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…)      

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