Sunday, April 28, 2019

1st Quarter GDP, March durable goods, new and existing home sales

The key economic report of this past week was the advance estimate of 1st quarter GDP from the Bureau of Economic Analysis, which was released on Friday; other widely watched releases included the March advance report on durable goods and the March report on new home sales, both from the Census bureau, and the Existing Home Sales Report for March from the National Association of Realtors (NAR)….also released this week was the Chicago Fed National Activity Index (CFNAI) for March, a weighted composite index of 85 different economic metrics, which rose to –0.15 in March from –0.31 in February, after February's index was revised down from the -0.29 reported last month...as a result, the 3 month average of that index fell to –0.24 in March from a revised –0.18 in February, a negative number which thus indicates that national economic activity has been below the historical trend over recent months...

This week also saw the release of two more regional Fed manufacturing surveys for April:  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 +3, following last month's reading of +10, indicating a fairly sluggish growth of that region's manufacturing, while the Kansas City Fed manufacturing survey for April, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to +5 in April, down from a reading of +10 in March but up from a index of +1 in February, also indicating fairly sluggish growth in that region's manufacturing....

1st Quarter GDP Grows at a 3.2% Rate, Despite Biggest Durable Goods Pullback Since Q4 2009

Our economy grew at a 3.2% rate in the 1st quarter, somewhat faster than the growth rate of the fourth quarter, as improving international trade balances, greater growth of private inventories, and a sizable increase in state and local government investment was only partially offset by slower growth in personal consumption...the Advance Estimate of 1st Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 3.2% annual rate from the output of the 4th quarter of 2018, when our real output grew at a 2.2% real rate...in current dollars, our first quarter GDP grew at a 3.84% annual rate, increasing from what would work out to be a $20,865.1 billion a year output rate in the 4th quarter of last year to a $21,062.7 billion annual rate in the 1st quarter of this year, with the headline 3.2% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 0.9%, aka the GDP deflator, was computed and applied to the current dollar change...

As is usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.6% in either direction before the third estimate for the quarter is released, which will be two months from now....also note that March construction and non-durables inventory data have yet to be reported, and that the BEA assumed a small increase in nonresidential construction, modest decreases in both residential and public construction, and a modest decrease in nondurable manufacturing inventories for March before they estimated 1st quarter output (see their Key source data and assumptions Excel file that accompanies this report for more specific details)..

While we cover the details on the 1st quarter 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 of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price indexes chained from 2012 prices, and then that all percentage changes in this report are calculated from those '2012 dollar' figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the advance estimate of 1st quarter GDP, which we find on the BEA GDP landing page, where you can also find links to just the tables on Excel and other technical notes...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2015, table 2, which shows the contribution of each of the components to the GDP growth figures for those quarters and years, table 3, which shows both the current dollar value and the inflation adjusted value in 2012 dollars of each of those components, and table 4, which shows the change in the price indexes for each of the GDP components....

Personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, grew at a 1.8% rate in current dollars in the 1st quarter, which worked out to a real growth rate of 1.2% in consumed goods and services after an annualized 0.6% PCE price index increase was used to adjust that personal spending for inflation....however, consumer outlays for durable goods actually fell at a 5.7% rate in current dollars while prices of those durable goods were on average 0.4% lower, and thus the BEA found real growth in output of consumer durables fell at a 5.3% rate, the largest real drop since the 4th quarter of 2009, as a drop in real consumption of automobiles at a 18.4% rate more than offset a modest increase in real consumption of recreational goods and vehicles, while other durable goods were little changed....the BEA also found that real output of consumer non-durable goods grew at a 1.7% rate after a decrease in consumer spending for non-durable goods at a 0.7% rate was adjusted for an average drop in non-durable prices at a 2.4% rate, with decreased real consumption of food, clothing and energy goods more than offset by greater growth in real consumption of other nondurables... meanwhile, the 3.7% nominal growth in consumer outlays for services was deflated by a 1.6% increase in prices for services to show that real output of consumer services grew at a 2.0% annual rate, led by real growth of health care and financial services....as a result of these changes in growth from the 4th to the 1st quarter, the decrease in outlays for durable goods subtracted 0.38 percentage points from GDP, largely on a 0.49 percentage point hit from automotives, while the increased consumption of non-durable goods added 0.24 percentage points to the growth of GDP, and as increased consumption of services added 0.96 percentage points to the growth rate of the 1st quarter economy..

The real change in other components of the change in GDP are computed by the BEA in the same manner as we have just illustrated for computing PCE; ie, the annualized increase in current dollar spending for the quarter is adjusted with the annualized inflation factor for that component, yielding the change in real units of goods or services produced during the quarter at an annual rate....thus, after inflation adjustment, real gross private domestic investment, which had grown at a 3.7% annual rate in the 4th quarter of 2018, grew at a 5.1% annual rate from there in the 1st quarter...however, real growth in fixed investment grew at a 1.5% annual rate in the 1st quarter, after growing at a 3.1% rate in the 4th quarter, as real non-residential fixed investment grew at a 2.7% rate while real residential investment contracted at a 2.7% rate...real investment in non-residential structures, however, fell at a 0.8% rate and subtracted 0.02 percentage points from 1st quarter GDP, while real investment in equipment grew at a 0.2% rate and added 0.01 percentage point to GDP, as real investment in intellectual property grew at 8.6% rate and added 0.39 percentage points to GDP, while contracting real residential investment subtracted 0.11 percentage points from the quarter’s growth rate....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3...

Meanwhile, greater growth in inventories boosted gross investment and hence GDP, as real private inventories grew by an inflation adjusted $128.4 billion in the quarter, up from the $96.8 billion of inflation adjusted inventory growth that we saw in the 4th quarter, and as a result the $31.6 billion greater real inventory growth added 0.65 percentage points to the 1st quarter's growth rate, after $7.0 billion in real inventory growth in the 4th quarter had added 0.11 percentage points to that quarter's GDP....however, since greater growth in inventories indicates that more of the goods produced during the quarter were left in storage or "sitting on the shelf”, the $31.6 billion increase in their growth in turn meant that real final sales of GDP were actually smaller by that much, and hence real final sales of GDP grew at a 2.5% rate in the 1st quarter, after real final sales had increased at a 2.1% rate in the 4th quarter, when the change in inventories was smaller, and hence had a smaller impact on real final sales of GDP…

At the same time, our real exports of goods and services grew at a 3.7% rate in the 1st quarter, after growing at a 1.8% rate in the 4th quarter of 2018, while our real imports shrunk at a 3.7% rate in the 1st quarter, after rising at a 2.0% rate in the 4th quarter...as you'll recall, real increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted in GDP elsewhere), so that  increase in 1st quarter exports added .45 percentage points to 1st quarter GDP....on the other hand, real increases in imports subtract from GDP because they are either consumption or investment that was added to another GDP component that shouldn't have been, because it was not produced in our country and hence is not part of our national product, so conversely a decrease in imports adds to GDP growth….hence the 3.7% decrease in real imports in the 1st quarter added .58 more percentage points to GDP, and as a result, our improving trade balance added a net 1.03% percentage points to 1st quarter GDP, after an increase in our trade deficit had subtracted 0.08% percentage points from GDP in the fourth quarter of last year...

Finally, real consumption and investment by all branches of government grew at a 2.4% annual rate in the 1st quarter, after decreasing at a 0.4% rate in the 4th quarter, as federal government consumption and investment was statistically unchanged, while state and local consumption and investment grew at a 3.9% rate.....at the federal level, inflation adjusted spending for defense grew at a 4.1% rate and added 0.16 percentage points to 1st quarter GDP growth, while real non-defense federal consumption and investment shrunk at a 5.9% rate and subtracted 0.16 percentage points from GDP...note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of goods or services....meanwhile, state and local government investment and consumption expenditures grew at an 3.9% annual rate and added 0.41 percentage points to the quarter's growth rate, as growth of real state and local investment at an 19.9% rate added 0.35 percentage points of that to the quarter's growth rate...

March Durable Goods: New Orders Up 2.7%, Shipments Up 0.3%, Inventories Up 0.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for March (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $6.8 billion or 2.7 percent to $258.5 billion in March, after February's new orders were revised from the $250.6 billion reported last month to $251.8 billion, now down by 1.1% from January's new orders, revised from the 1.6% drop originally reported, and as a result, year to date new orders are now up by 3.0% from those of 2018...the volatile monthly new orders for transportation equipment led this month’s increase, as new transportation equipment orders rose $6.1 billion or 7.0 percent to $93.8 billion, on a 31.2% increase in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders were up 0.4%, while excluding just new orders for defense equipment, new orders rose 2.3%....at the same time, new orders for nondefense capital goods less aircraft, a category that’s a proxy for equipment investment, rose 1.3% to $69,979 million, led by a 9.0% increase in new orders for communications equipment...

Meanwhile, the seasonally adjusted value of March shipments of durable goods, which were ultimately included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.9 billion or 0.3 percent to $259.6 billion, after the value of February shipments was revised from $258.6 billion to $258.7 billion, now up 0.3% from January....higher shipments of transportation equipment were responsible for the March increase, as those shipments increased by $1.0 billion or 1.1 percent to $90.7 billion...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $1.4 billion or 0.3 percent to $420.5 billion, after the value of end of February inventories was revised from $418.9 billion to $419.149 billion, now up 0.4% from January....a $0.7 billion or 1.0 percent increase to $71.6 billion in the value of inventories of machinery accounted for half of the March increase..

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but somewhat volatile new orders, rose for the 2nd time in the past 3 months, increasing by $3.2 billion or 0.3 percent to $1,181.9 billion, after the February unfilled orders decrease was revised from $3.6 billion to $3.2 billion, now down 0.2% from January...a $3.1 billion or 0.4 percent increase to $811.9 billion in unfilled orders for transportation equipment accounted for most of the increase, while unfilled orders excluding transportation equipment orders were up $119 million, statistically a 0.0% change....the unfilled order book for durable goods is now 2.8% above the level of last March, with unfilled orders for transportation equipment now 2.5% above their year ago level, mostly on a 4.0% increase in the backlog of orders for motor vehicles...

New Home Sales Reported Higher on Lower Prices in March

The Census report on New Residential Sales for March (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 692,000 homes annually during the month, which was 4.5 percent (±17.6 percent)* above the revised February annual sales rate of 662,000, and 3.0 percent (±11.4 percent)* above the estimated annual rate that new homes were selling at in March of last year....the asterisks indicates that based on their small sampling, Census could not tell whether March new home sales rose or fell from those of February, or even from home 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 February were revised from the annual rate of 667,000 reported last month to an annual rate of 662,000, and new home sales in January, initially reported at an annual rate of 607,000 and revised to a 636,000 rate last month, were revised back to a 625,000 a year rate with this report, while December's annualized new home sales rate, initially reported at an annual rate of 621,000 and revised from the initial revision of 652,000 to a 588,000 a year rate last month, were revised down to a 562,000 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 68,000 new single family homes sold in March, up from the estimated 56,000 new homes that sold in February and up from the 47,000 that sold in January .....the raw numbers from Census field agents were further used to estimate that the median sales price of new houses sold in March was $302,700, down from the median sale price of $315,200 in February and down from the median sales price of $335,400 in March a year ago, while the average new home sales price was $376,000, down from the $385,300 average sales price in February, but up from the average sales price of $369,200 in March a year ago....a seasonally adjusted estimate of 344,000 new single family houses remained for sale at the end of March, which represents a 6.0 month supply at the March sales rate, down from the 6.1 months of new home supply reported in February...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales increased to 692,000 Annual Rate in March and A few Comments on March New Home Sales..

Existing Home Sales Decrease 4.9% in March

The National Association of Realtors (NAR) reported that existing home sales fell at a 4.9% rate from February to March on a seasonally adjusted basis, projecting that 5.21 million existing homes would sell over an entire year if the March home sales pace were extrapolated over that year, a pace that was also 5.4% below the annual sales rate projected in March of a year ago...February homes sales, now at a 5.48 million annual rate, were revised from the 5.51 annual rate reported a month ago....the NAR also reported that the median sales price for all existing-home types was $259,400 in March, which was 3.8% higher than the median price of $249,800 in March a year earlier, which they report as "the 85th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Slide 4.9% in March", is in easy to read plain English, so if you're interested in a regional breakdown, or 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 during the month...this unadjusted data estimates that roughly 400,000 homes sold in March, up 28.6% from the 311,000 homes that sold in February, but down by 7.8% from the 434,000 homes that sold in March of last year, so we can see the effect of a large springtime seasonal adjustment causing the headline to show a decrease....that same pdf indicates that the median home selling price for all housing types rose by 3.7%, from a revised $250,100 in February to $259,400 in March, while the average home sales price rose 3.0% to $297,200 from the $288,500 average sales price in February, while it was up 2.5% from the $289,900 average home sales price of March a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, again see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 5.21 million in March and Comments on March 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, April 21, 2019

March retail sales, industrial production, & new home construction; February's trade deficit & business inventories

Major monthly reports released this week included the Commerce Dept report on our International Trade for February, the Retail Sales report for March and the Business Sales and Inventories report for February from the Census Bureau, the March report on Industrial Production and Capacity Utilization from the Fed, and the March report on New Residential Construction from the Census Bureau…the week also saw the release of the Regional and State Employment and Unemployment Summary for March from the BLS, while the Census Bureau also released the February report on Wholesale Trade, Sales and Inventories, the summary of which was later included in the aforementioned Business Sales and Inventories report...

This week also saw first two regional Fed manufacturing surveys for April: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an NYC suburban county in Connecticut, northern New Jersey, and Puerto Rico, reported their headline general business conditions index rose to +10.1, up from +3.7 in March, suggesting a return to modest growth for First District manufacturing... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell to +8.5 in April from +13.7 in March, indicating that a smaller plurality of the region's manufacturing firms reported increases in their activity this month...

Retail Sales Rose 1.6% in March after February and January Sales Revised Higher

Seasonally adjusted retail sales increased by 1.6% in March after retail sales for January and February were both revised a bit higher...the Advance Retail Sales Report for March (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $514.1 billion during the month, which was up by 1.6 percent (±0.5%) from February's revised sales of $491.8 billion and 3.6 percent (±0.7%) above the adjusted sales in March of last year...February's seasonally adjusted sales were revised from $506.0 billion to $506.1 billion, while January's sales were revised from $507.0 billion to $507.2 billion; as a result, the change from January to February remained at -0.2 percent (±0.2%)*.....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were up 16.2%, from $446,692 million in February to $519,066 million in March, while they were up 1.5% from the $511,626 million of sales in March of a year ago...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the March Census Marts pdf...to again explain what this table shows, the first double column shows us the seasonally adjusted percentage change in sales for each kind of business from the February revised figure to this month's March "advance" report in the first sub-column, and then the year over year percentage sales change since last March in the 2nd column; the second double column pair below gives us the revision of the February advance estimates (now called "preliminary") as of this report, with the new January to February percentage change under "Jan 2019 r" (revised) and the February 2018 to February 2019 percentage change as revised in the 2nd column of that pair...(for your reference, our copy of this same table from the advance February estimate, before this month's revisions, is here).... lastly, the third pair of columns shows the percentage change of the first 3 months of this year's sales (January, February and March) from the preceding three months of the 4th quarter (October thru December) and from the same three months of the 1st quarter a year ago....

March 2019 retail sales table

As you can see from that fifth column, retail sales for the 1st quarter of 2019 were only 0.1% higher than the 4th quarter of 2018, despite the 1.6% jump in March sales; that's because retail sales fell 1.6% in December, which meant that January sales, despite being up 0.7%, were still lower than those of November, and the 0.2% decrease in February sales didn't improve on that...that weakness in 1st quarter consumption will be evident when the first quarter GDP report is released next week..

Meanwhile, to compute March's real personal consumption of goods data for national accounts from this March retail sales report, the BEA will use the corresponding price changes from the March consumer price index, which we reviewed when it was released last week...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 the above table, we can see that March retail sales excluding the 3.5% price-related increase in sales at gas station were up by 1.4%....then, pulling the 1.0% increase in grocery & beverage sales and the 0.8% increase in food services sales out from that total, we find that core retail sales were up by a bit more than 1.5% for the month...since the March CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% lower in March, we can thus figure that real retail sales excluding food and energy will show an increase of around 1.7%...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 up 3.1%, the March price index for transportation commodities other than fuel was 0.1% higher, as as prices for new cars and trucks rose 0.5%, prices for used cars and trucks fell 0.4%, which would mean that real unit sales at auto & parts dealers were probably on the order of 3.0% higher, with real new car sales, up 3.3% in dollars, around 2.8% higher once the price increase is taken into account... on the other hand, while nominal sales at clothing stores were 2.0% higher in March, the apparel price index was 1.9% lower, which means that real sales of clothing likely rose around 3.9%...

In addition to figuring those core retail sales, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the March CPI report showed that the food price index was 0.3% higher, as the price index for food purchased for use at home rose 0.4% while the index for food bought away from home was 0.2% higher...thus, while nominal sales at food and beverage stores were 1.0% higher, real sales of food and beverages would only be around 0.6% higher in light of the 0.4% higher prices…meanwhile, the 0.8% increase in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants also rose around 0.6% during the month...but while sales at gas stations were up 3.5%, there was a 6.4% increase in price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 2.9%, with a caveat that gasoline stations do sell more than gasoline, so the actual decrease in real gas station sales was likely smaller...averaging real sales that we have thus estimated together, and excluding food services, we can then estimate that the income and outlays report for March will show that real personal consumption of goods rose by more than 1.3% in March, after falling by 0.1% in February and rising by a revised 0.3% in January, but after falling by 2.0% December...at the same time, the 0.6% increase in real sales at bars and restaurants would boost March real personal consumption of services by less than 0.1%...

Trade Deficit Fell 3.4% February on Greater Exports of Civilian Aircraft

Our trade deficit fell by 3.4% February, as both our exports and imports increased, but the value of our exports increased more than the value of our imports did....the Commerce Department report on our international trade in goods and services for February indicated that our seasonally adjusted goods and services trade deficit fell $1.8 billion to $49.4 billion in February, from a January deficit that was revised but statistically unchanged from the $51.1 billion deficit reported a month ago...in rounded figures, the value of our February exports rose by $2.3 billion to $209.7 billion on a $2.1 billion increase to $139.5 billion in our exports of goods and an increase of $0.2 billion to $70.1 billion in our exports of services, while our imports rose $0.6 billion to $259.1 billion on a $0.9 billion increase to $211.6 billion in our imports of goods, which was partially offset by a $0.3 billion decrease to $47.5 billion in our imports of services....export prices averaged 0.7% higher in February, so real exports were smaller than their nominal value by that percentage, while import prices were 1.0% higher, meaning that the 0.2% growth in the value of our imports was actually a contraction in real terms....

The increase in our February exports of goods came about as a result of higher exports of capital goods and of automotive products, which was partially offset by a decrease in our exports of industrial supplies...referencing the Full Release and Tables for February (pdf), in Exhibit 7 we find that our exports of capital goods rose by $2,125 million to $48,093 million on a $2,586 million increase in our exports of civilian aircraft and a $386 million increase in our exports of semiconductors, and that our exports of automotive vehicles, parts, and engines rose by $585 million to $14,115 million on a $654 million increase in our exports of passenger cars...in addition, our exports of consumer goods rose by $38 million to $17,808 million as a $573 million increase in our exports of pharmaceuticals was offset by a $288 decrease in our exports of gem diamonds and a $249 decrease in our exports of jewelry...partially offsetting the increases in those end use categories, our exports of industrial supplies and materials fell by $383 million to $43,016 million as a $281 million decrease in our exports of fuel oil, a $209 million decrease in our exports of natural gas liquids, and a $206 million decrease in our exports of natural gas were offset by a $492 million increase in our exports of crude oil and a $437 million increase in our exports of other petroleum products, while our exports of foods, feeds and beverages fell by $249 million to $10,746 million on a $207 million decrease in our exports of corn, and our exports of other goods not categorized by end use fell by $173 million to $5,216 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and shows that higher imports of consumer goods were responsible for the increase in our February imports, while their impact was limited by lower imports of industrial supplies and materials...our imports of consumer goods rose by $1,567 million to $56,730 million as a $2,088 million increase in our imports of cellphones and a $380 million increase in our imports of artwork and collectibles were partially offset by a $394 million decrease in our imports of pharmaceuticals and a $204 million decrease in our imports of toys, games, and sporting goods...in addition, our imports of capital goods rose by $191 million to $57,208 million as a $862 million increase in our imports of civilian aircraft engines, a $646 million increase in our imports of civilian aircraft, and a $292 million increase in our imports of semiconductors was partially offset by a $572 million decrease in our imports of computers, a $340 million decrease in our imports of drilling & oilfield equipment, a $229 million decrease in our imports of civilian aircraft parts and a $227 million decrease in our imports of excavating equipment, while our imports of other goods not categorized by end use rose by $453 million to $9,305 million….partially offsetting the increases in those end use categories, our imports of industrial supplies and materials fell by $1611 million to $42,568 million, as our imports of organic chemicals fell by $391 million, our imports of our imports of fuel oil fell by $223 million and our imports of iron and steel mill products fell by $211 million, and our imports of foods, feeds, and beverages fell by $199 million to $12,062 million on a $418 million decrease in imports of foods other than those itemized separately, and our imports of automotive vehicles, parts and engines fell by $15 million to $31,919 million as a $601 million increase in our imports of passenger cars was offset by a $434 million decrease in our imports of parts and accessories of vehicles other than bodies and chassis, engines and tires...

The Full Release pdf also gives us surplus and deficit details on our goods trade with selected countries:

The February figures show surpluses, in billions of dollars, with South and Central America ($3.7), Hong Kong ($2.8), United Kingdom ($0.9), Brazil ($0.6), Singapore ($0.4), Canada ($0.4), and OPEC ($0.3). Deficits were recorded, in billions of dollars, with China ($30.1), European Union ($12.4), Mexico ($7.7), Japan ($6.7), Germany ($5.5), Italy ($2.8), South Korea ($2.4), India ($2.2), France ($2.2), Taiwan ($1.7), and Saudi Arabia ($0.3).

  • The deficit with China decreased $3.1 billion to $30.1 billion in February. Exports increased $1.6 billion to $9.2 billion and imports decreased $1.5 billion to $39.3 billion.
  • The surplus with Hong Kong increased $1.0 billion to $2.8 billion in February. Exports increased $0.9 billion to $3.2 billion and imports decreased $0.1 billion to $0.3 billion.
  • The deficit with Japan increased $1.3 billion to $6.7 billion in February. Exports decreased $1.1 billion to $5.7 billion and imports increased $0.2 billion to $12.4 billion.

To gauge the impact of January and February trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, 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 1st quarter goods exports were at 149,892 million and 150,733 million for January and February respectively in that same 2012 dollar quantity index representation...averaging January and February goods exports and then computing the annualized change between that average and the average of the fourth quarter, we find that the 1st quarter's real exports of goods are running at a 6.09% annual rate above those of the 4th quarter, or at a pace that would add 0.51  percentage points to 1st quarter GDP.....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 January and February imports were at 233,413 million and 232,490 million respectively, after that same 2012 chained dollars inflation adjustment...that would indicate that so far in the 1st quarter, our real imports of goods have decreased at a 4.26% 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 4.26% rate would thus conversely add 0.51 more percentage points to 1st quarter GDP....hence, if the average trade deficit in goods of the two months reported here is continued in March, the net effect of our international trade in goods will be to add 1.02 percentage points to 1st quarter GDP...

Note that we have not computed the impact of the usually less volatile change in services here because the Census does not provide inflation adjusted data on those, but that the increase in exports of services combined with the decrease in imports of services suggests that February’s trade in services would also make a positive contribution to 1st quarter GDP...

Industrial Production Down 0.1% in March After Annual Revisions

The Fed's G17 release on Industrial production and Capacity Utilization for March reported that industrial production fell 0.1%% in March after rising by a revised 0.1% in February, which left production 2.8% higher than a year ago...however, this month’s data now reflects the results of an annual revision on March 27th which left the IP indexes for 2016 and 2017 a bit higher than the previously published numbers, and the estimates for 2015 and 2018 slightly lower....hence, the industrial production index, with the benchmark set for average 2012 production to equal to 100.0, ended at 110.2 in March, down 0.1% from February, after the February index, which had been published at 109.7 a month ago, was revised down from the revised 110.5 to 110.3, the revised January index was revised down from 110.4 to 110.2, the revised December index was revised from 110.6 to 110.5, the revised November index was revised from 110.5 to 110.6, and the revised October index was revised from 109.8 to 109.9...as a result of those revisions, US industrial production was down at a 0.3% annual rate for the first quarter as a whole...

The manufacturing index, which accounts for around 77% of the total IP index, slipped to 105.5 in March, after the February index was revised from 104.8 to 105.7 in the annual revision and then revised to 105.6 with this report....meanwhile, the January manufacturing index was revised from the revised 106.1 to 105.9, the revised December manufacturing index was unrevised at 106.5, the revised November manufacturing index was revised from 105.9 to 105.8, and the revised October manufacturing index was revised from 105.4 to 105.6...taking into account all revisions, the manufacturing index now stands 1.0% above its year ago level, while first quarter manufacturing has shrunk at a 1.1% annual rate from that of the 4th quarter of 2018....meanwhile, the mining index, which includes oil and gas well drilling, fell 0.8%, from 132.2 in February to 131.2 in March, after the February mining index was revised up from last month's reported 131.8, which meant the mining index was 10.5% higher than it was a year earlier...finally, the utility index, which typically fluctuates due to deviations from normal temperatures, rose by 0.2% in March, from 108.2 to 108.4, after the February utility index was revised from 107.3 to 108.2, up 3.7% from January...after both the annual and this month's revisions, the utility index is now 3.8% above that of a year ago, largely on a colder March this year than last..

This report also includes capacity utilization data, which is expressed as a percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry fell to 78.8% in March from 79.0% in February, which was revised from the 78.2% reported before the annual revision ...capacity utilization of NAICS durable goods production facilities slipped from a revised 76.7% in February to 76.6% in March, while capacity utilization for non-durables producers was unchanged at 77.2%...capacity utilization for the mining sector fell to 90.9% in March from 92.1% in February, which had been reported as 94.6% last month, while utilities were operating at 79.9% of capacity during March, unchanged from February, even as that February utility index was previously reported at 78.6%...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.. 

March Housing Starts and Building Permits Significantly Lower than a Year Ago

The March report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,139,000 in March, which was 0.3 percent (±14.6 percent)* below the revised estimated annual rate of 1,142,000 starts in February, and 14.2 percent (±8.8 percent) below last March's rate of 1,327,000 housing starts a year....the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell during March, with the figures in parenthesis the most likely range of the change indicated; in other words, March housing starts could have been up by 14.3% or down by as much as 14.9% from those of February, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for February housing starts was revised from the 1,162,000 reported last month to 1,142,000, while January starts, which were first reported at a 1,230,000 annual rate, were revised from last month's initial revised figure of 1,273,000 annually to a 1,298,000 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 93,300 housing units were started in March, up from the 80,200 units that were started in February and the 87,000 units that were started in January...of those housing units started in March, an estimated 65,500 were single family homes and 26,500 were units in structures with more than 5 units, up from the revised 54,900 single family starts in February and up from the 24,900 units started in structures with more than 5 units in February...

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 March, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,269,000, which was 1.7 percent (±1.4 percent) below the revised February rate of 1,291,000 permits, and was 7.8 percent (±1.9 percent) below the rate of building permit issuance in March a year earlier...the annual rate for housing permits issued in February was revised down from the originally reported  1,296,000....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 103,900 housing units were issued in March, up from the revised estimate of 89,700 new permits issued in February.... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.139 Million Annual Rate in March and Comments on February Housing Starts... 

February Business Sales Up 0.1%, Business Inventories Up 0.3%

After the release of the March retail sales report, the Census Bureau also released the composite Manufacturing and Trade, Inventories and Sales report for February (pdf), which incorporates the revised February retail data from that March retail report and the earlier published February 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 $1,446.8 billion in February, up 0.1 percent (±0.1 percent)* from January's revised sales, and up 2.4 percent (±0.3 percent) from February sales of a year earlier...note that total January sales were concurrently revised down from the originally reported $1,449.6 billion to $1,444,834 million, still a 0.3% increase from December....the value of manufacturer's sales rose 0.4% to $505,471 million in February; retail trade sales, which exclude restaurant & bar sales from the revised February retail sales reported earlier, fell 0.3% to $445,518 million, while wholesale sales rose 0.3% to $495,852 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,017.4 billion at the end of February, up 0.3 percent (±0.1%) from the end of January, and 4.9 percent (±0.5 percent) higher than in February a year earlier...at the same time, the value of end of January inventories was revised from the $2,013.9 billion reported last month to $2,011.7 billion, now 0.9% higher than January....seasonally adjusted inventories of manufacturers were estimated to be valued at $687,785 million, up 0.3% from January, and inventories of retailers were valued at $660,720 million, also 0.3% more than in January, while inventories of wholesalers were estimated to be valued at $668,892 million at the end of February, 0.2% higher than in January... 

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for February, which was up 0.4% for finished goods...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories could still have a positive impact on 1st quarter GDP, mostly because of the low bar set by 4th quarter real factory inventories…however, all of retail inventories and most of wholesale inventories are finished goods, meaning they will show a small real decrease in February once adjusted with the producer price index...since the 4th fourth quarter saw real retail inventories increase by $8.6 billion, or at a 5.1% annual rate, and real wholesale inventories increase by $14.6 billion, or at a 8.3% rate, any first quarter real decreases in those inventories will subtract from 1st quarter GDP by at least the magnitude of the 4th quarter increase...

 

(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 of which are picked from the aforementioned GGO posts, contact me…)      

Sunday, April 14, 2019

March consumer and producer prices, February’s factory inventories and JOLTS

Regular monthly reports released this week included all three major price indexes used by the BEA to adjust goods and services for inflation: March Consumer Price Index, the March Producer Price Index, and the March Import-Export Price Index, all of which were prepared by the Bureau of Labor Statistics...in addition, the BLS also released the Job Openings and Labor Turnover Survey (JOLTS) for February, while the Census Bureau released the Full Report on Manufacturers' Shipments, Inventories and Orders for February...

March Consumer Prices Up 0.4% on Higher Food, Shelter and Energy Prices

The consumer price index rose 0.4% in March on higher prices for groceries, 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 0.4% in March after it had risen 0.2% in February, been unchanged in January, in December and in November, and 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 252.776 in February to 254.202 in March, which left it statistically 1.863% higher than the 249.554 index reading in March of last year, which is reported as a 1.9% year over year increase....with higher prices for food and gasoline major reasons the increase in the overall index, seasonally adjusted core prices, which exclude food and energy, rose by just 0.1% for the month, as the unadjusted core price index rose from 261.114 to 261.836, which left the core index 2.036% ahead of its year ago reading of 256.610, which is reported as a 2.0% year over year increase, down from 2.1% in February...

The volatile seasonally adjusted energy price index rose 3.5% in March, after rising 0.4% in February, 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 is still 0.4% lower than in March a year ago...the price index for energy commodities was 6.2% higher in March, while the index for energy services rose 0.3%, after falling by 0.8% in February...the energy commodity index was up 6.2% due to a 6.4% increase in price of gasoline, the largest component, and a 2.1% increase in the index for fuel oils, while prices for other energy commodities, such as propane, kerosene, and firewood, averaged 1.6% higher...within energy services, the price index for utility gas service fell 0.1% after falling 2.4% in February and is now 1.4% lower than it was a year ago, while the electricity price index was 0.4% higher, after it had fallen 0.3% in February....energy commodities are still 0.6% lower than their year ago levels, with gasoline prices averaging 0.7% lower than they were a year ago, while the energy services price index is 0.1% lower than last March, as electricity prices are now 0.3% higher than a year ago…

The seasonally adjusted food price index was 0.3% higher in March, after rising 0.4% in February, 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 0.2% higher, as prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.1%, while food prices at employee sites and schools were on average unchanged...

In the food at home categories, the price index for cereals and bakery products was 0.3% higher even though average bread prices fell 0.1%, because breakfast cereal prices rose 1.7% and the price index for rice, pasta and cornmeal rose 2.2%....on the other hand, the price index for the meats, poultry, fish, and eggs group was 0.2% lower, even as ham prices rose 4.4%, because the poultry index fell 0.9% and shelf stable fish & seafood prices averaged 1.7% lower...meanwhile, the seasonally adjusted index for dairy products was 0.6% higher, as fresh whole milk prices rose 1.5%, while the fruits and vegetables index was 1.6% higher on a 1.6% increase in the index for fresh fruits, led by a 3.1% increase in prices for oranges, and a 2.0% 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 unchanged, as the index for frozen noncarbonated juices and drinks rose 1.6% while roast coffee prices were 0.3% lower...lastly, the index for the ‘other foods at home’ category was 0.2% higher, as the index for sugar and artificial sweeteners rose 1.3% and margarine prices rose 1.8%....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 March, just lettuce, which is now priced 18.9% 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 March after rising by 0.1% in February, and by 0.2% for the five months prior to that, after rising by 0.1% in August 0.2% in July, 0.2% in June, 0.2% in May, 0.1% in April, and by 0.2% last March, 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 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust March retail sales for inflation in national accounts data, the index for household furnishings and supplies was unchanged, as the price index for floor coverings rose 1.8% while the price index for major appliances was 2.1% lower...on the other hand, the apparel price index was 1.9% lower on a 4.8% decrease in the price index for boy's apparel and a 4.6% decrease in the price index for girls apparel...meanwhile, the price index for transportation commodities other than fuel was 0.1% higher, as prices for new cars and trucks rose 0.5%, prices for used cars and trucks fell 0.4%, and the price index for motor oil, coolant, and fluids was 5.2% higher...in addition, prices for medical care commodities were 0.4% higher as prescription drugs prices rose 0.6% even as the price index for medical equipment and supplies fell 1.5%....meanwhile, the recreational commodities index was unchanged as a 4.2% decrease in TV prices and a 1.2% decrease in the index for toys was offset by a 1.6% increase in the index for sports vehicles including bicycles and a 2.5% increase in the price index for sewing machines, fabric and supplies....at the same time, the education and communication commodities index was 0.1% lower on a 0.9% decrease in the index for computer software and accessories and a 1.8% decrease in the index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.1% lower, while the price index for ‘other goods’ rose 0.5% on a 1.8% increase in the price index for cigarettes...

Within core services, the price index for shelter rose 0.4% on a 0.4% increase in rents, a 0.3% increase in homeowner's equivalent rent, and a 0.9% increase in lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were on average 0.2% lower....at the same time, the price index for medical care services was 0.3% higher, as inpatient hospital services rose 0.5% and health insurance rose 1.3%...meanwhile, the transportation services index was unchanged as car and truck rentals fell 1.9% while vehicle maintenance and servicing rose 0.9% and intercity bus fares rose 9.0%...on the other hand, the recreation services price index was 0.4% higher as the index for rental of video discs and other media rose 2.4% and admissions to sporting events rose 5.2%....in addition, the index for education and communication services was 0.1% higher as college tuitions rose 0.8%....lastly, the index for other personal services was down 0.3% as the price index for tax return preparation and other accounting fees fell 7.8%...among core line items, prices for televisions, which are now 19.3% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.9% since last March, and the price index for dishes and flatware, which is down by 10.7% from a year ago, have all seen prices drop by more than 10% over the past year, while the price index for sewing machines, fabric and supplies, which has now increased 10.3% year over year, is the only line item to increase by a double digit magnitude over that span....

Producer Prices up 0.6% in March on Higher Energy Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.6% in March, as prices for finished wholesale goods averaged 1.0% higher, while average margins of final services providers rose 0.3%...that followed that followed a February report that showed the PPI had increased by 0.1%, with prices for finished wholesale goods on average 0.4% higher, while margins of final services providers were unchanged, 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%, revised December figures that had the PPI down 0.2%, with prices for finished wholesale goods down 0.5% while margins of final services providers were unchanged, and revised November figures that indicated the PPI was 0.1% lower, with prices for finished wholesale goods falling 0.5% while margins of final services providers increased 0.1%...on an unadjusted basis, producer prices are 2.2% higher than a year ago, up from the 1.9% 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 unchanged for the month, and is now just 2.0% higher than in March a year ago, down from 2.3% a month ago...

As we noted, the price index for final demand for goods, aka 'finished goods', was 1.0% higher in March, after being 0.4% higher in February, 0.8% lower in January, 0.5% lower in December, 0.5% 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 5.6% higher, after rising 1.8% in February falling 3.8% in January 4.3% in December and 5.2% in November, and as the price index for wholesale foods rose 0.3% after falling 0.3% in February, while the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher....wholesale energy prices rose on a 16.0% jump in the wholesale price for gasoline and a 12.6% increase in the wholesale price of diesel fuel, while the wholesale food price index rose on a 17.6% increase in wholesale prices for fresh and dry vegetables....among wholesale core goods, wholesale prices for cigarettes rose 3.4%, railroad equipment prices rose 2.4% and wholesale prices for tires rose 1.1%..

At the same time, the index for final demand for services rose 0.3%, after being unchanged in February, rising 0.3% in January, being unchanged in December, rising 0.1% in November, 0.8% in October, and 0.2% in September, as the February index for final demand for trade services rose 1.1% while the index for final demand for transportation and warehousing services fell 0.8%, and the core index for final demand for services less trade, transportation, and warehousing services was unchanged....among trade services, seasonally adjusted margins for apparel, jewelry, footwear and accessories retailers rose 4.2%, margins for major household appliances retailers rose 6.8%, and margins for computer hardware, software, and supplies retailers rose 3.0%, while margins for fuels and lubricants retailers fell 5.9%... among transportation and warehousing services, margins for airline passenger services fell 1.5% and margins for truck transportation of freight fell 0.8%...among the components of the core final demand for services index, margins for deposit services (partial) rose 6.3% and margins for arrangement of cruises and tours rose 5.9%..

This report also showed the price index for intermediate processed goods rose 0.8% in March, after rising 0.4% in February, falling 1.4% in January, falling  a revised 1.1% in December and a revised 0.6% in November, after rising 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 16.0% and refinery prices for diesel fuel rose 12.6%, while producer prices for natural gas sold to electric utilities fell 4.7%...on the other hand, prices for intermediate processed foods and feeds fell 0.3%, as the price index for wholesale meats fell 2.0% and producer prices for prepared animal feeds fell 0.9%...meanwhile, the core price index for intermediate processed goods less food and energy was unchanged as a 2.5% decrease in the index for plastic resins and materials offset a 2.7% increase in the price index for building paper and board ...prices for intermediate processed goods are still 0.8% higher than in March a year ago, now the 28th 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 rose 2.3% in March after falling 4.6% in February, 9.3% in January, rising a revised 8.9% in December, and falling a revised 3.3% in November....that was as the March price index for crude energy goods rose 7.3% on a 15.3% jump in crude oil prices, while the price index for unprocessed foodstuffs and feedstuffs fell 2.3% as producer prices for alfalfa hay fell 9.3%, producer prices for slaughter chickens fell 8.7% and producer prices for wheat fell 8.4%...at the same time, the index for core raw materials other than food and energy materials rose 1.2%, as prices for scrap iron and steel rose 5.9% and prices for nonferrous metal ores rose 3.8%...this raw materials index is still 3.5% 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 rose 0.4% in March, after falling 0.1% in February, rising 0.2% in January, rising a revised 0.1% in December and a revised 0.1% in November, and after rising 0.6% in October and by 0.3% in September...the price index for intermediate trade services was 0.8% higher, as margins for intermediate automotive parts and tires retailers rose 4.6% and margins for intermediate machinery and equipment parts and supplies wholesalers rose 1.1%…on the other hand, the index for transportation and warehousing services for intermediate demand fell 0.2%, as the intermediate index for long-distance motor carrying fell 1.2% and the index for transportation of passengers (partial) fell 1.5%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing rose 0.3%, as margins for intermediate television advertising time sales rose 1.8% as did the index for staffing services, while the index for executive search services fell 2.4%.....over the 12 months ended in March, 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...

Job Openings and Hiring Fall in February; Layoffs Rise

The Job Openings and Labor Turnover Survey (JOLTS) report for February from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 538,000, the largest drop in 42 months, from a record high of 7,625,000 in January to 7,087,000 in February, after January job openings were revised up from the originally reported 7,581,000 ...however, February's jobs openings were still 8.5% higher than the 6,530,000 job openings reported in February a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.8% in January to 4.5% in February, which was still up from the 4.2% rate of February a year ago...job openings in all services were lower, led by a 103,000 job opening decrease in bars and restaurants, while there were modest increases in job openings in construction and manufacturing (details on job openings by industry and 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 February, seasonally adjusted new hires totaled 5,696,000, down by 134,000 from the revised 5,829,000 who were hired or rehired in January, as the hiring rate as a percentage of all employed fell from 3.9% in January to 3.8% in February, which was the same as the hiring rate in February a year earlier (details of hiring by sector since October are in table 2)....meanwhile, total separations rose by 24,000, from 5,532,000 in January to 5,556,000 in February, as the separations rate as a percentage of the employed was unchanged at 3,7%, while it was up from 3.6% in February a year ago (see details in table 3)...subtracting the 5,556,000 total separations from the total hires of 5,696,000 would imply an increase of 140,000 jobs in February, quite a bit more than the revised payroll job increase of 33,000 for February reported in the March 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 founds that 3,480,000 of us voluntarily quit our jobs in February, little changed from the revised 3,483,000 who quit their jobs in January, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, which was up from 2.1% year earlier (see details in table 4)....in addition to those who quit, another 1,742,000 were either laid off, fired or otherwise discharged in February, up by 47,000 from the revised 1,695,000 who were discharged in January, as the discharges rate rose from 1.1% to 1.2% of all those who were employed during the month, while it was unchanged from the discharges rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 334,000 in February, down from 355,000 in January, for an 'other separations rate’ of 0.2%, the same as in January and as in February 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...  

February Factory Shipments Up 0.4%, Factory Inventories 0.3% Higher

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for February from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $2.6 billion or 0.5 percent to $497.5 billion in February, following a statistically insignificant decrease of less than $0.1 billion to $500.1 billion in January, which was revised from an increase of $0.3 billion or less than 0.1% to $500.5 billion that was reported for January last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as revised updates to the February 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 February, down four of the last five months, decreased $2.6 billion or 0.5 percent to $497.5 billion, the U.S. Census Bureau reported today.  This followed a virtually unchanged January decrease.  Shipments, up following four consecutive monthly decreases, increased $2.0 billion or 0.4 percent to $505.5 billion.  This followed a 0.3 percent January decrease.  Unfilled orders, down four of the last five months, decreased $3.6 billion or 0.3 percent to $1,177.6 billion.  This followed a 0.1 percent January increase.  The unfilled orders‐to‐shipments ratio was 6.54, down from 6.57 in January.   Inventories, up twenty‐seven of the last twenty‐eight months, increased $2.0 billion or 0.3 percent to $687.8 billion.  This followed a 0.5 percent January increase.  The inventories‐to‐shipments ratio was 1.36, unchanged from January.
  • New Orders - New orders for manufactured durable goods in February, down following three consecutive monthly increases, decreased $4.2 billion or 1.6 percent to $250.5 billion, unchanged from the previously published decrease.  This followed a 0.1 percent January increase.  Transportation equipment, also down following  three consecutive monthly increases, led the decrease, $4.1 billion or 4.5 percent to $86.2 billion.  New orders for manufactured nondurable goods increased $1.5 billion or 0.6 percent to $247.0 billion.
  • Shipments - Shipments of manufactured durable goods in February, up three of the last four months, increased $0.5 billion or 0.2 percent to $258.5 billion, unchanged from the previously published increase.  This followed a 0.5 percent January decrease.  Computers and electronic products, up four of the last five months, led the increase, $0.3 billion or 1.0 percent to $28.0 billion.  Shipments of manufactured nondurable goods, up following three consecutive monthly decreases, increased $1.5 billion or 0.6 percent to $247.0 billion.  This followed a 0.1 percent January decrease.  Petroleum and coal products, also up following three consecutive monthly decreases, led the increase, $1.4 billion or 2.8 percent to $51.9 billion.
  • Unfilled Orders - Unfilled orders for manufactured durable goods in February, down four of the last five months, decreased $3.6 billion or 0.3 percent to $1,177.6 billion, unchanged from the previously published decrease.  This followed a 0.1 percent January increase.  Transportation equipment, also down four of the last five months, led the decrease, $3.6 billion or 0.4 percent to $807.3 billion.
  • Inventories - Inventories of manufactured durable goods in February, up twenty‐five of the last twenty‐six months, increased $1.3 billion or 0.3 percent to $418.9 billion, unchanged from the previously published increase.   This followed a 0.5 percent January increase.  Transportation equipment, up five of the last six months, drove the increase, $1.3 billion or 1.0 percent to $134.1 billion.  Inventories of manufactured nondurable goods, up two consecutive months, increased $0.7 billion or 0.3 percent to $268.9 billion.  This followed a 0.6 percent January increase.  Petroleum and coal products, also up two consecutive months, drove the increase, $0.9 billion or 2.3 percent to $40.2 billion.

To gauge the effect of February's dollar valued 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 0.1% to $238,621 million; the value of work in process inventories was up 0.9% at $210,397 million, and the value of materials and supplies inventories was virtually unchanged at $238,767 million...at the same time, the producer price index for February indicated that prices for finished goods increased 0.4%, that prices for intermediate processed goods were also 0.4% higher, but that prices for unprocessed goods were on average 4.6% lower, with even core raw materials priced 0.7% lower than January's....assuming similar valuations for like inventories, that would suggest that February's real finished goods inventories were around 0.3% less than January’s, that real inventories of intermediate processed goods were 0.5% greater, and that real raw material inventory inventories were at least 0.7% greater….since real factory inventories in the 4th quarter were only a bit higher, any real factory inventory increases over the 1st quarter would add to the growth of 1st quarter GDP...

 

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

Sunday, April 7, 2019

March jobs; February’s retail sales, construction spending & durable goods; January’s business inventories

Major monthly reports released over the past week included the Employment Situation Summary for March from the Bureau of Labor Statistics, the Retail Sales report for February and the Business Sales and Inventories report for January, the February report on Construction Spending, and the Advance report on Durable Goods for February, all from the Census Bureau...in addition, the Fed released the Consumer Credit Report for February, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $15.2 billion, or at a 4.5% annual rate, as non-revolving credit expanded at a 4.9% annual rate to $2,984.8 billion and revolving credit outstanding grew at a 3.3% rate to $1,061.0 billion...

Privately issued reports released this week included the ADP Employment Report for March and the light vehicle sales report for March from Wards Automotive, which estimated that vehicles sold at a 17.48 annual rate in March, up from the 16.53 annual sales rate in February, and up from the 17.40 million rate a year earlier...in addition, the week saw both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the March Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 55.3% in March, up from 54.2% in February, which suggests an ongoing modest expansion in manufacturing firms nationally, and the March Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) fall to 56.1% in March, down from 59.7% in February, indicating a somewhat smaller plurality of service industry purchasing managers reported expansion in various facets of their business in March...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally... 

Employers Add 196,000 Jobs in March, Labor Force Participation Rate Falls 0.2% to 63.0%

The Employment Situation Summary for March indicated that payroll job growth was in line with recent averages, while the labor force participation rate fell because of a large decrease in those who reported being employed…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 196,000 jobs in March, after the previously estimated payroll job increase for January was revised up from 311,000 to 312,000 and the payroll jobs increase for February was revised up from 20,000 up to 33,000…including those revisions, this report thus represents a total of 210,000 more seasonally adjusted payroll jobs than were reported last month, a bit less than the 2018 average increase of 223,000 jobs per month...the unadjusted data shows that there were actually 714,000 more payroll jobs extant in March than in February, as the usual seasonal job increases in sectors such as construction, administrative and waste services, and in leisure and hospitality were normalized by the seasonal adjustments…

Seasonally adjusted job increases in March were spread through both the goods producing and the service sectors, with only manufacturing and the retail sector showing job losses a seasonally adjusted basis, while both of those sectors actually added a jobs on an unadjusted basis...seasonally adjusted manufacturing employment was down 6,000 but remains 209,000 higher than a year ago, while the retail sector showed a seasonally adjusted 11,700 job decrease, as drug stores cut 7,700 employees and general merchandise stores cut 7,200 jobs, probably due to widespread store closings...meanwhile, employment in health care rose by 49,100, with the addition of 13,600 jobs in hospitals, and the broad professional and business services sector added 37,000 jobs, as 9,600 more were employed in computer systems design and related services...the leisure and hospitality sector, which actually added 248,000 employees, saw a 33,000 seasonally adjusted payroll job increase, as an adjusted 27,400 more jobs were added in bars and restaurants...similarly, the construction sector saw the addition of 16,000 seasonally adjusted jobs, with 13,000 of those working for specialty contractors, after aberrant weather caused the sector to ‘show’ an increase of 56,000 jobs in January and a decrease of 25,000 jobs in February...at the same time, government sector jobs increased by 12,000, with the addition of 8,200 in local government education....in addition, there was also a 12,200 payroll job increase in social assistance sector, with the addition of 10,000 jobs in individual and family services, and the financial sector saw an 11,000 job increase, with 7,400 of those in the insurance business...meanwhile the other major sectors, including resource extraction, wholesale trade, transportation and warehousing, utilities, information, and private education all saw smaller increases in payroll employment over the month…

The establishment survey also showed that average hourly pay for all employees rose by 4 cents an hour to $27.70 an hour in March, after it had increased by a revised 10 cents an hour in February; at the same time, the average hourly earnings of production and non-supervisory employees increased by 6 cents to $23.24 an hour...employers also reported that the average workweek for all private payroll employees increased by 0.1 hour to 34.5 hours in March, while hours for production and non-supervisory personnel rose 0.1 hour to 33.7 hours...however, the manufacturing workweek was unchanged at 40.7 hours, while average factory overtime decreased by 0.1 hours to 3.4 hours...

Meanwhile, the March household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 201,000 to 162,960,000, while the similarly estimated number of those qualified as unemployed fell by 24,000 to 6,211,000; which thus meant a rounded decrease of 224,000 in the total labor force...since the working age population had grown by 145,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 369,000 to 95,577,000....with the number of those in the labor force decreasing while the civilian noninstitutional population was increasing, the labor force participation rate fell by 0.2% to 63.0%....at the same time, the decrease in number employed as a percentage of the increase in the population was enough to lower the employment to population ratio from 60.7% to 60.6%...however, the small decrease in the number unemployed was not enough to impact the unemployment rate, which remained at 3.8%....meanwhile, the number who reported they were involuntarily working part time rose by 189,000 to 4,499,000 in March, which apparently wasn't enough to change the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", as it remained at 7.3% in March, which in February had been the lowest since January 2001.....

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

Retail Sales Down 0.2% in February after January Sales Revised 0.5% Higher

Seasonally adjusted retail sales decreased 0.2% in February after retail sales for January were revised higher...the Advance Retail Sales Report for February (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $506.0 billion during the month, which was 0.2 percent (±0.5%) lower than January's revised sales of $507.0 billion but still 2.2 percent (±0.7 percent) above the adjusted sales in February of last year...January's seasonally adjusted sales were revised up from $504.4 billion to $507.0 billion, while December's sales were revised from $503.4 billion to $503.327 million; as a result, the December to January change was revised up from up 0.2 percent (±0.5%) to up 0.7 percent (±0.2%).…the downward revision to December sales was not large enough to have a material impact on 4th quarter GDP...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down 2.7%, from $459,480 million in January to $446,952 million in February, while they were up 2.2% from the $437,520 million of sales in February of a year ago...

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

February 2019 retail sales table

The revision to January's sales is actually the bigger story here than February's sales themselves...last week we reported on personal consumption expenditures for January and estimated their likely impact on 1st quarter GDP...more than a third of that figure was consumption of goods, which was sourced from the January retail sales report, which this report revises....in the January income and outlays report, personal consumption expenditures were seen barely growing at a 0.06% rate in January, largely because the $17.5 billion annualized increase in services spending for services was more than offset by a $17.6 billion annualized decrease in spending for durable goods...now January retail sales for major durable goods categories have been significantly revised higher: the previously reported 2.6% decrease in sales at auto dealers has been revised to a 2.0% decrease; the previously reported 1.2% decrease in sales at furniture stores has been revised to a 0.3% decrease; and the previously reported 0.3% decrease in sales at appliance stores has now been revised to a 0.6% increase….since there was no change in the January PCE price index for goods, the entirety of the $2.6 billion upward revision to January retail sales will go to the bottom line of January real PCE when it's revised at the end of this month.…but remember, retail sales shown here are a monthly figure, while personal consumption expenditures are expressed as an annual rate...that means the $2.6 billion upward revision to January retail sales will show up in PCE as a revision roughly 12 times that amount, or something on the order of $31 billion annualized, more than enough for a 0.2% upward revision to January PCE...

Meanwhile, to compute February's real personal consumption of goods data for national accounts from this February retail sales report, the BEA will use the corresponding price changes from the February consumer price index, which we reviewed when it was released in mid-March...to estimate what they will find, we first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that February retail sales excluding the 1.0% price-related increase in sales at gas station were down by 0.3%....then, pulling the 1.2% decrease in grocery & beverage sales and the 0.1% increase in food services sales out from that total, we find that core retail sales were down by less than 0.2% for the month...since the February CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% lower in February, we can thus figure that real retail sales excluding food and energy will show a small real increase...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 up 0.7%, the February price index for for transportation commodities other than fuel was 0.4% lower, as prices for new cars and trucks fell 0.3% and prices for used cars and trucks fell 0.7%...that would mean that real unit sales at auto & parts dealers were probably on the order of 1.1% higher, with real new car sales 1.0% higher.. on the other hand, while nominal sales at clothing stores were 0.4% lower in February, the apparel price index was 0.3% higher, which means that real sales of clothing likely fell around 0.7%...

In addition to figuring those core retail sales, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the February CPI report showed that the food price index was 0.4% higher, with the both the index for food purchased for use at home and prices for food bought to eat away from home 0.4% higher...thus, while nominal sales at food and beverage stores were 1.2% lower, real sales of food and beverages would be roughly 1.6% lower in light of the 0.4% higher prices…meanwhile, the 0.1% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants fell about 0.3% during the month...in addition, while sales at gas stations were up 1.0%, there was 1.5% increase in the retail price of gasoline during the month, which would suggest that real sales of gasoline were down on the order of 0.5%, with a caveat that gasoline stations do sell more than gasoline... averaging real sales that we have thus estimated together, and excluding food services, we can then estimate that the income and outlays report for February will show that real personal consumption of goods fell by more than 0.1% in February, after rising by a revised 0.3% in January, but after falling by 2.0% December...at the same time, the 0.3% decrease in real sales at bars and restaurants would clip February's real personal consumption of services by less than 0.1%...

Construction Spending Rose 1.0% in February after January & December Revised Much Higher

The Census Bureau's report on February construction spending (pdf) reported that "Construction spending during February 2019 was estimated at a seasonally adjusted annual rate of $1,320.3 billion, 1.0 percent (±0.8 percent) above the revised January estimate of $1,307.3 billion. The February figure is 1.1 percent (±1.5 percent)* above the February 2018 estimate of $1,305.5 billion. During the first two months of this year, construction spending amounted to $181.9 billion, 1.4 percent (±1.3 percent) above the $179.4 billion for the same period in 2018."...the January annualized spending estimate was revised 2.2% higher, from $1,279.6 billion to $1,307.3 billion, while December's construction spending was revised from $1,263.1 billion to $1,275.953 billion annually, which together meant that the January construction spending increase was revised from 1.3% to 2.5%...the $12.85 billion upward revision to December’s annualized spending would mean we’d see a upward revision of about 11 basis points to 4th quarter GDP when the annual revisions are released later this summer...

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 $994.5 billion, 0.2 percent (±0.8 percent)* above the revised January estimate of $993.0 billion. Residential construction was at a seasonally adjusted annual rate of $540.9 billion in February, 0.7 percent (±1.3 percent)* above the revised January estimate of $536.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $453.6 billion in February, 0.5 percent (±0.8 percent)* below the revised January estimate of $456.0 billion. 
  • Public Construction: In February, the estimated seasonally adjusted annual rate of public construction spending was $325.8 billion, 3.6 percent (±1.6 percent) above the revised January estimate of $314.4 billion. Educational construction was at a seasonally adjusted annual rate of $76.3 billion, 0.8 percent (±2.0 percent)* above the revised January estimate of $75.7 billion. Highway construction was at a seasonally adjusted annual rate of $111.1 billion, 9.5 percent (±5.3 percent) above the revised January estimate of $101.5 billion.

As you can tell from that summary, construction spending data 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 February’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 to determine the actual change in construction put in place...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 price index showed that aggregate construction costs were down 0.1% in February, after they had increased by 0.6% in January, and had increased by 0.1% in December and in November...on that basis, we can estimate that February construction costs were roughly 0.5% more than those of December, 0.6% more than those of November, and 0.7% more than those of October, and of course 0.1% less than January...we then use those relative percentages to inflate the lower cost spending figures for each of the 4th quarter months vis a vis February, which is arithmetically the same as adjusting higher priced January and February construction spending downward, for purposes of comparison....this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,275,953 in December, $1,273,143 in November, and $1,290,551 in October, while annualized construction spending was at $1,320,305 in February and $1,272,178 in January....thus to compare January's nominal construction spending of $1,307,335 and February's figure of $1,320,305 to inflation adjusted figures of the fourth quarter, our formula becomes:  ((1,320,305 +1,307,335 * 0.999) / 2 ) / ((1,275,953 * 1.005 + 1,273,143 * 1.006 + 1,290,551 * 1.007)/ 3) = 1.01988, which tells us that real construction spending over January and February was up by 1.988% from that of the 4th quarter period, or up at a 8.19% 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 that of January's & February's adjusted spending as a fraction of 4th quarter GDP, and find that 1st quarter construction spending is rising at a rate that would add about 0.63 percentage points to 1st quarter GDP, an estimate which assumes there would be little change in real construction in March..

February Durable Goods: New Orders Down 1.6%, Shipments Up 0.2%, Inventories Up 0.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for February (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods decreased by $4.2 billion or 1.6 percent to $250.6 billion in February, after January's new orders were revised from the $255.3 billion reported last month to $254.7 billion, now just 0.1% more than December's new orders…nonetheless, year to date new orders are still up by 4.4% from those of 2018...the volatile monthly new orders for transportation equipment were responsible for the month’s decrease, as new transportation equipment orders fell $4.3 billion or 4.8 percent to $86.0 billion, on a 31.1% drop to $10,185 million in new orders for commercial aircraft....excluding orders for transportation equipment, new orders rose 0.1%, while excluding just new orders for defense equipment, new orders fell 1.9%....new orders for nondefense capital goods less aircraft, a proxy for equipment investment, were also weak, falling $66 million or 0.1% to $68,873 million...

Meanwhile, the seasonally adjusted value of February shipments of durable goods, which will ultimately be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, increased by $0.5 billion or 0.2 percent to $258.6 billion, after the value of January shipments was revised from $257.9 billion to $258.062 billion, now down 0.4% from December....higher shipments of computers and electronic products led the February increase, as their shipments increased by $0.3 billion or 1.1 percent to $28.0 billion...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $1.3 billion or 0.3 percent to $418.9 billion, after end of January inventories were revised from $417.0 billion to $416.6 billion, now up 0.5% from December....increasing inventories of transportation equipment were responsible for the February increase, as they rose $1.3 billion or 1.0 percent to $134.1 billion....

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but very volatile new orders, fell for the 4th time in five months, decreasing by $3.6 billion or 0.3 percent to $1,177.6 billion, following a January increase of 0.1% to $1,181.27 billion, which was revised from the previously reported $1,181.9 billion...a $3.8 billion or 0.5 percent decrease to $807.2 billion in unfilled orders for transportation equipment was responsible for the overall decrease, while unfilled orders excluding transportation equipment orders were up $135 million to $370,450 million...the unfilled order book for durable goods is still 3.3% above the level of last February, with unfilled orders for transportation equipment 2.9% above their year ago level, boosted by a 15.3% increase in the backlog of orders for defense aircraft...

January Business Sales up 0.3%, Business Inventories Up 0.8%

After the release of the February retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for January (pdf), which incorporates the revised January retail data from that February report and the earlier published January 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 $1,449.6 billion in January, up 0.3 percent (±0.3%)* from December's revised sales, and up 2.8 percent (±0.3 percent) from January sales of a year earlier...note that total December sales were concurrently revised up from the originally reported $1,445.0 billion to $1,445.5 billion, now just a 0.9% decrease from November....manufacturer's sales fell 0.4% to $503,052 million in January; retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, rose 0.8% to $446,712 million, while wholesale sales rose 0.5% to $499,822 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,013.9 billion at the end of January, up 0.8 percent (±0.1%) from the end of December, and 5.3  percent (±0.4 percent) higher than in January a year earlier...at the same time, the value of end of December inventories was revised from the $1,994.5 billion reported last month to $1,997.0 billion, which would imply an upward revision of about 0.05 percentage points to 4th quarter GDP....seasonally adjusted inventories of manufacturers were estimated to be valued at $685,681 million in January, up 0.5% from December, and inventories of retailers were valued at $658,352 million, 0.8% more than in December, while inventories of wholesalers were estimated to be valued at $678,241 million at the end of January, 1.2% higher than in December...

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index for January, which was down 0.8% for finished goods...two weeks ago, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories would have a positive impact on 1st quarter GDP…also last week, we found that real wholesale inventories would be up by more than 2% but still not be enough to add to 1st quarter GDP growth yet, given the big jump in 4th quarter wholesale inventories….since nominal retail inventories for January have now been shown to be 0.8% higher, real retail inventories for the month, after the 0.8% finished goods price adjustment, thus would have thus increased by around 1.6% from December, after a fourth quarter that saw retail inventories increase at a 8.3% annual rate...so while the real retail inventory increase is not year enough to add to GDP, they are increasing at a rate greater than in the 4th quarter and hence well on their way to contributing positively to 1st quarter GDP by the end of March...

 

(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…)