Sunday, August 25, 2019

New and existing home sales for July

The only widely watched reports released this week were the July report on new home sales from the Census bureau and the Existing Home Sales Report for July from the National Association of Realtors (NAR)....this week saw the release of the Kansas City Fed manufacturing survey for August, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico; they reported their broadest composite index fell to -6 in August, down from readings of -1 in July and 0 in June, suggesting a mild contraction of that region's manufacturing industries....in addition, this week also saw a preliminary annual benchmark revision of employment data from the Bureau of Labor Statistics, which estimated there were 501,000 fewer payroll jobs in March of 2019 than had previously been reported...however, this estimate will not be applied to the monthly employment reports until the annual revision is finalized with the January 2020 employment report on the first Friday of February 2020, when the national employment survey figures are benchmarked to state tax records.....

New Home Sales Reported Lower in July After June Sales Revised Much Higher

The Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 635,000 new homes a year, which was 12.8 percent (±16.2 percent)* below the revised June rate of 728,000 new single family home sales a year, but 4.3 percent (±14.0 percent)* above the estimated annual rate that new homes were selling at in July of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June or even from those in July a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales new single family homes in June were revised from the annual rate of 646,000 reported last month to a 728,000 a year rate, post recession high, while home sales in May, initially reported at an annual rate of 626,000 and revised down to a 604,000 a year rate last month, were revised down to a 602,000 annual rate with this report, and while April's annualized home sales rate, initially reported at 673,000 and revised from a rate of 679,000 down to 658,000 last month, were also revised a bit lower, to a 656,000 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 showed that approximately 53,000 new single family homes sold in July, down from the 66,000 new homes that sold in June and the 58,000 that sold in May....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in July was $312,800, up from the median sale price of $306,000 in June but down from the median price of $327,500 in July a year ago, while the average July new home sales price was $388,000, up from $354,500 average sales price in June, but down from the average sales price of $392,300 in July a year ago....a seasonally adjusted estimate of 337,000 new single family houses remained for sale at the end of July, which represents a 6.4 month supply at the July sales rate, up from the revised 5.0 month supply of unsold homes in June, which was originally reported as a 6.3 month supply....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales decreased to 635,000 Annual Rate in July, Sales in June revised up to New Cycle High and A few Comments on June New Home Sales...

Existing Home Sales Rise 2.5% in July After June Sales Revised Higher

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sold rose 2.5% from June to July, projecting that 5.42 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was also 0.6% above the annual sales rate projected in July of a year ago….June home sales at a 5.29 million annual rate were revised from the 5.27 million annual rate indicated by last month's report...the NAR also reported that the median sales price for all existing-home types was $280,800 in July, 4.3% higher than in July a year earlier, which they report as "the 89th straight month of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Climb 2.5% in July", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release....since 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…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 540,000 homes sold in July, up by 2.3% from the 528,000 homes that sold in June, and up 3.3% from the estimated 523,000 homes that sold in July of last year, so we can see there wasn't much of a seasonal adjustment to bring the annualized published figures up to the level reported...that same pdf indicates that the median home selling price for all housing types fell 1.6%, from a revised record high of $285,300 in June to $280,800 in July, while the average home sales price was $317,100, down 1.3% from the $321,400 average selling price in June, but up 3.0% from the $307,600 average home sales price of July a year ago, with the regional average home sales prices ranging from a low of $253,300 in the Midwest to a high of $421,700 in the West...for additional commentary with long term graphs on this report, see "NAR: Existing-Home Sales Increased to 5.42 million in July" and "Comments on July Existing Home Sales" from Bill McBride at Calculated Risk...

 

(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, August 18, 2019

July’s consumer prices, retail sales, industrial production, and new home construction; June’s business inventories

Major economic reports released this past week were the July Consumer Price Index from the Bureau of Labor Statistics, the Retail Sales Report for July and the Business Sales and Inventories report for June, both from the Census bureau, the July report on Industrial Production and Capacity Utilization from the Fed, and the July report on New Residential Construction from the Census Bureau...other reports released this week included Regional and State Employment and Unemployment for July and the July Import-Export Price Index, both from the Bureau of Labor Statistics, and the first two regional Fed manufacturing surveys for August: the Empire State Manufacturing Survey from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +4.3 in July to +4.8 in August, suggesting a slight pickup in the otherwise slow growth of First District manufacturing, while the Philadelphia Fed Manufacturing Survey for August, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions fell from +21.8 in July to +16.8 in August, still suggesting ongoing growth of that region's manufacturing industries, as any positive index reading would...

Consumer Prices Up 0.3% in July on Higher Housing & Fuel Costs

The consumer price index was 0.3% higher in July, as higher prices for gasoline, rent, clothing, used vehicles, and most medical services were only partially offset by lower prices for groceries ...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.3% in July after rising 0.1% in June, 0.1% in May, 0.3% in April, 0.4% in March, 0.2% in February, and after they had been unchanged in January, in December and in November, and had risen 0.3% in October, 0.1% in September, 0.1% in August, and 0.2% last July...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 256.143 in June to 256.571 in July, which left it statistically 1.811% higher than the 252.006 index reading of June of last year, which is reported as a 1.8% year over year increase....with flat prices for food partially offsetting higher energy prices, seasonally adjusted core prices, which exclude food and energy, also rose by 0.3% for the month, as the unadjusted core price index rose from 263.177 to 263.566, which left the core index 2.2100% ahead of its year ago reading of 257.867, which is reported as a 2.2% year over year increase, up from the 2.1% year over year increase shown in June...

The volatile seasonally adjusted energy price index rose 1.3% in July, after falling 2.3% in June, 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, rising by 2.1% in October, and falling by 1.0% in September, and hence is still 2.0% lower than in June a year ago...the price index for energy commodities was 2.4% higher in July, while the index for energy services was unchanged, after falling by 0.7% in June....the energy commodity index was up 2.4% due to a 2.5% increase in the price of gasoline, the largest component, and a 0.6% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average unchanged...within energy services, the price index for utility gas service fell 1.8% after falling 0.3% in June and is now 2.9% lower than it was a year ago, while the electricity price index rose 0.6% after falling 0.8% in June....energy commodities are still 3.4% lower than their year ago levels, with gasoline prices averaging 3.3% lower than they were a year ago, while the energy services price index is 0.2% lower than last July, as electricity prices are now 0.5% higher than a year ago…

The seasonally adjusted food price index was unchanged in July, after being unchanged in June, rising 0.3% in May, falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3% in December, 0.2% in November, being unchanged in October, rising 0.1% in September, 0.1% in August, and 0.1% last July, as the price index for food purchased for use at home fell 0.1% in June, while the index for food bought to eat away from home was 0.2% higher, as prices at fast food outlets and prices at full service restaurants both rose 0.2% while food at employee sites and schools were on average 0.8% higher...

In the food at home categories, the price index for cereals and bakery products was 0.3% higher as average bread prices rose 0.7% and cookie prices rose 1.3%, while the price index for fresh biscuits, rolls, & muffins fell 0.5%...at the same time, the price index for the meats, poultry, fish, and eggs group was 0.1% higher, as the beef and veal price index rose 0.5% and ham prices rose 1.8%, while poultry prices averaged 1.1% lower...meanwhile, the seasonally adjusted index for dairy products was 0.3% lower, as prices for both fresh whole milk and cheese fell 0.2%...on the other hand, the fruits and vegetables index was 0.3% higher on a 0.6% increase in the price index for fresh fruits and a 1.3% increase in the price index for fresh vegetables, led by a 9.5% jump in prices for lettuce....however, the beverages index was 0.4% lower, as roast coffee prices fell 1.4% and carbonated drink prices were 0.5% lower....lastly, the index for the ‘other foods at home’ category was 0.7% lower, as prices for salad dressing fell 2.3%, peanut butter prices fell 1.6%, and the snack food index fell 1.5%....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 July, only prices for lettuce, which have now risen by 14.2% year over year, and prices for eggs, which are down 14.1% from a year ago, are only line items in the ‘food at home’ category with price changes of more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.3% in July after rising by 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for the five months prior to that, after rising by 0.1% in August, and by 0.2% last July, the composite price index of all goods less food and energy goods was 0.2% higher, 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 June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was up 0.3%, as the price index for window and floor coverings rose 1.5%, the index for furniture and bedding rose 0.7%, and the price index for outdoor equipment and supplies rose 1.1%, while the price index for major appliances was 1.0% lower....at the same time, the apparel price index was 0.4% higher on a 4.7% increase in the price index for men's suits, sport coats, and outerwear, a 2.4% increase in the index for women's suits and separates, and a 2.8% increase in the price index for boys and girls footwear... in addition, the price index for transportation commodities other than fuel was 0.2% higher even as prices for new cars fell 0.2%, because prices for used cars and trucks rose 0.9%, and the price index for motor oil, coolant, and fluids rose 3.9%...meanwhile, prices for medical care commodities also averaged 0.2% higher as prescription drugs prices rose 0.4%....on the other hand, the recreational commodities index was 0.4% lower on a 1.0% decrease in TV prices, a 1.4% drop in the price index for sporting goods, and a 1.7% decrease in the price index for toys, games, hobbies and playground equipment....however, the education and communication commodities index was 1.1% higher on a 2.8% increase in the price index for computers, peripherals, and smart home assistant devices...lastly, a separate price index for alcoholic beverages was 0.4% higher, while the price index for ‘other goods’ rose 0.6% on a 1.0% increase in the price index for tobacco and smoking products...

Within core services, the price index for shelter rose 0.3% on a 0.3% increase in rents, a 0.2% increase in homeowner's equivalent rent, and a 1.0% increase in lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.6% higher on a 2.0% increase in moving expenses....at the same time, the price index for medical care services was 0.5% higher, as outpatient hospital services rose 0.7% and health insurance rose 1.7%...meanwhile, the transportation services price index was 0.3% higher as vehicle repairs rose 0.4% and airline fares rose 2.3%....the recreation services price index was 0.2% higher as veterinarian services rose 0.6% and the index for club membership for shopping clubs, fraternal organizations, or participant sports fees rose 1.0%....the index for education and communication services was also 0.2% higher as the index for internet services and electronic information providers services rose 0.6% and technical and business school tuition and fees also rose 0.6%....lastly, the index for other personal services was up 0.5% as the price index for apparel services other than laundry and dry cleaning rose 1.0% and tax preparation services were 0.6% higher...among core line items, prices for televisions, which are now 20.2% cheaper than a year ago, and the price index for telephone hardware, calculators, and other consumer information items, which is down by 15.8% since last July, have both seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 15.9% over the past year, the price index for infants' furniture, which has increased 11.6% year over year, and intercity busfare, which has increased by 12.8% since last July, are the only line items to have increased by a double digit magnitude over that span....

July Retail Sales Rose 0.7% After May Sales were Revised Higher

Seasonally adjusted retail sales were 0.7% higher in July after retail sales for May were revised higher....the Advance Retail Sales Report for July (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $523.5 billion during  the month, which was 0.7 percent (± 0.5 percent) higher than June's revised sales of $519.9 billion and 3.4 percent (±0.7 percent) above the adjusted sales in July of last year...June's seasonally adjusted sales were revised from the $519.885 billion reported last month to $519.860 billion, which is considered statistically unchanged, while May sales were revised from $517.682 billion to $518.131 billion, which reduced the June increase from 0.4% to 0.3%....estimated unadjusted sales, extrapolated from a survey of a small sampling of retailers, indicated sales actually rose 2.7%, from $518,179 million in June to $532,348 million in July, while they were up 4.8% from the $508,010 million of sales in July a year ago...combined, the revisions to May and June indicate that 2nd quarter sales were roughly $0.42  billion higher than previously reported, which would add about $1.7 billion to the BEA's calculation of 2nd quarter personal consumption expenditures at an annual rate before the inflation adjustment, which should be enough to boost 2nd quarter GDP by 0.01 percentage points when the 2nd estimate is published at the end of the month…

Included below we have the table of the monthly and yearly percentage changes in retail sales by business type taken from the July Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from June to July in the first sub-column, and then the year over year percentage change for those businesses since last July in the 2nd column; the second pair of columns gives us the revision of last month’s June advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the May to June change under "May 2019 (r)evised" and the revised June 2018 to June 2019 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance June sale estimates, before this month's revision, is here....

July 2019 retail sales table

To compute July's real personal consumption of goods data for national accounts from this July retail sales report, the BEA will use the corresponding price changes from the July consumer price index, which we reviewed earlier….to estimate what they will find, we’ll first pull out the usually volatile sales of gasoline from the other totals...from the third line on the above table, we can see that July retail sales excluding the 1.8% jump in sales at gas stations were up by 0.6%....then, subtracting the figures representing the 0.6% increase in grocery & beverage sales and the 1.1% increase in food services sales from that total, we find that core retail sales were up by somewhat more than 0.5% for the month...since the July CPI report showed that the the composite price index of all goods less food and energy goods was 0.2% higher in July, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show an increase of about 0.3% for the month...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were down 0.6%, the July price index for transportation commodities other than fuel was 0.2% higher, which would suggest that real sales at auto & parts dealers were 0.8% lower once price increases are taken into account... similarly, while nominal sales at clothing stores were 0.8% higher in July, the apparel price index was 0.4% higher, which means that real sales of clothing only rose around 0.4%...

In addition to figuring those core retail sales, to make a complete estimate of real July PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do…the July CPI report showed that the food price index was unchanged, as the price index for food purchased for use at home fell 0.1% while the index for food bought away from home was 0.2% higher...thus, while nominal sales at food and beverage stores were 0.6% higher, real sales of food and beverages would have been around 0.7% higher in light of the 0.1% decrease in prices…meanwhile, the 1.1% increase in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants only rose around 0.9% during the month...at the same time, while sales at gas stations were up 1.8%, there was concurrently a 2.5% increase in the price of gasoline during the month, which would suggest that real sales of gasoline were actually on the order of 0.7% lower, with a caveat that gasoline stations sell more than gasoline, and we haven’t accounted for those other sales…by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for July will show that real personal consumption of goods rose by around 0.3% in July, after rising by a revised 0.3% in June, rising by a revised 0.6% in May and by 0.6% in April, after rising 1.9% in March, falling by 0.9% in February and rising by 1.7% in January...at the same time, the 0.9% increase in real sales at bars and restaurants should have a notable positive impact on June's real personal consumption of services...

Industrial Production Down 0.2% in July After Prior Months Revised Lower

The Fed's G17 release on Industrial production and Capacity Utilization for July indicated that industrial production fell by 0.2% in July after rising by a revised 0.2% in both May and in June...however, after revisions, industrial production is now up just 0.5% from a year ago, as compared to last month's 1.3% year over year increase...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 109.2 in July from 109.4 in June, which was revised from the 109.6 reported for June a month ago...at the same time, the May reading for the IP index was revised down from 109.6 to 109.2, and the April reading for the index was revised down from 109.2 to 109.0....

The manufacturing index, which accounts for more than 77% of the total IP index, decreased by 0.4% to 104.7 in July, after June's manufacturing index was revised from 105.2 to 105.1, May's manufacturing index was revised from 104.8 to 104.5, and April's manufacturing index was revised from 104.6 to 104.3, while the March and the February manufacturing indexes remained unrevised at 105.2 and 105.3 respectively...hence, the manufacturing index is down 0.5% from a year ago, having fallen 1.2% since December....meanwhile, the mining index, which includes oil and gas well drilling, fell from 133.6 in June to 131.2 in July, which was still 5.5% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 3.1 to 104.9 in July, after the June utility index was revised from 101.9 to 101.7 and the May index was revised from 105.7 to 105.2...with an equivalently hot July in 2018, the utility index is only 0.3% above its year ago reading of 104.6..

This report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell from 77.8 in June to 77.5 in July, after capacity utilization for June was revised from 77.9% to 77.8%, and after capacity utilization for April and May was revised lower as well....capacity utilization by NAICS durable goods production facilities fell from 75.9 in June to 75.6 in July, while capacity utilization for non-durables producers fell from 76.6% to 76.1% at the same time....meanwhile, capacity utilization for the mining sector fell to 89.1% in July from 91.2% in June, which was originally reported as 91.5%, while utilities were operating at 76.6% of capacity during July, up from their 74.5% of capacity during June, a figure that was originally reported at 74.6%...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....

New Housing Starts Reported Lower in July; Building Permits Higher

The July report on New Residential Construction (pdf) from the Census Bureau estimated that the widely watched count of new housing units started in July was at a seasonally adjusted annual rate of 1,191,000, which was 4.0 percent  (±8.0 percent)* below the revised June estimated annual rate of 1,241,000 housing units started, but was 0.6 percent (±8.2 percent)* above last July's pace of 1,184,000 housing starts annually....the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, July's housing starts could have been up by 4.0% or down by as much as 12.0% from those of June, with even larger revisions eventually possible...in this report, the annual rate for June housing starts was revised down from the 1,253,000 reported last month to 1,241,000, while May starts, which were first reported at a 1,269,000 unit annual rate, were revised from last month's initial revised figure of 1,265,000 annually to an annual rate of 1,264,000 with this report....

Those annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by Census field agents, which estimated that 113,700 housing units were started in July, down from the 116,600 units started in June...of those housing units started in July, an estimated 84,800 were single family homes and 27,800 were units in structures with more than 5 units, up from the revised 83,400 single family starts in June, but down from the 32,300 units started in structures with more than 5 units in June...

As we've pointed out previously, 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 July, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,336,000 housing units per year, which was 8.4 percent (±1.1 percent) above the revised June annual rate of 1,232,000 permits, and was 1.5 percent (±1.4 percent) above the rate of building permit issuance in July a year earlier...the annual rate for housing permits issued in June was revised from 1,220,000 to 1,232,000....

Again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected by canvassing census agents, which showed permits for 120,600 housing units were issued in July, up from the revised estimate of 111,000 new permits issued in June...the July permits included 79,000 permits for single family homes, up from 75,100 single family permits in June, and 37,400 permits for housing units in apartment buildings with 5 or more units, up from 31,900 such multifamily permits a month earlier... for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decline to 1.191 Million Annual Rate in July and Comments on July Housing Starts.

June Business Sales Up 0.1%, Business Inventories Up 0.1%, Lower than Estimated by the BEA

Following the release of the July retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for June(pdf), which incorporates the revised June retail data from that July retail report and the earlier published 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 $1,460.1 billion in June, up 0.1 percent (±0.2%)* from May revised sales, and up 1.3 percent (±0.4 percent) from June sales of a year earlier...note that total May sales were revised from the originally reported $1,461.4 billion to $1,458.2 billion, now down 0.1% from April, rather than up 0.2% as had previously been reported....manufacturer's adjusted sales were up 0.4% to $506,153 million in June, and retail trade sales, which exclude restaurant & bar sales from the revised June retail sales reported earlier, were up 0.3% to $455,392 million, while wholesale sales fell 0.3% to $498,539 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,035.7 billion at the end of June, virtually unchanged (±0.1 percent)* from May, but 5.2 percent (±0.4 percent) higher than in June a year earlier...the value of end of May inventories was revised down from the $2,036.4 billion reported last month to $2,035.8 billion...seasonally adjusted inventories of manufacturers were estimated to be valued at $695,585 million at the end of June, 0.2% higher than those at the end of May, inventories of retailers were valued at $661,444 million, 0.3% less than in May, while inventories of wholesalers were estimated to be valued at $678,669 million at the end of June, statistically unchanged from May...

The Key source data and assumptions that accompanied the release of the advance estimate of 2nd quarter GDP indicates that the BEA had assumed that total seasonally adjusted June manufacturing and trade inventories (on a Census basis) would increase by $3.1 billion from the previously published May figures...since this report shows that total June inventories increased by $0.1 billion while May inventories were revised down by $0.6 billion at the same time, that means that the advance estimate of 2nd quarter GDP overestimated end of June inventories by $3.6 billion, or at an annual rate of $14.4...assuming there is no major change relating to the inflation adjustment on those inventories, a revision to reflect these new figures would be enough to subtract about 0.28 percentage points from 2nd quarter GDP, when the 2nd estimate is released at the end of August...

 

(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, August 11, 2019

July’s producer prices, June’s wholesale inventories & JOLTS

Agency issued reports released this past week included the July Producer Price Index and the Job Openings and Labor Turnover Survey (JOLTS) for June, both from the Bureau of Labor Statistics, and the June report on Wholesale Trade, Sales and Inventories from the Census Bureau...in addition, the Fed released the Consumer Credit Report for June, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $14.4  billion, or at a 4.2% annual rate, as non-revolving credit expanded at a 5.8% rate to $3,030.6 billion while revolving credit outstanding contracted at a 0.1% rate to $1,071.5 billion...

Privately issued reports included the July Non-Manufacturing Report On Business from the Institute of Supply Management, which saw the NMI (non-manufacturing index) fall to 53.7% in July, from 55.1% in June, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in July than in June, and the Mortgage Monitor for June (pdf) from Black Knight Financial Services, which indicated that 3.73% of mortgages were delinquent in June, up from 3.36% delinquent in May, but down from the 3.74% delinquency rate in May 2018, and that 0.49% of mortgages remained in the foreclosure process in June, up from 0.49% of all mortgages in May but down from 0.56% a year ago...June's near 11% jump in mortgage delinquencies was one of the top five such single-month increases in the past decade and one of the top 15 among records going back to 2000....

Producer Price Index Rose 0.2% July, Largely On Higher Energy Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.2% in July, as prices for finished wholesale goods increased 0.4%, while margins of final services providers decreased by 0.1%...that followed a June report that indicated the PPI rose 0.1%, as prices for finished wholesale goods decreased 0.4%, while margins of final services providers increased by 0.4%, a May report that indicated the PPI was also 0.1% higher, as prices for finished wholesale goods averaged 0.2% lower while average margins of final services providers rose 0.3%, a revised April report that now has the PPI 0.3% higher, with prices for finished wholesale goods and average margins of final services providers both 0.3% higher, and a revised March report that showed the PPI had increased by 0.4%, with prices for finished wholesale goods up 1.0% and margins of final services providers now up 0.1%....on an unadjusted basis, producer prices are 1.7% higher than a year ago, same as had been indicated by last month's report...meanwhile, the core producer price index, which excludes food, energy and trade services, was down 0.1% for the month, and is now only 1.7% higher than in June a year ago, down from the 2.1% YoY increase shown in June...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.4% higher in July, after being 0.4% lower in June, 0.2% lower in May, 0.3% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, 0.6% lower in December, 0.5% lower in November, 0.8% higher in October, and 0.1% lower in September of 2018....the finished goods index rose in July because the price index for wholesale energy was 2.3% higher, after falling by 3.1% in June and by 1.0% in May, after rising by a revised 2.2% in April and a revised 5.2% in March, while the price index for wholesale foods rose 0.2% in July after rising 0.6% in June, and while the index for final demand for core wholesale goods (excluding food and energy) rose 0.5 after being unchanged for three months in a row....wholesale energy prices were higher on a 5.2% increase in wholesale prices for gasoline, a 7.9% jump in wholesale prices for diesel fuel, and 8.0% higher wholesale prices for home heating oil, while the wholesale food price index rose on a 6.2% increase in the wholesale price index for grains, a 3.0% increase in wholesale prices for fish and shellfish, and a 1.8% increase in wholesale prices for beef and veal....among wholesale core goods, the wholesale price index for office and store machines and equipment rose 12.7% , wholesale prices for mining machinery and equipment rose 1.6%, and wholesale prices for cigarettes rose 0.8%..

At the same time, the index for final demand for services fell 0.1% in July, after rising 0.4% in June, 0.3% in May, a revised 0.3% in April, and a revised 0.1% in March, as the index for final demand for trade services rose 0.2% in July and the index for final demand for transportation and warehousing services also rose 0.2%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.3% lower.... among trade services, seasonally adjusted margins for auto parts and tire retailers rose 6.2%, margins for major household appliance retailers rose 6.1%, margins for flooring and floor coverings retailers rose 3.0%, and margins for machinery and vehicle wholesalers rose 3.0%, while margins for fuels and lubricants retailers fell 9.9%... among transportation and warehousing services, margins for air transportation of freight rose 0.9% and margins for airline passenger services rose 1.5%...among the components of the core final demand for services index, margins for guestroom rentals fell 4.3% while margins for traveler accommodation services fell 3.6%..

This report also showed the price index for intermediate processed goods rose 0.2% in July, after falling 1.1% in June and 0.2% in May, after being unchanged in April (revised), and rising a revised 0.6% in March....the price index for intermediate energy goods rose 2.2%, as refinery prices for gasoline rose 5.2% and refinery prices for diesel fuel rose 7.9%, while prices for natural gas sold to electric utilities fell 5.1%...however, prices for intermediate processed foods and feeds fell 0.1%, as the producer price index for prepared animal feeds fell 1.6% and producer prices for processed poultry fell 0.7%... in addition, the core price index for intermediate processed goods less food and energy fell 0.2% as producer prices for steel mill products decreased 2.6% and producer prices for hardwood lumber fell 2.4%... prices for intermediate processed goods are now 2.0% lower than in June a year ago, the third consecutive year over year decrease following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods rose 1.6 in July, after falling 3.3% in June, falling 5.1% in May, rising a revised 3.1% in April, but after falling a revised 0.4% in March (which had been reported as a 2.3% price increase as recently as two months ago)....that was as the July price index for crude energy goods rose 2.8% as crude oil prices rose 10.9%, while the price index for unprocessed foodstuffs and feedstuffs fell 0.2% as a 16.1% decrease in producer prices for slaughter hogs and a 7.6% decrease in producer prices for alfalfa hay were partially offset by a 10.3% increase in producer prices for corn....at the same time, the index for core raw materials other than food and energy materials rose 1.9%, as wastepaper prices rose 6.3% and prices for nonferrous metal ores rose 5.5%...this raw materials index is still 10.4% lower than a year ago, as the year over year change on this index has been negative all year...

Lastly, the price index for services for intermediate demand fell 0.2% in July, after rising 0.2% in June, being unchanged in May, rising a revised 0.2% in April,  a revised 0.5% in March, being unchanged in February, rising 0.2% in January, and rising 0.1% in December and in November...the price index for intermediate trade services was 0.8% lower, as margins for intermediate paper and plastic product wholesalers fell 6.1% and margins for intermediate machinery and equipment parts and supplies wholesalers fell 2.2%…on the other hand, the index for transportation and warehousing services for intermediate demand rose 0.3%, as the intermediate index for courier, messenger, and U.S. postal services rose 0.8% and the price index for pipeline transportation of petroleum products rose 3.6%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing fell 0.1%, as the index for business loans (partial) fell 3.7% and the intermediate index for traveler accommodation services fell 3.6% while the price index for waste collection rose 3.5%....over the 12 months ended in June, the year over year  price index for services for intermediate demand, which has never turned negative on an annual basis, is still 2.0% higher than it was a year ago...

Job Openings Lower in June; Hiring, Layoffs, and Job Quitting Also Down

The Job Openings and Labor Turnover Survey (JOLTS) report for June from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 36,000, from 7,384,000 in May to 7,348,000 in June, after May job openings were revised higher, from 7,323,000 to 7,384,000...June jobs openings were also 0.6% lower than the 7,393,000 job openings reported in June a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.7 in May to 4.6% in June, and was also down from the 4.7% rate in June of a year ago...the greatest drop in June job openings was in bars and restaurants, where openings fell by 81,000 to 835,000, while job openings in retail rose by 73,000 to 888,000 (see table 1 for details on other categories of job openings)...like most BLS releases, the press release for 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 June, seasonally adjusted new hires totaled 5,702,000, down by 58,000 from the revised 5,760,000 who were hired or rehired in May, as the hiring rate as a percentage of all employed was unchanged at 3.8%, while it remained lower than the 3.9% hiring rate in June a year earlier (details of hiring by industry since January are in table 2)....meanwhile, total separations decreased by 76,000, from 5,557,000 in May to 5,481,000 in June, as the separations rate as a percentage of the employed fell from 3.7% to 3.6%, which was also down from the 3.7% separations rate of June a year ago (see table 3)...subtracting the 5,481,000 total separations from the total hires of 5,702,000 would imply an increase of 221,000 jobs in June, somewhat more than the revised payroll job increase of 193,000 for June reported by the July establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,433,000 of us voluntarily quit their jobs in June, down from the revised 3,478,000 who quit their jobs in May, while the 'quits rate', widely watched as an indicator of worker confidence, remained unchanged at 2.3% of total employment, same as the quits rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,702,000 were either laid off, fired or otherwise discharged in June, down by 71,000 from the revised 1,773,000 who were discharged in May, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.2% a year earlier (see table 5)...meanwhile, other separations, which includes retirements and deaths, were at 345,000 in June, up from 303,000 in May, for an 'other separations rate’ of 0.2%, same as in May and as in June 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 easily accessed using the links to tables at the bottom of the press release...

June Wholesale Sales Down 0.3% After May Sales Revised 0.7% Lower; Inventories Virtually Unchanged

The June report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $498.5 billion, down 0.3 percent (+/-0.4%)* from the revised May level, and down 0.2 percent (±1.1 percent)* from wholesale sales of June 2018... the May preliminary estimate was revised down $3.6 billion or 0.7% to $499.8 billion from the $503.4 billion sales reported last month, which is now 0.6% less than April's sales, rather than a 0.1% increase...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this June report estimated that wholesale inventories were valued at a seasonally adjusted $678.7 billion at month end, virtually unchanged (+/-0.2%)* from the revised May level but 7.6 percent (±1.1 percent) higher than in June a year ago, with the May preliminary estimate revised higher, from $678.1 billion to $678.4 billion at the same time, still a 0.4% increase from April....

In the advance report on 2nd quarter GDP of two weeks ago, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted wholesale inventories were valued at $680.02 billion at the end of June, up from $678.39 billion in May....that's $1.35 billion more than the $678.67 billion that this report shows, which would imply that the quarterly change in 2nd quarter inventories was overestimated at roughly a $5.4 billion annual rate...assuming there's no revision in the inflation adjustment to those inventories, that would mean that the growth rate of 2nd quarter GDP was overestimated by more than 0.10 percentage points, just based on what this report shows...

 

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

Sunday, August 4, 2019

July’s jobs report; June’s income and outlays, trade deficit, construction spending and factory inventories

The major economic releases from the past week included the Employment Situation Summary for July from the Bureau of Labor Statistics and four June reports that included metrics which were either estimated or included in last week's release of 2nd quarter GDP: the June report on Personal Income and Spending from the Bureau of Economic Analysis, the BEA report on our International Trade for June, and the June report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for June, both from the Census Bureau...This week also saw the last regional Fed manufacturing survey for July: the Texas area manufacturing survey from the Dallas Fed, which also includes southeast New Mexico and northeast Louisiana as well as Texas, reported its broadest general business activity index rose from -12.1 in June to -6.3 in June, indicating that activity among Texas manufacturers is contracting at a slower pace...

Privately issued reports included the ADP Employment Report for July, the light vehicle sales report for July from Wards Automotive, which estimated that vehicles sold at a 16.82 million annual rate in July, down from the 17.21 million annual rate in June, but up from the 16.68 million annual rate in July a year ago, and the Case-Shiller house price indexes for May from S&P Case-Shiller, who reported that their national home price index was 3.4% higher than in the same month's report a year ago...This week also saw the widely followed manufacturing purchasing manager's survey from the Institute for Supply Management (ISM): the July Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 51.2% in July, down from 51.7% in June, suggesting very slow growth among manufacturing firms nationally... 

Employers Add 164,000 Jobs in July, Manufacturing Workweek at a 66 Month Low; U6 Unemployment Rate at a 19 Year Low

The Employment Situation Summary for July from the Bureau of Labor Statistics indicated that payroll job growth was a bit below average, while the labor force participation rate and the employment to population ratio both rose because more of those not previously counted found work…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 164,000 jobs in July, after the payroll job increase for May was revised down from 72,000 jobs to 62,000, and the June jobs increase was revised down from 224,000 jobs to 193,000, and hence the combined number of jobs created over those two months was 41,000 less than was previously reported....the unadjusted data shows that there were actually 1,059,000 fewer payroll jobs extant in July than in June, as the large seasonal job cutbacks associated with the end of the school year were normalized by the seasonal adjustments…

Seasonally adjusted job increases were spread through throughout the private goods producing and service sectors and government, with only the information sector seeing a statistically significant loss of 10,000 jobs, as there were 5,900 fewer jobs in the motion picture and sound recording industries...employment in health care and social assistance rose by 50,400, with the addition of 12,600 jobs in individual and family social services and 10,700 jobs in home health care services....the broad professional and business services category added 38,000 jobs, as 10,600 were added in computer systems design and management and technical consulting services added 5,800...financial industries added another 18,000 jobs, with 11,400 more employed by insurance carriers and related activities...meanwhile, employment in manufacturing increased by 16,000, mostly in the manufacture of durable goods, with 9,500 of those jobs in transportation equipment factories...the various branches of government also saw their employment increase by 16,000, as local school districts retained 11,700 more workers than they normally would in July...in addition, private educational services added 15,700 more jobs after seasonal adjustment...the leisure and hospitality sector also added a seasonally adjusted 10,000 jobs, with 15,400 more working in bars and restaurants than would be expected at this time of year.....meanwhile, the other major sectors, including mining and logging, construction, wholesale sales, retail sales, transportation and warehousing, and utilities all saw smaller changes in payroll employment over the month…

The establishment survey also showed that average hourly pay for all employees rose by 8 cents an hour to $27.98 an hour, after it had increased by a revised 8 cents an hour in June; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $23.46 an hour...employers also reported that the average workweek for all private payroll employees decreased by a tenth of an hour to 34.3 hours, while hours for production and non-supervisory personnel also fell by a tenth of an hour to 33.5 hours, a 27 month low....at the same time, the average manufacturing workweek fell by three-tenths of an hour to 40.3 hours, the lowest since January 2014, while factory overtime was down by two-tenths of an hour to 3.2 hours..

Meanwhile, the seasonally adjusted extrapolation from the July household survey estimated that the number of those employed rose by an estimated 283,000 to 157,288,000, while the similarly estimated number of those unemployed rose by 88,000 to 6,063,000; which therefore meant that July saw a net increase of 370,000 in the total labor force...since the working age population had grown by 188,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 183,000 to 95,874,000....hence, the 370,000 increase of those in the labor force was enough to raise the labor force participation rate from 62.9% in June to 63.0% in July....at the same time, the increase in number employed vis-a-vis the increase in the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.1% to 60.7%...however, the increase in those unemployed vis-a-vis the increase in the total labor force meant the unemployment rate was unchanged at 3.7%....meanwhile, the number who reported they were involuntarily working part time fell by 363,000 to 3,984,000 in July, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.2% in June to 7.0% in July, the lowest since December 2000..

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.. 

June Personal Income Up 0.4%, Personal Spending Up 0.2%; Savings Jumps 30% on Annual Revision

Like the GDP report last week, the June Income and Outlays report also went through annual revision, with revisions from January 2014 through May 2019 for all of the metrics it reports, including personal consumption expenditures (PCE), the personal income and disposable personal income data, our savings and savings rate, and the PCE price index, the inflation gauge the Fed targets....since all the revisions made to personal consumption expenditures had already been incorporated into the GDP revisions that we looked at last week, today we'll only consider those revisions from recent months that are relevant to putting the June change in perspective...

Also like the GDP report, all the dollar values reported in this release are seasonally adjusted and at an annual rate, ie, they tell us what income, spending and saving would be for an entire year if June's adjusted income and spending were extrapolated over a whole year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from May to June....thus, when the opening line of the news release for this report tell us "Personal income increased $83.6 billion (0.4 percent) in June..", they mean that the annualized figure for all types of personal income in June, $18,675.9 billion, was $83.6 billion, or well more than 0.4% more than the $18,592.3 billion annualized personal income figure for May; the actual increase in personal income in June over May is not given....similarly, disposable personal income, which is income after taxes, also increased by more than 0.4%, from an annual rate of $16,384.7 billion in May to an annual rate of $16,454.5 billion in June...the contributors to the June increase in personal income and disposable personal income can be viewed in table 1 of the Full Release & Tables (pdf) for this release, also as annualized amounts, and were led by a $48.4 billion increase to $9,355.8 billion annually in wages and salaries and a $13.4 billion increase to $3,168.1 billion annually in personal transfer receipts from government programs….note that with the annual revision, the annualized figure for May personal income was revised from $18,183.5 billion up to $18,592.3 billion, and disposable personal income was revised from the originally reported 16,028.8 billion annually to $16,384.7 billion...

Meanwhile, seasonally adjusted personal consumption expenditures (PCE) for June, which were included in the change in real PCE in 2nd quarter GDP, rose at a $41.0 billion annual rate to a rate of $14,549.6 billion in consumer spending annually, an increase of a bit less than 0.3% from May's PCE, which itself was revised from the previously reported annual rate of $14,468.4 billion to $14,508.6  billion....total personal outlays for June, which includes interest payments, and personal transfer payments in addition to PCE, rose by an annualized $62.7 billion to $15,118.5 billion, which left personal savings, which is disposable personal income less total outlays, at a $1,336.0 billion annual rate in June, up from the revised $1,310.4 billion in personal savings in May...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, was at 8.1% in June, up from 8.0% in May...we should note that as a result of the large upward revision to personal income and the smaller upward revision to personal consumption expenditures, that savings rate has jumped by 2.0% from the 6.1% previously published for May....in May's report (pdf), before the annual revision, personal savings were reported at a $985.4 billion rate; moreover, the reported savings rate of May a year earlier was reported at 3.2%, with personal savings reported at a $482.0 annual rate, so we have had 2 consecutive annual revisions which have more than doubled the savings rate...

While our personal consumption expenditures accounted for 69.6% of our second quarter GDP, before they were included in the national measurement of the change in our output they were first adjusted for inflation, to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption.....that's done with the price index for personal consumption expenditures, which is included in this report, which is a chained price index based on 2012 prices = 100....from Table 9 in the pdf for the June release, we find that that index rose from 109.514 in May to 109.646 in June, giving us a month over month inflation rate of 0.12053%, which BEA reports as an increase of +0.1%; at the same time, Table 11 gives us a year over year PCE price index rounded to an increase of 1.4%, and a core price increase, excluding food and energy, of 1.6% for the past year, both somewhat below the Fed's inflation target....applying the June inflation adjustment to the change in June PCE shows that real PCE was up 0.162% in June, which BEA reports as a 0.2% change in their rounded tables...note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2012 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another’s....those results are shown in tables 7 and 8 of the PDF, where you'll see the quarterly figures given are identical to those shown in table 3 of last week's GDP report, and which were used to compute the contribution of real personal consumption of goods and services to GDP.. 

June Trade Deficit Down 0.3% as Lower Imports of Oil & Cellphones Offset Falling Exports

Our trade deficit decreased by 0.3% in June as the value of both our exports and our imports decreased, but the value of our imports decreased by a bit more....the Commerce Department report on our international trade in goods and services for June indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $0.2 billion to $55.154 billion in June from a revised May deficit of $55.344 billion, which had previously been reported at $55.5 billion...the value of our June exports fell by $4.4 billion to $206.3 billion on a $3.9 billion decrease to $137.1 billion in our exports of goods and a $0.5 billion decrease to $69.2 billion in our exports of services, while our imports fell $4.6 billion to $261.5 billion on a $4.7 billion decrease to $212.3 billion in our imports of goods which was partially offset by a $0.1 billion increase to $49.2 billion in our imports of services...export prices were on average 0.7% lower in June, so the month's change in real exports was greater than their nominal change by that percentage, while import prices were 0.9% lower, meaning that our real imports were likewise greater than their nominal value by that percentage..

The decrease in our June exports resulted from lower exports of consumer goods, capital goods, and automotive vehicles, which were slightly offset by an increase in our exports of industrial supplies and materials....referencing the Full Release and Tables for June (pdf), in Exhibit 7 we find that our exports of consumer goods fell by $1,935 million to $16,171 million on a $793 million decrease in our exports of gem diamonds, $476 million decrease in our exports of pharmaceuticals, and a $353 million decrease in our exports of jewelry, and that our exports of capital goods fell by $1,190 million to $44,858 million on decreases of $381 million in our exports of computer accessories, $228 million in our exports of industrial machines other than those itemized separately, and $219 million in our exports of telecommunications equipment, and that our exports of automotive vehicles, parts, and engines fell by $512 million to $13,284 million on a $356 million decrease in our exports of new and used passenger cars and a $215 million decrease in our exports of trucks, buses, and special purpose vehicles...in addition, our exports of other goods not categorized by end use fell by $422 million to $5,519 million....slightly offsetting those decreases, our exports of industrial supplies and materials rose by $202 million to $44,574 million on increases in our exports of refined products and raw materials, and our exports of foods, feeds and beverages rose by $75 million to $12,046 million on a $339 million increase in our exports of soybeans...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that lower imports of cell phones, crude oil, and other petroleum products were among the reasons for the June decrease in our imports...our imports of industrial supplies and materials decreased by $3,208 million to $43,139 million on a $1,371 million decrease in our imports of crude oil, a $963 million decrease in our imports of petroleum products other than fuel oil, and a $333 million decrease in our imports of fuel oil...in addition, our imports of consumer goods fell by $915 million to $54,733 million on a $1,364 million decrease in our imports of cellphones and a $250 million decrease in our imports of furniture and similar household goods…in addition, our imports of automotive vehicles, parts and engines fell by $600 million to $32,633 million on a $247 million decrease in our imports of automotive parts other than tires, engines, bodies and chassis, our imports of capital goods fell by $335 million to $56,913 million on $389 million lower imports of civilian aircraft and $221 million lower imports of computer accessories, and our imports of foods, feeds, and beverages fell by $87 million to $12,699 million...partially offsetting the decreases in those categories, our imports of other goods not categorized by end use rose by $722 million to $10,495 million.

The Full Release and Tables pdf for this month's report also gives us surplus and deficit details on our goods trade with selected countries:

The June figures show surpluses, in billions of dollars, with South and Central America ($4.8), Hong Kong ($2.3), Brazil ($1.3), and United Kingdom ($0.1). Deficits were recorded, in billions of dollars, with China ($30.2), European Union ($15.9), Mexico ($9.2), Japan ($6.2), Germany ($5.2), Canada ($3.3), Italy ($2.6), France ($1.9), Taiwan ($1.7), India ($1.6), South Korea ($1.4), OPEC ($0.3), Saudi Arabia ($0.3), and Singapore ($0.1).

  • The deficit with the European Union decreased $1.0 billion to $15.9 billion in June. Exports decreased $0.5 billion to $26.7 billion and imports decreased $1.5 billion to $42.7 billion.
  • The surplus with Brazil increased $0.8 billion to $1.3 billion in June. Exports increased $0.3 billion to $3.9 billion and imports decreased $0.5 billion to $2.6 billion.
  • The balance with Singapore shifted from a surplus of $0.6 billion to a deficit of $0.1 billion in June. Exports decreased $0.2 billion to $2.5 billion and imports increased $0.4 billion to $2.6 billion. *

In the advance report on 2nd quarter GDP released last week, our June trade deficit was estimated based on the Advance Report on our International Trade in Goods which was also released last week, just before the GDP release...that report estimated that our June goods trade deficit was at $74,171 million on a Census basis, down from the $75,049 million goods deficit reported in May...this report revises those figures and shows that our actual goods trade deficit in June was $75,121 million on a balance of payments basis, and $74,161 million on a Census basis, and that the May goods deficit was revised to $74,802 million on a Census basis...together, those revisions from the previously published data mean that the 2nd quarter goods trade deficit was roughly $257 million less than the estimate that was used in last week's GDP report, or a bit over $1.0 billion more at an annual rate, which would indicate a upward revision of roughly 0.02 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August...note that the BEA's key source data and assumptions reports services at an annual rate which this report does not, but that May’s exports of services were revised down by $0.1 billion and May’s imports of services were revised down by $0.1 billion at the same time, revisions which should on net cancel each other out...

Construction Spending Fell 1.3% in June after Prior Months Were Revised Higher

The Census Bureau report on construction spending for June (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,287.0 billion annually if extrapolated over an entire year, which was 1.3 percent (±1.2 percent) below the revised annualized estimate of $1,332.2 billion of construction spending for May and 2.1 percent (±1.6 percent) below the estimated annualized level of construction spending in June of last year...the May annualized construction spending estimate was revised more than 0.7% higher, from $1,293.9 billion to $1,303.4 billion, while the annual rate of construction spending for April was revised nearly 0.5% higher, from $1,304.0 billion to $1,310.1 billion....

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $962.9 billion, 0.4 percent (±0.8 percent)* below the revised May estimate of $967.0 billion. Residential construction was at a seasonally adjusted annual rate of $507.2 billion in June, 0.5 percent (±1.3 percent)* below the revised May estimate of $509.7 billion. Nonresidential construction was at a seasonally adjusted annual rate of $455.7 billion in June, 0.3 percent (±0.8 percent)* below the revised May estimate of $457.3 billion.
  • Public Construction: In June, the estimated seasonally adjusted annual rate of public construction spending was $324.1 billion, 3.7 percent (±2.0 percent) below the revised May estimate of $336.4 billion. Educational construction was at a seasonally adjusted annual rate of $73.0 billion, 6.8 percent (±2.0 percent) below the revised May estimate of $78.3 billion. Highway construction was at a seasonally adjusted annual rate of $101.9 billion, 6.4 percent (±5.4 percent) below the revised May estimate of $108.9 billion.

Construction spending for April and May was higher than what was reported by the BEA in the advance report for 2nd quarter GDP last week, while construction spending for June was lower...as we saw above, annualized construction spending for April was revised $6.1 billion higher, and annualized construction spending for May was revised $9.5 billion higher...in reporting 2nd quarter GDP, the Excel file with key source data and assumptions accompanying the report indicated on line 84 that they had estimated that the value of June nonresidential construction would be $0.7 billion greater than that of the previously reported May figure, that June residential construction on lines 110 and 111 would be $1.3 billion greater than that of the reported May figure, and that the value of June public construction shown on line 200 would be unchanged from the previously published May figure...hence, the figures used by the BEA for total June construction in the 2nd quarter GDP report were $2.0 billion greater than the previously published May figure...with June construction now reported down $16.4 billion from a May figure that was revised $9.5 billion higher, that means that the BEA had overestimated annualized June construction spending by $8.9 billion when reporting 2nd quarter GDP...thus, after averaging the revisions to the three months, the total revised annualized figure for 2nd quarter construction spending would thus be $2.2 billion more than the figures used by the BEA when computing 2nd quarter GDP, implying they’d need an upward revision of roughly 0.05 percentage points to 2nd quarter GDP when the 2nd estimate is released at the end of August..

Factory Shipments Up 0.4% in June, Factory Inventories Up 0.2%

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $3.1 billion or 0.6 percent to $493.8 billion in June, following a drop of 1.3% to $490.7 billion in May, which was revised from the 0.7 percent decrease to $493.6 billion reported for May 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 a revised update to the advance report on durable goods we reported on last week...on those revisions, the Census Bureau's summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that here:

  • Summary: New orders for manufactured goods in June, up following two consecutive monthly decreases, increased $3.1 billion or 0.6 percent to $493.8 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent May decrease. Shipments, up four of the last five months, increased $1.9 billion or 0.4 percent to $506.2 billion. This followed a 0.1 percent May increase. Unfilled orders, down four of the last five months, decreased $8.0 billion or 0.7 percent to $1,160.2 billion. This followed a 0.8 percent May decrease. The unfilled orders‐to‐shipments ratio was 6.53, down from 6.62 in May. Inventories, up nine of the last ten months, increased $1.3 billion or 0.2 percent to $695.6 billion. This followed a 0.2 percent May increase. The inventories‐to‐shipments ratio was 1.37, down from 1.38 in May.
  • New orders for manufactured durable goods in June, up following two consecutive monthly decreases, increased $4.5 billion or 1.9 percent to $245.4 billion, down from the previously published 2.0 percent increase. This followed a 2.3 percent May decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $2.9 billion or 3.7 percent to $80.4 billion. New orders for manufactured nondurable goods decreased $1.3 billion or 0.5 percent to $248.4 billion.
  • Shipments of manufactured durable goods in June, up two consecutive months, increased $3.2 billion or 1.3 percent to $257.7 billion, down from the previously published 1.4 percent increase. This followed a 0.5 percent May increase. Transportation equipment, also up two consecutive months, led the increase, $2.6 billion or 3.0 percent to $88.7 billion. Shipments of manufactured nondurable goods, down two consecutive months, decreased $1.3 billion or 0.5 percent to $248.4 billion. This followed a 0.3 percent May decrease. Petroleum and coal products, also down two consecutive months, drove the decrease, $2.2 billion or 4.1 percent to $52.1 billion.
  • Unfilled orders for manufactured durable goods in June, down four of the last five months, decreased $8.0 billion or 0.7 percent to $1,160.2 billion, unchanged from the previously published decrease. This followed a 0.8 percent May decrease. Transportation equipment, also down four of the last five months, drove the decrease, $8.3 billion or 1.0 percent to $792.5 billion.
  • Inventories of manufactured durable goods in June, up eleven of the last twelve months, increased $1.4 billion or 0.3 percent to $426.0 billion, unchanged from the previously published increase. This followed a 0.5 percent May increase. Transportation equipment, also up eleven of the last twelve months, led the increase, $1.2 billion or 0.9 percent to $139.7 billion. Inventories of manufactured nondurable goods, down three consecutive months, decreased $0.1 billion or virtually unchanged to $269.6 billion. This followed a 0.2 percent May decrease. Petroleum and coal products, down two consecutive months, drove the decrease, $1.0 billion or 2.4 percent to $40.0 billion. By stage of fabrication, June materials and supplies increased 0.1 percent in durable goods and increased 0.4 percent in nondurable goods. Work in process increased 0.5 percent in durable goods and decreased 1.3 percent in nondurable goods. Finished goods increased 0.5 percent in durable goods and increased 0.2 percent in nondurable goods. 

The BEA's key source data and assumptions (xls) for the advance estimate of second quarter GDP indicates on line 143 that they had estimated that the value of non-durable goods inventories would be unchanged before any inflation adjustment in June, while this report indicates that total non-durable goods inventories actually decreased in value by $0.1 billion, which would indicate that they overestimated the change in the 2nd quarter GDP inventory component by about $0.4 billion on an annualized basis, which would suggest that 2nd quarter GDP might have to be revised downwards by 0.01 percentage point to account for what this report shows...note that durable goods inventories, which had also been used as source data for the advance estimate of GDP, were unchanged from the previously published increase with this report...

 

(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…)