Sunday, January 26, 2020

December’s report on existing home sales

The only widely watched report that was released this past week was the existing home sales report for December from the National Association of Realtors (NAR); the week also saw the release of the Regional and State Employment and Unemployment Summary for December from the Bureau of Labor Statistics, which breaks down the previously published employment data by state and region, and the Chicago Fed National Activity Index (CFNAI) for December, a weighted composite index of 85 different economic metrics, which fell to -0.35 in December, down from +0.41 in November, which was also revised down from the +0.56 reported last month…nonetheless, the 3 month average of the CFNAI rose to –0.23 in December, up from a revised –0.31 in November, which still indicates that national economic activity continued at a pace below the historical trend over the 4th quarter months…in addition, the week also saw the release of the Kansas City Fed manufacturing survey for January, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to -1 in January, up from -5 in December and -2 in November, indicating a moderation of the contraction of that region’s manufacturing…

December Existing Home Sales Up 3.6% As Price Increases Widen

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose by 3.6% from November to December, the 4th increase in six months, projecting that 5.54 million existing homes would sell over an entire year if the December home sales pace were extrapolated over that year, a pace that was also 10.8% above the annual sales rate they projected in December of a year ago.…November sales are indicated to have been at a 5.35 million rate, unrevised from the annual rate indicated by last month’s report…for the year, existing home sales totaled 5.34 million, the same number as sold in 2018, but 3.1% fewer than the 5.51 million homes that were sold in 2017…the NAR also reported that the median sales price for all existing-home types was $274,500 in December, which was up from $271,300 in November, and 7.8% higher than in December a year earlier, which they report "marks 94 straight months of year-over-year gains“…..the NAR press release, which is titled “Existing-Home Sales Climb 3.6% in December“, 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 for 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 like to look at the raw data overview (pdf) to see what actually transpired during the month…this unadjusted data indicates that roughly 434,000 homes sold in December, up by 7.4% from the 404,000 homes that sold in November, and 15.1% more than the 377,000 homes that sold in December of last year, so we can see that the seasonal adjustments had a modest negative impact on the published figures….that same pdf indicates that the median home selling price for all housing types rose 1.2%, from a revised $271,300 in November to $274,500 in December, while the average home sales price was $311,200, up 1.0% from the $308,200 average sales price in November, and up 5.9% from the $293,800 average home sales price of December a year ago…for the year as a whole, the median home sales price was at $271,800, up 4.8% from the median sales prices of $259,300 in 2018, while the average home sales price was at $308,400, a 3.4% increase from the $298,200 average home sales price in 2018...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 5.54 million in December and Comments on December 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, January 19, 2020

December's consumer & producer prices, retail sales, industrial production, & housing starts; November's business inventories & JOLTS

Major reports that were released this past week included the December Consumer Price Index, the December Producer Price Index, the December Import-Export Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for November, all from the Bureau of Labor Statistics; the December report on Industrial Production and Capacity Utilization from the Fed, and the Advance Retail Sales Report for December, the New Residential Construction report for December (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for November, all from the Census Bureau..

The week also saw the release of the first two regional Fed manufacturing surveys for January: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from +2.9 in November and from +3.5 in December to +4.8 in January, suggesting ongoing slow growth of 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 rose from a revised reading of +2.4 in December to + 17.0 in January, indicating a return to faster growth for that region's manufacturing firms this month...

Consumer Prices Rose 0.2% in December on Higher Prices for Gasoline, Clothing, & Insurance

The consumer price index rose 0.2% in December, as higher prices for gasoline, fast food, clothing and health insurance were only partly offset by lower prices for electricity, used cars and airline fares...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.2% in December after rising 0.3% in November, 0.4% in October, being unchanged in September, rising 0.1% in August, rising 0.3% in July, rising 0.1% in June, rising 0.1% in May, rising 0.3% in April, rising 0.4% in March, rising 0.2% in February, and after they had been unchanged in January, in December and last November...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 257.208 in November to 256.974 in December, which left it statistically 2.285% higher than the 251.233 index reading of November of last year, which is reported as a 2.3% year over year increase, up from 2.1% a month ago....with prices for energy a major contributor to the overall index increase, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, as the unadjusted core price index also fell from 265.108 to 264.935, which left the core index 2.2587% ahead of its year ago reading of 259.083, which is also reported as a 2.3% year over year increase, same as was reported for October...

The volatile seasonally adjusted energy price index rose 1.4% in December, after rising 0.8% in November and by 2.7% in October, but after falling 1.4% in September. falling 1.9% in August. rising 1.3% in July, falling 2.3% in June, falling 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, and falling by 2.6% last December, and hence is now 3.4 higher than in December a year ago...the price index for energy commodities was 2.8% higher in December, while the index for energy services was 0.3% lower, after rising 0.4% in November....the energy commodity index was up 2.8% due to a 2.8% increase in the price of gasoline, the largest component, and a 1.6% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 2.9% higher...within energy services, the price index for utility gas service rose 0.3% after rising 1.1% in November but is still 3.5% lower than it was a year ago, while the electricity price index fell 0.5% after rising 0.3% in November....energy commodities are now averaging 7.4% higher than their year ago levels, with gasoline prices averaging 7.9% higher than they were a year ago, while the energy services price index is now 1.2% lower than last December, as electricity prices are now 0.4% lower than a year ago…

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

In the food at home categories, the price index for cereals and bakery products was 0.4% lower as average bread prices fell 0.6%, prices for fresh cakes and cupcakes fell 3.3%, rice prices fell 2.1% and cookie prices fell 1.6%...on the other hand, the price index for the meats, poultry, fish, and eggs group was 1.3% higher, as egg prices rose 2.9%, chicken prices rose 3.3%, and the fresh fish and seafood price index rose 1.4%...meanwhile, the seasonally adjusted index for dairy products was unchanged, as average prices for fresh whole milk rose 0.3% while the index for ice cream & related products fell 1.6%...at the same time, the fruits and vegetables index was 0.3% lower on a 1.2% decrease in the price index for fresh vegetables and a 1.7% decrease in the price index frozen vegetables...in addition, the beverages index was 0.4% lower, as prices for roast coffee fell 2.1% and carbonated drink prices were 1.1% lower....lastly, the index for the ‘other foods at home’ category was down 0.3%, as the price index for candy and chewing gum fell 1.7%, the index for fats and oils including peanut butter but not including butter and margarine fell 1.6%, the index for frozen and freeze dried prepared foods 1.2% and the snack food price index fell 1.2%, while prices for prepared salads averaged 3.8% higher....the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last December, none of the food line items have seen a price change greater than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.1% December after rising by 0.2% November, 0.2% October, 0.1% in September, 0.3% in August, 0.3% in July, 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for each of the five months prior to that, the composite price index of all goods less food and energy goods was unchanged in December, while the more heavily weighted composite for all services less energy services was 0.2% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust December’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.3% lower, as the price index for living room, kitchen, and dining room furniture fell 1.0% and the index for laundry appliances fell 3.1% while the index for window coverings rose 5.6%....on the other hand, the apparel price index was 0.4% higher as a 3.2% increase in the price index for girl's apparel and a 2.1% increase in the price index for women's dresses more than offset a 6.5% decrease in the price index for men's suits, sport coats, and outerwear... meanwhile, the price index for transportation commodities other than fuel was 0.2% lower even as prices for new cars and trucks rose 0.1% because prices for used cars and trucks fell 0.8% and tire prices fell 0.2%, while the price index for motor oil, coolant, and fluids rose 5.4%...at the same time, prices for medical care commodities averaged 1.5% higher because prescription drugs prices rose 2.1%...however, the recreational commodities index was 0.6% lower on a 2.0% decrease in TV prices, an 0.8% decrease in the price index for sporting goods, a 3.3% decrease in the price index for photographic equipment, and a 1.3% decrease in price index for newspapers and magazines....in addition, the education and communication commodities index was 1.2% lower on a 1.6% decrease in the price index for computers, peripherals, and smart home assistant devices and a 2.4% decrease in the price index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.1% higher, while the price index for ‘other goods’ was 0.5% lower on a 0.6% decrease in the index for hair, dental, shaving, and miscellaneous personal care products and a 1.9% decrease in the price index for cosmetics, perfume, bath, nail preparations and implements...

Within core services, the price index for shelter rose 0.2% as rents rose 0.2%, homeowner's equivalent rent rose 0.2%, while prices for lodging away from home at hotels and motels fell 2.0%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.1% higher....in addition, the price index for medical care services was 0.4% higher, as the index for hospital services rose 0.3% and health insurance rose 1.4%....on the other hand, the transportation services price index was was 0.3% lower as the price index for car and truck rental fell 1.3%, airline fares fell 1.4% and the index for other intercity transportation fell 2.5%....meanwhile, the recreation services price index rose 0.5% as prices for cable and satellite television services rose 1.1%, veterinarian services rose 0.6% and the index for admission to sporting events rose 1.5%...at the same time, the index for education and communication services was 0.2% higher as the index for child care and nursery school rose 0.3%, the index for delivery services rose 1.1%, and prices for internet services and electronic information provision rose 0.4%....lastly, the index for other personal services was up 0.4% as the price index for funeral expense rose 0.6% and the index for tax return preparation and other accounting fees was 1.9% higher...

Among core line items, prices for televisions, which now average 20.5% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 14.6% since last December, and the price index for computer software and accessories, which is down 11.2% 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 20.4% over the past year, the price index for infants' furniture, which has increased 22.0% year over year, and intercity bus-fare, which has increased by 19.7% since last December, are the only line items to have increased by a double digit magnitude over that span....

Retail Sales Rose 0.3% in December after Prior Months Were Revised Lower

Seasonally adjusted retail sales increased in December after retail sales for October and November were revised lower...the Advance Retail Sales Report for December (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $529.6 billion during the month, which was 0.3 percent (±0.4%)* higher than November's revised sales of $527.8 billion, and was 5.8 percent (±0.7 percent) above the adjusted sales in December of last year...November's seasonally adjusted sales were revised a bit lower, from $528.0 billion to $527.8 billion, while October's sales were revised 0.1% lower, from $527.0 billion to $526.4 billion; as a result, the October to November change was revised up from an increase of 0.2 percent (±0.4%) to an increase of 0.3 percent (±0.2%), and the year over year increase for the 4th quarter came in at 4.1%.....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated actual sales rose 11.1%, from $597,347 million in November to $537,635 million in December, while they were up 6.0% from the $563,497 million of sales in December a year ago, so we can see how the large seasonal adjustment to holiday sales brought the headline sales increase down from the big holiday sales increase that one would normally expect in December...

Since it's the end of the quarter and the end of the year for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what this table shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the November revised figure to this month's December "advance" figure in the first sub-column, and then the year over year percentage sales change since last December in the 2nd column; the second double column pair below gives us the revision of the November advance estimates (now called "preliminary") as of this report, with the new October to November percentage change under "Oct 2019 r" (revised) and the November 2018 to November 2019 percentage change as revised in the 2nd column of that pair (for your reference, the table of from advance estimate of November sales, before this month's revisions, is here).... then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (October, November and December) from the preceding three months of the 3rd quarter (July, August and September) and then from the same three months (October, November and December) of a year earlier....that first column of the last pair thus gives us a snapshot comparison of 3rd quarter sales to fourth quarter sales, which is useful in estimating the impact of retail sales on 4th quarter GDP, once those sales are adjusted for inflation….

December 2020 retail sales table

To compute December's real personal consumption of goods data for national accounts from this December retail sales report, the BEA will use the corresponding price changes from the December consumer price index, which we reviewed above...to estimate what they will find, we'll first separate out the volatile sales of gasoline from the other totals...from the third line on this table, we can see that December retail sales excluding the 2.8% price-related increase in sales at gas stations were up by 0.1%....then, subtracting the figures representing the 0.4% increase in grocery & beverage sales and the 0.2% increase in food services sales from that total, we find that core retail sales were up by less than half of 0.1% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was unchanged in December, we can thus approximate that real retail sales excluding food and energy will on average be close to our nominal core retail sales, or show an increase of less than half of 0.1%, which would be rounded to 0%...however, the actual adjustment 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 clothing stores were 1.6% higher in December, the apparel price index was 0.4% higher, which would mean that real sales of clothing only rose around 1.2%.…on the other hand, while sales at furniture stores were up 0.1%, the price index for household furnishings and supplies decreased by 0.3%, which would suggest that real sales at furniture stores rose by roughly 0.4%…similarly, while nominal sales at sporting goods, hobby, music and book stores rose 0.9%, the price index for recreational commodities fell 0.6%, so we can figure real sales of recreational goods were up roughly 1.5%...

In addition to figuring those core retail sales, to make a complete estimate of real December PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the CPI report showed that the food price index was 0.2% higher in December, with the index for food purchased for use at home 0.1% higher, while prices for food bought to eat away from home were 0.3% higher... hence, with nominal sales at food and beverage stores 0.4% higher, real sales of food and beverages would only be around 0.3% higher in light of the 0.1% higher prices…likewise, the 0.2% increase in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants fell about 0.1%...meanwhile, while sales at gas stations were up 2.8%, there was also a 2.8% increase in the retail price of gasoline, which would suggest real sales of gasoline were close to unchanged, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales.....by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we can estimate that the income and outlays report for December will show that real personal consumption of goods rose by almost 0.1% for the month, after rising by 0.5% in November, but after falling by a revised 0.3% in October...at the same time, the 0.1% decrease in real sales at bars and restaurants will have a slightly negative December’s real personal consumption of services...

Industrial Production Fell 0.3% in December Due to Warm Weather, After October’s & November’s Output Were Revised Higher

The Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production fell by a seasonally adjusted 0.3% in December after rising by a revised 0.8% in November, but after falling by a revised 0.5% in October, which together meant that industrial production fell at a 0.5% annual rate in the 4th quarter, after rising by a revised 1.2% rate in the 3rd quarter....the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell to 109.4 in December from 109.8 in November, which was revised from the 109.7 reported last month, while at the same time the index for October was revised from 108.5 to 108.9, now a 0.5% increase from September, rather than the 0.9% decrease previously reported...the IP index for September was revised lower from 109.5 to 109.4, while the index for August was revised higher, from 109.9 to 110.0...year over year industrial production is now down 1.0%, down from the 0.8% year over year decrease reported a month ago....

The manufacturing index, which accounts for more than 75% of the total IP index, rose 0.2% to 105.0 in December, after the November index was revised from 104.9 to 104.8, but is still 1.3% lower than it was a year ago....meanwhile, the mining index, which includes oil and gas well drilling, rose from 132.6 in November to 134.4 in December, after the November mining index was revised up from 132.3, which lifted the mining index to a level 1.4% higher than it was a year earlier...finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, fell by 5.6% in our warm December, from 107.6 to 101.6, after the November utility index was revised from 106.6 to 107.6, now 1.0% higher than October...since December 2018 was also depressed in a warmer than normal month, the utility index is still only 1.9% lower than it was a year ago...

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell to 77.0% in December from 77.4% in November, which was revised from the 77.3% reported last month...capacity utilization of NAICS durable goods production facilities fell from a downwardly revised 75.5% in November to 75.2% in December, while capacity utilization for non-durables producers rose from a downwardly revised 75.7% to 76.1%...capacity utilization for the mining sector rose to 89.6% in December from 88.8% in November, which was originally reported as 88.6%, while utilities were operating at 73.5% of capacity during December, down from 78.0% of capacity during November, which was previously reported at 77.3%...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....

Producer Price Index Up 0.1% in November On Higher Energy Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.1 in December, as average prices for finished wholesale goods rose 0.3% while margins of final services providers were on average unchanged...that followed a November report that the PPI was unchanged, as prices for finished wholesale goods had risen 0.3% while margins of final services providers fell 0.3%, an October report that had the PPI 0.4% higher, with prices for finished wholesale goods 0.7% higher and margins of final services providers up by 0.3%, a revised September report that showed producer prices fell 0.3%, with prices for finished wholesale goods 0.4% lower while margins of final services providers decreased by 0.3%, and a revised August report that showed the PPI rose 0.2%, even prices for finished wholesale goods fell by 0.3%, because the more heavily weighted margins of final services providers increased by 0.3%....on an unadjusted basis, producer prices are now 1.3% higher than a year ago, up from the 1.1% year over year increase indicated by last month's report, which had been the lowest annual price increase since the year ended October 2016...meanwhile, the core producer price index, which excludes food, energy and trade services, also rose by 0.1% for the month, and is now 1.5% higher than in December a year ago, up from the 1.3% YoY increase shown in November...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.3% higher in December, after being 0.3% higher in November, 0.7% higher in October, 0.4% lower in September, 0.3% lower in August, 0.4% higher in July, 0.5% lower in June, 0.2% lower in May, 0.4% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, and 0.6% lower in December of 2018....the finished goods index rose 0.3% in November because the wholesale price index for energy goods was 1.5% higher, after rising by 0.6 in November and 2.8% in October, after falling by a revised 2.8% in September and by a revised 1.4% in August, while the price index for wholesale foods fell 0.2% in December after rising 1.1% in November, 1.3% in October and 0.3% in September, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.1% higher after rising 0.2% in November....wholesale energy prices were higher due to a 3.7% increase in wholesale prices for gasoline, a 7.7% increase in wholesale prices for home heating oil, and a 6.4% increase in wholesale prices for diesel fuel, while the wholesale food price index fell on a 7.0% decrease in the wholesale price index for beef and veal, a 7.1% decrease in the wholesale price index for fresh and dry vegetables, and a 10.4% decrease in the wholesale price of eggs for fresh use....among wholesale core goods, wholesale prices for iron and steel scrap rose 11.3% and wholesale prices for agricultural machinery and equipment rose 1.3%..

At the same time, the index for final demand for services was unchanged in December, after falling by 0.3% in November, rising by 0.3% in October, falling by a revised 0.3% in September, and rising by 0.3% in August, as the index for final demand for trade services fell 0.3%, the index for final demand for transportation and warehousing services rose 2.7%, and the core index for final demand for services less trade, transportation, and warehousing services was 0.1% lower....among trade services, seasonally adjusted margins for sporting goods and boat retailers fell 4.3%, margins for apparel, jewelry, footwear, and accessories retailers fell 3.7%, and margins for fuel & lubricants retailers fell 4.3%, while margins for book retailers rose 3.8% ... among transportation and warehousing services, margins for airline passenger services rose 8.6%...among the components of the core final demand for services index, margins for portfolio management rose 1.9%, and margins for consumer loans (partial) rose 1.8%, while margins for arrangement of cruises and tours fell 3.9%...

This report also showed the price index for intermediate processed goods rose 0.1% in December, after rising 0.2% in November, 0.4% in October. but after falling by a revised 0.2% in September and a revised 0.5% in August....the price index for intermediate energy goods rose 1.0%, as refinery prices for gasoline rose 3.7% and refinery prices for No. 2 diesel fuel rose 6.4%...at the same time, prices for intermediate processed foods and feeds rose 0.1%, as the producer price index for processed poultry rose 2.0% while the index for meats fell 1.7%... meanwhile, the core price index for intermediate processed goods less food and energy fell 0.2% as the producer price index for steel mill products fell 1.8% and producer prices for synthetic rubber decreased 1.6%, while the index for building paper and board rose 5.4%... prices for intermediate processed goods are still 1.7% lower than in December a year ago, the eighth consecutive year over year decrease, following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods rose 1.8% in December, after rising 3.9% in November and by 1.0% in October, but after falling by a revised 1.6% in September and by a revised 1.7% in August....that was as the December price index for crude energy goods rose 0.4% as crude oil prices rose 3.4% while unprocessed natural gas prices fell 4.6%, while the price index for unprocessed foodstuffs and feedstuffs rose 2.3% on a 10.0% increase in producer prices for slaughter chickens, a 3.4% increase in producer prices for slaughter hogs and a 8.8% increase in producer prices for alfalfa hay....at the same time, the index for core raw materials other than food and energy materials rose 3.0%, as prices for unprocessed iron and steel scrap rose 11.3% and prices for nonferrous metal ores rose 4.5%...this raw materials index is still 7.3% lower than a year ago, as the year over year change on this index remained negative all year...

Lastly, the price index for services for intermediate demand rose 0.4 percent in November after falling 0.1 percent in November, 0.2 percent in October, and a revised 0.1 percent in September, while rising a revised 0.4% in August...the price index for intermediate trade services was 0.3% higher, as margins for intermediate machinery and equipment parts and supplies wholesalers rose 2.8%, margins for metals, minerals, and ores wholesalers rose 1.9%, and margins for intermediate building materials, paint, and hardware wholesalers rose 1.8%, while margins for chemicals and allied products wholesalers fell 4.2%…at the same time, the index for transportation and warehousing services for intermediate demand was 1.2% higher, as the price index for intermediate transportation of passengers (partial) rose 8.5% and the index for arrangement of freight and cargo rose 4.0%...in addition, the core price index for intermediate services less trade, transportation, and warehousing rose 0.2%, as the intermediate price index for "internet advertising space sales, excluding Internet ads sold by print publishers" rose 6.0% and the price index for television advertising time sales rose 4.0%, while the index for intermediate traveler accommodation services fell 3.0%...over the 12 months ended in October, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 1.8% higher than it was a year ago, up from 1.4% in November and from 1.6% in October...

November Business Sales Up 0.7% Business Inventories Down 0.2%

After the release of the December retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for November (pdf), which incorporates the revised November retail data from that December report and the earlier published November 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 $1,465.7 billion in November, up 0.7 percent (±0.2%) from October's revised sales, and up 1.0 percent (±0.4%) from November sales of a year earlier...note that total October sales were concurrently revised from the previously reported $1,456.0 billion to $1,454.9 billion, now down 0.2% from September....manufacturer's sales rose 0.3% to $502,166 million in November; retail trade sales, which exclude restaurant & bar sales from the revised November retail sales reported earlier, rose 0.4% to $462,883 million, and wholesale sales rose 1.5% to $500,651 million..

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,037.4 billion at the end of November, down 0.2 percent (±0.1 percent) from October, but 2.8 percent (±0.5 percent) higher than in November a year earlier...at the same time, the value of end of October inventories was revised from the $2,042.8 billion reported a month ago to $2,041.2 billion, now just a 0.1% increase from September.... seasonally adjusted inventories of manufacturers were estimated to be valued at $700,989 million, up 0.1% from October, while inventories of retailers were valued at $661,499 million, 0.7% lower than in October, and inventories of wholesalers were estimated to be valued at $674,943 million at the end of November, 0.1% lower than in October...

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for November, which was up 0.3% for finished goods, including an increase of 0.2% ex food & energy...last week, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged the negative change in those inventories would have a substantial negative impact on 4th quarter GDP growth…also last week, we found that real wholesale inventories were at least 0.4% lower for the month, following a 0.6% real decrease in October, and that they would also subtract substantially from 4th quarter GDP growth….since nominal retail inventories for November have now been shown to 0.7% lower, real retail inventories for the month, considering the 0.3% finished goods price adjustment, would have thus decreased by 1.0% from October, after a real 0.6% decrease in that month...since the third quarter saw total inventories increase at an inflation adjusted $80 billion annual rate, these real inventory decreases we now have indicated for the 4th quarter would necessarily subtract that amount, plus the amount of the real 4th quarter decrease, from the growth of 4th quarter GDP...

Job Openings Much Lower In November; Hiring & Quitting Rise, Layoffs Fall

The Job Openings and Labor Turnover Survey (JOLTS) report for November from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 561,000, from 7,361,000 in October to 6,800,000 in November, after October job openings were revised 96,000 higher, from 7,267,000 to 7,361,000...November's jobs openings were thus 10.8% lower than the 7,626,000 job openings reported in November a year ago, as the job openings ratio expressed as a percentage of the employed fell to 4.3% in November from 4.6% October, and was also down from 4.8% in November a year ago....the largest percentage decrease in November openings appears to be a 112,000 job opening decrease to 214,000 openings in the construction sector, while the health care and social assistance sector saw job openings increase by 47,000 to 1,180,000 (see table 1 for more job openings details)...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 November, seasonally adjusted new hires totaled 5,821,000, up by 39,000 from the revised 5,782,000 who were hired or rehired in October, as the hiring rate as a percentage of all employed remained at 3.8% in November, while it was still down from 3.9% in November a year ago (details on hiring by region and by sector since July are in table 2)....meanwhile, total separations fell by 4,000, from 5,652,000 in October to 5,648,000 in November, as the separations rate as a percentage of the employed remained at 3.7%, same it was in November a year ago (see table 3)...subtracting the 5,648,000 total separations from the total hires of 5,821,000 would imply an increase of 173,000 jobs in November, somewhat less than the revised payroll job increase of 256,000 for November reported in the December establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,536,000 of us voluntarily quit our jobs in November, up by 39,000 from the revised 3,479,000 who quit their jobs in October, while the quits rate, widely watched as an indicator of worker confidence, remained unchanged at 2.3% of total employment, also the same as it was a year earlier (see job quitting details in table 4)....in addition to those who quit, another 1,749,000 were either laid off, fired or otherwise discharged in November, down by 46,000 from the revised 1,795,000 who were discharged in October, as the discharges rate fell from 1.2% to 1.1% of total employment, which was also down from the discharges rate of 1.3% in November a year ago....meanwhile, other separations, which includes retirements and deaths, were at 363,000 in November, up from 360,000 in October, for an 'other separations rate’ of 0.2%, which was the same rate as in October and as in November 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 easily using the links to tables at the bottom of the press release...

Housing Starts at a 13 Year High in December, New Permits Down

the December report on New Residential Construction (pdf) from the Census Bureau estimated that the number of new housing units started in December was at a seasonally adjusted annual rate of 1,608,000, a 13 year high, which was 16.9 percent (±12.8 percent) above the revised November estimated annual rate of 1,375,000 housing units started, and was 40.8 percent (±20.5 percent) above last December's annual rate of 1,142,000 housing starts...the figures in parenthesis are the most likely range of the change indicated; in other words, December housing starts could have been up by 4.1% or by as much as 29.7% more those of last December, with revisions of a greater magnitude in either direction possible...in this report, the annual rate for November housing starts was revised from the 1,365,000 reported last month to 1,375,000, while October starts, which were first reported at a 1,314,000 annual rate, were revised from last month's initial revised figure of 1,323,000 annually to a 1,340,000 annual rate with this report....

those 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 108,500 housing units were started in December, up from the 103,100 units that were started in November, unusual in that construction usually slows during the winter months...of those housing units started in December, an estimated 68,600 were single family homes and 38,700 were units in structures with more than 5 units, down from the revised 68,700 single family starts in November, but up from the 32,700 units started in structures with more than 5 units in November...

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 December, Census estimated new building permits for housing units were being issued at a seasonally adjusted annual rate of 1,416,000, which was 3.9 percent (±1.6 percent) below the revised November rate of 1,474,000 permits, but was 8.8 percent (±1.1 percent) above the rate of building permit issuance in December a year earlier...the annual rate for housing permits issued in November was revised down from the originally reported 1,482,000 but was still the highest since May 2007....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 107,300 housing units were issued in December, down from the revised estimate of 107,500 new permits issued in November...the December permits included 62,400 permits for single family homes, down from 63,800 single family permits issued in November, and 41,700 permits for housing units in apartment buildings with 5 or more units, up from 40,800 such multifamily permits a month earlier... for more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.608 Million Annual Rate in December and Comments on December Housing Starts...

 

(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, January 12, 2020

December’s jobs report; November’s trade deficit, factory inventories, and wholesale trade…

Major economic reports released the past week were the Employment Situation Summary for December from the Bureau of Labor Statistics, the November report on our International Trade from agencies within the Commerce Dept, and the Full Report on Manufacturers' Shipments, Inventories and Orders for November and the November report on Wholesale Trade, Sales and Inventories (pdf), both from the Census Bureau....in addition, this week the Fed released the Consumer Credit Report for November, which showed that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $12.5 billion, or at a 3.6% annual rate, as non-revolving credit expanded at a 5.8% rate to $3,089.7 billion in November while revolving credit outstanding shrank at a 2.7% rate to $1,086.3 billion... 

Privately issued reports released this week included the ADP Employment Report for December and the December Non-Manufacturing Report On Business; which saw the NMI (non-manufacturing index) come in at 55.0%, up from 53.9% in November, indicating that a greater plurality of service industry purchasing managers reported expansion in various facets of their business in December than did in November….

Employers Add 145,000 Jobs in December, Unemployment Rate Steady at 50 Year Low

The Employment Situation Summary for December indicated that employers added the smallest number of jobs since May, but that the unemployment rate remained at a 50 year low and the U-6 unemployment rate fell to the lowest on record…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 145,000 jobs in December, after the previously estimated payroll job increase for November revised down by 10,000 from 266,000, to 256,000, and the payroll jobs increase for October was revised down by 4,000 from 156,000 to 152,000…that means that this report represents a net of just 131,000 more seasonally adjusted payroll jobs than were reported last month, and that brought the average monthly job increase for 2019 down to 176,000 jobs, down from the 2018 average increase of 223,000 jobs per month....the unadjusted data, meanwhile, shows that there were actually 278,000 fewer payroll jobs extent in December than in November, as the usual seasonal layoffs in areas such as construction and other outdoor services were normalized by the seasonal adjustments to show the job increases indicated..

Seasonally adjusted job increases in De​cember were concentrated in the private service sector and in construction, as manufacturing employment fell by 12,000, resource exploitation employment fell by 9,000, and employment in transportation and warehousing fell by 10,500...however, even after a downward seasonal adjustment, retail sales still added 41,200 more workers, led by a 33,200 increase in those working in clothing and accessories stores and a 7,000 job increase in building material and garden supply stores....another 40,000 seasonally adjusted jobs were added in the leisure and hospitality sector, with the addition of 15,900 more jobs in bars and restaurants and 14,400 more in amusements, gambling, and recreation....meanwhile, employment in health care and social assistance increased by 33,900 jobs during the month, as 8,800 more employees were added by hospitals and 7,300 more were employed by outpatient care centers...after seasonal adjustment, construction work saw a relative job increase of 20,000, as non-residential specialty trade contractors employed 9,800 more workers than would have been expected for December...meanwhile, employment in the other major sectors including the broad professional and business services sector, wholesale trade, utilities, financial activities, information, and government, all saw somewhat smaller job gains over the month..

Depressed by the aforementioned increases in mostly lower paying jobs, the establishment survey also showed that average hourly pay for all employees rose by just 3 cents an hour to $28.32 an hour in December, after it had increased by a revised 9 cents an hour in November; that brought the average pay gain for the year to 79 cents, an increase of 2.9% since last December....meanwhile, the average hourly earnings of production and non-supervisory employees increased by 2 cents to $23.79 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.3 hours in December, while hours for production and non-supervisory personnel was unchanged at 33.5 hours...at the same time, the manufacturing workweek held steady at 40.5 hours, while average factory overtime was unchanged at 3.2  hours...

Meanwhile, the December household survey indicated that the seasonally adjusted extrapolation of those who reported being employed rose by an estimated 267,000 to 158,803,000, while the estimated number of those unemployed fell by 58,000 to 5,753,000; which together meant there was a net 209,000 increase in the total labor force...since the working age population had grown by 161,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 48,000 to 95,625,000...with the increase of those in the labor force not much larger than the increase in the civilian noninstitutional population, the labor force participation rate remained unchanged at 63.2% in December....meanwhile, the increase in number employed as a percentage of the increase in the population was not significant enough to change the employment to population ratio, which we could think of as an employment rate, as it was also unchanged at 61.0%...at the same time, the relatively small decrease in the number considered unemployed was not enough to lower the unemployment rate, which remained at a 50 year low of 3.5% in December.. meanwhile, the number of those who reported they were forced to accept just part time work fell by 140,000, from 4,288,000 in November to 4,148,000 in December, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", by 0.2% to 6.7% of the labor force in December, which appears to be an all time low...

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

Trade Deficit Fell 8.2% in November on Lower Imports of Capital Goods & Consumer Goods

Our trade deficit fell by 8.2% in November as the value of our exports increased while the value of our imports decreased....the Census report on our international trade in goods and services for November indicated that our seasonally adjusted goods and services trade deficit fell by a rounded $3.9 billion to $43.1 billion in November, from an October deficit of $46.9 billion, which was revised from the $47.2 billion trade deficit reported for October a month ago...the value of our November exports rose by $1.4 billion to $208.6 billion on a $1.0 billion increase to $137.2 billion in our exports of goods and a $0.4 billion increase to $71.5 billion in our exports of services, while the value of our imports fell $2.5 billion to $251.7 billion on a $2.9 billion decrease to $201.1 billion in our imports of goods, which was partly offset by an increase of $0.4 billion to $50.7 billion in our imports of services...export prices were on average 0.2% higher in November, which means the relative real increase in exports for the month was smaller than the nominal increase by that percentage, while import prices were also 0.2% higher, meaning the decrease in real imports was greater than the nominal dollar decrease reported here by that percentage...

The $1.4 billion increase in the value of our November exports of goods largely resulted from greater exports of capital goods and consumer goods, which was partially offset by lower exports of industrial supplies and materials and of "other" goods...referencing the Full Release and Tables for November (pdf), in Exhibit 7 we find that the value of our exports of capital goods rose by $610 million to $45,325 million on a $377 million increase in our exports of drilling & oilfield equipment and a $278 million increase in our exports of civilian aircraft engines, and that our exports of consumer goods rose by $484 million to $17,105 million on a $305 million increase in our exports of gem diamonds and a $389 million increase in our exports of pharmaceuticals...in addition, our exports of automotive vehicles, parts, and engines rose by $434 million to $13,399 million on $105 million increases in our exports of automotive engines and of passenger cars and a $94 million increase in our exports of vehicle accessories other than bodies, engines and tires, while our exports of foods, feeds and beverages rose by $192 million to $10,705 million on a $250 million increase in our exports of soybeans...partially offsetting the increases in those export categories, our exports of industrial supplies and materials fell by $490 million to $44,381 million as a $796 million decrease in our exports crude oil and a $253 million decrease in our exports of precious metals other than gold was partly offset by a $248 million increase in our exports of petroleum products other than fuel oil and a $201 million increase in our exports of nonmonetary gold, while our exports of other goods not categorized by end use fell by $511 million to $5,656 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports, and shows that lower imports of capital goods and consumer goods accounted for the lion's share of the November decrease in our imports...our imports of capital goods fell by $1,156 million to $55,406 million on a $635 million decrease in our imports of civilian aircraft, a $599 million decrease in our imports of computers, and a $391 million increase in our imports of semiconductors, and our imports of consumer goods fell by $1,003 million to $51,309 million on a $458 million decrease in our imports of cellphones, a $349 million decrease in our imports of artwork, antiques and other collectibles, a $224 million decrease in our imports of pharmaceuticals, and a $206 million decrease in our imports of furniture and related household goods....at the same time, the value of our imports of industrial supplies and materials fell by $618 million to $40,773 million on a $410 million decrease in our imports of petroleum products other than fuel oil and a $211 million decrease in our imports of nuclear fuel materials, our imports of foods, feeds, and beverages fell by $164 million to $12,238 million, and our imports of other goods not categorized by end use fell by $811 million to $9,719 million....partly offsetting the decreases in those import categories, our imports of automotive vehicles, parts and engines rose by $1,065 million to $30,114 million on a $539 million increase in our imports of vehicle accessories other than bodies, engines and tires, a $257 million increase in our imports of, trucks, buses, and special purpose vehicles, and a $207 million increase in our imports of automotive engines and engine parts..

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 November figures show surpluses, in billions of dollars, with South and Central America ($4.9), Hong Kong ($1.8), Brazil ($1.7), United Kingdom ($1.3), OPEC ($0.7), Singapore ($0.6), and Saudi Arabia ($0.1). Deficits were recorded, in billions of dollars, with China ($25.6), European Union ($13.5), Mexico ($8.5), Japan ($5.7), Germany ($5.2), India ($2.4), Italy ($2.3), Taiwan ($1.7), Canada ($1.7), South Korea ($1.2), and France ($1.2).

  • • The deficit with China decreased $2.2 billion to $25.6 billion in November. Exports increased $1.4 billion to $8.9 billion and imports decreased $0.8 billion to $34.5 billion.
  • • The deficit with Canada decreased $1.6 billion to $1.7 billion in November. Exports increased $0.1 billion to $24.0 billion and imports decreased $1.5 billion to $25.7 billion.
  • • The deficit with Japan increased $1.3 billion to $5.7 billion in November. Exports decreased $0.6 billion to $5.8 billion and imports increased $0.7 billion to $11.6 billion.

To estimate the impact of October's and November's trade in goods on the eventual 4th 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 in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the exception that they are not annualized here....from that table, we can figure that 3rd quarter real exports of goods averaged 149,243.3 million monthly in 2012 dollars, while similarly inflation adjusted October and November exports were at 147,973 million and 148,707 million respectively in that same 2012 dollar quantity index representation...annualizing the change between the average monthly real exports of the two quarters, we find that the 4th quarter's real exports of goods are falling at a 2.399% annual rate from those of the 3rd quarter, or at a pace that would subtract about 0.19 percentage points from 4th quarter GDP if it were to continue at the same pace through December....in a similar manner, we find that our 3rd quarter real imports of goods averaged 233,955.7 million monthly in chained 2012 dollars, while inflation adjusted October and November imports were at 226,925 million and 223,960 million in 2012 dollars respectively...those chained dollar representations of real goods would indicate that so far in the 4th quarter, real imports have been shrinking at annual rate of 13.78% from those of the 3rd quarter...since imports are subtracted from GDP because they represent the portion of the consumption and investment components of GDP that occurred during the quarter that was not produced domestically, their decrease at a 13.78% rate would conversely add about 1.62 percentage points to 4th quarter GDP....hence, if our October and November trade deficit in goods is maintained at these levels throughout December, our improving balance of trade in goods would add about 1.43 percentage points to the growth of 4th quarter GDP....(note, however, that we have not computed the impact on GDP of the usually less volatile change in services here, mostly because the BEA does not provide inflation adjusted data on those, and we don't have an easy way to adjust for all their price changes)...

Factory Shipments Up 0.3% in November, Factory Inventories Up 0.3%, Both on Higher Prices

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for November from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $3.6 billion or 0.7 percent to $493.0 billion in November, following an increase of 0.2% to $496.6 billion in October, which was revised from the 0.3% increase to $497.0 billion that was reported for October 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 as revised updates to the October advance report on durable goods we reported on two weeks ago...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 November, down three of the last four months, decreased $3.6 billion or 0.7 percent to $493.0 billion, the U.S. Census Bureau reported today.  This followed a 0.2 percent October increase.  Shipments, up two consecutive months, increased $1.7 billion or 0.3 percent to $502.2 billion.  This followed a 0.1 percent October increase.  Unfilled orders, down two of the last three months, decreased $4.9 billion or 0.4 percent to $1,158.7 billion.  This followed a virtually unchanged October increase.  The unfilled orders‐to‐shipments ratio was 6.67, down from 6.68 in October.  Inventories, up eleven of the last twelve months, increased $2.0 billion or 0.3 percent to $701.0 billion.  This followed a 0.2 percent October increase.  The inventories‐to‐shipments ratio was 1.40, unchanged from October.
  • New orders for manufactured durable goods in November, down two of the last three months, decreased $5.2 billion or 2.1 percent to $242.2 billion, down from the previously published 2.0 percent decrease.   This followed a 0.2 percent October increase.  Transportation equipment, down three consecutive months, led the decrease, $5.0 billion or 5.9 percent to $79.0 billion.  New orders for manufactured nondurable goods increased $1.6 billion or 0.6 percent to $250.8 billion.
  • Shipments of manufactured durable goods in November, up following four consecutive monthly decreases, increased $0.1 billion or virtually unchanged to $251.4 billion, down from the previously published 0.1 percent increase.  This followed a 0.1 percent October decrease.  Electrical equipment, up two of the last three months, drove the increase, $0.3 billion or 2.2 percent to $11.8 billion.  Shipments of manufactured nondurable goods, up two consecutive months, increased $1.6 billion or 0.6 percent to $250.8 billion.  This followed a 0.3 percent October increase.  Petroleum and coal products, up four of the last five months, led the increase, $1.4 billion or 2.7 percent to $53.5 billion.
  • Unfilled orders for manufactured durable goods in November, down two of the last three months, decreased $4.9 billion or 0.4 percent to $1,158.7 billion, unchanged from the previously published decrease.  This followed a virtually unchanged October increase.  Transportation equipment, down following four consecutive monthly increases, led the decrease, $4.8 billion or 0.6 percent to $790.1 billion. 
  • Inventories of manufactured durable goods in November, up sixteen of the last seventeen months, increased $1.6 billion or 0.4 percent to $433.7 billion, unchanged from the previously published increase.   This followed a 0.3 percent October increase.  Transportation equipment, also up sixteen of the last seventeen months, drove the increase, $1.8 billion or 1.2 percent to $149.2 billion.  Inventories of manufactured nondurable goods, up following seven consecutive monthly decreases, increased $0.3 billion or 0.1 percent to $267.3 billion.  This followed a 0.1 percent October decrease.  Petroleum and coal products, up two consecutive months, drove the increase, $0.7 billion or 1.7 percent to $39.6 billion. 

To gauge the impact of November factory inventories on 4th 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 November's finished goods inventories was 0.1% higher at $243,579 million; the value of work in process inventories was 0.7% higher at $219,930 million, and materials and supplies inventories were valued 0.1% higher at $237,480 million...the producer price index for November indicated that prices for finished goods increased 0.3%, that prices for intermediate processed goods were 0.2% higher, and that prices for unprocessed goods were on average 3.9% higher....assuming similar valuations for like types of inventories, those price changes would suggest that November's real finished goods inventories were down about 0.1%, that real inventories of intermediate processed goods were around 0.5% greater, and real raw material inventories were 3.8% smaller…those inventory changes follow an October report that indicated real finished goods inventories were about 0.7% lower, that real inventories of intermediate processed goods were 0.1% lower, and that real raw material inventory inventories were about 0.9% lower…since real factory inventories in the 3rd quarter were substantial higher, any inventory decreases in the 4th quarter such as we see indicated here will not only subtract from GDP in and of themselves, but also reverse the inventory gains of the 3rd quarter...

November Wholesale Sales Up 1.5%, Wholesale Inventories Down 0.1%

The November report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$500.7 billion, up 1.5 percent (±0.5 percent) from the revised October level and .. up 0.8 percent (±1.1 percent)* from the November 2018 level. The September 2019 to October 2019 percent change was revised from the preliminary estimate of down 0.7 percent (±0.5 percent) to down 0.9 percent (±0.5 percent).*"...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold...

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods left in a warehouse represent goods that were produced but not sold, and this November report estimated that wholesale inventories were valued at a seasonally adjusted "$674.9 billion at the end of November, down 0.1 percent (±0.2 percent)* from the revised October level. Total inventories were up 3.3 percent (±1.2 percent) from the revised November 2018 level. ..the value of inventories at the end of October was revised to $675.4 billion from the $675.6 billion indicated by last month's report, still up 0.1% from September..

To estimate the impact of November wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index...although details are not broken out in this report, we've previously estimated that about 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...as we noted earlier, the producer price index for November indicated that prices for finished goods rose 0.3%, that prices for intermediate processed goods rose 0.2%, and that prices for unprocessed goods were on average 3.9% higher; thus the 0.1% decrease in the nominal value of wholesale inventories was despite rising prices, and hence real wholesale inventories were at least 0.4% lower for the month, and that follows an October when real whole inventories were roughly 0.6% lower....since real wholesale inventories in the 3rd quarter were mostly higher, any decrease in 4th quarter inventories such as we see indicated here will subtract both the 4th quarter decrease and the inventory gains of the 3rd quarter from 4th quarter GDP...

 

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

Sunday, January 5, 2020

November’s construction spending; October Case-Shiller HPI, December auto sales

The only major agency report released this week was the November report on Construction Spending (pdf) from the Census Bureau...in addition, in the last of the regional Fed surveys for December, the Dallas Fed Texas Manufacturing Outlook Survey, reported their general business activity composite index fell to -3.2 from November's -1.3, thus suggesting a modest contraction of the Texas manufacturing economy...

Privately issued reports released this week included the December report on light vehicle sales from Wards Automotive, which estimated that vehicles sold at a 16.70 million annual rate in December, down from the 17.09 million annual pace of vehicle sales in November and down from the 17.51 million vehicle rate reported for December of 2018, and the widely followed manufacturing purchasing manager's survey from the Institute for Supply Management (ISM): the December Manufacturing Report On Business reported that the manufacturing PMI (Purchasing Managers Index) fell to 47.2% in December, down from 48.1% in November and the lowest reading since June 2009, which suggests a modest contraction among manufacturing firms nationally...

This week also saw the release of the Case-Shiller Home Price Index for October from S&P Case-Shiller, which doesn’t even include any prices of homes, but just a index generated by averaging relative sales prices of homes that sold during August, September and October against the sales prices of the same homes when they sold during prior 3 month periods going back to January 2000...comparing sales prices on that basis, the Case-Shiller report indicated that their national home price index for those 3 months averaged 3.3% higher than it did for the same homes that sold during the same 3 month period a year earlier, up from the 3.2% year over year index increase indicated by the September report... 

Construction Spending Rose 0.6% in November After Prior Months Were Revised Much Higher

The Census Bureau's report on construction spending for November (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,324.1 billion annually if extrapolated over an entire year, which was 0.6 percent (±1.0%)* above the revised October annualized estimate of $1,316.8 billion and also 4.1 percent (±1.5 percent) above the estimated annualized level of construction spending in November of last year...at the same time, the annualized October construction spending estimate was revised nearly 2.0% higher, from $1,291.1 billion to $1,316.8 billion, while the annual rate of construction spending for September was revised more than 1.0% higher, from $1,301.8 billion to $1,315.2 billion...the $13.4 billion upward revision to September construction spending would imply that the 3rd estimate of 3rd quarter GDP growth was understated by roughly than 0.10 percentage points, a change which will not be applied to published GDP figures until the annual revision is released in the middle of next summer...

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 $985.5 billion, 0.4 percent (±0.7 percent)* above the revised October estimate of $981.1 billion. Residential construction was at a seasonally adjusted annual rate of $536.1 billion in November, 1.9 percent (±1.3 percent) above the revised October estimate of $526.3 billion. Nonresidential construction was at a seasonally adjusted annual rate of $449.4 billion in November, 1.2 percent (±0.7 percent) below the revised October estimate of $454.7 billion.
  • Public Construction: In November, the estimated seasonally adjusted annual rate of public construction spending was $338.6 billion, 0.9 percent (±1.5 percent)* above the revised October estimate of $335.7 billion. Educational construction was at a seasonally adjusted annual rate of $83.9 billion, virtually unchanged from (±1.5 percent)* the revised October estimate of $84.0 billion. Highway construction was at a seasonally adjusted annual rate of $96.4 billion, 2.2 percent (±3.9 percent)* above the revised October estimate of $94.3 billion.

As you can infer from that summary, construction spending would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and in government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of November spending reported in this release on 4th 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...that’s difficult because 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 the prices changes of all of those types of construction separately, we've opted to use the producer price index for final demand construction as an inexact shortcut to make an approximate price adjustment and thereby get a rough estimate of the real change in construction...

That price index showed that aggregate construction costs were unchanged in November after being up 0.4% in October, up 0.1% in September and unchanged in August...on that basis, we can estimate that construction costs for November were up 0.4% from September, up 0.5% from August, and up 0.5% from July, while they were obviously unchanged from October...we then use those percentage changes to inflate the lower cost spending figures for each of those 3rd quarter months against November, which is arithmetically the same as adjusting higher priced October and November construction spending downward, for purposes of comparison...annualized construction spending in millions of dollars for the third quarter months is given as $1,315,229 for September, $1,305,986 for August, and $1,291,250 for July, while it was at annual rates of $1,316,764 in October and @1,324,122 in November....thus to compare the difference between the inflation adjusted construction spending of the two recent 4th quarter months and those of the third quarter, our calculation would be ((1,324,122 + 1,316,764)/2) / ((1,315,229 *1.004 + 1,305,986 * 1.005 + 1,291,250 * 1.005) / 3) = 1.007789, meaning average real construction over the months of October and November was up 0.7789% vis a vis the 3rd quarter...in GDP terms, that means real construction for the 4th quarter has increased at an annual rate of 3.152% from that of the 3rd quarter so far, or at a pace that would add about 0.23 percentage points to 4th quarter GDP, should real December construction continue at the same pace as that of October and November… 

 

(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…)