Sunday, March 31, 2019

4th quarter GDP revision; February's income and outlays, housing starts and new home sales; January's trade deficit

The key economic releases from the Bureau of Economic Analysis this week included what they are still calling "the 3rd estimate" of 4th quarter GDP, even though the 1st estimate was cancelled, and the February report on Personal Income and Spending, which only includes spending data from January, since that data is dependent on delayed Census reports...meanwhile, delayed reports that were released this week included International Trade for January from the Commerce Dept, and February's New Residential Construction and February's New Home Sales from the Census Bureau...

The week also saw the release of the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, which fell to –0.29 in February from –0.25 in January, after January's index was revised up from the –0.43 reported last month...as a result, the 3 month average of that index fell to -0.18 in February, from a neutral reading of zero in January, which indicates that national economic activity has been somewhat below the historical trend over recent months...in addition, the Case-Shiller Home Price Index for January from S&P Case-Shiller reported that home prices during November, December and January averaged 4.3% higher nationally than prices for the same homes that sold during the same 3 month period a year earlier, down from 4.6% year over year increase in December, revised from the 4.7% increase reported in the December report last month...

This week also saw the release of the last three regional Fed manufacturing surveys for March: the Dallas Fed Texas Manufacturing Outlook Survey reported their general business activity composite index fell to +8.3 from last month's +13.1, still suggesting a ongoing expansion in the Texas energy centered economy, while 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 fell to +10 in March, down from +16 in February, but up from -2 in January, also suggesting a continuing modest expansion in that region's manufacturing, and the Kansas City Fed manufacturing survey for February, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index rose to 10 in March, up from 1 in February and 5 in January, likewise indicating a modest expansion among 10th District manufacturers...

4th Quarter GDP Revised to Indicate Growth at a 2.2% Rate

The Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.2% rate in the 4th quarter, revised from the 2.6% growth rate indicated by the initial estimate reported last month, as personal consumption expenditures, fixed investment and growth of government were smaller than was previously estimated, while the negative impact of the trade deficit was less than was previously estimated....in current dollars, our fourth quarter GDP grew at a 4.06% annual rate, increasing from what would work out to be a $20,658.2 billion a year output rate in the 3rd quarter to a $20,865.1 billion annual rate in the 4th quarter, with the headline 2.2% 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...that GDP deflator had previously been reported at 1.8%..

As we review the revision details below, remember that this release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times the change that actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as 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 3rd estimate of 4th quarter GDP, which is linked to on the BEA's GDP landing page, where you can also find links to just the tables on Excel and other technical notes about this release...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2014, table 2, which shows the contribution of each of the components to the GDP 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....the pdf for the 4th quarter initial estimate, which this estimate revises, is here...

Seasonally adjusted real personal consumption expenditures (PCE), the largest component of GDP, were revised to show growth at a 2.5% annual rate in the 4th quarter, rather than the 2.8% growth rate reported last month, as growth of consumer spending in dollars at a 4.0% annual rate was deflated with the PCE price index, which indicated consumer inflation grew at a 1.5% annual rate in the 4th quarter, unrevised from the initial estimate....real consumption of durable goods grew at a 3.6% annual rate, revised from 5.9% in the second estimate, and added 0.25 percentage points to GDP, as real output of motor vehicles grew at a 9.0% annual rate and accounted for four-fifths of that durable goods growth....real consumption of nondurable goods by individuals rose at a 2.1% annual rate, revised from the 2.8% increase reported in the initial estimate, and added 0.29 percentage points to 4th quarter growth, as all categories of non-durables saw their output grow in the quarter....at the same time, real consumption of services grew at a 2.4% annual rate, unrevised from last month, and added 1.12 percentage points to the final GDP tally, as consumption of household services accounted for nearly two-thirds of the 4th quarter increase in services...

Meanwhile, real gross private domestic investment grew at a 3.7% annual rate in the 4th quarter, revised from the 4.6% growth estimate made last month, as the growth rate of real private fixed investment was revised from a 3.9% rate to a 3.1% rate, while real inventory growth was a bit less than was previously estimated...investment in non-residential structures was revised from shrinking at a 4.2% rate to shrinking at a 3.9% rate, while real investment in equipment was revised to show growth at a 6.6% rate, revised from the 6.7% growth rate previously reported...in addition, the 4th quarter's investment in intellectual property was revised from growth at a 13.1% rate to growth at a 10.7% rate, while the contraction rate of residential investment was revised from 3.5% to 4.7% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.12 percentage points from the economy's growth rate, increased investment in equipment added 0.39 percentage points, our investment in intellectual property added 0.46 percentage points, while the slowdown in residential investment subtracted 0.18  percentage points from the change in the growth rate of 4th quarter GDP...

At the same time, the inflation adjusted growth of real private inventories was revised from the previously reported $97.1 billion to show inventories had grown at an $96.8 billion rate, which came after inventories had grown at an inflation adjusted $89.8 billion rate in the 3rd quarter, and hence the $7.0 billion positive change in real inventory growth from the 3rd quarter to the 4th added 0.11 percentage points to the 4th quarter's growth rate, revised from the 0.13 percentage point addition to GDP due to inventory growth reported in the initial estimate....however, since growth in inventories indicates that more of the goods produced during the quarter were left in storage or "sitting on the shelf”, their increase by $7.3 billion in turn means real final sales of GDP were actually smaller by that amount, and hence real final sales of GDP grew at a 2.1% rate in the 4th quarter, which was still up from the real final sales growth rate of 1.0% in the 3rd quarter, when the much greater increase in inventory growth meant that the quarter’s growth in real final sales was considerably lower...

The previously reported increase in real exports was revised a bit higher with this estimate, while the reported increase in real imports was revised a bit lower, and hence our net trade was a smaller subtraction from GDP than was previously reported...our real exports grew at a 1.8% rate, rather than at the 1.6% rate reported in the initial estimate, and since exports are added to GDP because they are part of our production that was not consumed in or added to investment in our country, their growth added 0.22 percentage points to the 4th quarter's growth rate, revised from the 0.19 percentage point addition from exports shown last month....meanwhile, the previously reported 2.7% rate of increase in our real imports was revised to an 2.0% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their growth subtracted 0.30 percentage points from 4th quarter GDP, revised from the 0.41 percentage point subtraction shown last month....thus, our weaker trade balance subtracted a net of 0.8 percentage points from 4th quarter GDP, revised from the 0.22 percentage point GDP subtraction resulting from foreign trade that was indicated in the initial estimate..

Finally, there was a reversal in real government consumption and investment in this estimate, as the entire government sector is now seen to have shrunk at a 0.4% rate, revised from the 0.4% growth rate reported a month ago...real federal government consumption and investment was seen to have grown at a 1.1% rate in this estimate, down from the 1.6% growth rate shown in the initial estimate, as real federal outlays for defense grew at a 6.4% rate and added 0.24 percentage points to 4th quarter GDP, revised from the 6.9% growth rate shown previously, while growth in all other federal consumption and investment was revised from contracting at a 5.6% rate to a contraction at a 6.1% rate, which thus subtracted 0.16 percentage points from 4th quarter GDP...meanwhile, real state and local consumption and investment was revised from shrinking at a 0.3% rate in the first estimate to shrinking at a 1.3% rate in this estimate, as state and local investment spending shrunk at an 8.8% rate and subtracted 0.18 percentage points from 4th quarter GDP, while state and local consumption spending grew at a 0.4% rate and added 0.03 percentage points to GDP....note that government outlays for social insurance are not included in this government 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.... 

Personal Income up 0.2% in February, Personal Spending up 0.1% in January, PCE Price Index down 0.1%

Since our personal consumption expenditures account for nearly 70% of GDP, they are usually the key metric for determining the ultimate trajectory of GDP each quarter, and hence the key monthly release that inputs into GDP each quarter is the report on Personal Income and Outlays from the Bureau of Economic Analysis…however, with Census reports on retail sales and some services surveys still running behind schedule because of the January government shutdown, this month's report includes Personal Income for February and Personal Outlays for January, instead of the usual report encompassing all February data...so while this report gives us monthly data on our personal consumption expenditures (PCE) and the monthly PCE price index, which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated, that data, as well as the monthly savings rate, is all for January, while only the monthly personal income data and disposable personal income are new for February...

Note that because this report feeds in to GDP and other national accounts data, the change reported for each of the metrics reported on is not the current monthly change; rather, the amounts are seasonally adjusted and at an annual rate; ie, it tells us what income and spending would be for a year if the month's adjusted income and spending were extrapolated over an entire year....hence, when the opening line of the January summary for this report tell us "Personal income decreased $22.9 billion (-0.1 percent) in January", that means that the annualized figure for all US personal income in January, $17,999.7 billion, was $22.9 billion, or a more than 0.1% less than the annualized personal income figure of $18,022.6 billion for December; the actual change in personal income from December to January is not given...similarly, annualized disposable personal income, which is income after taxes, fell by a bit more than 0.2%, from an annual rate of an annual rate of $15,948.3 billion in December to an annual rate of $15,913.4 billion in January...the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...there, we see that the reason for the $22.9 billion annual rate of decrease in January personal income was a $107.0 billion drop in interest and dividend income, reversing December's unusual gains; wages and salaries, meanwhile, saw a $30.2 billion increase…

In February, on the other hand, personal income increased at an annual rate of $42.0 billion, or by more than 0.2%, from an annualized $17,999.7 billion in January to an annualized $18,041.7 billion in February...at the same time, disposable personal income increased at a $31.3 billion annual rate, or by a bit less than 0.2%, from a $15,913.4 billion annual rate in January to a $15,944.7 billion annual rate in February...the major reason for the February increase in personal income was a $27.7 billion rate of increase in wages and salaries, while proprietor's income also contributed, rising at a $11.8 billion rate..

For the January personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased by $8.6 billion, or by less than 0.1%, from a $14,157.4 billion annual rate in December to a $14,166.0 billion annual rate in January; at the same time, the December PCE figure was revised down from the originally reported $14,176.2 billion annually, a revision that was already incorporated into this week's 4th quarter GDP estimate (this report, although usually released a business day later than the GDP release, is computed concurrently)....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $6.3 billion to $14,725.1 billion annually in January, which left total personal savings, which is disposable personal income less total outlays, at a $1,188.3 billion annual rate in January, down from the revised $1,229.5 billion in annualized personal savings in December... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 7.5% in January from the December savings rate of 7.7%, which had been a three year high...

As you know, before January's personal consumption expenditures are used in the 1st quarter GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....that's done with the price index for personal consumption expenditures, which is shown in Table 9 in the pdf for this report, which is a chained price index based on 2012  prices = 100....that PCE price index fell from 108.938 in December to 108.873 in January, giving us a month over month inflation rate of -0.05967%, which BEA rounds to a 0.1% decrease in reporting it in text and tables here....then, applying that -0.05967% inflation adjustment to the small increase in January PCE shows that real PCE rose by 0.12048% in January, which the BEA reports as a 0.1% increase...note that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it gives us that month's annualized real PCE in those same chained 2012 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to that of another....that result is shown in table 7 of the PDF, where we see that January's chained dollar consumption total works out to 13,011.9 billion annually, 0.12% more than December's 12,996.3 billion, statistically the same as the real PCE decrease we just computed..

However, to estimate the impact of the change in January PCE on the change in GDP, the change from December doesn't help us much, since GDP is reported quarterly...thus we have to compare January's real PCE to the the real PCE of the 3 months of the third quarter....while this report shows PCE for all those amounts monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 in this report, where we find that the annualized real PCE for the 4th quarter was represented by 13,032.3 billion in chained 2012 dollars..(ie, that's the same as what's shown in table 3 of the pdf for the 4th quarter GDP report)....when we compare January's real PCE representation of 13,011.9 billion to the 4th quarter real PCE figure of 13,032.3 billion, we find that real PCE is shrinking at a 0.624% annual rate so far in the 1st quarter....that’s a rate that would mean that if January real PCE does not improve during February and March, growth in PCE would subtract 0.41 percentage points from the growth rate of 1st quarter GDP...

Trade Deficit Fell 14.6% in January, Led by Lower Imports of Capital Goods, Oil

Our trade deficit fell 14.6% in January, almost reversing the 18.8% increase in December, as the value of our exports increased and the value of our imports decreased...the Commerce Dept report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit rose by $8.8 billion to $51.1 billion in January, from a December deficit which was revised from $59.8 billion to $59.9 billion....the value of our January exports rose by a rounded $1.9 billion to $207.3 billion on a $1.8 billion increase to $137.4 billion in our exports of goods and an increase of $0.2 billion to $70.0 billion in our exports of services, while our imports fell by $6.8 billion to $258.5 billion on a $6.5 billion decrease to $210.7 billion in our imports of goods and a $0.3 billion decrease to $47.8 billion in our imports of services...export prices averaged 0.6% higher in January, so real exports were smaller than their nominal value by that percentage, while import prices were also 0.6% higher, meaning that the contraction in real imports was greater than the nominal decrease reported here by that percentage....

The increase in our January exports of goods was mostly due to higher exports of soybeans and of automotive vehicles, which were partially offset by a decrease in our exports of civilian aircraft...referencing the Full Release and Tables for January (pdf), in Exhibit 7, we find that our exports of foods, feeds and beverages rose by $1,253 million to $10,849 million on a $910 million increase in our exports of soybeans, and that our exports of automotive vehicles, parts and engines rose by $1,218 million to $13,529 million on a $726 million increase in our exports of passenger cars and a $299 million increase in our exports of trucks, buses, and special purpose vehicles...in addition, our exports of consumer goods increased by $669 million to $17,765 million on a $325 million increase in our exports of gem diamonds and a $283 million increase in our exports of jewelry...partially offsetting the increases in those end use categories, our exports of capital goods fell by $778 million to $45,922 million on a $1,277 million decrease in our exports of civilian aircraft and a $270 million decrease in our exports of industrial engines, partly offset by a $385 million increase in our exports of computer accessories and a $213 million increase in our exports of medicinal equipment…in addition, our exports of industrial supplies and materials fell by $299 million to $43,397 million on a $264 million decrease in our exports of organic chemicals and a $238 million decrease in our exports of fuel oil, and our exports of other goods not categorized by end use fell by $277 million to $5,382 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our January goods imports and shows that our imports in all end use categories decreased in January, led by lower imports of capital goods and of industrial supplies and materials...our imports of capital goods fell by $2,962 million to $57,017 million on a $946 million decrease in our imports of computer accessories, a $723 million decrease in our imports of semiconductors, a $704 million decrease in our imports of civilian aircraft, a $473 million decrease in our imports of telecommunications equipment, a $385 million decrease in our imports of generators and accessories, and a $299 million decrease in our imports of industrial machines other than those itemized separately, while at the same time our imports of drilling & oilfield equipment rose by $308 million, our imports of civilian aircraft parts rose by $307 million, and our imports of computers rose by $295 million...meanwhile, our imports our imports of industrial supplies and materials fell by $2,323 million to $43,756 million as the value of our imports of crude oil fell by $1,359 million, our imports of nonmonetary gold fell by $253 million, and our imports of other precious metals fell by $219 million, and our imports of consumer goods fell by $334 million to $55,160 million as a $667 million decrease in our imports of furniture and a million decrease in our imports of appliances were partially offset by a $494 million increase in our imports of cellphones and a $223 million increase in our imports of toys, games, and sporting goods...in addition, our imports of foods, feeds, and beverages fell by $318 million to $12,264 million on a $218 million decrease in our imports of fish and shellfish, our imports of automotive vehicles, parts and engines fell by $172 million to $31,936 million, and our imports of other goods not categorized by end use fell by $330 million to $8,851 million...

To gauge the impact of January trade on 1st 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 for inflation in chained 2012  dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here....from that table, we can figure that 4th quarter real exports of goods averaged 148,107.7 million monthly in chained 2012 dollars, while inflation adjusted January goods exports were at 149,741 million in that same 2012 dollar quantity index representation... annualizing the change between the two figures, we find that January's real exports of goods are thus running at a 4.48% annual rate above those of the 4th quarter, or at a pace that would add about 0.37 percentage points to 1st quarter GDP growth if continued through February and March...in a similar manner, we find that our 4th quarter real imports of goods averaged 235,498 million monthly in chained 2012 dollars, while inflation adjusted goods imports in January were at 233,558 million...that would indicate that so far in the 1st quarter, we have seen our real imports of goods decrease at a 3.25% annual rate from those of the 4th quarter...since an increase in imports would subtract from GDP because it would represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 3.25% rate would conversely add another 0.39 percentage points to 1st quarter GDP....hence, if our January trade in goods deficit is maintained at the same level throughout the 1st quarter, our improving balance of trade in goods would add about 0.76 percentage points to the growth of our 1st quarter GDP....note, however, that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have easy access to the details on all their price changes... 

Housing Starts, Permits Reported Lower in February

The February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,162,000, which was 8.7 percent (±10.3 percent)* below the revised estimated January annual rate of 1,273,000, and was 9.9 percent (±11.5 percent)* below last February's rate of 1,290,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month or even over the past year, with the figures in parenthesis the most likely range of the change indicated; in other words, February housing starts could have been up by 1.6% or down by as much as 19.0% from those of January, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for January housing starts was revised from the 1,230,000 reported earlier this month to 1,273,000, while December starts, which were first reported at a 1,078,000 annual rate, were revised from last month's initial revised figure of 1,037,000 annually to a 1,140,000 annual rate with this report....

these annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 81.300 housing units were started in February, down from the 85,100 units that were started in January but up from the 76,000 units that were started in December...of those housing units started in February, an estimated 55,700 were single family homes and 25,200 were units in structures with more than 5 units, down from the revised 63,700 single family starts in January but up from the 20,100 units started in structures with more than 5 units in January...

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,296,000, which was 1.6 percent (±1.2 percent) below the revised January annual rate of 1,317,000 permits, and was 2.0 percent (±1.7 percent) below the rate of building permit issuance in February a year earlier...the annual rate for housing permits issued in January was revised down from the originally reported 1,345,000....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for roughly 90,200 housing units were issued in February, down from the revised estimate of 94,400 new permits issued in January, with single family permits down from 58,100 to 57,700 and permits for units in structures of more than 5 units down from 33,300 to 30,000....for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.162 Million Annual Rate in February and Comments on February Housing Starts...

February New Home Sales Reported Higher

The Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 667,000 homes annually during the month, which was 4.9 percent (±14.4 percent)* above the revised January annual sales rate of 636,000, and 0.6 percent (±13.1 percent)* above the estimated annual rate that new homes were selling at in February of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether February new home sales rose or fell from those of January, or even from February sales of a year ago, with the figures in parenthesis representing the 90% confidence range for the 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 of new single family homes in January were revised from the annual rate of 607,000 reported last month to an annual rate of 636,000, and new home sales in December, initially reported at an annual rate of 621,000 and revised to a 652,000 rate earlier this month, were revised down to a 588,000 a year rate with this report, while November's annualized new home sales rate, initially reported at an annual rate of 657,000 and revised from a 599,000 rate to a 628,000 annual rate two weeks ago, were revised back down to a 612,000 annual 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 56,000 new single family homes sold in February, up from the estimated 49,000 new homes that sold in January and up from the 41,000 that sold in December, and up from the 54,000 that sold in February a year ago...the raw estimates from Census field agents further indicated that the median sales price of new houses sold in February was $315,300, up from the median sale price of $303,900 in January but down from the median sales price of $ 327,200 in February a year ago, while the average February new home sales price was $379,600, up from the $358,000 average sales price in January, and up from the average sales price of $373,600 in February a year ago....a seasonally adjusted estimate of 340,000 new single family houses remained for sale at the end of February, which represents a 6.1 month supply at the February sales rate, down from the revised 6.5 months months of new home supply in January...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increased to 667,000 Annual Rate in February and A few Comments on February New Home Sales...

 

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

Sunday, March 24, 2019

January's factory inventories and wholesale sales: February's existing home sales

This week's major releases included two delayed reports that will provide inputs into 1st quarter GDP: the Full Report on Manufacturers' Shipments, Inventories and Orders for January and the January report on Wholesale Trade, Sales and Inventories, both from the Census Bureau…we also had the regularly scheduled the Existing Home Sales Report for February from the National Association of Realtors (NAR), and the release of the Regional and State Employment and Unemployment Summary for February from the BLS, putting that monthly report back on it's regular schedule, after the January report was released 3 weeks late last week due to an annual revision...in addition, this week also saw the release of the March Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, which reported its broadest diffusion index of manufacturing conditions rose to +13.7 in March from -4.1 in February, indicating a return to growth for that region's manufacturing...

January Factory Shipments Down 0.4%, Factory Inventories 0.5% Higher

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for January from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by a rounded $0.3 billion or by less than 0.1 percent to $500.5 billion in December, following a increase of 0.1% to $500.1 billion in December, which was revised from an increase of less than 0.1% to $499.9 billion that was reported for December earlier this 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 January advance report on durable goods which was released last week...on those durable goods orders 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 January, up two consecutive months, increased $0.3 billion or 0.1 percent to $500.5 billion, the U.S. Census Bureau reported today.  This followed a 0.1 percent December increase.  Shipments, down four consecutive months, decreased $1.8 billion or 0.4 percent to $503.1 billion.  This followed a 0.2 percent December decrease.  Unfilled orders, up following three consecutive monthly decreases, increased $1.4 billion or 0.1 percent to $1,181.9 billion.  This followed a 0.1 percent December decrease.  The unfilled orders‐to‐shipments ratio was 6.57, up from 6.55 in December.   Inventories, up twenty‐six of the last twenty‐seven months, increased $3.6 billion or 0.5 percent to $685.7 billion.  This followed a 0.1 percent December increase.  The inventories‐to‐shipments ratio was 1.36, up from 1.35 in December.
  • New Orders - New orders for manufactured durable goods in January, up three consecutive months, increased $0.9 billion or 0.3 percent to $255.3 billion, down from the previously published 0.4 percent increase.  This followed a 1.3 percent December increase.  Transportation equipment, up five of the last six months, drove the increase, $1.1 billion or 1.2 percent to $91.0 billion.  New orders for manufactured nondurable goods decreased $0.5 billion or 0.2 percent to $245.2 billion.
  • Shipments - Shipments of manufactured durable goods in January, down following two consecutive monthly increases, decreased $1.3 billion or 0.5 percent to $257.9 billion, unchanged from the previously published decrease.   This followed a 0.7 percent December increase.  Transportation equipment, also down following two consecutive monthly increases, led the decrease, $1.2 billion or 1.3 percent to $90.1 billion.  Shipments of manufactured nondurable goods, down three consecutive months, decreased $0.5 billion or 0.2 percent to $245.2 billion.  This followed a 1.1 percent December decrease.  Chemical products, down following five consecutive monthly increases, led the decrease, $0.3 billion or 0.5 percent to $66.5 billion.
  • Unfilled Orders - Unfilled orders for manufactured durable goods in January, up following three consecutive monthly decreases, increased $1.4 billion or 0.1 percent to $1,181.9 billion, unchanged from the previously published increase.  This followed a 0.1 percent December decrease.  Transportation equipment, also up following three consecutive monthly decreases, led the increase, $0.9 billion or 0.1 percent to $811.6 billion.
  • Inventories - Inventories of manufactured durable goods in January, up twenty‐four of the last twenty‐five months, increased $1.9 billion or 0.5 percent to $417.2 billion, up from the previously published 0.4 percent increase.  This followed a 0.3 percent December increase.  Transportation equipment, up four of the last five months, led the increase, $1.2 billion or 0.9 percent to $132.6 billion.  Inventories of manufactured nondurable goods, up following two consecutive monthly decreases, increased $1.8 billion or 0.7 percent to $268.5 billion.  This followed a 0.4 percent December decrease.  Petroleum and coal products, up following three consecutive monthly decreases, led the increase, $1.3 billion or 3.5 percent to $39.2 billion. 

To gauge the effect of January's nominal factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased 0.5% to $238,498 million; the value of work in process inventories was up 0.4% at $208,093 million, and materials and supplies inventories were valued 0.6% higher at $239,090 million...the producer price index for January indicated that prices for finished goods decreased 0.8%, that prices for intermediate processed goods were 1.4% lower, and that prices for unprocessed goods were on average 9.3% lower....assuming similar valuations for like inventories, that would suggest that January's real finished goods inventories were about 1.3% greater than December, that real inventories of intermediate processed goods were about 1.8% greater, and that real raw material inventory inventories were around 9.9% greater…with the increase in factory inventories relatively small part of the 4th quarter quarter GDP inventory increase, such real factory inventory increases in January would point to another inventory boost to 1st quarter GDP..

January Wholesale Sales Up 0.5%, Wholesale Inventories Up 1.2%

The January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $499.8 billion, up 0.5 percent (±0.7 percent)* from the revised December level, and 2.7 percent (±0.7 percent) higher than wholesale sales of January 2018... the December preliminary estimate of wholesale sales was revised up from $497.2 billion to $497.5 billion, which meant December's sales were 0.9% below the November level, rather than 1.0% as was reported earlier this month...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 sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this January report estimated that wholesale inventories were valued at $669.9 billion at month end, an increase of 1.2 percent (+/-0.4%) from the revised December level and 7.7 percent (±1.1) percent higher than January a year ago, with the December preliminary inventory estimate concurrently revised upward from $661.8 billion to $662.0 billion, still an increase of 1.1% from November...

Like factory inventories, these wholesale inventories will also be adjusted the producer price index for January in national accounts data...with notable exceptions such as farm products, chemicals and petroleum, we've estimated that wholesale inventories are roughly 70% finished goods...with the January producer price index for finished goods down by 0.8%, and producer price indexes for intermediate goods & raw goods down by even more, we can thus project that January’s real wholesale inventories would be up by more than 2%...however, since the real wholesale inventory increase over the 4th quarter was greater than 3%, January's wholesale inventories increase alone would not yet be enough to add to 1st quarter GDP...

February Existing Home Sales Rose 11.8%

The National Association of Realtors (NAR) reported that existing home sales increased by 11.8% from January to February on a seasonally adjusted basis, projecting that 5.51 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was still 1.8% below the 5.61 annual sales rate projected in February of a year ago....the January home sales pace was revised from the 4.94 million annual rate reported last month to a 4.93 million annual rate with this report...the NAR also reported that the median sales price for all existing-home types was $249,500 in February, 3.6% higher than in February a year earlier, which they report as "the 84th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Surge 11.8 Percent in February",  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 usually look at the raw data overview (pdf) to see what actually happened with home sales during the month...this unadjusted data indicates that roughly 312,000 homes sold in February, up 9.5% from the 285,000 homes that sold in January, but down by 2.2% from the 319,000 homes that sold in February of last year....that same pdf indicates that the median home selling price for all housing types rose fractionally from a revised $249,300 in January to $249,500 in February, while the average home sales price inched up to $288,200 from the $288,100 average sales price in January, and was up 2.7% from the $280,600 average home sales price of February a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 5.51 million in February and A Few Comments on February 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, March 17, 2019

February’s consumer and producer prices and industrial production; January’s retail sales, construction spending, durable goods, new home sales & JOLTS; December's business inventories

Monthly economic reports that were released on their regular schedule over the past week included the February Consumer Price Index, the February Producer Price Index and the February Import-Export Price Index from the Bureau of Labor Statistics (BLS),  and the February report on Industrial Production and Capacity Utilization from the Fed...in addition, the BLS also released both the Job Openings and Labor Turnover Survey (JOLTS) for January and the Regional and State Employment and Unemployment Report for January during this same week, an oddity but apparently scheduled that way...meanwhile, Census Dept reports that were delayed in the aftermath of the government shutdown that were finally released this week included the Retail Sales report for January and the Business Sales and Inventories report for December, the Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January, the January report on Construction Spending, and the January report on new home sales...this week also saw the release of the first regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell to a 22 month low of +3.7, down from +8.8 in February, suggesting a slowing of the modest expansion of First District manufacturing...

Retail Sales Up 0.2% in January after November and December Revised Lower

Seasonally adjusted retail sales increased 0.2% in January after retail sales for November and December were revised lower...the Advance Retail Sales Report for January (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $504.4 billion during the month, which was up 0.2 percent (±0.5%) from December's revised sales of $503.4 billion and 2.3 percent (±0.7%) above the adjusted sales in January of last year....December's seasonally adjusted sales were revised down from $505.8 billion to $503.4 billion, while November's sales were also revised lower, from $512.2 billion to $511.6 billion; as a result, the November to December change was revised down 1.2 percent (±0.5 percent) to down 1.6 percent (±0.3 percent).....the revisions to November and December sales would indicate that 4th quarter personal consumption expenditures were lower at a rate of more than a $12 billion annually, which would thereby reduce 4th quarter GDP by around 0.28 percentage points....estimated unadjusted retail sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 19.2%, from $565,105 million in December to $456,426 million in January, while they were 2.6% higher than the $444,738 million of sales in January a year ago, so we can see how a large seasonal adjustment to holiday and post holiday sales brought the headline sales into line, compared to the big sales decrease that would normally be expected in January...

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

January 2019 retail sales table

To compute January's real personal consumption of goods data for national accounts from this January retail sales report, the BEA will use the corresponding price changes from the January 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 January retail sales excluding the 2.0% price-related decrease in sales at gas station were up by 0.4%....then, pulling the 1.1% increase in grocery & beverage sales and the 0.7% increase in food services sales out from that total, we find that core retail sales were up by less 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 0.4% higher in January, we can thus figure that real retail sales excluding food and energy will be down by more than 0.2%...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were down 2.4%, the January price index for for transportation commodities other than fuel was up 0.2% on a 0.2% increase in prices for new cars and trucks, which would mean that real unit sales at auto & parts dealers were probably on the order of 2.6% lower, with real car sales 2.8% lower.. similarly, while nominal sales at clothing stores were 1.3% lower in January, the apparel price index was 1.1% higher, which means that real sales of clothing probably fell around 2.4%...

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately…the January CPI report showed that the food price index was 0.2% higher, with the index for food purchased for use at home 0.1% higher, while prices for food bought to eat away from home were 0.3% higher... thus, while nominal sales at food and beverage stores were 1.1% higher, real sales of food and beverages would be roughly 1.0% higher in light of the 0.1% higher prices…meanwhile, the 0.7% increase in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants rose about 0.4% during the month...in addition, while sales at gas stations were down 2.0%, there was a 5.5% decrease in the retail price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 3.5%, with a caveat that gasoline stations do sell more than gasoline... averaging real sales that we have thus estimated together, we can then estimate that the income and outlays report for January will show that real personal consumption of goods fell by less than 0.1% in January, after falling by a revised 1.8% in December, but rising by a revised 1.2% in November...at the same time, the 0.4% increase in real sales at bars and restaurants would boost January’s real personal consumption of services by less than 0.1%...

February Consumer Prices Up 0.2% on Higher Food, Shelter and Energy

The consumer price index rose 0.2% in February on higher prices for food, shelter and gasoline….the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the seasonally adjusted price index for urban consumers rose 0.2% in February after it had been unchanged in November, in December and in January, 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 251.712 in January to 252.776 in January, which left it statistically 1.520% higher than the 248.991 index reading in January of last year, which is reported as a 1.5% year over year increase....with higher prices for food and gasoline contributing to the increase in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, as the unadjusted core price index rose from 260.122 to 261.114, which left the core index 2.084% ahead of its year ago reading of 255.783, which is reported as a 2.1% year over year increase, down from 2.2% in January...

The volatile seasonally adjusted energy price index rose 0.4% in February, after falling  3.1% in January, 2.6% in December, 2.8% in November, rising by 2.1% in October, and falling by 1.0% in September, and thus is still 5.0% lower than in January a year ago...the price index for energy commodities was 1.5% higher in February, while the index for energy services fell by 0.8%, after falling by 0.5% in January...the energy commodity index was up 1.5% due to a 1.5% increase in price of gasoline, the largest component, and an 1.5% increase in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 0.1% higher...within energy services, the price index for utility gas service fell 2.4% after falling 0.3% in January and is now 2.6% lower than it was a year ago, while the electricity price index was 0.3% lower, after it had fallen 0.6% in January....energy commodities are still 8.6% lower than their year ago levels, with gasoline prices averaging 9.1% lower than they were a year ago, while the energy services price index is now 0.6% lower than last February, as electricity prices are now unchanged from a year ago…

The seasonally adjusted food price index was 0.4% higher in February, after rising 0.2% in January, 0.3 in December, 0.2% in November, being unchanged in October, rising 0.1% in September, 0.1% in August, and 0.1% in July, as the price index for food purchased for use at home rose 0.4% in February, and the index for food bought to eat away from home was also 0.4% higher, as prices at fast food outlets rose 0.5% and prices at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged 0.3% higher...

In the food at home categories, the price index for cereals and bakery products was 0.7% higher as average bread prices rose 0.4%, breakfast cereal prices rose 0.9%, and the price index for cakes, cupcakes and cookies rose 1.6%....at the same time, the price index for the meats, poultry, fish, and eggs group was 0.2% higher, even as the beef and veal index fell 0.5%, because the poultry index rose 1.2% and fish & seafood prices averaged 0.8% higher...in addition, the seasonally adjusted index for dairy products was 0.3% higher, as fresh whole milk prices rose 0.6%, while the fruits and vegetables index was 0.9% higher on a 1.9% increase in the price index for fresh vegetables, which included a 4.9% jump in the price of lettuce....at the same time, the beverages index was 0.7% higher, as the index for noncarbonated juices and drinks rose 1.0%...lastly, the index for the ‘other foods at home’ category was 0.3% higher, as the index for sugar and artificial sweeteners rose 0.6%, butter prices rose 3.1%, and the index for frozen and freeze dried prepared foods was 1.6% higher....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 December, just lettuce, which is now priced 14.5% 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 0.1% in February after rising by 0.2% for the past five months 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% last February, and by 0.3% last January, the composite price index of all goods less food and energy goods was 0.2% 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 January retail sales for inflation in national accounts data, the index for household furnishings and supplies increased by 0.3%, as the price index for furniture and bedding rose 1.2% while the price index for outdoor equipment and supplies was 1.0% higher...likewise, the apparel price index was also 0.3 higher on a a 3.4% increase in the price index for men's and boy's apparel and a 2.0% increase in the index for boy's and girls footwear...on the other hand, the price index for transportation commodities other than fuel was 0.4% lower, as prices for new cars and trucks fell 0.3%, prices for used cars and trucks fell 0.7%, and the price index for motor oil, coolant, and fluids fell 4.7%...in addition, prices for medical care commodities were 1.0% lower as prescription drugs prices fell 1.0% while the price index for medical equipment and supplies fell 0.6%....meanwhile, the recreational commodities index fell 0.9% on a 3.2% decrease in TV prices, a 1.9% decrease in the index for sporting goods, and a 2.3% decrease in the index for photographic equipment and supplies ....at the same time, the education and communication commodities index was 0.5% lower on a 0.9% decrease in the index for computers, peripherals, and smart home assistant devices and a 1.2% decrease in the index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.2% higher, while the price index for ‘other goods’ rose 0.5% on a 3.6% 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 1.4% increase in lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.1%, and other household operation costs were on average 0.3% lower....at the same time, the price index for medical care services was unchanged, as hospital services fell 0.7% while health insurance rose 1.3%..meanwhile, the transportation services index was down by 0.1% as car and truck rentals fell 6.8% while car repairs rose 0.6% and airline fares rose 0.5%...in addition, the recreation services price index was 0.2% lower even though the index for video discs and other media including rentals rose 2.1% because admissions to sporting events fell 7.2%....on the other hand, the index for education and communication services was 0.2% higher as college tuitions rose 0.3% and postage rose 1.9%....lastly, the index for other personal services was up 0.6% as the price index for legal services rose 0.9% and tax return preparation and other accounting fees rose 2.6%...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 15.1% since last February, and the price index for infant's equipment, which is down by 11.5% 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 10.5% year over year, the price index for major appliances, which is up 11.0% since last February, and the index for tax return preparation and other accounting fees, which is now up 13% from a year ago, have all seen prices rise by a double digit magnitude over that span....

Producer Prices up 0.1% in February on Higher Energy Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.1% in February, as prices for finished wholesale goods averaged 0.4% higher, while average margins of final services providers were statistically unchanged...that followed a January report that showed the PPI 0.1% lower, as prices for finished wholesale goods were on average 0.8% lower, while margins of final services providers increased by 0.3%, a 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 revised November report that indicated the PPI was 0.2% lower, with prices for finished wholesale goods falling 0.8% while margins of final services providers increased 0.1%, and a revised October report that indicated the PPI was 0.8% higher, with prices for finished wholesale goods rising 0.8% and margins of final services providers also rising 0.8%...on an unadjusted basis, producer prices are 1.9% higher than a year ago, down from the 2.0% 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 0.1% for the month, and is now 2.5% higher than in February a year ago...

As we noted, the price index for final demand for goods, aka 'finished goods', was 0.4% higher in February, after being 0.8% lower in January, 0.3% lower in December, 0.8% lower in November, 0.8% higher in October, and 0.1% lower in September....the finished goods index rose because the price index for wholesale energy was 1.8% higher, after falling 3.8% in January 4.3% in December and 5.2% in November, while the price index for wholesale foods fell 0.3% after falling 1.7% in January, and the index for final demand for core wholesale goods (excluding food and energy) was up 0.1%....wholesale energy prices rose on a 3.3% increase in the wholesale price for gasoline, a 5.4% increase in wholesale prices for LP gas, and a 7.2% jump in the wholesale price of diesel fuel ...the wholesale food price index, meanwhile, included a 6.7% increase in wholesale prices for eggs and an 12.8% decrease in wholesale prices for fresh and dry vegetables....among wholesale core goods, average wholesale prices for electronic components and accessories rose 2.4% while wholesale prices for sanitary paper products rose 2.8%..

At the same time, the index for final demand for services rose 0.3%, after rising 0.3% in January, being unchanged in December, rising a revised 0.1% in November, a revised 0.8% in October, and 0.2% in September, as the February index for final demand for trade services fell 0.4% and the index for final demand for transportation and warehousing services fell 1.3%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.3% higher....among trade services, seasonally adjusted margins for  fuels and lubricants retailers fell 10.5%, margins for apparel, jewelry, footwear and accessories retailers fell 3.8% and margins for TV, video, and photographic equipment and supplies retailers fell 5.9%, while margins for computer hardware, software, and supplies retailers rose 3.7%... among transportation and warehousing services, margins for airline passenger services fell 4.2% and margins for air transportation of freight fell 0.4%...among the components of the core final demand for services index, margins for for traveler accommodation services rose 5.3% while margins for arrangement of cruises and tours rose 3.2%..

This report also showed the price index for intermediate processed goods rose 0.4% in February, after falling 1.4% in January, 0.9% in December and a revised 0.8% in November, after rising a revised 0.7% in October and 0.1% in September....the price index for intermediate energy goods rose 1.6%, as refinery prices for gasoline rose 3.3% and refinery prices for residual fuels rose 19.5%, while producer prices for natural gas sold to electric utilities fell 9.0%...on the other hand, prices for intermediate processed foods and feeds fell 0.1%, as the price index for processed fats and oils fell 2.5% and producer prices for prepared animal feeds fell 1.1%...meanwhile, the core price index for intermediate processed goods less food and energy was 0.1% higher on a 2.2% increase in the index for basic organic chemicals and a 10.8% increase in the price index for agricultural chemicals other than phosphates ...prices for intermediate processed goods are still 0.6% higher than in February a year ago, now the 27th 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 4.6% in February, after falling 9.3% in January, rising 11.1% in December, falling a revised 5.2% in November, rising a revised 3.3% in October and 0.9% in September....that was as the February price index for crude energy goods fell 10.9% on a 28.5% drop in raw natural gas prices, while crude oil prices rose 2.6%...at the same time, the price index for unprocessed foodstuffs and feedstuffs fell 1.0%, as producer prices for slaughter hogs fell 13.3% and producer prices for slaughter chickens fell 5.6%...at the same time, the index for core raw materials other than food and energy materials fell 0.7%, as prices for scrap iron and steel fell 4.1% and waste paper prices fell 7.3%...this raw materials index is now 8.8% lower than a year ago, after being as much as 9.1% higher year over year as recently as December...

Lastly, the price index for services for intermediate demand fell 0.1% in February, after rising 0.2% in January, 0.1% in December, a revised 0.1% in November, a revised 0.6% in October and by 0.3% in September...the price index for intermediate trade services was 0.1% lower, as margins for intermediate hardware, building material, and supplies retailers fell 3.8% and margins for food wholesalers fell 1.2%…the index for transportation and warehousing services for intermediate demand also fell 0.1%, as the intermediate index for air transportation of passengers fell 4.2% while the index for the U.S. Postal Service rose 1.7%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing was unchanged, as intermediate cable and satellite subscriber services rose 2.4% and the index for portfolio management increased 2.1%, while the index for nonresidential real estate rents fell 2.7% and the index for internet advertising space sales fell 3.1%.....over the 12 months ended in February, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is still 2.6% higher than it was a year ago...

Construction Spending Up 1.3% in January after December and November Revised Much Lower 

The Census Bureau's report on January construction spending (pdf) estimated that January's seasonally adjusted construction spending would work out to $1,279.6 billion annually if extrapolated over an entire year, which was 1.3 percent (±0.8 percent) above the revised annualized estimate of $1,263.1 billion for construction spending in December, but only 0.3 percent (±1.2 percent)* above the estimated annualized level of construction spending of January last year...the December spending estimate, published last week, was revised from $1,292.7 billion to $1,263.1 billion, while November's annualized construction spending was revised from $1,300.6 billion to $1,273,143 million...since these figures are annualized, the combined downward revisions of $57.1 billion to November and December construction spending figures would be averaged over the 3 months of the 4th quarter and therefore lower the quarter's annualized construction spending by around $19 billion, and would thus imply an downward revision of about 0.42 percentage points to fourth quarter GDP when the second estimate is released at the end of March, assuming there are no major changes to the previously applied inflation adjustments...

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $966.0 billion, 0.2 percent (±0.7 percent)* above the revised December estimate of $964.2 billion. Residential construction was at a seasonally adjusted annual rate of $511.4 billion in January, 0.3 percent (±1.3 percent)* below the revised December estimate of $512.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $454.7 billion in January, 0.8 percent (±0.7 percent) above the revised December estimate of $451.2 billion.
  • Public Construction: In January, the estimated seasonally adjusted annual rate of public construction spending was $313.6 billion, 4.9 percent (±1.6 percent) above the revised December estimate of $299.0 billion. Educational construction was at a seasonally adjusted annual rate of $77.8 billion, 2.2 percent (±2.0 percent) above the revised December estimate of $76.1 billion. Highway construction was at a seasonally adjusted annual rate of $99.9 billion, 11.8 percent (±5.1 percent) above the revised December estimate of $89.3 billion.

As you can tell from that summary, construction spending would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of January’s construction spending reported in this release on 1st quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and come up with an estimate... that index showed that aggregate construction costs were up 0.6% in January, after they had increased by 0.1% in December and by 0.1% in November...

On that basis, we can thus estimate that January construction costs were roughly 0.7% more than those of November, and about 0.8% more than October, and of course, 0.6% more than December...we’ll then use those percentages to inflate the lower priced spending figures for each of the 4th quarter months and compare them to January, which is arithmetically the same as deflating January construction spending, for purposes of comparison.…this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,263,141 in December, $1,273,143 in November, and $1,290,551 in October...thus to compare January's nominal construction spending of $1,279,636 million to inflation adjusted figures of the fourth quarter, our formula becomes:  (1,279,636 / ((( 1,263,141 * 1.006) +  (1,273,143 * 1.007) + (1,290,551 *1.008)) / 3) = 0.9961745, indicating that adjusted for inflation, construction spending in January was down 0.3826% vis a vis that of the 4th quarter, or down at a 1.52% annual rate...then, to figure the potential effect of that change on GDP, we take the difference between the 4th quarter inflation adjusted average and January's inflation adjusted spending as a fraction of inflation adjusted 4th quarter GDP, and find that January construction spending is falling at a rate that would subtract about 0.11 percentage points from 1st quarter GDP, if in the unlikely event that there is no further change in real construction over the next two months..

    Industrial Production Rose 0.1% in February on a 3.7% Jump in Utility Output

    The Fed's February G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 0.1% in February after falling by a revised 0.4% in January, which still left industrial output 3.5% higher than a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 109.7 in February, after the January index was revised up from the 109.4 reported last month to 109.5, the December index was revised down from 110.1 to 109.9, the November index was revised down from 110.0 to 109.8, the October index was revised down from 109.3 to 109.2, and September index was revised up from 109.0 to 109.1..

    The manufacturing index, which accounts for more than 77% of the total IP index, fell to 104.8 in February, from a January index that remained at 105.2 after the December manufacturing index was revised down from 106.1 to 105.7, November manufacturing index was revised down from 105.3 to 105.1, and the October manufacturing index was revised down from 105.0 to 104.9...after those revisions, the manufacturing index is now just 1.0% above its year ago level....meanwhile, the mining index, which includes oil and gas well drilling, rose 0.3%, from 131.4 in January to 131.8 in February, after the January index was revised up from 131.3, which left the mining index 12.5% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 3.7% in February, from 103.5 to 107.3, after the January utility index was revised from 102.8 to 103.5, now down 0.9% from December...with this February's temperatures below the levels seen across much of the US last February, the utility index is now 9.0% higher 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 February from 78.3% in January, which was revised up from the 78.2% reported last month ...capacity utilization of NAICS durable goods production facilities fell from a revised 76.3% in January to 76.1% in February, while capacity utilization for non-durables producers fell from a downwardly revised 76.9% to 76.2%...capacity utilization for the mining sector fell to 94.6% in February from 94.9% in January, which was originally reported as 94.8%, while utilities were operating at 78.6% of capacity during February, up from their 75.9% of capacity during January, which was previously reported at 75.4%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories..

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

    The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for January (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $0.9 billion or 0.4 percent to $255.3 billion in January, which was also 7.8% higher than those of January 2018... at the same time, December's new orders were revised but unchanged from the $254.4 billion reported last month, but are now indicated to be 1.3% greater than November's new orders, revised from the 1.2% previously reported, because November orders were revised from $251.5 billion to $251.2 billion....the volatile monthly new orders for transportation equipment were responsible for the January increase, as new transportation equipment orders rose $1.0 billion or 1.2 percent to $90.9 billion, on a 15.9% increase to $15,690 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders fell 0.1%, while excluding just new orders for defense equipment, new orders rose 0.7%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose $529 million or 0.8% to $68,804 million...

    Meanwhile, the seasonally adjusted value of January shipments of durable goods, which will included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, decreased in value by $1.3 billion or 0.5 percent to $257.9 billion, after the value of December shipments was revised from from $259.7 billion to $259.15 billion, now up 0.7% from November...a drop in the value of shipments of transportation equipment caused the January decrease, as they fell $1.3 billion or 1.4 percent to $90.0 billion...at the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $1.7 billion or 0.4 percent to $417.0 billion, after December inventories were revised from $414.7 billion to $415.3 billion, now up 0.3% from November....once again, it was inventories of transportation equipment that led the increase, as they rose $1.2 billion or 0.9 percent to $132.6 billion....

    Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but quite volatile monthly new orders, rose for the first time in 4 months, increasing by $1.4 billion or 0.1 percent to $1,181.9 billion, following a December decrease of 0.1% to $1,180,485 million, which was previously reported as $1,180.1 billion...a $0.9 billion or 0.1 percent to $811.6 billion in unfilled orders for transportation equipment led the increase, but unfilled orders excluding transportation equipment orders were also up 0.1% to $369,778 million...the unfilled order book for durable goods is now 4.1% above the level of last January, with unfilled orders for transportation equipment now 4.0% above their year ago level, led by a 14.3% increase in the backlog of orders for defense aircraft...

    December Business Sales Down 1.0%, Business Inventories Up 0.6%

    After the release of the January retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for December (pdf), which incorporates the revised December retail data from that January report and the earlier published December 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 $1,445.0 billion in December, down 1.0 percent (±0.2 percent) from November's revised sales, but up 2.1 percent (±0.3 percent) from December sales of a year earlier...note that total November sales were concurrently revised down from the originally reported $1,462.5 billion to $1,458.95 billion, now down 0.6% from October....manufacturer's sales fell 0.2% to $504,894 million in December; retail trade sales, which exclude restaurant & bar sales from the revised December retail sales reported earlier, fell 1.8% to $442,972 million, and wholesale sales fell 1.0% to $497,162 million...

    Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,994.5 billion at the end of December, up 0.6 percent (±0.1%) from November, and 4.8 percent (±0.4 percent) higher than in December a year earlier...at the same time, the value of end of November inventories was revised from the $1,980.5 billion reported last month to $1,981.9 billion, now statistically unchanged from October....seasonally adjusted inventories of manufacturers were estimated to be valued at $681,549 million in December, statistically unchanged from November, while inventories of retailers were valued at $651,103 million, 0.9% more than in November, and inventories of wholesalers were estimated to be valued at $661,843 million at the end of December, 1.1% higher than in November...

    December’s factory inventories and wholesale inventories were published in the days preceding the initial 4th quarter GDP report, so that data would have been accounted for in that GDP estimate...the December retail inventory data used in the GDP report came from estimates in the Advance Economic Indicators report published by the Census in advance of the GDP, which showed December retail trade inventories at $651,097 million...this report revises that and shows December inventories at $651,103, a statistically insignificant change that should not impact 4th quarter GDP...

    January New Home Sales Reported Lower Than in December and in January a Year Ago

    The Census report on New Residential Sales for January (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 607,000 homes annually in January, which was s 6.9 percent (±16.3 percent)* below the revised December annual sales rate of 652,000, and 4.1 percent (±14.0 percent)* below the estimated 633,000 annual rate that new single family homes were selling at in January of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether January new home sales rose or fell from those of December, or even from January sales of a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in December were revised from the annual rate of 621,000 reported last week to an annual rate of 652,000, and new home sales in November, initially reported at an annual rate of 657,000 and revised to a 599,000 rate last week, were revised back up to a 628,000 a year rate with this report, while October's annualized new home sales rate, initially reported at an annual rate of 544,000 and revised from a 562,000 to a 549,000 a year rate last week, were again revised to a 552,000 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 45,000 new single family homes sold in January, down from the estimated 47,000 new homes that sold in December and the 46,000 that sold in November....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in January was $317,200, down from the median sale price of $319,100 in December and down from the median sales price of $329,600 in January a year ago, while the average January new home sales price was $373,100, down from the $374,000 average sales price in December, and down from the average sales price of $377,800 in January a year ago....a seasonally adjusted estimate of 336,000 new single family houses remained for sale at the end of January, which represents a 6.6 month supply at the January sales rate, up from the revised 6.3 months of new home supply now indicated for December and for November...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decreased to 607,000 Annual Rate in January and A few Comments on January New Home Sales...

    Job Openings at a Record High In January, Hiring, and Quitting Up, Layoffs Down

    The Job Openings and Labor Turnover Survey (JOLTS) report for January from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 102,000, from 7,479,000 in December to a record high of 7,581,000 in January, after December job openings were revised 144,000 higher, from 7,335,000 to 7,479,000, as part of an annual revision of all 2018 job openings and labor turnover data...January's jobs openings were also 15.0% higher than the revised 6,591,000 job openings now reported for January of a year ago, as the job opening ratio expressed as a percentage of the employed increased to 4.8% from the 4.7% logged in December, which was also up from the 4.3% rate of January a year ago...(details on job openings by industry and by region can be viewed in Table 1)...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 January, seasonally adjusted new hires totaled 5,801,000, up by 84,000 from the revised 5,717,000 who were hired or rehired in December, as the hiring rate as a percentage of all employment rose from 3.8% in December to 3.9% in January, and was also up from the 3.7% hiring rate in January a year earlier (details of hiring by sector since September are in table 2)....meanwhile, total separations rose by 81,000, from 5,469,000 in December to 5,550,000 in January, as the separations rate as a percentage of the employed rose from 3.6% to 3.7%, which was also up from 3.6% in January a year ago (see table 3)...subtracting the 5,550,000 total separations from the total hires of 5,801,000 would imply an increase of 251,000 jobs in January, somewhat less than the revised payroll job increase of 311,000 for January reported in the February 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 3,490,000 of us voluntarily quit our jobs in January, up by 99,000 from the revised 3,391,000 who quit their jobs in December, while the quits rate, widely watched as an indicator of worker confidence, was unchanged at 2.3% of total employment, while it was up from the 2.0% quits rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,723,000 were either laid off, fired or otherwise discharged in January, down by 28,000 from the revised 1,751,000 who were discharged in December, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.3% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 336,000 in January, up from 327,000 in December, for an 'other separations rate’ of 0.2%, the same as as in December and in January 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…)