Sunday, March 29, 2020

3rd estimate 4th quarter GDP; February’s income and outlays, durable goods, & new home sales

The key economic reports released the past week were the 3rd estimate of 4th quarter GDP and the February report on Personal Income and Spending from the Bureau of Economic Analysis; other widely watched releases included  the advance report on durable goods for February and the February report on new home sales, both from the Census bureau...we also had the release of the Chicago Fed National Activity Index (CFNAI) for February, a weighted composite index of 85 different economic metrics, rose to which rose to +0.16 in February from –0.33 in January, which was revised from the -0.25 reported for January last month...however, the 3 month average of the CFNAI decreased to –0.21 in February from a revised –0.11 in January, which 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 March: 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 rose to +2 in March from -2 in February, still a near zero reading, suggesting a stagnation in that region's manufacturing, and the Kansas City Fed manufacturing survey for March, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to -17 in March, the lowest reading since April 2009, down from 5 in February and from -1 in January, suggesting the onset of a sharper contraction in that region's manufacturing...

4th Quarter GDP Grew at a 2.1% Rate, Unchanged from Second Estimate

The Third Estimate of our 4th Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 2.1% rate in the quarter, statistically unchanged from the 2.1% growth rate reported in the second estimate last month, as personal consumption expenditures were a bit greater than was previously estimated, while subtractions from investment were a bit more and additions to GDP from trade and defense spending were a bit less than was previously estimated....in current dollars, our fourth quarter GDP grew at a 3.5% annual rate, increasing from what would work out to be a $21,542.5 billion a year output rate in the 3rd quarter to a $21,729.1 billion annual rate in the 4th quarter, with the headline 2.1% annualized rate of increase in real output arrived at after an annualized inflation adjustment averaging 1.3%, known in aggregate as the GDP deflator, was computed and applied to the current dollar change of each of the GDP components...

Remember that the GDP 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 changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 3rd estimate of 4th quarter GDP, which can be accessed directly on the BEA's GDP landing page, which also offers links to just the tables on Excel and other technical notes...specifically, we reference table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 1st quarter of 2016; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the components...the pdf for the 4th quarter second estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from a growth rate of 1.7% to an overall 1.8% growth rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 3.2% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated inflation grew at a 1.4% annual rate in the 4th quarter, which was revised from the 1.3% PCE inflation rate reported a month ago...real consumption of durable goods grew at a 2.8% annual rate, which was revised from the 2.6% growth rate shown in the 2nd estimate, and added 0.20 percentage points to GDP, as real consumption of motor vehicles and parts grew at a 5.4% rate and accounted for over 60% of the durable goods increase....however, real consumption of nondurable goods by individuals shrunk at a 0.6% annual rate, revised from the 0.3% contraction rate reported in the 2nd estimate, and subtracted 0.08 percentage points from the 4th quarter’s economic growth rate, as a 1.2% contraction in real consumption of food and beverages and a 2.1% contraction in real consumption of gasoline and other energy goods accounted for most of the shrinkage in non-durables....at the same time, consumption of services grew at a 2.4% annual rate, revised from the 2.2% growth rate reported last month, and added 1.12 percentage points to the final GDP tally, as real consumption of health care services grew at a 4.9% rate and accounted for more than half of the quarter’s growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 6.0% annual rate in the 4th quarter, unrevised from the contraction estimate reported last month, as real private fixed investment shrunk at a 0.6% rate, revised from the 0.5% contraction rate reported in the 2nd estimate, while inventory growth was bit greater than previously estimated...investment in non-residential structures was revised to show contraction at a 7.2% rate, not as deep as the 8.1% contraction rate previously reported, and real investment in equipment contracted at 4.3% rate, revised from the 4.4% contraction rate shown a month ago...meanwhile the quarter's investment in intellectual property products was revised from growth at a 4.0% rate to growth at a 2.8% rate, while at the same time real residential investment was shown to be growing at a 6.5% annual rate, revised from 6.2% in the previous report....after those revisions, the decrease in investment in non-residential structures subtracted 0.21 percentage points from the 3rd quarter's growth rate and the decrease in investment in equipment subtracted 0.25 percentage points from the quarter's growth rate, while growth in investment in intellectual property added 0.13 percentage points to the growth rate of 4th quarter GDP and growth in residential investment added 0.24 percentage points to the growth rate of GDP.....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....

At the same time, growth of real private inventories was revised from the previously reported $13.1 billion in inflation adjusted growth to show that inventory grew at an inflation adjusted $13.0 billion rate….that came after inventories had grown at an inflation adjusted $69.4 billion rate in the 3rd quarter, and hence the (rounded) $56.4 billion negative change in real inventory growth from the 3rd to the 4th quarter subtracted 0.98 percentage points from the 4th quarter's growth rate, same as the subtraction from GDP due to the slower inventory growth reported in the second  estimate....however, since a smaller growth of inventories indicates that less of the goods produced during the quarter were left in a warehouse or sitting on the shelf, their decrease at a $56.4 billion rate conversely meant that real final sales of GDP were actually greater by that much, and hence real final sales of GDP grew at a 3.1% rate in the 4th quarter, same as was shown in the second estimate, in contrast to the real final sales growth rate of 2.1% in the 3rd quarter, when the lack of inventory growth meant that the quarter’s growth in real final sales was the same as that of the quarter's GDP.....

The previously reported increase in real exports was revised a bit higher with this estimate, while the previously reported decrease in real imports was revised lower, and on net the change in our net trade was a slightly smaller addition to GDP rather than was previously reported...our real exports grew at a 2.1% rate rather than the 2.0% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, that growth added 0.24 percentage points to the 4th quarter's growth rate, statistically unrevised from the addition shown in the previous report....meanwhile, the previously reported 8.6% contraction in our real imports was revised to a 8.4% contraction, and since imports are subtracted from GDP because they represent either consumption or investment added to an other GDP component that was not produced here, their decrease conversely added 1.27 percentage points to 4th quarter GDP, rather than the 1.29 percentage point addition shown last month....thus, our improving trade balance added a net of 1.51 percentage points to 4th quarter GDP, rather than the rounded 1.53 percentage point addition that had been indicated by the second estimate..

Finally, there was also a downward revision to real government consumption and investment in this 3rd estimate, as the real growth rate for the entire government sector was revised from growth at a 2.6% rate to growth at a 2.5% rate...real federal government consumption and investment was seen to have grown at a 3.4% rate in this estimate, down from the 3.8% growth rate shown in the second estimate, as real federal outlays for defense grew at a 4.4% rate and added 0.17 percentage points to 4th quarter GDP, revised from the 5.3% growth rate shown previously, while all other federal consumption and investment was revised from a 1.7% growth rate to growth at a 1.9% rate, which added 0.05 percentage points to 4th quarter GDP....meanwhile, real state and local consumption and investment was revised from growth at a 1.9% rate in the second estimate to growth at a 2.0% rate in this estimate, as state and local investment spending grew at a 5.4% rate and added 0.11 percentage points to 4th quarter GDP, while state and local consumption spending grew at a 1.2% rate and also added 0.11 percentage points to GDP...note that government outlays for social insurance are not included in this government GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services...

Personal Income up 0.6% in February, Personal Spending up 0.2%, PCE Price Index up 0.1%

The February report on Personal Income and Outlays from the Bureau of Economic Analysis gives us nearly half the data that will go into 1st quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated....this report also provides us with the nation's personal income data, disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase in a year if February’s adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's 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 January to February...

Hence, when the opening line of the press release for this report tell us "Personal income increased $106.8 billion (0.6 percent) in February", that means that the annualized figure for US personal income in February, $19,095.1 billion, was $106.8 billion, or somewhat less than 0.6% greater than the annualized personal income figure of $18,988.3 billion for January; the actual change in personal income from January to February is not given...similarly, annualized disposable personal income, which is income after taxes, rose by a bit more than 0.5%, from an annual rate of an annual rate of $16,765.1 billion in January to an annual rate of $16,853.8 billion in February...the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in February, the largest contributors to the $106.8 billion annual rate of increase in personal income were a $49.5 billion annualized increase in wages and salaries and a $47.4 billion annualized increase in business & farm proprietors’ income…

For the personal consumption expenditures (PCE) that will be included in 1st quarter GDP, BEA reports that they increased at a $27.7 billion annual rate, or by a tad less than 0.2 percent, as the annual rate of PCE rose from $14,881.2 billion in January to $14,908.8 in February, after the January PCE figure was revised up from the originally reported $14,870.7 billion annually...the current dollar increase in February spending resulted from a $41.0 billion annualized increase to $10,344.1 billion in annualized in spending for services, which was partially offset by a $13.3 billion decrease to $4,564.8 billion in spending for goods, a decrease which was evident in last week's February retail sales report....total personal outlays for February, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $28.4 billion to $15,469.3 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $1,384.5 billion annual rate in February, up from the revised $1,324.3 billion in annualized personal savings in January... as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to an 11 month high of 8.2% in February from January's savings rate of 7.9%... 

Before personal consumption expenditures can be used in the 1st quarter GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption...the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is included in Table 9 in the pdf for this report....that PCE price index rose from 110.685 in January to 110.784 in February, a month over month inflation rate that's statistically 0.08944%, which BEA reports as an increase of 0.1 percent, following a PCE price index increase of 0.1% that was reported for January...then, applying that 0.0894% inflation adjustment to the increase in February PCE shows that real PCE rose by 0.09594% in February, which the BEA also reports as a 0.1% increase......notice that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it gives us that month's annualized real PCE in those same chained 2012 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to that of another....that result is shown in table 7 of the PDF, where we see that February's chained dollar consumption total works out to 13,458.2 billion annually, 0.974% more than January's 13,445.1 billion, statistically the same as the real PCE increase we just computed..

Finally, to estimate the impact of the change in PCE on the change in GDP, we have to compare real PCE from January and February to the the real PCE of the 3 months of the fourth quarter....while this report shows PCE for all those months on a monthly basis, the BEA also provides the annualized chained dollar PCE on a quarterly basis in table 8 in the pdf for this report, where we find that the annualized real PCE for the 3 months of the 4th quarter was represented by 13,413.8 billion in chained 2012 dollars...(note that's the same figure shown in table 3 of the pdf for the 4th quarter GDP report)....then, by averaging the annualized chained 2012 dollar PCE figures for January and February, 13,445.1 billion and 13,458.2 billion, we get an equivalent annualized PCE for the two months of the 1st quarter that we have the data for so far....when we compare that average of 13,451.6 to the 4th quarter chained dollar PCE of 13,413.8, we find that 1st quarter real PCE has grown at a 1.334% annual rate for the two months of the 1st quarter included in this report (note the math to get that annual rate: (((13,445.1 + 13,458.2 ) / 2 ) / 13,413.8 ) ^ 4 = 1.006096...that growth rate means that if March real PCE does not improve from the average of January and February, which now seems likely, growth in PCE would add just 0.93 percentage points to the growth rate of the 1st quarter...

February Durable Goods: New Orders Up 1.2%, Shipments Up 0.0%, Inventories Flat

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 increased by $2.9 billion or 1.2 percent to $249.4 billion in February, after January's new orders were revised from the $246.2 billion reported last month to $246.54 billion, now a 0.1% increase from December's new orders…however, year to date new orders are only up by 0.4% from those of 2019...the volatile monthly new orders for transportation equipment were responsible for February’s increase, as new transportation equipment orders rose $3.8 billion or 4.6 percent to $87.0 billion, despite a 14.9% decrease to $3,812 million in new orders for defense aircraft....excluding orders for transportation equipment, new orders fell 0.6%, while excluding just new orders for defense equipment, new orders rose 0.1%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, were fairly weak, falling by $553 million or 0.8% to $68,775 million...

Over the same period, the seasonally adjusted value of February’s shipments of durable goods, which will ultimately be included as inputs into various components of 1st quarter GDP after adjusting for changes in prices, rose for the first time in eight months, increasing by $2.1 billion or 0.8 percent to $252.3 billion, after the value of January shipments was revised from $250.1 billion to $250.2 billion, now down 0.1% from December....higher shipments of transportation equipment were also responsible for the February shipments increase, as they increased by $2.4 billion or 2.9 percent to $85.0 billion...meanwhile, shipments of nondefense capital goods less aircraft fell 0.7% to $68,922 million, after January’s capital goods shipments were revised 0.3% lower...

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose by $0.1 billion to $434.9 billion, an increase which is considered statistically unchanged, after January inventories were revised from $435.4 billion to $434.768 billion, now down 0.1% from December....inventories of transportation equipment rose $0.6 billion or 0.4 percent to $151.7 billion, while inventories of computers and electronic products fell $0.3 billion or 0.7% to $43.38 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, rose for the fourth time in five months, increasing by $1.4 billion or 0.1 percent to $1,158.6 billion, following a statistically insignificant January increase to $1,157.28 billion, which was revised from the previously reported $1,157.0 billion....a $1.9 billion or 0.2 percent increase to $791.3 billion in unfilled orders for transportation equipment was responsible for the increase, while unfilled orders excluding transportation equipment orders were down 0.2% to $367,363 million...the unfilled order book for durable goods is now 0.6% below the level of last February, with unfilled orders for transportation equipment 2.0% below their year ago level, mostly due to a 4.7% decrease in the backlog of orders for commercial aircraft and parts...

February New Home Sales Reported Lower

The Census report on New Residential Sales for February (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 765,000 homes annually during the month, which was 4.4 percent (±14.8 percent)* below the revised January annual sales rate of 800,000 new home sales, but 14.3 percent (±17.5 percent)* above the estimated annual rate that new homes were selling at in February of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether February new home sales rose or fell from those of January, or even from the February sales rate of a year ago, with the figures in parenthesis representing the 90% confidence range for the reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....with this report; sales of new single family homes in January were revised from the annual rate of 764,000 reported last month to an annual rate of 800,000, and new home sales in December, initially reported at an annual rate of 694,000 and revised up to a 708,000 rate last month, were revised up to a 724,000 a year rate with this report, while November's annualized new home sales rate, initially reported at an annual rate of 719,000 and revised from a 697,000 rate to a 692,000 a year rate last month, were revised back up to a 700,000 annual rate with this release...

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 68,000 new single family homes sold in February, up from the estimated 62,000 new homes that sold in January and up from the 49,000 that sold in December, and up from 57,000 in February a year ago...the raw numbers from Census field agents further estimated that the median sales price of new houses sold in February was $345,900, up from the median sale price of $325,300 in January and up from the median sales price of $320,800 in February a year ago, while the average February new home sales price was $403,800, up from the $384,000 average sales price in January, and up from the average sales price of $383,600 in February a year ago....a seasonally adjusted estimate of 319,000 new single family houses remained for sale at the end of February, which represents a 5.0 month supply at the February sales rate, up from the revised 4.8 months months of new home supply in January...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales at 765,000 Annual Rate in February and A few Comments on February New Home Sales..

 

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

Sunday, March 22, 2020

February’s retail sales, industrial production, housing construction, & existing home sales; January’s business inventories & JOLTS

major monthly reports released over the past week included the Retail Sales report for February and Business Sales and Inventories for January from the Census Bureau, the February report on Industrial Production and Capacity Utilization from the Fed, the February report on New Residential Construction, also from the Census Bureau, and the Existing Home Sales Report for February from the National Association of Realtors (NAR)...in addition, the Bureau of Labor Statistics released both the Job Openings and Labor Turnover Survey (JOLTS) for January and the Regional and State Employment and Unemployment Report for January during this same week... this week also saw the release of the first two regional Fed manufacturing surveys for March: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one NYC suburban county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +12.9 in February to an eleven year low of -21.5 in March, the largest drop on record, suggesting the sudden onset of a recession in 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 a nine year low of -12.7 in March from +36.7 in February, also the largest drop for that index on record and also indicating a sudden contraction of that region's manufacturing activity this month...

Retail Sales Down 0.5% in February after Revisions to December and January

seasonally adjusted retail sales decreased 0.5% 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 $528.1 billion during the month, which was 0.5 percent (±0.4%) lower than January's revised sales of $530.9 billion, but still 4.3 percent (±0.7 percent) above the adjusted sales in February of last year...January's seasonally adjusted sales were revised up from $529.8 billion to $530.9 billion, while December's sales were revised from $528.4 billion down to $527,646 million; as a result, the December to January change was revised up from up 0.3 percent (±0.4 percent)* to up 0.6 percent (±0.3 percent)...the downward revisions to December sales would indicate that 4th quarter personal consumption expenditures will be revised lower at about a $2.1 billion annual rate, which would thereby reduce 4th quarter GDP by about 0.04 percentage points...estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales were down 0.8%, from $483,330 million in January to $479,583 million in February, while they were up 7.8% from the $444,794 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 2019 (r)" (revised) and the January 2019 to January 2020 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, should you be interested in more detail in how it was revised.….

February 2020 retail sales table

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 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 February retail sales excluding the 2.8% price-related decrease in sales at gas station were down by 0.3%.....then, subtracting the figures representing the fractional decrease in grocery & beverage store sales and the 0.5% decrease in food services sales from that total, we find that core retail sales were down by less than 0.3% for the month (-0.268%)...since the CPI report showed that the composite price index for all goods less food and energy goods was 0.2% higher in February, we can thus approximate that real retail sales excluding food and energy will on average be down by nearly 0.5%.....however, the actual adjustment in national accounts data 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 and parts dealers were down 0.9%, the price index for transportation commodities other than fuel was 0.2% higher, which would suggest that real sales at vehicle and parts dealers fell by roughly 1.1%...similarly, while nominal sales at clothing stores were 1.2% lower in February, the apparel price index was 0.4% higher, which means that real sales of clothing probably fell around 1.6%...on the other hand, while nominal sales at sporting goods, hobby, music and book stores rose 0.1%, the price index for recreational commodities fell 0.1%, so we can figure real sales of recreational goods were up by roughly 0.2%....

In addition to figuring those core retail sales, we should adjust food and energy retail sales for their price changes separately…the February CPI report showed that the food price index was 0.4% higher, with the index for food purchased for use at home 0.5% higher, while prices for food bought to eat away from home were 0.2% higher... thus, while nominal sales at food and beverage stores were unchanged, real sales of food and beverages would be roughly 0.5% lower in light of the 0.5% higher prices…meanwhile, the 0.5% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell about 0.7% during the month....on the other hand, while sales at gas stations were down 2.8%, there was a 3.3% decrease in the retail price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 0.5%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales....averaging real sales that we have thus estimated together, but leaving out real restaurant and bar sales, we can then estimate that the income and outlays report for February will show that real personal consumption of goods fell by more than 0.4% in February, after rising by a revised 0.2% in January, but after being unchanged in December, also revised...at the same time, the 0.7% decrease in real sales at bars and restaurants would reduce the growth rate of February’s real personal consumption of services by almost 0.1%...

Industrial Production Up 0.6% in February on 7.1% Jump in Utility Output

The Fed's February G17 release on Industrial production and Capacity Utilization reported that industrial production increased by 0.6% in February after falling by a revised 0.5% in January, which left industrial output unchanged from a year ago...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, was at 109.6 in February, after the January index was revised down from 109.2 to 109.0, the December index was revised up from 109.5 to 109.6, and the November index was left unchanged at 110.0..

The manufacturing index, which accounts for more than 77% of the total IP index, rose to 104.9 in February, after the January index was revised down from 104.9 to 104.8...with the prior months unrevised, the manufacturing index now sits 0.4% below its year ago level....meanwhile, the mining index, which includes oil and gas well drilling, fell 1.5%, from 135.0 in January to 133.0 in February, after the January index was revised down from 136.2, which still left the mining index 2.1% higher than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, rose by 7.1% in our cooler February, from 98.4 to 105.4, after our warm January’s utility index was revised from 98.0 to 98.4, now down 4.9% from December...with this February's temperatures below the warmer levels seen across much of the US last February, the utility index is 0.4% higher than it was a year ago, after the January utility index had been reported 6.2% lower than it was in January a year earlier...

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose to 77.0% in February from 76.6% in January, which was revised down from the  76.8% reported last month ...capacity utilization of NAICS durable goods production facilities rose from a revised 74.5% in January to 74.7% in February, while capacity utilization for non-durables producers slipped from an upwardly revised 76.5% to 76.4%...capacity utilization for the mining sector fell to 88.4% in February from 89.9 % in January, which was originally reported as 90.7%, while utilities were operating at 75.8% of capacity during February, up from their 71.0% of capacity during January, which was previously reported at 70.6%...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..

Housing Starts, Permits Reported Lower in February

The February report on New Residential Construction (pdf) from the Census Bureau estimated that their widely watched count of new housing units started in February was at a seasonally adjusted annual rate of 1,599,000, which was 1.5 percent (±12.4 percent)* below the revised estimated January annual rate of 1,624,000, but was 39.2 percent (±17.7 percent) above last February's rate of 1,149,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell during the month, with the figures in parenthesis the most likely range of the change indicated; in other words, February housing starts could have been up by 10.9% or down by as much as 13.9% from those of January, with revisions of a greater magnitude in either direction still possible...in this report, the annual rate for January housing starts was revised from the 1,567,000 reported last month to 1,624,000, while December starts, which were first reported at a 1,608,000 annual rate, were revised from last month's initial revised figure of 1,626,000 annually back down to a 1,601,000 annual rate with this report....

The annual rates of 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 113,000 housing units were started in February, down from the 113,200 units that were started in January but up from the 108,300 units that were started in December....of those housing units started in February, an estimated 75,300 were single family homes and 36,300 were units in structures with more than 5 units, up from the revised 68,000 single family starts in January but down from the 44,600 units started in structures with more than 5 units in December...

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in February, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,464,000, which was 5.5 percent (±1.5 percent) below the revised January rate of 1,550,000 permits, but was 13.8 percent (±2.1 percent) above the rate of building permit issuance in February a year earlier...the annual rate for housing permits issued in January was a 13 year high for building permits and was revised up from the originally reported 1,551,000....

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 100,800 housing units were issued in February, down from the revised estimate of 112,800 new permits issued in January....of those issued in February, 70,600 were permits for single family homes and 27,000 were permits for units in structures of more than 5 units, up from the 70,400 single family permits in January, but down from the 39,500 permits for units in structures of more than 5 units...for graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.599 Million Annual Rate in February and Comments on February Housing Starts... 

Job Openings Jumped in January; Hiring and Layoffs Fell, Quits were Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for January from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 411,000, from 6,552,000 in December to 6,963,000 in January, after December job openings were revised 129,000 higher, from 6,423,000 to 6,552,000, as part of an annual revision of 2019's job openings and labor turnover data...January's jobs openings were still 7.4% lower than the revised 7,520,000 job openings reported for January a year ago, as the job opening ratio expressed as a percentage of the employed increased to 4.4% from the 4.1% logged in December, but was down from the 4.8% rate of January a year ago...(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 January, seasonally adjusted new hires totaled 5,824,000, down by 103,000 from the revised 5,927,000 who were hired or rehired in December, as the hiring rate as a percentage of all employed fell from 3.9% in December to 3.8% in January, and was also down from the 3.9% hiring rate in January a year earlier (details of hiring by sector since September are in table 2)....meanwhile, total separations fell by 148,000, from 5,762,000 in December to 5,614,000 in January, as the separations rate as a percentage of the employed fell from 3.8% to 3.7%, which was also down from 3.8% in January a year ago (see table 3)...subtracting the 5,614,000 total separations from the total hires of 5,824,000 would imply an increase of 210,000 jobs in January, somewhat less than the revised payroll job increase of 273,000 for January reported in the February establishment survey of two weeks ago 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 3,532,000 of us voluntarily quit our jobs in January, up from the revised 3,528,000 who quit their jobs in December, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.3% of total employment, while it was down from the 2.4% quits rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,684,000 were either laid off, fired or otherwise discharged in January, down by 209,000 from the revised 1,893,000 who were discharged in December, as the discharges rate fell from 1.2% to 1.1% of all those who were employed during the month, which was also down from the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 399,000 in January, up from 341,000 in December, for an 'other separations rate’ of 0.3%, up from 0.2% in December and from 0.2% in January of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release...   

January Business Sales Up 0.6%, Business Inventories Down 0.1%

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 $1,471.2 billion in January, up 0.6 percent (±0.2 percent) from December's revised sales, and 2.1 percent (±0.3 percent) higher than January sales of a year earlier...note that total December sales were concurrently revised up from the originally reported $1,461.0 billion to $1,462.940 billion, now a 0.1% increase from November, rather than the 0.1% decrease previously reported....manufacturer's sales fell 0.5% to $501,825 million in January, while retail trade sales, which exclude restaurant & bar sales from the revised January retail sales reported earlier, rose 0.6% to $464,818 million, and wholesale sales rose 1.6% to $504,570 million...

meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,035.3 billion at the end of January, down 0.1 percent (±0.1 percent)* from the end of December, but still 1.1 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 $2040.0 billion reported last month to $2,038.1 billion, now unchanged from November, which would imply a downward revision of about 0.03 or 0.04 percentage points to 4th quarter GDP....seasonally adjusted inventories of manufacturers were estimated to be valued at $703,403 million, down 0.1% from December, and inventories of retailers were valued at $660,227 million, statistically unchanged from in December, while inventories of wholesalers were estimated to be valued at $671,621 million at the end of January, 0.4% lower than in December...

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for January, which indicated finished goods prices were 0.1% higher...two weeks ago, we looked at real factory inventories with producer price adjustments for goods at various stages of production, and judged those inventories would have a modest negative impact on 1st quarter GDP…also two weeks ago, we found that January's wholesale inventories decrease alone would not yet be enough to hit 1st quarter GDP….since the nominal value of retail inventories for January has now been shown to be 0.1% lower, real retail inventories for the month, after the 0.1% finished goods price adjustment, thus would have thus decreased by 0.2% from December, after a fourth quarter that saw real retail inventories decrease at a 2.6% annual rate...therefore, what is shaping up to be a much smaller real retail inventory decrease in the 1st quarter to date would have a noticeable positive impact on 1st quarter GDP...

February's Existing Home Sales Rose 6.5%

The National Association of Realtors (NAR) reported that existing home sales increased by 6.5% from January to February on a seasonally adjusted basis, projecting that 5.77 million existing homes would sell over an entire year if the February home sales pace were extrapolated over that year, a pace that was the highest since 2007 and 7.2% above the annual sales rate projected in February of last year....however, the January home sales pace was revised from the 5.46 million annual rate reported a month ago to a 5.42 million rate with this report...the NAR also reported that the median sales price for all existing-home types was $270,100 in February, 8.0% higher than in February a year earlier, which they report "marks 96 straight months of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Jump 6.5% in February", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf) to see what actually happened with home sales during the month...this unadjusted data indicates that roughly 335,000 homes sold in February, up 5.7% from the revised 317,000 homes that sold in January, and 7.7% more than the 311,000 homes that sold in February of last year....that same pdf indicates that the median home selling price for all housing types rose by 1.5%, from a revised $266,200 in January to $270,100 in February, while the average home sales price rose by less than one percent to $302,900 from the $305,800 average sales price in January, which was also up 6.0% from the $288,500 average home sales price of February a year ago...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Increased to 5.77 million in February and Comments on February Existing Home Sales...

 

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

Sunday, March 15, 2020

February’s consumer and producer prices

this week saw the release of the three major monthly price indices from the Bureau of Labor Statistics: the February Consumer Price Index, the February Producer Price Index and the February Import-Export Price Index ... in addition, this week also saw the Mortgage Monitor for January from Black Knight Financial Services, which indicated that 3.22% of all mortgages were delinquent in January, down from 3.40% in December and down from 3.75% in January of 2019, and that 0.46% of all mortgages were in the foreclosure process, the same percentage that were in foreclosure in December but down from the 0.51% of mortgages that were in foreclosure a year earlier...

Consumer Prices Rose 0.1% in February on Higher Prices for Food, Rent, & Clothing

The consumer price index rose 0.1% in February, as higher prices for food, shelter, and clothing were partly offset by lower prices for energy and drugs...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in February, after rising by 0.1% in January, 0.2% in December, 0.2% in November, 0.2% in October, 0.1% in September, 0.1% in August and rising 0.3% in July...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 257.971 in January to 258.678 in February, which left it statistically 2.3349% higher than the 252.776 index reading of February of last year, which is reported as a 2.3% year over year increase, down from 2.5% a month ago....with lower prices for energy a major drag on the overall index increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.2% for the month, as the unadjusted core price index rose from 266.004 to 267.268, which left the core index 2.3568% ahead of its year ago reading of 261.114, which is reported as a 2.4% year over year increase, up from the 2.3% year over year increase that was reported for January...

The volatile seasonally adjusted energy price index fell 2.0% in February, after falling 0.7% in January, after rising 1.6% in December, 0.8% in November and by 1.7% in October, but after falling 0.8% in September, falling 1.4% in August and rising 0.9% in July, and is now still 2.8% higher than in February a year ago...the price index for energy commodities was 1.6% lower in February, while the index for energy services was 0.3% lower, after rising 0.6% in January....the energy commodity index was down 3.5% due to a 3.3% decrease in the price of gasoline, the largest component, and a 8.5% decrease in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.1% lower...within energy services, the price index for utility gas service fell 0.9% after rising 1.0% in January and is still 2.0% lower than it was a year ago, while the electricity price index fell 0.1% after rising 0.6% in January....energy commodities are still averaging 5.0% higher than their year ago levels, with gasoline prices averaging 5.6% higher than they were a year ago, while the energy services price index is now unchanged from last February, as electricity prices are still 0.6% higher than a year ago…

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

In the food at home categories, the price index for cereals and bakery products was 0.5% higher as average bread prices rose 0.9%, prices for fresh biscuits, rolls, muffins rose 0.9%, the index for rice, pasta, and cornmeal rose 0.7%, and the index for crackers and cracker products prices rose 2.7%...at the same time, the price index for the meats, poultry, fish, and eggs group was 0.2% higher, as ham prices rose 3.2%, egg prices rose 1.1%, and the poultry index was 0.4% higher... meanwhile, the seasonally adjusted index for dairy products was 1.1% higher, as prices for cheese & related products rose 1.1% and the index for 'other' dairy products rose 1.5%...however, the fruits and vegetables index was unchanged as the price index fresh fruits rose 0.1%, the price index for fresh vegetables was unchanged, and the index for canned fruits rose 0.7% while the price index for frozen fruits and vegetables fell 1.0%...at the same time, the beverages index was 0.5% higher as the price index for beverage materials including coffee and tea rose 1.1%....lastly, the index for the ‘other foods at home’ category was up 0.8, as the price index for sugar and sugar substitutes rose 0.8%, peanut butter prices rose 4.2%, the price index for snacks rose 2.5%, the index for frozen and freeze dried prepared foods rose 1.0%, and prices for baby food averaged 3.7% higher....the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last February, only the price of ham, which has risen 10.2% has seen a price change greater than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.2% in February after rising by 0.2% in January, 0.1% December, 0.2% November, 0.1% October, 0.2% in September, 0.2% in August, and by 0.3% in July, the composite price index of all goods less food and energy goods was 0.2% higher in February, while the more heavily weighted composite for all services less energy services was also 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust February’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.1% higher, as the price index for major appliances rose 4.3% and the index for living room, kitchen, and dining room furniture rose 1.9%....at the same time, the apparel price index was 0.4% higher on a 3.4% increase in the price index for men's underwear, nightwear, swimwear, and accessories, a 4.2% increase in the price index for women's outerwear, and a 2.6% increase in the price index for girl's apparel... in addition, the price index for transportation commodities other than fuel was 0.2% higher as prices for new cars rose 0.4%, prices for used cars and trucks rose 0.4% and the price index for motor oil, coolant, and fluids rose 3.4%...on the other hand, prices for medical care commodities averaged 0.6% lower because prescription drugs prices fell 0.8%, non-prescription drugs prices fell 0.3% and the medical equipment price index fell 0.3%...meanwhile, the recreational commodities index was 0.1% lower despite a 4.9% increase in the price index for photographic equipment and supplies, due a 1.6% decrease in TV prices, a 1.1% decrease in the price index for sports vehicles including bicycles, a 2.4% decrease in the price index for toys, games, hobbies and playground equipment, and a 1.6% decrease in price index for newspapers and magazines...on the other hand, the education and communication commodities index was 0.6% higher on a 1.5% increase in the price index for computer peripherals, and smart home assistants and a 0.9% increase in the price index for college textbooks...lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ was 0.6% higher on a 1.2% increase in the index for hair, dental, shaving, and miscellaneous personal care products and a 0.7% increase in cigarette prices..

Within core services, the price index for shelter rose 0.3% as rents rose 0.3%, homeowner's equivalent rent rose 0.2%, and prices for lodging away from home at hotels and motels rose 2.3%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were 0.7% higher on a 1.7% increase in the price index for gardening and lawncare services....in addition, the price index for medical care services was 0.3% higher, even as the price index for hospital services fell 0.1%, because the price of health insurance rose 1.4%...at the same time, the transportation services price index was was 0.3% higher as the price index for car and truck rental rose 0.7%, motor vehicle repair costs rose 1.6% and motor vehicle insurance rose 0.5%....on the other hand, the recreation services price index fell 0.5% as prices for cable and satellite television services fell 0.6%, veterinarian services fell 0.7% and the index for admission to sporting events fell 4.0%...meanwhile, the index for education and communication services was 0.1% higher as day care and preschool tuition rose 0.6%, postage rose 0.6%, and the price index for land-line telephone services rose 0.3%....lastly, the index  for other personal services was up 0.3% as the price index for legal services rose 0.6%, and the index for checking account and other bank services was 0.8% higher...

Among core line items, prices for televisions, which are now averaging 19.9% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 13.9% since last February, the rental of video discs and other media, which has fallen 16.2% from a year ago, the price index for boys' apparel, which has fallen by 11.1% in the past year, and the price index for computer software and accessories, which is down 10.6% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 20.7% over the past year, is the only line item to have increased by a double digit magnitude over that span....

Producer Prices Down 0.6% in February on Lower Food and Energy Prices, Lower Margins for Retailers

The seasonally adjusted Producer Price Index (PPI) for final demand fell 0.6% in February, as prices for finished wholesale goods averaged 0.9% lower, while average margins of final services providers decreased by 0.3%...that follows a January report that indicated the PPI had risen 0.5%, as prices for finished wholesale goods had been on average 0.1% higher, while margins of final services providers increased by 0.7%, a December report that indicated the PPI was up 0.2%, with prices for finished wholesale goods up 0.3% while margins of final services providers were unchanged, a revised November report that shows the PPI was 0.1% lower, with prices for finished wholesale goods rising 0.3% while margins of final services providers decreased 0.2%, and a revised October report that indicated the PPI was 0.3% higher, with prices for finished wholesale goods rising 0.5% and margins of final services providers rising 0.2%....on an unadjusted basis, producer prices are now now just 1.3% higher than a year ago, down from the 2.1% year over year increase indicated by last month's report, while, the core producer price index, which excludes food, energy and trade services, fell by just 0.1% for the month, and is now 1.4% higher than in February a year ago, down from the 1.5% year over year increase shown in January...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.9% lower in February, after being 0.1% higher in January, 0.3% higher in December, 0.3% higher in November, 0.5% higher in October, 0.2% lower in September, 0.3% lower in August, 0.3% higher in July, 0.5% lower in June, 0.2% lower in May, 0.3% higher in April, 0.9% higher in March, and 0.3% higher in February of last year....the finished goods index fell 0.9% in February because the wholesale price index for energy goods was 3.6% lower, after falling by 0.7% in January but after rising by 1.5% in December, 0.5% in November and 1.8% in October, and because the price index for wholesale foods fell 1.6% in January after rising 0.2% in January, falling 0.3% in December and after rising 1.2% in November and 1.4% in October, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.1% lower after rising 0.3% in January and 0.2% in December...wholesale energy prices were lower due to a 6.5% decrease in wholesale prices for gasoline, an 11.6% decrease in wholesale prices for home heating oil, and a 10.0% decrease in wholesale prices for diesel fuel, while the wholesale food price index fell 1.6% on a 28.9% decrease in the wholesale price index for fresh and dry vegetables, a 6.6% decrease in the wholesale price index for fish and shellfish and a 5.4% decrease in the wholesale price index for oilseeds, and despite a 33.4% increase in the wholesale price of eggs for fresh use....among wholesale core goods, wholesale prices for iron and steel scrap fell 7.1%, wholesale prices for light motor trucks fell 1.5%, the wholesale price index for women's, girls', and infants' apparel fell 2.4% and the wholesale price index for industrial chemicals fell 1.7%..

At the same time, the index for final demand for services fell 0.3% in February, after rising 0.7% in January, being unchanged in December, falling by a revised 0.2% in November, and rising by a revised 0.2% in October, as the index for final demand for trade services fell 0.7%, the index for final demand for transportation and warehousing services fell 0.6%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.1% higher....among trade services, seasonally adjusted margins for apparel, jewelry, footwear, and accessories retailers fell 11.7%, margins for book retailers fell 3.2%, and margins for food and alcohol wholesalers fell 1.5%, while margins for machinery, equipment, parts, and supplies wholesalers rose 1.3% ... among transportation and warehousing services, margins for air transportation of freight fell 1.2% and margins for airline passenger services fell 0.9%...among the components of the core final demand for services index, margins for hospital outpatient care rose 1.0%, margins for securities brokerage, dealing, investment advice, and related services rose 3.6%, and margins for home health and hospice care rose 1.1%, while margins for arrangement of vehicle rentals and lodging fell 5.8%...

This report also showed the price index for intermediate processed goods fell 0.9% in February, after falling 0.3% in January, rising 0.1% in December, rising a revised 0.2% in November, and a revised 0.3% in October....the price index for intermediate energy goods fell 4.0%, as refinery prices for gasoline fell 6.5%, refinery prices for jet fuel fell 16.% and refinery prices for No. 2 diesel fuel fell 10%, while producer prices liquefied petroleum gas fell 11.3%...at the same time, prices for intermediate processed foods and feeds fell 0.6%, as the producer price index for meats fell 2.6% and the index for prepared animal feeds fell 1.8%...meanwhile, the core price index for intermediate processed goods less food and energy fell 0.2% as the producer price index for copper and brass mill shapes fell 3.2% and producer prices for primary nonferrous metals and for paper both decreased 2.3%... prices for intermediate processed goods are now 2.1% lower than in Febuary a year ago, the tenth 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 fell 7.7% in February, after falling 0.6% in January, but after rising 1.6% in December, a revised 2.8% in November, and a revised 0.3% in October....that was as the February price index for crude energy goods fell 13.6% as crude oil prices fell 16.3% and as unprocessed natural gas prices fell 15.8%, while the price index for unprocessed foodstuffs and feedstuffs fell 5.8% on a 10.2% decrease in producer prices for slaughter hogs, a 7.6% decrease in producer prices for slaughter turkeys, and a 6.0% decrease in producer prices for raw milk...at the same time, the index for core raw materials other than food and energy materials fell 1.5%, as prices for unprocessed iron and steel scrap fell 7.1%, prices for copper base scrap fell 5.2%, and prices for aluminum base scrap fell 1.9%...this raw materials index is now 8.2% lower than a year ago, as the year over year change on this index remained negative all last year...

Lastly, the price index for services for intermediate demand slipped 0.1 in February after being unchanged in January, rising 0.4 percent in December, rising a revised 0.1 percent in November, and falling a revised 0.6 percent in October...the price index for intermediate trade services was 0.4% lower, as margins for intermediate building materials, paint, and hardware wholesalers fell 1.3% and margins for food wholesalers fell 1.8%, while the index for transportation and warehousing services for intermediate demand was 0.2% lower, as the price index for water transportation of freight fell 4.0% and the price index for intermediate air mail and package delivery services, excluding by USPS, fell 1.4%...on the other hand, the core price index for intermediate services less trade, transportation, and warehousing was unchanged, as the intermediate price index for securities brokerage, dealing, investment advice, and related services rose 3.6%, the price index for radio advertising time sales rose 1.8%, and the price index for wireless telecommunication services rose 2.9%, while the price index for traveler accommodation services fell 10.0%, the price index for nonresidential real estate rents fell 3.7%, the price index for deposit services (partial) fell 1.6% and the index for "internet advertising space sales, excluding Internet ads sold by print publishers" fell 1.2%...over the 12 months ended in January, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 1.4% higher than it was a year ago, down from 1.7% in January and from 1.8% in December...

 

 

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

Sunday, March 8, 2020

February’s jobs report; January’s trade deficit, construction spending, factory inventories, & wholesale sales

in addition to the Employment Situation Summary for February from the Bureau of Labor Statistics, this week's major releases included four reports that will input into 1st quarter GDP: the Commerce Dept report on our International Trade for January, the January report on Construction Spending, the Full Report on Manufacturers' Shipments, Inventories and Orders for January and the January report on Wholesale Trade, Sales and Inventories, all from the Census Bureau....in addition, the Fed released the Consumer Credit Report for January, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.0 billion, or at a 3.4% annual rate, as non-revolving credit expanded at a 5.8% annual rate to $3,112.6 billion while revolving credit outstanding contracted at a 3.3% rate to $1,090.1 billion...

the week’s privately issued reports included the ADP Employment Report for February and the light vehicle sales report for February from Wards Automotive, which estimated that vehicles sold at a 16.83 annual rate in February, down 0.5% from the revised 16.92 million annual sales rate in January, and down 0.8% from the 16.96 million annual sales rate in February a year ago...in addition, this week saw both of the widely followed purchasing manager's survey from the Institute for Supply Management (ISM): the February Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 50.1% in February, down from 50.9% in January, which suggests stagnation among manufacturing firms nationally, while the February Non-Manufacturing Report On Business reported their NMI (non-manufacturing index) rose to 57.3%, up from 55.5% in January, indicating a larger plurality of service industry purchasing managers reported expansion in various facets of their business in February...

Employers Add 273,000 Jobs in February, Unemployment Rate Falls to 3.5%

The Employment Situation Summary for February reported a second consecutive large payroll job increase, probably at least in part due to unseasonably warm weather during the reference weeks of both January and February, while the employment rate and the unemployment rate both fell 0.1%,…estimates extrapolated from the seasonally adjusted establishment survey projected that employers added 273,000 jobs in February, after the previously estimated payroll job increase for change for January was revised up by 48,000 from 225,000 to 273,000, and the payroll jobs increase for December was revised from 147,000 to 184,000…hence, job gains have now averaged 243,000 per month over the past 3 months, quite a bit more than the 2019 average of 176,000 jobs per month...the unadjusted data shows that there were actually 880,000 more payroll jobs extant in February than in January, as large seasonal job increases in sectors such as professional & business services, leisure and hospitality and public and private education were leveled by the seasonal adjustments…

Seasonally adjusted job increases in February were spread through the private goods producing and service sectors and government, while retail sales, wholesale sales, and the transportation and warehousing sector saw seasonally adjusted job decreases of 7,000, 2,600, and 4,000 and respectively... employment in health care and social assistance rose by 56,500, led by the addition of 17,500 jobs in individual and family services and 9,500 jobs in doctor's offices… the leisure and hospitality sector saw an increase of 51,000 jobs with the addition of 52,600 more jobs in bars and restaurants... ...in addition, employment in the various branches of government increased by 45,000 with the addition of 15,500 jobs in state education systems and 12,200 jobs in local government excluding local school districts...seasonally adjusted construction jobs increased by 42,000, with 13,500 of those working for nonresidential specialty trade contractors and 12,200 more working for residential specialty trade contractors....the broad professional and business services sector added 41,000 jobs, with a increases of 10,300 jobs in both architectural and engineering services and in administrative and waste services...another 26,000 jobs were added by the financial sector, with 12,900 of those in real estate, rental and leasing....employment in manufacturing rose by 15,000, led by the addition of 7,800 jobs in the manufacture of transportation equipment...meanwhile, employment in other major sectors, including resource extraction, information, and utilities saw job gains of less than 10,000 over the month....

The establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $28.52 an hour in February, after it had increased by 5 cents an hour in January, revised from the 7 cent increase reported last month; at the same time, the average hourly earnings of production and non-supervisory employees increased by 8 cents an hour to $23.96 an hour...employers also reported that the average workweek for all private payroll employees increased by a tenth of an hour to 34.4 hours in February, while hours for production and non-supervisory personnel increased by 0.1 hour to 33.7 hours...in addition, the manufacturing workweek increased by 0.2 hour to 40.7 hours, while average factory overtime was up 0.1 hour to 3.2 hours...

Meanwhile, the February household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 45,000 to 158,759,000, while the similarly estimated number of those unemployed fell by 105,000 to 5,787,000; which together meant there was a 60,000 decrease in the total labor force...since the working age population had grown by 126,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 186,000 to 95,082,000...with the decrease of those in the labor force statistically insignificant compared to the civilian noninstitutional population, the labor force participation rate remained unchanged at 63.4%....however, the increase in number employed as a percentage of the increase in the population was small enough to lower the employment to population ratio, which we could think of as an employment rate, from 61.2% in January to 61.1% in February ...at the same time, the decrease in the number unemployed was large enough reduce the unemployment rate from 3.6% in January to 3.5% in February....on the other hand, the number who reported they were involuntarily working part time rose by 136,000 to 4,318,000 in February, which was enough to increase the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 6.9% in January to 7.0% in February....

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

US Trade Deficit Fell 6.7% in January, Led by Lower Imports of Nonmonetary Gold and Automobiles

Our trade deficit fell 6.7% in January, partly reversing the revised 11.0% increase in December, as the value of our exports decreased but the value of our imports decreased by more...the Commerce Dept report on our international trade in goods and services for January indicated that our seasonally adjusted goods and services trade deficit fell by $3.3 billion to $45.3 billion in January, from a December deficit which was revised from $48.9 billion to $48.6 billion....the value of our January exports fell by $0.9 billion to $208.6 billion as a $1.4 billion decrease to $136.4 billion in our exports of goods was partly offset by an increase of $0.5 billion to  $72.2 billion in our exports of services, while our imports fell by $4.2 billion to $253.9 billion on a $4.1 billion decrease to$203.4 billion in our imports of goods and a $0.1 billion decrease to $50.5 billion in our imports of services...export prices averaged 0.7% higher in January, which means the relative real decrease in exports for the month was greater than the nominal decrease by that percentage, while import prices were unchanged, meaning that the real contraction in real imports was the same as the nominal decrease reported here...

The decrease in our January exports of goods was mostly due to lower exports of aircraft, oil & oil products, which were partially offset by an increase in our exports of automotive vehicles, parts, and engines...referencing the Full Release and Tables for January (pdf), in Exhibit 7, we find that our exports of capital goods fell by $1,002 million to $44,381 million on a $1,683 million decrease in our exports of civilian aircraft and a $260 million decrease in our exports of aircraft engines, partly offset by a $390 million increase in our exports of telecommunications equipment and a $232 million increase in our exports of medicinal equipment, while our exports of industrial supplies and materials fell by $970 million to $45,172 million on a $781 million decrease in our exports of crude oil, a $580 million decrease in our exports of fuel oil, and a $487 million decrease in our exports of non-monetary gold, which were partly offset by a $432 million increase in our exports of other precious metals...in addition, our exports of other goods not categorized by end use fell by $277 million to $5,382 million...partially offsetting the decreases in those end use categories, our exports of automotive vehicles, parts and engines rose by $851 million to $13,229 million on a $378 million increase in our exports of passenger cars and a $346 million increase in our exports of trucks, buses, and special purpose vehicles, and our exports of foods, feeds and beverages rose by $523 million to $10,993 million on a $314 million increase in our exports of soybeans, while our exports of consumer goods increased by $105 million to $16,550 million as a $214 million increase in our exports of gem diamonds and increased exports of several other consumer items were only partly offset by decreases of $411 million in our exports of artwork, antiques and other collectibles and $210 million cell phones and similar household goods...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our January goods imports and shows that the January decrease in our imports was led by lower imports of industrial supplies and materials and of uncategorized other goods....our imports our imports of industrial supplies and materials fell by $2,428 million to $42,355 million on a $1,291 million decrease in our imports of non-monetary gold, a $607 million decrease in our imports of petroleum products other than fuel oil, a $413 million decrease in our imports of crude oil, a $282 million decrease in our imports of fuel oil, and a $263 million decrease in our imports of natural gas, which were partially offset by a $391 million increase in our imports of organic chemicals, while our imports of other goods not categorized by end use fell by $1,390 million to $9,525 million...in addition, our imports of automotive vehicles, parts and engines fell by $671 million to $29,105 million as a $1,108 million decrease in our imports of passenger cars was partly offset by a $485 million increase in our imports of parts and accessories other than engines, chassis, or tires, and our imports of capital goods fell by $638 million to $55,426 million on a $341 million decrease in our imports of telecommunications equipment and a $324 million decrease in our imports of civilian aircraft...partly offsetting the decreases in those import categories, our imports of foods, feeds, and beverages rose by $602 million to $12,893 million on a $323 million increase in our imports of beer and wine and a $237 million increase in our imports of foods not otherwise listed, while our imports of consumer goods increased by $556 million to $52,453 million on a $853 million increase in our imports of pharmaceutical preparations and a $406 million increase in our imports of televisions and video equipment, which themselves were offset by a $630 million decrease in our imports of cellphones....

The Full Release and Tables pdf for this month's report also summarizes Exhibit 19, which gives us surplus and deficit details on our goods trade with selected  countries:

The January figures show surpluses, in billions of dollars, with South and Central America ($5.8), Hong Kong ($1.8), Brazil ($1.7), United Kingdom ($1.6), and OPEC ($1.3). Deficits were recorded, in billions of dollars, with China ($23.7), European Union ($13.5), Mexico ($9.2), Germany ($5.6), Japan ($5.3), Italy ($2.6), Taiwan ($1.8), India ($1.7), Canada ($0.7), France ($0.7), South Korea ($0.6), Singapore ($0.1), and Saudi Arabia (less than $0.1).

  • The deficit with Canada decreased $3.7 billion to $0.7 billion in January. Exports increased $0.7 billion to $24.6 billion and imports decreased $2.9 billion to $25.3 billion.
  • The deficit with China decreased $2.1 billion to $23.7 billion in January. Exports increased $0.2 billion to $7.7 billion and imports decreased $1.8 billion to $31.4 billion.
  • The deficit with Japan increased $0.9 billion to $5.3 billion in January. Exports decreased $1.1 billion to $5.7 billion and imports decreased $0.2 billion to $10.9 billion.

To gauge the impact of January trade on 1st quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that the amounts are not annualized here....from that table, we can figure that 4th quarter real exports of goods averaged 148,271 million monthly in chained 2012 dollars, while inflation adjusted January goods exports were at 146,902 million in that same 2012 dollar quantity index representation... computing the annualized change between those two figures, we find that January's real exports of goods are thus falling at a 3.64% annual rate from those of the 4th quarter, or at a pace that would subtract about 0.29 percentage points from 1st quarter GDP growth if continued through February and March...in a similar manner, we find that our 4th quarter real imports of goods averaged 226,868.3 million monthly in chained 2012 dollars, while inflation adjusted goods imports in January were at 224,599 million...that would indicate that so far in the 1st quarter, we have seen our real imports of goods decrease at a 3.94% annual rate from those of the 4th quarter...since an increase in imports would subtract from GDP because it would represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 3.96% rate would conversely add 0.48 percentage points to 1st quarter GDP....hence, if our January trade in goods deficit is maintained at the same level throughout the 1st quarter, the modest improvement in our balance of trade in goods would add about 0.19 percentage points to the growth of our 1st quarter GDP....

Note that both exports and imports were revised from July through December to incorporate more comprehensive and updated quarterly and monthly data; in addition, seasonally adjusted data for all months in 2019 were revised so that the totals of the seasonally adjusted months equalled the annual totals...the obvious impact of these revisions will be to necessitate the revision of GDP figures for each quarter of 2019; however, for quarters other than the 4th, which still has another estimate due out at the end of the month, those GDP revisions will not take place until the annual GDP revisions, which are typically released near the end of July...

Construction Spending Up 1.8% in January after December and November Figures Are Revised Much Higher 

The Census Bureau's report on January construction spending (pdf) estimated that January's seasonally adjusted construction spending would work out to $1,369.2 billion annually if extrapolated over an entire year, which was 1.8 percent (±0.8 percent) above the revised annualized estimate of $1,345.5 billion for construction spending in December, and 6.8 percent (±1.3 percent) above the estimated annualized level of construction spending of January last year...the December spending estimate was revised from the $1,327.7 billion published a month ago to $1,345.5 billion, while November's annualized construction spending was revised from $1,329.9 billion to $1,342.49 billion...since those figures are annualized, the combined upward revisions of $30.2 billion to November and December construction spending figures would be averaged over the 3 months of the 4th quarter and therefore raise the quarter's annualized construction spending by over $10 billion, and would thus imply an upward revision of about 0.23 percentage points to fourth quarter GDP when the third estimate is released at the end of March, assuming there are major changes or imbalances in the previously applied inflation adjustments...

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 $1,022.7 billion, 1.5 percent (±0.7 percent) above the revised December estimate of $1,007.6 billion. Residential construction was at a seasonally adjusted annual rate of $554.8 billion in January, 2.1 percent (±1.3 percent) above the revised December estimate of $543.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $468.0 billion in January, 0.8 percent (±0.7 percent) above the revised December estimate of $464.1 billion.
  • Public Construction In January, the estimated seasonally adjusted annual rate of public construction spending was $346.5 billion, 2.6 percent (±1.5 percent) above the revised December estimate of $337.8 billion. Educational construction was at a seasonally adjusted annual rate of $81.5 billion, 0.7 percent (±1.8 percent)* above the revised December estimate of $80.9 billion. Highway construction was at a seasonally adjusted annual rate of $103.9 billion, 5.4 percent (±4.6 percent) above the revised December estimate of $98.6 billion.

As you can tell from that summary, construction spending would input into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of January’s construction spending reported in this release on 1st quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...there are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment and come up with an estimate... that index showed that aggregate construction costs were up 0.8% in January, after they had been unchanged in both December and in November...

On that basis, we can thus estimate that January construction costs were roughly 0.8% more than those of November, and about 0.8% more than October, and of course, 0.8% more than December...we’ll then use those percentages to inflate the lower priced spending figures for each of the 4th quarter months and compare them to January, which is arithmetically the same as deflating January construction spending, for purposes of comparison.…this report gives annualized construction spending in millions of dollars for the 4th quarter months as $1,345,467 in December, $1,342,490 in November, and $1,320,788 in October...thus to compare January's nominal construction spending of $1,369,223 million to inflation adjusted figures of the fourth quarter, our calculation is:  (1,369,223 / ((( 1,345,467 * 1.008) +  (1,342,490 * 1.008) + (1,320,788 *1.008)) / 3) = 1.0165447, hence indicating that adjusted for inflation, construction spending in January was up 1.6545% vis a vis that of the 4th quarter, or up at a 6.78% annual rate...then, to figure the potential effect of that change on GDP, we take the difference between the 4th quarter inflation adjusted average and January's inflation adjusted spending as a fraction of inflation adjusted 4th quarter GDP, and find that January construction spending is rising at a rate that would add about 0.51 percentage points to 1st quarter GDP, if in the unlikely event that there is no further change in real construction over the next two months..

January Factory Shipments Down 0.5%, Factory Inventories 0.1% Lower

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for January from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods decreased by a rounded $2.3 billion or 0.5 percent to $497.9 billion in January, following an increase of 1.9% to $500.2 billion in December, which was revised from the increase of 1.8% to $499.3 billion that was reported for December a month ago....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only accurate in respect to its revised updates to the January advance report on durable goods which was released last week..on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in January, down two of the last three months, decreased $2.3 billion or 0.5 percent to $497.9 billion, the U.S. Census Bureau reported today.  This followed a 1.9 percent December increase.  Shipments, down following three consecutive monthly increases, decreased $2.3 billion or 0.5 percent to $501.8 billion.  This followed a 0.5 percent December increase.  Unfilled orders, up three of the last four months, increased $0.1 billion or virtually unchanged to $1,157.0 billion.  This followed a virtually unchanged December increase.  The unfilled orders‐to‐shipments ratio was 6.63, down from 6.65 in December.  Inventories, down following four consecutive monthly increases, decreased $0.5 billion or 0.1 percent to $703.4 billion.  This followed a 0.4 percent December increase.  The inventories‐ to‐shipments ratio was 1.40, unchanged from December.
  • New orders for manufactured durable goods in January, down two of the last three months, decreased $0.4 billion or 0.2 percent to $246.0 billion, unchanged from the previously published decrease.  This followed a 2.8 percent December increase.  Transportation equipment, down four of the last five months, drove the decrease, $1.7 billion or 2.1 percent to $82.2 billion.  New orders for manufactured nondurable goods decreased $1.9 billion or 0.8 percent to $251.9 billion.
  • Shipments of manufactured durable goods in January, down seven consecutive months, decreased $0.4 billion or 0.2 percent to $249.9 billion, unchanged from the previously published decrease.  This followed a 0.2 percent December decrease.  Transportation equipment, also down seven consecutive months, drove the decrease, $1.2 billion or 1.4 percent to $82.3 billion.  Shipments of manufactured nondurable goods, down following three consecutive monthly increases, decreased $1.9 billion or 0.8 percent to $251.9 billion.  This followed a 1.1 percent December increase.  Petroleum and coal products, down following four consecutive monthly increases, drove the decrease, $2.1 billion or 3.8 percent to $53.9 billion.
  • Unfilled orders for manufactured durable goods in January, up three of the last four months, increased $0.1 billion or virtually unchanged to $1,157.0 billion, unchanged from the previously published increase.   This followed a virtually unchanged December increase.  Fabricated metal products, up following four consecutive monthly decreases, drove the increase, $0.2 billion or 0.2 percent to $86.1 billion. 
  • Inventories of manufactured durable goods in January, down following sixteen consecutive monthly increases, decreased less than $0.1 billion or virtually unchanged to $435.3 billion, down from the previously published virtually unchanged increase.  This followed a 0.3 percent December increase.   Machinery, down six consecutive months, drove the decrease, $0.5 billion or 0.7 percent to $71.0 billion.   Inventories of manufactured nondurable goods, down following two consecutive monthly increases, decreased $0.5 billion or 0.2 percent to $268.1 billion.  This followed a 0.4 percent December increase.   Chemical products, down six of the last seven months, drove the decrease, $0.6 billion or 0.7 percent to $89.8 billion. 

To gauge the effect of January's nominal factory inventories on 1st quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories decreased 0.2% to $244,560 million; the value of work in process inventories was down 0.1% at $221,582 million, while materials and supplies inventories were valued 0.1% higher at $237,261 million...the producer price index for January indicated that prices for finished goods increased 0.1%, that prices for intermediate processed goods were 0.3% lower, and that prices for unprocessed goods were on average 0.6% lower....assuming similar valuations for like inventories, that would suggest that January's real finished goods inventories were about 0.3% less than December's, that real inventories of intermediate processed goods were about 0.2% greater, and that real raw material inventory inventories were around 0.7% greater…while the 4th quarter quarter GDP inventory increase was relatively small, resulting in almost a full point hit to GDP, that was as a large increase in real factory inventories was offset by decreases in real retail and wholesale inventories....hence, taken alone, the relatively small January increase in real factory inventories will have a modest negative impact on 1st quarter GDP...

January Wholesale Sales Up 1.6%, Wholesale Inventories Down 0.4%

The January report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $504.6 billion, up 1.6 percent (±0.5 percent) from the revised December level and up 2.2 percent (±0.7 percent) from the revised wholesale sales of January 2019....the December preliminary estimate of wholesale sales was revised up from $494.4 billion to $496.743 billion, which meant December's sales were 0.2% below the November level, rather than down 0.7% as was reported a month ago...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this January report estimated that wholesale inventories were valued at $669.9 billion at month end, a decrease of 0.4  percent (+/-0.4%) from the revised December level but 0.4 percent (±0.9)* percent higher than January a year ago, with the December preliminary inventory estimate concurrently revised upward from $674.5 billion to $674.0 billion, now down 0.3% from November...

Like factory inventories, these wholesale inventories will also be adjusted the producer price index for January in national accounts data...with notable exceptions such as farm products, chemicals and petroleum, we've estimated that wholesale inventories appear to be roughly 70% finished goods...with the January producer price index for finished goods up by 0.1% while the producer price indexes for intermediate goods & raw goods were 0.3% and 0.6% lower respectively, we can thus figure that January’s real wholesale inventories would be down by close to 0.4%...however, since the real wholesale inventory decrease over the 4th quarter was even greater, January's wholesale inventories decrease alone would not yet be enough to hit 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…)