5 billion. Highway construction was at a seasonally adjusted annual rate of $98.0 billion, 2.6 percent (±4.4 percent)* above the revised August estimate of $95.5 billion.

    The BEA's key source data and assumptions (xls) that accompanied the 3rd quarter GDP report indicates that they had estimated that September's residential construction would increase by an annualized $3.6 billion from previously published figures, that nonresidential construction would decrease by an annualized $5.7 billion from last month's report, and that September's public construction would decrease by an annualized $1.0 billion from last month's report....this report indicates that residential construction increased at a $3.0 billion rate in September after August's annualized residential construction was revised $1.2 billion higher, that nonresidential construction decreased at a $1.1 billion annual rate after August's figure was revised $3.5 billion higher, and that annualized public construction rose by $4.7 billion after August's public construction was revised $5.1 billion lower...netting those September figures, that means the BEA had underestimated September's construction spending by an annualized $6.2 billion...in addition, the annual rate of construction spending for August was revised $0.2 billion lower, and the annual rate of construction spending for July was revised $5.6 billion higher...thus, for the 3rd quarter as a whole, the advance GDP release under-reported nominal construction spending by an annualized $3.9 billion... assuming that the inflation adjustments to those figures remain the same, that would suggest that 3rd quarter GDP will be revised 0.09 percentage points higher to account for what this report shows...

     

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

    Sunday, October 27, 2019

    September’s durable goods, new home sales and existing home sales

    Widely watched reports released this past week included the advance report on durable goods for September and the September report on new home sales, both from the Census bureau, and the Existing Home Sales Report for September from the National Association of Realtors (NAR)....in addition, this week also saw the release of two more regional Fed manufacturing surveys for October: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to +8 in October from -9 in September, suggesting a return to modest growth in that region's manufacturing, and the Kansas City Fed manufacturing survey for October, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to -3 in October, down from -2 in September but up from -6 in August, all readings which are indicative of contraction among that region's manufacturers...

    September Durable Goods: New Orders Down 1.1%, Shipments Down 0.4%, Inventories Up 0.5%

    The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $2.8 billion or 1.1 percent to $248.2 billion in September, after August's new orders were revised from the $250.7 billion reported last month to $251.0 billion, now 0.3% greater than July's orders, revised from last month's reported 0.2% increase...however, year to date new orders are now 0.8% below those of 2018, down from the 0.4% year to date decrease we saw in this report last month....the volatile monthly change in new orders for transportation equipment led the September orders increase, as new transportation equipment orders fell $2.3 billion or 2.7 percent to $84.5 billion, on a 11.8% decrease to $7,987 million in new orders for commercial aircraft....however, excluding orders for transportation equipment, other new orders still fell 0.3%, and excluding just new orders for defense equipment, new orders decreased 1.2%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $345 million or 0.5% to $68,642 million...

    The seasonally adjusted value of September shipments of durable goods, which will ultimately be included as inputs into various components of 3rd quarter GDP after adjusting for changes in prices, fell for the 3rd month in a row, decreasing by $1.0 billion or 0.4 percent to $252.5 billion, after August shipments were revised from from $254.2 billion to $253.5 billion, now down 0.1% from July....a $1.0 billion or 1.2 percent decrease to $84.6 billion in shipments of transportation equipment was responsible for the decrease, without which all other shipments rose by a statistically insignificant $11 million...meanwhile, shipments of nondefense capital goods less aircraft were down 0.7% at $68,928 million, their fourth monthly decrease in a row ..

    Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 14th time in 15 months, increasing by $2.1 billion or 0.5 percent to $430.3 billion, after August inventories were revised from $428.6 billion to $428.2 billion, now just 0.2% higher than the prior month...an increase in inventories of transportation equipment were also responsible for the September inventory increase, as they rose $2.1 billion or 1.4 percent to $145.3 billion...

    Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, were down in September following two monthly increases, but they fell by less than $0.1 billion to $1,163.5 billion, after August unfilled orders were revised from $1,176.5 billion to $1,176.66 billion, still a 0.9% increase from July...a decrease of less than $0.1 billion to $794.5 billion in unfilled orders for transportation equipment was responsible for most of the decrease, as unfilled orders excluding transportation equipment orders rose by a statistically insignificant $70 million.... compared to a year earlier, the unfilled order book for durable goods is now 1.8% below the level of last September, with unfilled orders for transportation equipment 2.7% below their year ago level, on a 4.0% decrease in the backlog of orders for defense aircraft and a 3.3% decrease in the backlog of orders for motor vehicles...  

    September New Home Sales Little Changed; Median Sales Price at a 31 Month Low

    The Census report on New Residential Sales for September (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 701,000 annually, which was 0.7 percent (±16.1 percent)* below the revised annual pace of 706,000 that new single family homes were selling at in August but 15.5 percent (±20.2 percent)* above the estimated annual rate that new homes were selling at in September of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether September new home sales rose or fell from those of August, or even from those 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....hence, the estimates provided in these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales of new single family homes in August were revised from the annual rate of 713,000 reported last month down to a 706,000 a year rate, while home sales in July, initially reported at an annual rate of 635,000 and revised to a 666,000 a year rate last month, were revised to a 665,000 a year rate with this report, while June's annualized home sale rate, initially reported at an annual rate of 646,000 and revised from the first revision at a 728,000 a year rate to a 729,000 a year rate last month, were revised but still at a 729,000 a year 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 indicated that approximately 54,000 new single family homes sold in September, down from the estimated 57,000 new homes that sold in August and the estimated 56,000 that sold in July....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in September was $299,400, down from the median sale price of $325,200 in August, down 8.8% from the median sales price of $328,300 in September a year ago and the lowest since February 2017, while the average September new home sales price was $362,700, down from the $394,800 average sales price in August, and down from the average sales price of $386,400 in September a year ago....a seasonally adjusted estimate of 321,000 new single family houses remained for sale at the end of September, which represents a 5.5 month supply of homes at the September sales rate, down from the 5.7 months supply of new homes originally reported for August...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decreased to 701,000 Annual Rate in September and A few Comments on September New Home Sales...

    September Existing Home Sales Down 2.2%

    The National Association of Realtors (NAR) reported that their seasonally adjusted tally of existing home sales fell by 2.2% from August to September, the first decrease in three months, projecting that 5.38 million homes would sell over an entire year if the September home sales pace were extrapolated over that year, a pace that was still 3.9% above the annual sales rate projected in September of a year ago...August sales, now at a 5.50 million annual rate, were revised from the 5.49 million rate reported a month ago ...the NAR also reported that the median sales price for all existing-home types was $272,100 in September, down from $278,900 in August but 5.9% higher than in September a year earlier, which they say "marks 91 straight months of year-over-year gains"...the NAR press release, which is titled "Existing-Home Sales Decrease 2.2% in September", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

    Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 452,000 homes sold in September, down by 15.0% from the 532,000 homes that sold in August, but 7.4% more than the 421,000 homes that sold in September of last year, so we can see that the seasonal adjustment gave a considerable boost to the monthly change published in the press release...that same pdf indicates that the median home selling price for all housing types fell 2.4%, from a revised $278,900 in August to $272,100 in September, while the average home sales price was $308,500, down 2.1% from the $315,000 average sales price in August, but up 4.2% from the $296,000 average home sales price of September a year ago, with regional average home sales prices ranging from a low of $240,700 in the Midwest to a high of $418,600 in the West... 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 5.38 million in September and Comments on September 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…)