Sunday, February 24, 2019

December durable goods, January existing home sales

The only widely watched reports that were released this past week were the Advance Report on Durable Goods for December from the Census Bureau and the Existing Home Sales Report for January from the National Association of Realtors (NAR)…the December advance report on durable goods had originally been scheduled for January 15th, and was delayed till February 21st due to the government shutdown, while the privately issued existing homes sales report was obviously unaffected...during most Februarys, we would have normally seen a New Residential Construction report for January by this date; however, the December New Residential Construction report originally scheduled for January 17th has yet to be published and is now rescheduled for February 26th, so it appears we remain more than a month behind...

Other than the aforementioned reports, this week also saw the release of the Philadelphia Fed February Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported their broadest diffusion index of manufacturing conditions fell to -4.1 in February from a reading +17.0 in January, the largest drop in their survey since August 2011, and the index’s first negative reading since May 2016, indicating a small plurality of that region's manufacturing firms reported a slowdown in their manufacturing activity this month..

December Durable Goods: New Orders Up 1.2%, Shipments Up 0.8%, Inventories Up 0.2%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for December (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $3.0 billion or 1.2 percent to $254.4 billion in December, after November's new orders were revised from the $250.8 billion reported two months ago to $251.5 billion, now 1.0% more than October's new orders...for the year, 2018’s new orders were 8.1% above those of 2017, an increase from the 5.8% year over year change this report indicated for 2017....an increase in the volatile monthly new orders for transportation equipment was largely responsible for the December increase, as new transportation equipment orders rose $2.8 billion or 3.3 percent to $90.2 billion, on a 17.3% increase to $15,053 million in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders just rose 0.1%, while excluding just new orders for defense equipment, new orders rose 1.8%....however, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $462 million or 0.7% to $68,502 million...

Meanwhile, the seasonally adjusted value of December shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased by $2.1 billion or 0.8 percent to $259.7 billion, after the value of November shipments was revised from from $256.7 billion to $257.6 billion, now up 1.0% from October...shipments of transportation equipment, up $1.4 billion or 1.5 percent to $91.4 billion, led the increase, on a 1.8% increase to $62,097 million in shipments of motor vehicles....meanwhile, shipments of nondefense capital goods less aircraft rose 0.5% to $69,239 million, after November’s capital goods shipments were revised fractionally lower...for the year, shipments of durable goods were valued 7.3% greater than those of 2017…

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 23rd time in the past 24 months, increasing by $0.9 billion or 0.2 percent to $414.7 billion, after November inventories were revised from $412.8 billion to $413,852 million, now up 0.4% from October....a 1.1 percent increase to $36,623 million in inventories of primary metals was the largest percentage inventory increase, while a 2.4 percent decrease to $12,915 million in inventories of defense aircraft was the largest percentage decrease...

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 third month in a row, falling by $1.149 billion or 0.1 percent to $1,180.1 billion, after unfilled orders for November were revised from $1,181.7 billion to $1,181.274 billion, now a 0.2% decrease from October...a $1.151 billion or 0.1 percent decrease to $811.1 billion in unfilled orders for transportation equipment was responsible for the decrease, as unfilled orders excluding transportation equipment orders were statistically unchanged at $369,028 million...compared to the end of 2017, the unfilled order book for durable goods at the end of December was 3.8% above the level of the prior year end, with unfilled orders for nondefense capital goods less aircraft 2.1% above their year ago level..   

Existing Home Sales Fell 1.2% in January

The National Association of Realtors (NAR) reported that existing home sales fell by 1.2% from December to January on a seasonally adjusted basis, projecting that 4.94 million existing homes would sell over an entire year if the January home sales pace were extrapolated over that year, a pace that was also 8.5% below the annual sales rate projected in January of a year ago...December home sales are now shown to have been running at a 5.00 million annual rate, revised up from the 4.99 million annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $247,500 in January, 2.8% higher than in January a year earlier, which they report as "the 83rd straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Drop 1.2 Percent in January", 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 read about 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 usually look at the raw data overview (pdf) to see what actually happened during the month...this unadjusted data indicates that roughly 285,000 homes sold in January, down by 24.4% from the 377,000 homes that sold in December, and down 8.9% from the 313,000 homes that sold in January of last year, so we can see the effect of a large wintertime seasonal adjustment...that same pdf indicates that the median home selling price for all housing types fell 2.8%, from a revised $254,700 in December to $247,500 in January, while the average home sales price was $286,800, down 2.4% from the $293,800 average sales price in December, but up 1.5% from the $269,500 average home sales price of January 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 4.94 million in January and A Few Comments on January 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, February 17, 2019

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

This week saw the release of seven regular monthly agency reports, with 5 of them released as they were originally scheduled and two released a month late, delayed by the government shutdown...the on time reports included the January Consumer Price Index, the January Producer Price Index and the January Import-Export Price Index from the Bureau of Labor Statistics, the January report on Industrial Production and Capacity Utilization from the Fed, and the Job Openings and Labor Turnover Survey (JOLTS) report for December, also from the BLS...meanwhile, the reports on Retail Sales for December and Business Sales and Inventories for November from the Census Bureau, which had originally been scheduled for release on January 16th, were released on Thursday of this past week....at the same time, the reports on Retail Sales for January and Business Sales and Inventories for December, which would have normally been released this week, were postponed, with no rescheduled date yet published as of this writing..

This week also saw the release of the first regional Fed manufacturing surveys for February: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, northern New Jersey, and Puerto Rico, reported their headline general business conditions index rose to +8.8, up from +3.9 in January, suggesting a return to fairly steady growth in First District manufacturing....

Retail Sales Fell 1.2% in December after Prior Months Were Revised Lower

Seasonally adjusted retail sales decreased in December after retail sales for October and November were revised lower...the Advance Retail Sales Report for December (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $505.8 billion during the month, which was down 1.2 percent (±0.5%)* from November's revised sales of $512.2 billion, but was 2.3 percent (±1.4 percent) above the adjusted sales in December of last year...November's seasonally adjusted sales were revised down 0.3%, from $513.5 billion to $512.2 billion, while October's sales were revised 0.2% lower, from $512.4 billion to $511.6 billion; as a result, the October to November change was revised up from an increase of 0.2 percent (±0.5%) to an increase of 0.1 percent (±0.2%), and the year over year increase for the 4th quarter came in at 3.7%.....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated actual sales rose 8.6%, from $524,525 million in November to $569,523 million in December, while they were up 1.4% from the $561,418 million of sales in December a year ago, so we can see how the large seasonal adjustment to holiday sales brought the headline sales increase down from the big holiday sales increase that one would normally expect in December...

Since it's the end of the quarter and the end of the year for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what this table shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the November revised figure to this month's December "advance" figure in the first sub-column, and then the year over year percentage sales change since last December in the 2nd column; the second double column pair below gives us the revision of the November advance estimates (now called "preliminary") as of this report, with the new October to November percentage change under "Oct 2018 r" (revised) and the November 2017 to November 2018 percentage change as revised in the 2nd column of that pair (for your reference, the table of from advance estimate of November sales, before this month's revisions, is here).... then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (October, November and December) from the preceding three months of the 3rd quarter (July, August and September) and then from the same three months (October, November and December) of a year earlier....that first column of the last pair thus gives us a snapshot comparison of 3rd quarter sales to fourth quarter sales, which is useful in estimating the impact of this report on 4th quarter GDP, after adjusting those sales for inflation….

December 2018 retail sales table

To compute December's real personal consumption of goods data for national accounts from this December retail sales report, the BEA will use the corresponding price changes from the December consumer price index, which we reviewed when it was released a month ago...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 December retail sales excluding the 5.1% price-related decrease in sales at gas station were down by 0.9%....then, pulling the 0.5% increase in grocery sales and the 0.7% decrease in food services sales out from that total, we find that core retail sales were down 1.0% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was unchanged in December, we can thus figure that real retail sales excluding food and energy will also be down by roughly 1.0%...however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were up 1.1%, the December price index for for transportation commodities other than fuel was down 0.2%, which would mean that real unit sales at auto & parts dealers were probably on the order of 1.3% higher... on the other hand, while sales at clothing stores were 0.7% lower in December, the apparel price index was 1.1% higher, which means that real sales of clothing probably fell around 1.8%.…

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately…the CPI report showed that the food price index was 0.3% higher in December, with the index for food purchased for use at home 0.2% higher, while prices for food bought to eat away from home were 0.4% higher... thus, while nominal sales at food and beverage stores were 0.4% lower, real sales of food and beverages were roughly 0.6% lower in light of the 0.2% higher prices…meanwhile, the 0.7% decrease in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants fell about 1.1% during the month...on the other hand, while sales at gas stations were down 5.1%, there was a 5.8% decrease in the retail price of gasoline, which would suggest that real sales of gasoline were up on the order of 0.7%, with a caveat that gasoline stations do sell more than gasoline... averaging real sales computed thusly together, we'd estimate that the income and outlays report for December will show that real personal consumption of goods fell by 0.9% in December, after rising by a revised 0.1% in November and 0.6% in October...at the same time, the 1.1% drop in real sales at bars and restaurants would reduce December’s real personal consumption of services by more than 0.1%...all in all, this surprisingly negative report should reduce previous estimates of 4th quarter GDP growth by between 0.7 and 0.8 percentage points..

January Consumer Prices Unchanged as Higher Fuel and Rents Offset Lower Energy

The consumer price index was unchanged in January, as higher prices food, clothing and shelter were offset by lower prices for energy….the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers was unchanged in January after it had been unchanged in November and in December, had risen 0.3% in October, 0.1% in September, 0.1% in August, and 0.2% in July...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 251.233 in December to 251.712 in January, which still left it statistically 1.551% higher than the 247.867 index reading in January of last year, which is reported as a 1.6% year over year increase....with lower gasoline prices the primary reason for the drop in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core price index rose from 259.083 to 260.122, which left the core index 2.154% ahead of its year ago reading of 254.638, which is reported as a 2.2% year over year increase, the same as was reported for November and December...

The volatile seasonally adjusted energy price index fell by 3.1% in January, after falling 2.6% in December, 2.8% in November, rising by 2.1% in October, and falling by 1.0% in September, and thus is now 4.8% lower than in January a year ago...the price index for energy commodities was 5.3% lower in January, while the index for energy services fell by 0.5%, after rising by 1.5% in December...the energy commodity index was down 5.3% due to a 5.5% decrease in price of gasoline, the largest component, and an 1.3% decrease in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 1.9% lower...within energy services, the index for utility gas service fell 0.3% after rising by 5.1% in December and is still 4.3% higher than it was a year ago, while the electricity price index was 0.6% lower, after it had risen 0.4% in December....energy commodities are now 9.7% lower than their year ago levels, with gasoline prices averaging 10.1% lower than they were a year ago, while the energy services price index is still 1.3% higher than last January, as electricity prices have also increased by 0.4% over that period…

The seasonally adjusted food price index was 0.2% higher in January, after rising 0.3 in December, 0.2% in November, being unchanged in October, rising 0.1% in September, 0.1% in August, and 0.1% in July, as the price index for food purchased for use at home rose 0.1% in January, while the index for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.6% and prices at full service restaurants rose 0.2%, while food prices at employee sites and schools averaged 0.2% lower...

In the food at home categories, the price index for cereals and bakery products was 0.4% lower as average bread prices fell 0.3%, breakfast cereal prices fell 1.1%, and the price index cakes, cupcakes and cookies fell 1.4%....on the other hand, the price index for the meats, poultry, fish, and eggs group was 0.6% higher, as the beef and veal index rose 1.4%, the pork index rose 0.7%, and egg prices averaged 0.9% higher...at the same time, the seasonally adjusted index for dairy products was 0.3% lower, even though unadjusted milk prices rose 1.1%, as cheese prices fell 0.7% and ice cream prices fell 0.4%...the fruits and vegetables index was also 0.3% lower on a 1.6% decrease in the price index for canned fruits and a 1.7% decrease in the price index for fresh vegetables, which included a 7.1% cut in prices for lettuce....at the same time, the beverages index was 0.8% higher, as carbonated drink prices rose 2.1% and noncarbonated juices and drinks prices rose 1.3%...lastly, the index for the ‘other foods at home’ category was 0.1% higher, as the index for sugar and sweets rose 1.3% while peanut butter prices fell 2.5%....the itemized list for price changes in 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 December, just lettuce, which is still priced 10.1% higher than a year ago, is the only ‘food at home’ line item that has seen prices change by more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.2% for the fifth month in a row after rising by 0.1% in August 0.2% in July, 0.2% in June, 0.2% in May, 0.1% in April, 0.2% in March, 0.2% in February, and by 0.3% last January, the composite price index of all goods less food and energy goods was 0.4% higher, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust January retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.4%, as the price index for appliances rose 1.4% while the price index for window and floor coverings was 3.8% higher...at the same time, the apparel price index was 1.1% higher on a 4.5% increase in the index for boy's and girls footwear, a 3.1% increase in the index for boy's apparel and a 4.2% increase in the index for women's outerwear...at the same time, the price index for transportation commodities other than fuel was 0.2% higher, as prices for new cars and trucks rose 0.2% and the index for motor vehicle parts and equipment other than tires rose 0.7%...in addition, prices for medical care commodities were 0.1% higher as prescription drugs prices were unchanged while the price index for medical equipment and supplies rose 0.7%....meanwhile, the recreational commodities index rose 0.3% on a 3.2% increase in the index for audio equipment and a 1.4% increase in the index for photographic equipment and supplies equipment... on the other hand, the education and communication commodities index was 0.8% lower on a 1.7% decrease in the index for computer software and accessories, a 1.3% decrease in the index for telephone hardware, calculators, and other consumer information items, and a 1.3% decrease in prices for college textbooks...lastly, a separate price index for alcoholic beverages was unchanged, while the price index for ‘other goods’ rose 0.4% on a 1.0% increase in the price index for miscellaneous personal goods...

Within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.3% increase in homeowner's equivalent rent, and a 0.5% increase in lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection fell 0.5%, and other household operation costs were on average 0.3% higher....the price index for medical care services was also up by 0.3%, as both doctor's and dentists services rose 0.4% and health insurance rose 1.7%...on the other hand, the transportation services index was down by 0.2% as car and truck rentals fell 2.0% and airline fares fell 0.9%...at the same time, the recreation services price index was 0.3% higher as the index for video discs and other media including rentals rose 3.8% and the price index for pet services including veterinary rose 0.5%....meanwhile, the index for education and communication services was 0.2% higher as college tuitions rose 0.4% and postage rose 1.7%....lastly, the index for other personal services was down 0.1% as the price index for legal services fell 1.1%...among core line items, prices for televisions, which are still 16.8% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.5% since last January, and the price index for infant's equipment, which is down by 10.4% from a year ago, have all seen prices drop by more than 10% over the past year, while the price index for boys' apparel, which has now increased 11.3% year over year, and the price index for newspapers and magazines, which is up 10.5% since last December, have both seen prices rise by a double digit magnitude over that span...

Industrial Production Drops 0.6% in January after Prior Months Revised Higher

The Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by 0.6% in January after rising by a revised 0.1% in December, which left it 3.8% higher than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 109.4 in January from 110.1 in December, after the December index was revised from 109.9 to 110.1, the November index was revised from the 109.6 reported last month to 110.0, the October index was revised from 109.1 to 109.3, and the September index was revised from 108.9 to 109.0....as a result of this month's revisions, industrial production grew 0.2% in September, rather than the 0.1% previously reported, grew 0.3% in October, revised from 0.2%, and grew 0.6% in November, revised from the 0.4% previously reported, while industrial production grew 0.1% in December rather than the 0.3% growth that was previously reported...

The manufacturing index, which accounts for around 77% of the total IP index, fell 0.9% in January, from 106.1 to 105.2, after the December index was revised from 106.2 to 106.1, the November index was revised from 105.0 to 105.3, and the September index was revised from 105.1 to 105.2, while the October index remained at 105.0...the January decrease in manufacturing was primarily due to a 13.6% drop in motor vehicle assemblies, from an annual rate of 12.27 million in December to an annual rate of 10.60 in January; factory output excluding motor vehicles and parts was down 0.2 percent...meanwhile, the mining index, which includes oil and gas well drilling, rose from 131.2 in December to 131.3 in January after the December index was revised up from 130.5, which left the mining index 15.3% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 0.4% in January, from 102.4 to 102.8, after the December utility index was revised from 102.0 to 102.4 and the November utility index was revised from 108.9 to 109.9...with January 2018’s heating requirements quite a bit higher than those of this year, the utility index is now 5.6% lower than it was a year ago...

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell to 78.2% in January from 78.8% in December, which was revised from the 78.7% that was reported last month ...capacity utilization of NAICS durable goods production facilities fell from an upwardly revised 77.6 in December to 76.1% in January, while capacity utilization for non-durables producers rose from an unrevised 77.2% to 77.1%...capacity utilization for the mining sector fell to 94.8% in January from 95.3% in December, which was originally reported as 94.8%, while utilities were operating at 75.4% of capacity during January, up from their 75.2% of capacity during December, which was previously reported at 75.0%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

Producer Prices Down 0.1% in January on Lower Food and Energy Prices

The seasonally adjusted Producer Price Index (PPI) for final demand fell 0.1% in January, as prices for finished wholesale goods were on average 0.8% lower, while margins of final services providers increased by 0.3%...that followed a revised December report that also had the PPI down 0.1%, with prices for finished wholesale goods down 0.3% while margins of final services providers were unchanged, a November report that indicated the PPI was 0.1% higher, with prices for finished wholesale goods falling 0.5% while margins of final services providers increased 0.3%, a revised October report that indicated the PPI was 0.5% higher, with prices for finished wholesale goods rising 0.5% and margins of final services providers rising 0.6%, and a revised September report that indicated the PPI was 0.1% higher, with prices for finished wholesale goods 0.1% lower and margins of final services providers 0.1% higher....on an unadjusted basis, producer prices are 2.0% higher than a year ago, down from the 2.5% year over year increase that had been indicated by last month's report...meanwhile, the core producer price index, which excludes food, energy and trade services, was up 0.2% for the month, and is now 2.5% higher than in January a year ago...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.8% lower in December, after being 0.3% lower in December, 0.5% lower in November, 0.5% higher in October, and 0.1% lower in September....the goods index fell because the price index for wholesale energy was 3.8% lower, after falling 4.3% in December and 5.1% in November, while the price index for wholesale foods fell 1.7% after rising 2.6% in December, and the index for final demand for core wholesale goods (excluding food and energy) was up 0.3%....wholesale energy prices fell on a 7.3% decrease in the wholesale price for gasoline, a 9.9% decrease in wholesale prices for heat oil, and a 13.7% drop in the wholesale price of diesel fuel ...the wholesale food price index, meanwhile, included a 22.1% decrease in wholesale prices for fresh fruits and melons and an 25.3% decrease in wholesale prices for fresh and dry vegetables....among wholesale core goods, wholesale prices for construction machinery and equipment rose 1.7% while wholesale prices for household appliances rose 3.2%..

At the same time, the index for final demand for services rose 0.3%, after being unchanged in December, rising 0.3% in November, 0.6% in October, and a revised 0.2% in September, as the January index for final demand for trade services rose 0.8% and the index for final demand for transportation and warehousing services rose 0.5%, while the core index for final demand for services less trade, transportation, and warehousing services was unchanged....among trade services, seasonally adjusted margins for apparel, jewelry, footwear and accessories retailers rose 6.3% and margins for TV, video, and photographic equipment and supplies retailers rose 14.8%, while margins for fuel and lubricant retailers fell 7.0%... among transportation and warehousing services, margins for airline passenger services rose 1.1% and margins for truck transportation of freight rose 0.3%...among the components of the core final demand for services index, margins for arrangement of vehicle rentals and lodging rose 6.0% while margins for portfolio management services fell 5.2%..

This report also showed the price index for intermediate processed goods fell 1.4% in January, after falling 0.9% in December and 0.6% in November, after rising a revised 0.5% in October and 0.1% in September....the price index for intermediate energy goods fell 6.5%, as refinery prices for gasoline fell 7.3% and refinery prices for diesel fuel fell 13.7%, while producer prices for natural gas sold to electric utilities fell 20.0%...on the other hand, prices for intermediate processed foods and feeds rose 0.5%, as the price index for processed poultry rose 6.9% and producer prices for dairy products rose 1.7%...meanwhile, the core price index for intermediate processed goods less food and energy was 0.3% lower on a 4.6% decrease in the index for basic organic chemicals and a 4.4% decrease in the price index for plastic resins and materials...prices for intermediate processed goods are still 0.9% higher than in December a year ago, now the 26th consecutive year over year increase, after 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods fell 9.3 in January, after rising 11.1% in December, falling 5.3% in November, rising 3.5% in October and a revised 0.9% in September....that was as the January price index for crude energy goods fell 19.0% on a 32.3% drop in raw natural gas prices, while crude oil prices fell 6.1%...at the same time, the price index for unprocessed foodstuffs and feedstuffs fell 0.5%, as producer prices for corn fell 3.2% and producer prices for alfalfa hay fell 7.1%...at the same time, the index for core raw materials other than food and energy materials fell 1.9%, as prices for scrap iron and steel fell 6.6% and waste paper prices fell 6.1%...this raw materials index is now 3.1% lower than a year ago, a reversal of the 9.1% year over year decrease that we saw in the December report, and only the second negative year over year reading in the index since October 2016...

Lastly, the price index for services for intermediate demand rose 0.2% in January, after rising 0.1% in December, 0.2% in November, a revised 0.5% in October and a revised 0.3% in September...the price index for intermediate trade services was 0.7% higher, as margins for machinery and equipment parts and supplies wholesalers rose 2.2% and margins for chemicals and allied products wholesalers rose 3.3%…the index for transportation and warehousing services for intermediate demand rose 0.2%, as the intermediate index for transportation of passengers rose 1.1% and the index for warehousing and storage services rose 0.7%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was 0.1% higher, as the index for business loans (partial) rose 2.9% and radio advertising time sales rose 3.3%....over the 12 months ended in January, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 2.9% higher than it was a year ago...

November Business Sales Down 0.3% Business Inventories Down 0.1%

After the release of the December retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for November (pdf), which incorporates the revised November retail data from that December report and the earlier published November 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 $1,462.5 billion in November, down 0.3 percent (±0.2%) from October's revised sales, but up 4.2 percent (±1.2%) from November sales of a year earlier...note that total October sales were concurrently revised up from the previously reported $1,469.9 billion to $1,467.5 billion, now up just 0.1% from September....manufacturer's sales fell 0.6% to $505,116 million in November; retail trade sales, which exclude restaurant & bar sales from the revised November retail sales reported earlier, rose 0.2% to $452,014 million, and wholesale sales fell 0.6% to $505,348 million.

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,980.5 billion at the end of November, down 0.1 percent (±0.1 percent)* from October, but 4.6 percent (±1.4 percent) higher than in November a year earlier...at the same time, the value of end of October inventories was revised from the $1,982.2 billion reported two month ago to $1,982.5 billion....seasonally adjusted inventories of manufacturers were estimated to be valued at $681,056 million, down 0.1% from October, while inventories of retailers were valued at $645,439 million, 0.4% lower than in October, and inventories of wholesalers were estimated to be valued at $654,008 million at the end of November, 0.3% higher than in October...

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for November, which was down 0.3% for finished goods, largely on lower energy prices...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged the change in those inventories would have a modest negative impact on 4th quarter GDP growth…the week before that, we found that real wholesale inventories were roughly 0.7% higher, but because of the even larger 3rd quarter increase, they would also subtract from 4th quarter GDP growth….since nominal retail inventories for November have now been shown to 0.4% lower, real retail inventories for the month, even after the 0.3% finished goods price adjustment, would have thus decreased by 0.1% from October, after a small 0.2% increase in that month...since the third quarter saw total inventories increased at a 31.9% annual rate and added 2.33 percentage points to GDP, any inventory increase smaller than that in the 4th quarter would necessarily subtract from the growth of 4th quarter GDP...

Job Openings at a Record High In December; Hiring Up, Layoffs Down, Quitting Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for December from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 169,000, from 7,166,000 in November to a record 7,335,000 in December, after November job openings were revised 278,000 higher, from 6,888,000 to 7,166,000...December's jobs openings were also 29.4% higher than the 5,669,000 job openings reported in December a year ago, as the job opening ratio expressed as a percentage of the employed at 4.7% was up from the 4.6% logged in November, and up from 3.7% in December a year ago...the leisure and hospitality sector, with a 121,000 job opening increase to 1,147,000, saw the largest increase, while the trade, transportation, and utilities sector saw job openings decrease by 66,000 to 1,346,000 (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 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 December, seasonally adjusted new hires totaled 5,907,000, up by 97,000 from the revised 5,812,000 who were hired or rehired in November, as the hiring rate as a percentage of all employed remained unchanged at 3.9% in December, but was up from 3.7% in December a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 18,000, from 5,563,000 in November to 5,545,000 in December, as the separations rate as a percentage of the employed rose was unchanged at 3.7%, while it was up from 3.6% in December a year ago (see table 3)...subtracting the 5,545,000 total separations from the total hires of 5,907,000 would imply an increase of 362,000 jobs in December, quite a few more than the revised payroll job increase of 222,000 for December reported in the January establishment survey of two weeks ago, and outside of the expected +/-115,000 margin of error in these incomplete samplings, indicating one or both of these surveys is in error on the change in December employment...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,482,000 of us voluntarily quit our jobs in December, down from the revised 3,494,000 who quit their jobs in November, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, the same at it was a year earlier (see details in table 4)....in addition to those who quit, another 1,697,000 were either laid off, fired or otherwise discharged in December, down by 56,000 from the revised 1,753,000 who were discharged in November, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was the same as the discharges rate of 1.1% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 366,000 in November, up from 316,000 in November, for an 'other separations rate’ of 0.2%, the same rate as in November and the same as in December of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...  

 


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

Sunday, February 10, 2019

November's trade deficit, factory inventories, et al…

The major economic reports released this past week were the November report on our International Trade and the Full Report on Manufacturers' Shipments, Inventories and Orders for November, both from the Census Bureau....those reports had originally been scheduled for Monday and Tuesday of the 2nd week of January, and were both postponed until this week due to the government shutdown...meanwhile, the December report on our International Trade and the Full Report on December Manufacturers' Shipments, Inventories and Orders, which both had originally been scheduled to be released this week, were postponed, with no revised release date for either yet scheduled...so far, we've seen nothing in the rescheduled releases that indicates either the Census or the BEA will be "catching up" on the reports they've postponed, although the BEA has announced that they will skip the advance report on 4th quarter GDP altogether, and release an "initial" 4th quarter GDP estimate on February 28th, the previously scheduled release date for the 2nd estimate..

Meanwhile, the Fed released the Consumer Credit Report for December on schedule, and it indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $16.5 billion, or at a 5.0% annual rate in December, as non-revolving credit expanded at a 6.0% rate to $2,813.1 billion and revolving credit outstanding rose at a 2.0% rate to $1,044.6 billion...for the year, consumer credit expanded by 4.9%, as revolving credit grew by 2.8% and nonrevolving credit grew by 5.6%...

Privately issued reports released this week included the January Non-Manufacturing Report On Business from the Institute for Supply Management, which saw their NMI (non-manufacturing index) come in at 56.7%, down from 58.0% in November, indicating that a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in January than did in December, and the Mortgage Monitor for December (pdf) from Black Knight Financial Services, which indicated that 3.88% of all US mortgages were delinquent in December, up from 3.71% in November but down from 4.71% in December a year ago, and that 0.52% of all mortgages were in the foreclosure process at the end of the month for the 4th straight month, down from the 0.65% of mortgages that were in foreclosure in December a year ago...

Trade Deficit Falls 11.5% in November on Lower Fuel Costs, Consumer Imports

Our trade deficit fell by 11.5% in November as the value of both our exports and our imports decreased, but our imports decreased by much more....the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit fell by $6.4 billion to $49.3 billion in November, from an October deficit of $55.7 billion, which was revised from the $55.5 billion trade deficit reported for October 2 months ago...the value of our November exports fell by $1.3 billion to $209.9 billion on a $1.2 billion decrease to $140.3 billion in our exports of goods and a decrease of $0.1 billion to $69.5 billion in our exports of services, while the value of our imports fell $7.7 billion to $259.2 billion on a $7.9 billion decrease to $211.9 billion in our imports of goods, which was slightly offset by an increase of $0.2 billion to $47.3 billion in our imports of services...export prices were on average 0.8% lower in November, so the change in our real November exports would be greater than the nominal value of them by that percentage, while import prices averaged 1.9% lower, meaning real imports were greater than the nominal dollar values reported here by that percentage....

The $1.3 billion decrease in the value of our November exports of goods largely resulted from lower exports of industrial supplies and consumer goods, which was partially offset by greater exports of capital goods...referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that the value of our exports of industrial supplies and materials fell by $1,362 million to $45,878 million on a $576 million decrease in our exports of petroleum products other than fuel oil and a $464 million decrease in our exports of nonmonetary gold, and that our exports of consumer goods fell by $903 million to $17,046 million on a $526 million decrease in our exports of gem diamonds and a $420 million decrease in our exports of pharmaceuticals...in addition, our exports of automotive vehicles, parts, and engines fell by $375 million to $12,336 million on a $220 million decrease in our exports of vehicle accessories other than bodies, engines and tires, and our exports of other goods not categorized by end use fell by $47 million to $5,604 million...partially offsetting the decreases in those export categories, our exports of capital goods rose by $1,411 million to $48,375 million on a $996 million increase in our exports of civilian aircraft and a $386 million increase in our exports of telecommunications equipment, and our exports of foods, feeds and beverages rose by $61 million to $10,446 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 industrial supplies and materials accounted for the November decrease in our imports...our imports of consumer goods fell by $4,279 million to $53,128 million on a $2,294 million decrease in our imports of cellphones, a $419 million decrease in our imports of artwork, antiques and other collectibles, a $275 million decrease in our imports of pharmaceuticals, and a $270 million decrease in our imports of apparel and household textile goods other than those made of wool or cotton...at the same time, the value of our imports of industrial supplies and materials fell by $3,417 million to $45,997 million as our imports of petroleum products other than fuel oil fell by $1,367 million, our imports of fuel oil fell by $769 million and our imports of crude oil fell by $698 million, our imports of foods, feeds, and beverages fell by $146 million to $12,153 million, and our imports of other goods not categorized by end use fell by $597 million to $9,549 million....offsetting the decreases in those import categories, our imports of capital goods rose by $345 million to $57,254 million on a $404 million increase in our imports of semiconductors, and our imports of automotive vehicles, parts and engines rose by $243 million to $32,083 million on a $267 million increase in our imports of trucks, buses, and special purpose vehicles....

The Full Release and Tables also gives us details on our balance of trade with selected countries:

The November figures show surpluses, in billions of dollars, with South and Central America ($4.8), Hong Kong ($2.6), United Kingdom ($0.9), Singapore ($0.8), and Brazil ($0.7). Deficits were recorded, in billions of dollars, with China ($35.4), European Union ($13.8), Mexico ($6.8), Japan ($5.7), Germany ($5.6), Italy ($2.7), South Korea ($1.9), India ($1.7), Taiwan ($1.6), Saudi Arabia ($1.5), France ($1.3), OPEC ($1.2), and Canada ($0.8).

  • The deficit with China decreased $2.8 billion to $35.4 billion in November. Exports decreased $0.1 billion to $7.4 billion and imports decreased $2.9 billion to $42.8 billion. 
  • The deficit with Canada decreased $1.3 billion to $0.8 billion in November. Exports decreased $0.4 billion to $24.5 billion and imports decreased $1.7 billion to $25.3 billion. 
  • The deficit with Taiwan increased $0.4 billion to $1.6 billion in November. Exports decreased $0.3 billion to $2.5 billion and imports increased $0.1 billion to $4.1 billion.

To gauge the impact of both October's and November's trade in goods on the eventual 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 the impact of trade figures for GDP, with the exception that they are not annualized here....from that table, we can estimate that 3rd quarter real exports of goods averaged 149,417 million monthly in 2012 dollars, while similarly inflation adjusted October and November exports were at 149,595 million and 150,007 million respectively in that same 2012 dollar quantity index representation.... annualizing the change between the average real exports of the two quarters, we find that the 4th quarter's real exports of goods are rising at a 1.03% annual rate from those of the 3rd quarter, or at a pace that would add about 0.09 percentage points to 4th quarter GDP if continued at the same pace through December.....in a similar manner, we find that our 3rd quarter real imports of goods averaged 234,772.7 million monthly in chained 2012 dollars, while inflation adjusted October and November imports were at 237,886 million and 230,829 million in 2012 dollars respectively...that would indicate that so far in the 4th quarter, real imports have been shrinking at annual rate of 0.706% from those of the 3rd quarter...since imports are subtracted from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their decrease at a 0.706% rate would conversely add about 0.08 percentage points to 4th quarter GDP....hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our improving balance of trade in goods would add about 0.17 percentage points to the growth of 4th quarter GDP....(note that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the Census does not provide inflation adjusted data on those, and we don't have easy source of all their price changes..)

Factory Shipments Down 0.6% in November, Factory Inventories Down 0.1%, Both on Lower Prices

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for November from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $3.1 billion or 0.6 percent to $499.2 billion in November, following a decrease of 2.1% to $502.26 billion in October, which was revised from the 2.1% decrease to $502.7 billion that was reported for October two months ago....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 November advance report on durable goods which was released on December 21st...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 November, down two consecutive months, decreased $3.1 billion or 0.6 percent to $499.2 billion, the U.S. Census Bureau reported today.  This followed a 2.1 percent October decrease.  Shipments, down two consecutive months, decreased $3.2 billion or 0.6 percent to $505.1 billion.  This followed a 0.1 percent October decrease.  Unfilled orders, down two consecutive months, decreased $1.8 billion or 0.1 percent to $1,181.5 billion.  This followed a 0.2 percent October decrease.  The unfilled orders‐to‐shipments ratio was 6.60, down from 6.68 in October.  Inventories, down following twenty‐four consecutive monthly increases, decreased $1.0 billion or 0.1 percent to $681.1 billion.  This followed a 0.2 percent October increase.  The inventories‐to‐shipments ratio was 1.35, up from 1.34 in October.
  • New orders for manufactured durable goods in November, up following two consecutive monthly decreases, increased $1.8 billion or 0.7 percent to $250.8 billion, down from the previously published 0.8 percent increase.  This followed a 4.3 percent October decrease.  Transportation equipment, up three of the last four months, drove the increase, $2.5 billion or 3.0 percent to $87.0 billion.  New orders for manufactured nondurable goods decreased $4.9 billion or 1.9 percent to $248.4 billion.
  • Shipments of manufactured durable goods in November, up three of the last four months, increased $1.8 billion or 0.7 percent to $256.7 billion, unchanged from the previously published increase.  This followed a 0.3 percent October decrease.  Transportation equipment, also up three of the last four months, drove the increase, $1.8 billion or 2.1 percent to $89.5 billion.  Shipments of manufactured nondurable goods, down following eight consecutive monthly increases, decreased $4.9 billion or 1.9 percent to $248.4 billion.  This followed a 0.1 percent October increase.  Petroleum and coal products, also down following eight consecutive monthly increases, drove the decrease, $5.5 billion or 9.3 percent to $53.2 billion.
  • Unfilled orders for manufactured durable goods in November, down two consecutive months, decreased $1.8 billion or 0.1 percent to $1,181.5 billion, unchanged from the previously published decrease.  This followed a 0.2 percent October decrease.  Transportation equipment, also down two consecutive months, drove the decrease, $2.5 billion or 0.3 percent to $812.4 billion. 
  • Inventories of manufactured durable goods in November, up twenty‐two of the last twenty‐three months, increased $1.6 billion or 0.4 percent to $413.7 billion, up from the previously published 0.3 percent increase.  This followed a 0.2 percent October increase.  Primary metals, up twenty‐four of the last twenty‐ five months, led the increase, $0.3 billion or 0.9 percent to $36.1 billion.  Inventories of manufactured nondurable goods, down following sixteen consecutive monthly increases, decreased $2.6 billion or 1.0 percent to $267.4 billion.  This followed a 0.1 percent October increase.  Petroleum and coal products, down two consecutive months, drove the decrease, $3.1 billion or 7.3 percent to $39.8 billion.

To gauge the impact of November 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 November's finished goods inventories was 0.1% lower at $236,677 million; the value of work in process inventories was 0.5% lower at $207,096 million, and materials and supplies inventories were valued 0.1% higher at $237,283 million...the producer price index for November indicated that prices for finished goods decreased 0.4%, that prices for intermediate processed goods were 0.7% lower, and that prices for unprocessed goods were on average 5.3% lower....assuming similar valuations for like types of inventories, those price changes would suggest that November's real finished goods inventories were up about 0.3%, that real inventories of intermediate processed goods were around 0.2% greater, and real raw material inventories were 5.2% greater…those inventory changes follow an October report that indicated real finished goods inventories were about 0.3% lower, that real inventories of intermediate processed goods were 1.1% lower, and that real raw material inventory inventories were about 3.3% lower…since real factory inventories in the 3rd quarter were substantial higher, any inventory increases in the 4th quarter that are smaller than those will 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…)      

    Sunday, February 3, 2019

    January’s jobs report; November’s construction spending, new home sales and wholesale sales, et al

    As is usual with the first Friday of the month, the major economic release of this past week was the Employment Situation Summary for January from the Bureau of Labor Statistics...in addition, the week also saw the release of three Census Dept reports that had been postponed during the shutdown; the November report on new home sales, which had originally been scheduled to be released on December 27th; the November report on Construction Spending (pdf), which had been scheduled for January 3rd, and the November report on Wholesale Trade, Sales and Inventories (pdf) , which had been scheduled for January 10th...at the same time, the 1st estimate of 4th quarter GDP and the December report on Personal Income and Spending, both from the Bureau of Economic Analysis, and the December report on Construction Spending (pdf), which had originally been scheduled for Wednesday, Thursday and Friday of this week respectively, were postponed, with no revised release dates for those reports yet given...

    This week also saw the release of the Chicago Fed National Activity Index (CFNAI) for December, a weighted composite index of 85 different economic metrics, which rose to +0.27 in December, up from +0.21 in November, which was revised from the +0.22 reported last month...as a result, the 3 month average of the index rose to +0.16 in December, up from a revised +0.11  in November, which indicates that national economic activity continued at a pace above the historical trend over the 4th quarter months...in addition, the week also saw the last Fed manufacturing survey for January; the January Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index rose to +1.0, up from last month's -5.1, a near zero reading which the Dallas Fed says “suggests manufacturers were fairly balanced in their assessment of whether activity had improved or worsened from last month”...

    The week’s privately issued reports included the ADP Employment Report for January, the light vehicle sales report for January from Wards Automotive, which estimated that vehicles sold at a 16.60 million annual rate in January, down from the 17.51 million annual rate reported in December, and down from the 17.07 million annual rate in January a year ago, and the Case-Shiller Home Price Index for November from S&P Case-Shiller, which reported that prices for homes that sold nationally during September, October and November averaged 5.2% higher than the prices for the same homes that sold during the same 3 month period a year earlier....in addition, the week also saw the release of the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the January Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 56.6% in January, up from 54.3% in December, which suggests a somewhat faster paced expansion among manufacturing firms nationally...

    Employers Add 304,000 Jobs in January, Unemployment Rate Rises to 4.0%

    The Employment Situation Summary for January from the Bureau of Labor Statistics indicated greater than average job creation over the month, partly offset by revisions to December, while the household survey was impacted by the effects of the government shutdown during the survey week, wherein those on temporary layoff were counted as unemployed…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 304,000 jobs in January, after the previously estimated payroll job increase for December was revised down from 312,000 to 222,000, while the payroll jobs increase for November was revised up from 156,000 to 176,000…that means that this report represents a total of 234,000 more seasonally adjusted payroll jobs than the report of a month ago, just a bit better than the past year's average monthly gain of 223,000 jobs per month...the unadjusted data, however, shows that there were actually 2,981,000 fewer payroll jobs remaining in January than in December, as the normal post holiday seasonal layoffs in areas such as retail, wholesale, goods transportation, leisure and hospitality were normalized by the seasonal adjustments..

    As is usual for the January jobs report, this report included the results of the annual benchmark revision, which revised prior reports and set March 2018 (the benchmark) at 148,279,000 payroll jobs, 1,000 fewer jobs than was previously reported for that month, while job totals for every month in 2018 were concurrently revised by magnitudes of less than 97,000 per month as well (as is shown in Table A of the press release)...as a result of this revision, 2018 job growth totaled 2,674,000 payroll jobs, up a bit from the previously published totals of 2,638,000, while job growth in earlier years was revised slightly as well...since all the newly revised figures are now incorporated into this month's report as if previously reported totals had never been reported, that's the way we'll cover it...

    Seasonally adjusted job increases in January were spread through through both the goods producing and the private service sectors and government, with only the information services sector seeing a net loss of 4,000 jobs...leading the increases, seasonally adjusted employment in the leisure and hospitality sector increased by 74,000 jobs over the month, with the addition of 36,600 more jobs in bars and restaurants and 32,200 more working in amusements, gambling, and recreation...also after seasonal adjustments, 52,000 jobs were added in construction, with 34,300 of those working for specialty trade contractors, with sizable job increases with both nonresidential and residential specialty trade contractors...another 45,400 jobs were added in health care and social assistance, as 18,800 more employees were added by hospitals and 5,300 more were employed by medical and diagnostic laboratories...the broad professional and business services sector added 30,000 jobs, led by a 7,000 job increase in computer systems design and related services....the transportation and warehousing sector added 26,600 more seasonally adjusted workers, with 15,100 of those employed in warehousing and storage facilities...then, also after the typical seasonal adjustment, retail sales added 20,800 more workers, with a 17,400 increase in those working in sporting goods, hobby, book, and music stores offsetting a 12,400 decrease in employment in general merchandise stores...in addition, 13,000 more jobs were added by manufacturers, with factories producing a wide variety of durable goods of accounting for all of those, as employment with non-durable goods manufacturers fell by 7,000...13,000 jobs were also added in financial activities, with 5,700 of those in real estate...meanwhile, employment in the other major sectors, including mining, wholesale trade, utilities, private education and government, all saw smaller job gains over the month..

    The establishment survey also showed that average hourly pay for all employees rose by 3 cents an hour to $27.56 an hour in January, after it had increased by a revised 10 cents an hour in December; at the same time, the average hourly earnings of production and non-supervisory employees also increased by 3 cents to $23.12 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.5 hours in January, while hours for production and non-supervisory personnel was unchanged at 33.7 hours...however, the manufacturing workweek decreased by 0.1 hour to 40.8 hours, while average factory overtime was down by 0.1 hour to 3.5 hours...

    Reflecting the effects of the government shutdown, the January household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 251,000 to 156,694,000, while the estimated number of those unemployed rose by 241,000 to 6,535,000; which led to a rounded 11,000 decrease in the total labor force...however, those numbers were skewed from what they should have been because a number of federal workers were classified as employed but absent from work, who also should have been classified as unemployed on temporary layoff…about those “employed” workers, the BLS says “they are accepted as recorded” & that “no ad hoc actions are taken to reassign survey responses”…further complicating the January results, the benchmark revision to 2018’s civilian noninstitutional population indicated that December’s population had been overstated by 800,000, which meant that all the population dependent metrics had to be adjusted for that revision….with a January population increase of 151,000 partially offsetting  that, that meant the number of employment aged individuals who were not in the labor force was down by 639,000 from previously published figures to 95,010,000, the labor force participation rate increased from 63.1% to 63.2%, and the employment to population ratio, which we could think of as an employment rate, increased from 60.6% in December to 60.7% in January, all despite fewer workers being employed.…at the same time, the increase in the number unemployed was large enough to increase the unemployment rate, as it rose from 3.9% to 4.0%, and it would have even been higher had the aforementioned furloughed federal employees been properly classified...meanwhile, the number of those who reported they were forced to accept just part time work, which includes many of those federal employees, rose by 490,000, from 4,657,000 in December to 5,147,000 in January, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.6% of the labor force in December to 8.1% in January...however, we can expect most of that to be reversed in February…

    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 of the press release to avoid the need to scroll up and down the page to view the tables you want to see..   

    Construction Spending Rose 0.8% in November After Prior Months Were Revised Much Lower

    The Census Bureau's report on construction spending for November (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,299.9 billion annually if extrapolated over an entire year, which was 0.8 percent (±1.3%)* above the revised October annualized estimate of $1,289.7 billion and also 3.4 percent (±1.5 percent) above the estimated annualized level of construction spending in November of last year...however, the annualized October construction spending estimate was revised nearly 1.5% lower, from $1,308.8 billion to $1,289.7 billion, while the annual rate of construction spending for September was revised more than 1.7% lower, from $1,310.8 billion to $1,287.9 billion...the $22.9 billion downward revision to September construction spending would imply that the 3rd estimate of 3rd quarter GDP growth was overstated by more than 0.19 percentage points, a change which will not be applied to published GDP figures until the annual revision is released in the middle of next summer...

    Further details on different subsets of construction spending are provided by the Census release summary:

    • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $993.4 billion, 1.3 percent (±0.8 percent) above the revised October estimate of $980.4 billion. Residential construction was at a seasonally adjusted annual rate of $542.5 billion in November, 3.5 percent (±1.3 percent) above the revised October estimate of $524.2 billion. Nonresidential construction was at a seasonally adjusted annual rate of $450.8 billion in November, 1.2 percent (±0.8 percent) below the revised October estimate of $456.1 billion.
    • Public Construction: In November, the estimated seasonally adjusted annual rate of public construction spending was $306.5 billion, 0.9 percent (±2.3 percent)* below the revised October estimate of $309.3 billion. Educational construction was at a seasonally adjusted annual rate of $76.7 billion, 2.0 percent (±1.6 percent)* below the revised October estimate of $78.3 billion. Highway construction was at a seasonally adjusted annual rate of $93.4 billion, 1.7 percent (±5.6 percent)* above the revised October estimate of $91.8 billion.

    As you can infer from that summary, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and in government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of November 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 the prices changes of 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 and thereby get a rough estimate of the real change in construction...

    That index showed that aggregate construction costs were up 0.2% in November after being up 1.9% in October, down 0.1% in September and up 0.2% in August...on that basis, we can estimate that construction costs for November were up 2.1% from September, up 2.0% from August, and up 2.2% from July, while they were obviously up 0.2% from October...we then use those percentages to inflate the lower cost spending figures for each of those 3rd quarter months, which is arithmetically the same as adjusting higher priced October and November construction spending downward, for purposes of comparison...annualized construction spending in millions of dollars for the third quarter months is given as $1,287,893 for September, $1,311,824 for August, and $1,317,701 for July, while it was at 1,289,658 annually in October and 1,299,875 annually in November...thus to compare the inflation adjusted construction spending of the two recent 4th quarter months to those of the third quarter, our calculation would be ((1,299,875 + 1.002 * 1,289,658) / 2) /(( 1,287,893 *1.021 + 1,311,824 * 1.020 + 1,317,701 * 1.022) / 3)  = 0.9721, meaning real construction over the months of October and November was down 2.788% vis a vis the 3rd quarter...in GDP terms, that means real construction for the 4th quarter decreased at an annual rate of 10.695% from that of the 3rd quarter, or at a pace that would subtract about 0.94 percentage points from 4th quarter GDP, should real December construction continue at the same pace as that of October and November…

    November New Home Sales Reported Higher On Much Lower Prices

    The Census report on New Residential Sales for November (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 657,000 homes annually during the month, which was 16.9 percent (±19.9 percent)* above the revised October rate of 562,000 new single family home sales a year but 7.7 percent (±20.7 percent)* below the estimated annual rate that new homes were selling at in November of last year...the figures in parenthesis indicate 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 up from the annual rate of 544,000 reported two months ago to 562,000, while home sales in September, initially reported at an annual rate of 553,000 and revised to a 597,000 a year rate with the last report, were also revised higher, to a 613,000 a year rate with this report, and while August's annualized home sale rate, initially reported at an annual rate of 629,000 and revised from the initially revised 608,000 a year rate to a 603,000 a year rate last report, were further revised lower to a 601,000 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 indicated that approximately 48,000 new single family homes sold in November, up from the estimated 44,000 new homes that sold in October and the 46,000 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 $302,400, down from the median sale price of $325,100 in October and down from the median sales price of $343,400 in November a year ago, while the average November new home sales price was $362,400, down from the $395,500 average sales price in October, and down from the average sales price of $388,500 in November a year ago....a seasonally adjusted estimate of 330,000 new single family houses remained for sale at the end of November, which represented a 6.0 month supply at the November sales rate, down from the previously reported 7.4 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 increased to 657,000 Annual Rate in November and A few Comments on November New Home Sales...

    November Wholesale Sales Down 0.6%, Wholesale Inventories Up 0.3%

    The November report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$505.3 billion, down 0.6 percent (±0.4 percent) from the revised October level, but [was] up 4.0 percent (±3.5 percent) from the November 2017 level. The September 2018 to October 2018 percent change was revised from the preliminary estimate of down 0.2 percent (±0.5 percent)* to down 0.6 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 November report estimated that wholesale inventories were valued at a seasonally adjusted "$654.0 billion at the end of November, up 0.3 percent (±0.2 percent) from the revised October level. Total inventories were up 6.5 percent (±4.4 percent) from the revised November 2017 level."

    To estimate the impact of November 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 in this report, we've previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...the producer price index for November indicated that prices for finished goods fell 0.4%, prices for intermediate goods intermediate goods fell 0.7%, and prices for unprocessed goods fell 5.3%; thus the 0.3% increase in the nominal value of wholesale inventories was despite falling prices, and hence real wholesale inventories were at least 0.7% higher for the month...however, since real wholesale inventories in the 3rd quarter were much higher each month, any smaller increase real wholesale inventories change in the 4th quarter would still 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…)