October’s durable goods and existing home sales

There were just two widely watched economic reports released this week: the Advance Report on Durable Goods for October from the Census bureau and the Existing Home Sales Report for October from the National Association of Realtors.. The week also saw the release of the Chicago Fed National Activity Index (CFNAI) for October, a weighted composite index of 85 different economic metrics, which fell to -0.49 in October from -0.02 in September, which was revised up from the +0.02 reading reported for September last month...as a result, the more often cited 3 month average of the CFNAI fell to -0.22 in October, down from a revised +0.00 in September, which indicates that national economic activity has been below the historical trend over the most recent months, as would any negative index number....

October Durable Goods: New Orders Fell 5.4%, Shipments Fell 0.9%, Inventories Rose 0.3%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for October (pdf) from the Census Bureau reported that the value of the widely followed new orders for manufactured durable goods decreased by $16.0 billion or 5.4 percent to $279.4 billion in October, the third decrease in four months, after the value of September's new orders was revised from the $297.2 billion reported a month ago to $295.4 billion, which now indicates a 4.0% increase from August, rather than the 4.7% increase previously reported...,year to date new orders are still running 4.0% above those of 2022, albeit down from the 4.4% year to date increase we saw in this report last month....

As usual, the volatile monthly change in the value of new orders for transportation equipment was the cause of October's new orders decrease, as new transportation equipment orders fell $16.0 billion or 14.8 percent to $92.1 billion, on a 49.6% decrease to $16,146 million in new orders for commercial aircraft and a 3.8% decrease to $59,403 million in new orders for motor vehicles and parts....excluding orders for transportation equipment, the value of other new orders was virtually unchanged, while excluding just new orders for defense equipment, new orders decreased 6.7%....meanwhile, the value of new orders for non-defense capital goods less aircraft, a proxy for equipment investment, fell by $46 million or by less than 0.1% to $73,794 million, after falling by a downwardly revised 0.2% in September...

At the same time, the seasonally adjusted value of October's shipments of durable goods, which will be included as inputs into various components of 4th quarter GDP after adjusting for any changes in prices, decreased by $2.4 billion or 0.9 percent to $280.4 billion, also the third decrease in four months, after the value of September shipments was revised from $283.7 billion to $282.8  billion, now down 0.6% from August....a decrease in the value of shipments of transportation equipment led the October decrease, falling $2.1 billion or 2.3 percent to $88.4 billion, on a 3.7% decrease in the value of shipments of motor vehicles and a 1.7% decrease in the value of shipments of commercial aircraft, while the value of shipments excluding transportation equipment fell 0.2% to $191,981 million...meanwhile, the value of shipments of nondefense capital goods less aircraft was virtually unchanged at $74,351 million, after the value of September capital goods shipments was revised from $74,381 million to $74,345 million, now virtually unchanged from August..

On the other hand, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the third month in a row, increasing by $1.5 billion or 0.3 percent to $525.1 billion, after the value of September's inventories was revised from $523.7 billion to $523.6 billion, still 0.1% higher than the prior month...an increase in the value of inventories of transportation equipment, also up three consecutive months, led the October inventory increase, rising $1.1 billion or 0.6 percent to $165.9 billion, while the value of inventories of other than transportation equipment rose 0.1% to $359.2 billion...

Finally, the value of unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the 10th time in eleven months, increasing by $4.0 billion or 0.3 percent to $1,356.9 billion, after the value of September’s unfilled orders was revised from $1,353.8 billion to $1,352.8 billion, now a 1.3% increase from August....a $3.7 billion or 0.4 percent increase to $859.2 billion in unfilled orders for transportation equipment led the October increase, while the value of unfilled orders excluding transportation equipment was up by just $347 million, or less than 0.1%, to $497,660 million....compared to a year earlier, the unfilled order book for durable goods is 7.3% above the level of last October, with the value of unfilled orders for transportation equipment 12.4% above their year ago level, largely due to a 16.1% increase in the value of the backlog of orders for commercial aircraft......

Existing Home Sales Fell 4.1% to a 13 Year Low in October

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales decreased 4.1% from September to October, the fifth straight decline, projecting that 3.79 million existing homes would sell over an entire year if the October home sales pace were extrapolated over that year, a pace that was 14.6% below the 4.44 million annual sales rate projected in October of a year ago, and was also 38.8% below the 6.19 million annual sales rate of October 2011...September's sales, at a 3.95 million annual rate, were revised from the 3.96 million annual rate indicated by last month's report....the NAR also reported that the median sales price for all existing-home types was $391,800 in October, 3.4% higher than in October a year earlier, reporting that year over year prices were still higher in all four regions.....the NAR press release, which is titled "Existing-Home Sales Receded 4.1% in October", 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 like to look at the raw data overview (pdf), which gives us a close approximation of the actual number of homes that sold each month...this unadjusted data indicates that roughly 333,000 homes sold in October, down by 4.3% from the 348,000 homes that sold in September, and down by 3.4% from the 371,000 homes that sold in October of last year, so we can see there wasn't much change from the seasonal adjustment to this month’s annualized published figures...that same pdf indicates that the median home selling price for all housing types was 0.3% lower in October, the fourth consecutive price decease, falling from a revised $392,800 in September to $391,800 in October, while it was still up 3.4% from the $378,800 median home sales price of October a year ago...by region, median home sales prices ranged from a low of $285,100 in the Midwest to a high of $602,200 in the West, with the Northeast and Midwest showing the steepest decreases in their median sales price over past four months...for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following posts from Bill McBride at Calculated Risk:NAR: Existing-Home Sales Decreased to 3.79 million SAAR in October and NAR: Existing-Home Sales Decreased to 3.79 million SAAR in October; New Cycle Low, Months-of-Supply Close to 2019 Levels, which in turn links to a more complete analysis in his real estate newsletter....

 

 

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

October’s consumer and producer price indexes, retail sales, industrial production, and housing starts; September’s business inventories..

Major reports released this past week included the September Consumer Price Index, the September Producer Price Index, and the September Import-Export Price Index, all from the Bureau of Labor Statistics, the Retail Sales Report for October and the associated Business Sales and Inventories Report for September, both from the Census Bureau, the October report on Industrial Production and Capacity Utilization from the Fed, and the October report on New Residential Construction, also from the Census bureau...in addition, the BLS also released the Regional and State Employment and Unemployment for October, a report which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of that report provides a useful summary of this data, the serious statistics aggregation can be found in the tables linked at the end of the report, where one can find the civilian labor force data and the change in payrolls by industry for each of the 50 states, the District of Columbia, Puerto Rico, and the Virgin Islands...

This week also saw the release of the first three regional Fed manufacturing survey for November: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, a suburban NYC county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose from -4.6 in October to +9.1 in November, meaning that a significant plurality of First District manufacturers are now reporting improving conditions, after reporting a deteriorating conditions last month; 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 reading of -9.0 in October to -5.9 in November, their 16th negative reading in 18 months, which they clearly explain means "18 percent of the firms reported decreases in general activity this month (down from 35 percent last month), while 12 percent reported increases (down from 26 percent); 70 percent reported no change (up from 38 percent last month)..", and the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, who reported their broadest composite index was at -2 in November, up from -8 in October and from -8 in September, which means that just a small plurality of Tenth District manufacturers are still reporting deteriorating conditions this month...

CPI Unchanged in October as Higher Rents were Offset by Lower Fuel Prices

The consumer price index was unchanged in October, as higher prices for rent, car insurance, health insurance, hospital services, utilities, and admissions to sporting events were offset by lower prices for gasoline, appliances, used vehicles, motels and hotels, and information technology commodities...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that the weighted average of seasonally adjusted prices of consumer goods and services was unchanged in October, after rising by 0.4% in September, by 0.6% in August, by 0.2% in July, by 0.2% in June, by 0.1% in May, by 0.4% in April, by 0.1% in March, by 0.4% in February, by 0.5% in January, by 0.1% in December, by 0.2% last November, and by 0.5% in October of last year...the unadjusted CPI-U index, which was originally set to have prices of the 1982 to 1984 period equal to 100, actually fell from 307.789 in September to 307.671 in October, which still left it statistically 3.2411% higher than the index reading of 298.012 in October of last year, which is reported as a 3.2% year over year increase, down from the 3.7% year over year increases reported for August and September, with such widely cited year over year figures often telling you us about last year's CPI changes than this years…with lower fuel prices reducing the overall index, seasonally adjusted core prices, which exclude food and energy, were up by 0.2% for the month, as the unadjusted core price index rose from 310.817 to 311.380, which left the core index 4.0309% ahead of its year ago reading of 299.315, which is reported as a 4.0% year over year increase, down from the 4.1% year over year core price increase that was reported in September, and well down from the 6.6% annual increase reported for September 2022, which had been the largest annual increase in core prices in forty years...

The volatile seasonally adjusted energy price index fell 2.5% in October, after rising by 1.5% in September, rising by 5.6% in August, rising by 0.1% in July, rising by 0.6% in June, falling by 3.6% in May, rising by 0.6% in April, falling by 3.5% in March, and by 0.6% in February, while rising by 2.0% in January, falling by 3.1% in December, falling by 1.4% last November, and rising by 1.7% last October, and is now 4.5% lower than in that October of a year ago....the price index for energy commodities was 4.9% lower in October, while the price index for energy services was 0.5% higher, after it had risen by 0.6% in September....the energy commodity index was down 4.9% on a 5.0% decrease in the price of gasoline and an 0.8% decrease in the price of fuel oil, while the price index for other energy commodities, including propane, kerosene, and firewood, were on average unchanged...within energy services, the price index for utility gas service rose 1.2% after falling 1.9% in September, and is still 15.8% lower than it was a year ago, while the electricity price index rose 0.3% in October after rising 1.3% in September... energy commodities are now averaging 6.2% lower than their year ago levels, with gasoline prices averaging 5.3% lower than they were a year ago, while the energy services price index is still down 2.3% from last October, even as electricity prices are still averaging 2.4% higher than a year ago…

Meanwhile, the seasonally adjusted food price index was 0.3% higher in October, after being 0.2% higher in September, 0.2% higher in August, 0.2% higher in July, 0.1% higher in June, 0.2% higher in May, and after being unchanged in March and April, rising by 0.4% in February, by 0.5% in January, by 0.4% in December, by 0.6% in November, and by 0.7% last October, as the price index for food purchased for use at home was 0.3% higher in October, after being 0.1% higher in September, 0.2% higher in August, 0.3% higher in July, and unchanged in June, while the index for food bought to eat away from home was 0.4% higher, as average prices at fast food outlets rose 0.5%, prices at full service restaurants rose 0.3%, food prices at employee sites and schools averaged 0.2% higher, but while "other food away from home" averaged 0.9% lower....

In the food at home categories, the price index for cereals and bakery products was 0.4% higher, as bread prices rose 1.0%, the price index for flour and prepared flour mixes rose 0.9%, the price index for fresh sweetrolls, coffeecakes, and doughnuts rose 1.5% and the price index for frozen and refrigerated bakery products, pies, tarts, and turnovers was 0.7% higher…at the same time, the price index for the meats, poultry, fish, and eggs food group was 0.7% higher, as the price index for beef and veal rose 1.2%, the price index for pork rose 1.3%, and the price index for uncooked poultry other than chicken and including turkey rose 1.2%....in addition, the seasonally adjusted price index for dairy products was 0.3% higher, as average milk prices rose 1.0% and the price index for cheese and related products was 0.5% higher.... meanwhile, the fruits and vegetables price index was unchanged, as the price index for fresh vegetables fell 1.3% while the price index for canned fruits and vegetables was 1.1% higher....on the other hand, the beverages price index was 0.1% lower, even as the price index for carbonated drinks was 0.6% higher, as the price index for coffee was 0.6% lower and the price index for other beverage materials including tea fell 1.5%....lastly, the price index for the ‘other foods at home’ category was 0.3% higher, as the price index for sugar and sugar substitutes rose 1.6%, the price index for peanut butter rose 1.5%, the price index for baby food and formula rose 1.0%, and the price index for olives, pickles, and relishes was 1.9% higher...

Among the seasonally adjusted core components of the CPI, which rose by 0.2% in October, after rising by 0.3% in September, by 0.3% in August, by 0.2% in July, by 0.2% in June, by 0.4% in May, by 0.4% in April, by 0.4% in March, by 0.5% in February, by 0.4% in January, by 0.4% in December, by 0.3% last November, and by 0.3% last October, the composite price index of all goods less food and energy goods was 0.1% lower in October, while the more heavily weighted composite for all services less energy services was 0.3% higher....

Among the goods components of the core price index, which will be used by the Bureau of Economic Analysis to adjust October’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.2% lower, as the price index for window and floor coverings and other linens fell 1.5%, the price index for tools, hardware, outdoor equipment and supplies fell 1.1, and the price index for major appliances fell 2.0%, led by a 5.0% drop in prices for laundry equipment...on the other hand, the apparel price index was 0.1% higher on a 1.1% increase in the price index for women's suits and separates, a 1.5% increase in the price index for men's suits, sport coats, and outerwear, and a 1.2% increase in the price index for jewelry and watches…however, the price index for transportation commodities other than fuel was 0.4% lower, as average prices for new cars and trucks fell 0.1%, the price index for used cars and trucks fell 0.8% and the price index for vehicle parts and equipment other than tires was 1.0% lower…meanwhile, the price index for medical care commodities was 0.4% higher because prescription drug prices rose 0.8%…at the same time, the recreational commodities index was 0.1% higher, as the price index for TVs rose 0.7%, the price index for sports vehicles including bicycles rose 0.5%, the price index for newspapers and magazines rose 1.8%, and the price index for photographic equipment and supplies rose 6.8%…on the other hand, the education and communication commodities index was 1.3% lower on a 1.9% decrease in the price index for telephone hardware, calculators, and other consumer information items and a 1.3% decrease in the price index for computer software and accessories …lastly, a separate price index for alcoholic beverages was 0.2% higher, while the price index for ‘other goods’ was 1.1% higher on a 1.9% increase in the price index for cigarettes, a 0.7% increase in the price index for cosmetics, perfume, bath, nail preparations and implements, and a 1.2% increase in the price index for miscellaneous personal goods...

Within core services, the price index for shelter was 0.3% higher as rents rose 0.3% and homeowner's equivalent rent was 0.4% higher, while prices for lodging away from home at hotels and motels fell 2.9%, and the price index for water, sewers and trash collection was 0.3% higher....at the same time, the price index for medical care services was 0.3% higher, as the price index for hospital services rose 1.1%, the price index for dental services rose 0.5%, and the price index for health insurance rose 1.1%...moreover,, the transportation services price index was 0.8% higher, as the price index for parking tolls, and other fees rose 2.2% and the price index for motor vehicle insurance rose 1.9%…in addition, the recreation services price index was 0.1% higher, as the price index for veterinary services rose 0.6% and the price index for admission to sporting events was 3.6% higher…meanwhile. the price index for education and communication services was unchanged, as the price index for residential telephone services rose 0.9% and the price index for elementary and high school tuition and fees rose 0.4%, while the price index for college tuition fell 0.2% and postage was 1.3% cheaper…lastly, the index for other personal services rose 0.3%, as the price index for haircuts and other personal care services rose 0.4% and the price index for financial services was 0.3% higher..

Retail Sales Fell 0.1% in October after September Sales Were Revised 0.1% Higher

Seasonally adjusted retail sales decreased 0.1% in October after retail sales for August and September were revised higher...the Advance Retail Sales Report for October (pdf) from the Census Bureau estimated that seasonally adjusted retail and food services sales totaled $705.0 billion during the month, which was 0.1 percent (±0.5%) lower than September's revised sales of $$705.7 billion but 2.5 percent (±0.7 percent) above the seasonally adjusted sales in October of last year... September's adjusted sales were revised from the $704.9 billion reported last month to $705.7 billion, while August's sales were revised from $699.9 billion to $ 699.54 billion, and hence the combination of those two revisions left the August to September percentage change and +0.9% (±0.2 percent), revised from the +0.7% previously reported....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 2.3%, from $685,813 million in September to $701,548 million in October, while they were up 2.7% from the $683,198 million of sales in October a year ago....the net $0.44 billion upward revision to August and September's retail sales would indicate an upward revision of around $1.8 billion at an annual rate in 3rd quarter sales, and should increase the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.3 percentage points, assuming the distribution of price adjustments in the revised figures is similar to that of those originally published...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the October Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each kind of business from the September revised figure to this month's October "advance" report in the first sub-column, and then the year over year percentage sales change since last October in the 2nd column...the second double column pair below gives us the revision of the September advance estimates (now called "preliminary") as of this report, with the new August to September percentage change under "Aug 2023 r" (revised) and the September 2022 to September 2023 percentage change as revised in the last column shown...for your reference, the table of last month’s advance estimate of September sales, before this month's revisions, is here...

To compute October's initial estimate of real personal consumption of goods data for national accounts from this October retail sales report, the BEA will use the corresponding price changes for each type of sales from the October consumer price index, which we just reviewed...to estimate what they will find, we start by pulling out the usually volatile sales of gasoline from the other totals...from the third line on the above table, we can see that October retail sales excluding the 0.3% decrease in sales at gas stations were also down 0.1%....then, subtracting the figures representing the 0.6% increase in grocery & beverage sales and the 0.3% increase in food services sales from that total, we find that core retail sales were down by almost 0.3% for the month....since the CPI report showed that the composite price index for all goods less food and energy goods was 0.1% lower in October, we can thus approximate that real retail sales, excluding food and energy sales, were on average about 0.2% lower for the month...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 motor vehicle & parts dealers were down by 1.0%, the price index for transportation commodities other than fuel was 0.4% lower, which would imply that real unit sales at auto & parts dealers would be around 0.6% lower...likewise, while sales at furniture stores were down 2.0%, the price index for household furnishings and supplies decreased by 0.2%, which would suggest that real sales at furniture stores fell by around 1.8%…on the other hand, while nominal sales at drug stores rose 1.1%, the price index for medical care commodities rose 0.4%, so real sales at drug stores were only up around 0.7%...

In addition to figuring those core retail sales, to make a complete estimate of real October’ PCE for goods, 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 0.3% higher in October, with the price index for food purchased for use at home 0.3% higher, while prices for food bought to eat away from home were 0.4% higher... hence, with nominal sales at food and beverage stores 0.6% higher, real sales of food and beverages would this be roughly 0.3% higher in light of the 0.3% higher prices…likewise, the 0.3% increase in nominal sales at bars and restaurants, once adjusted for 0.4% higher prices, suggests that real sales at bars and restaurants fell 0.1%...meanwhile, while nominal sales at gas stations were down 0.3%, there was a 5.0% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 4.7%, with the caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices, so the increase in real sales at gas stations was certainly somewhat less than our imputed estimate...by reweighing and averaging the real sales changes that we have thus estimated back together, arbitrarily cutting our ridiculous gasoline sales increase in half, and excluding food services, we can estimate that the income and outlays report for October will show that real personal consumption of goods rose by about 0.2% for the month*, after rising by a revised 0.6% in September, and falling by a revised 0.2% in August, but after rising by 0.9% in July, and rising by 0.2% in both May and June, but after falling by 0.5% in May, and after rising by 0.2% in April....at the same time, the 0.1% decrease in real sales at bars and restaurants will have a minor negative impact on October's real personal consumption of services... (* NB: we have a low confidence in that estimate because of the gasoline sales anomaly....)

Industrial Production Fell 0.7% in October after September's Output was Revised Lower

The Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production fell by 0.6% in October after rising by 0.1% in September, which was revised down from the 0.3% increase previously reported….the industrial production index, with the benchmark now set for average 2017 production to equal to 100.0, fell to 102.7 in October from 103.4 in September, after September's index was revised down from 103.6 to 103.4, July and August's indices were both were unrevised at 103.3, June index was unrevised at 102.3, and May's index was revised up from 102.8 to 102.9...with the October decrease and the September downwards revision, the industrial production was 0.7% lower than a year ago, down from the 0.1% year over year increase reported a month ago..

The manufacturing index, which accounts for more than 75% of the total IP index, decreased by 0.7%, from 99.7 in September to 99.0 in October, and was 1.7% below its level of a year ago, after September's manufacturing index was revised down from 99.8 to 99.7, August's manufacturing index was revised up from 99.4 to 99.5, and May's manufacturing index was revised up from 99.7 to 99.8....meanwhile, the mining index, which includes oil and gas well drilling, rose by 0.4%, from 119.5 in September to 120.0 in October, after the September index was revised down from 121.2 to 119.5, which leaves the mining index 2.2% higher than it was a year ago....at the same time, the utility index, which often fluctuates due to above or below normal temperatures, fell by 1.6% on mild weather in October, from 107.1 to 105.4, after the September utility index was revised from 107.0 to 107.1 and August's utility index was revised from 107.4 to 107.7, thus revising the September drop in utility output from 0.3% to0.6%, while still leaving the utility index 2.9% higher than it was a year earlier..

Producer Prices Fell 0.5% in October on Lower Energy and Trade Services

The seasonally adjusted Producer Price Index (PPI) for final demand fell 0.5% in October, the biggest drop since the pandemic impact in April 2020. as the weighted average of prices for wholesale goods was 1.4% lower while the price index for final demand for services was unchanged....that decrease followed a revised 0.4% increase in September, when the weighted average of prices for wholesale goods was 0.8% higher and the price index for final demand for services was 0.2% higher, an August index that was 0.8% higher, when the index for finished goods rose 1.9% while the price index for final demand services was 0.4% higher, a PPI that was 0.6% higher in July, when the average of prices for wholesale goods was 0.3% higher and the price index for final demand for services was 0.8% higher, a PPI that rose 0.1% in June, when prices for wholesale goods were unchanged and final demand for services was 0.1% higher, and a 0.3% decrease in May, when average prices for wholesale goods fell 1.5%, while the price index for final demand for services was 0.2% higher....on an unadjusted basis, producer prices are still 1.3% higher than a year ago, while the core producer price index, which excludes food, energy and trade services, was up 0.1% for the month, and is now 2.9% higher than it was a year ago…

As we noted, the producer price index for final demand for goods was 1.4% lower in October, after being 0.8% higher in September. 1.9% higher in August, and and 0.3% higher in July, after being unchanged in June, 1.5% lower in May, 0.1% higher in April, 1.1% lower in March, 0.4% lower in February, 1.3% higher in January, 1.4% lower in December, 0.3% higher in November, 0.4% higher in October, and 0.5% higher in September of last year, and hence is now down 1.1% from a year ago....the final demand goods price index was 1.4% lower in October as the price index for wholesale energy goods was 6.5% lower, after rising 3.1% in September, 10.2% in August and 0.8% in June and in July, and the price index for wholesale foods was 0.2% lower, after rising 0.7% in September, while the index for final demand for core wholesale goods (excluding food and energy) was 0.1% higher, after rising 0.2% in September...

Wholesale energy prices were down 6.5% in October on a 15.3% decrease in wholesale prices for gasoline, an 11.1% decrease in wholesale prices for home heating oil, and a 12.0% decrease in wholesale prices for diesel fuel, while the final demand food price index was 0.2% lower on a 6.2% decrease in the wholesale price index for fresh fruits and melons, a 12.9% decrease in the wholesale price index for eggs for fresh use, and a 4.7% decrease in the wholesale price index for oilseeds....among core wholesale goods, the wholesale price index for printing trades machinery and equipment rose 2.4%, the wholesale price index for industrial chemicals rose 2.9%, and the wholesale price index for cigarettes increased 2.8%...

Meanwhile, the price index for final demand for services was unchanged in October, after being 0.2% higher in September, 0.3% higher in August, 0.8% higher in July, after being 0.1% higher in June, 0.2% higher in both April and May, 0.1% lower in March, 0.2% higher in February, and unchanged in January, but after rising by 0.2% in December, by 0.4% in November, and by 0.2% last October, and is still 2.6% higher than a year ago…the price index for final demand for trade services fell 0.7%, the price index for final demand for transportation and warehousing services rose 1.5%, 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 5.5%, margins for major household appliances retailers fell 6.9%, margins for furniture retailers fell 2.4%, and margins for machinery and vehicle wholesalers fell 2.9%, but margins for TV, video, and photographic equipment and supplies retailers rose 10.3%....among transportation and warehousing services, average margins for airline passenger services rose 3.1% and margins for air transportation of freight rose 2.2%....among the components of the core final demand for services index, the price index for deposit services rose 1.7%, the price index for the price index for passenger car rental rose 2.1%, and the price index for the price index for hospital inpatient care rose 1.0%...

This report also showed the price index for intermediate processed goods fell 0.9% in October, after rising 0.5% in September, and 2.2% in August, but after falling by 0.3% in July, falling by 0.5% in June, by 1.6% in May, by 0.5% in April, by 1.0% in March, by 0.4% in February, but after rising by 1.1% in January, after falling by 2.5% in December, by 0.5% in November, and by 0.2% in October of last year....the price index for intermediate energy goods fell 4.3% in October as refinery prices for gasoline fell 15.3%, refinery prices for diesel fuel fell 12.0%, producer prices for liquefied petroleum gas fell 6.9%, and producer prices for industrial natural gas fell 6.6%... at the same time, the price index for intermediate processed foods and feeds fell 0.4%, as the producer price index for prepared animal feeds fell 1.1% and the producer price index for fats and oils fell 0.1%....on the other hand, the core price index for intermediate processed goods less food and energy goods was 0.1% higher, as the producer price index for basic organic chemicals rose 4.1%, the producer price index for phosphates rose 5.8%, and the producer price index for fluid power equipment rose 2.3% while the producer price index for building paper and board fell 6.5%....average prices for intermediate processed goods are now 4.5% lower than in October 2022, the eighth consecutive year over year decrease, and are thus way down from their 26.6% year over year increase of November 2021, which had been a 46 year high...

At the same time, the price index for intermediate unprocessed goods fell 1.4% in September, after rising 3.7% in September, 2.2% in August and 2.4% in July, after falling 1.0% in June, after falling 5.2% in May, rising 1.1% in April, after falling by 4.7% in March, by 4.9% in February and by 4.7% in January.....that was as the October price index for crude energy goods fell 0.3%, as unprocessed natural gas prices rose 10.9%, crude oil prices fell 2.9%, and coal prices were 1.9% higher...at the same time, the price index for unprocessed foodstuffs and feedstuffs was 3.1% lower, led by a 13.8% decrease in producer prices for slaughter turkeys, a 9.0% decrease in producer prices for slaughter hogs, and a 6.0% decrease in producer prices for wheat....in addition, the index for core raw materials other than food and energy materials was 0.4% lower on a 3.4% decrease in the price index for copper base scrap and a 1.1% decrease in the price of iron ore....this raw materials price index is now 14.0% lower than a year ago, the ninth negative print after twenty-seven consecutive year over year increases, which came after the annual change on this index had been negative from the beginning of 2019 through October of 2020...

Lastly, the price index for services for intermediate demand was unchanged in October, after being unchanged in September, 0.1% higher in August, 0.6% higher in July, unchanged in June, 0.2% higher in May, 0.7% higher in April, 0.3% lower in March, 0.3% higher in February, 1.0% higher in January, after being unchanged in December, 0.8% higher last November, and 0.4% higher last October….the price index for intermediate trade services rose 0.9%, as margins for intermediate building materials, paint, and hardware wholesalers rose 1.4%, margins for chemicals and allied products wholesalers rose 6.7%, and margins for metals, minerals, and ores wholesalers rose 3.2%....at the same time, the index for transportation and warehousing services for intermediate demand was 0.7% higher, as the intermediate price index for transportation of passengers rose 3.1%, the intermediate price index for air transportation of freight rose 2.2%, the intermediate price index for arrangement of freight and cargo rose 2.0%, and the intermediate price index for air mail and package delivery services, excluding by the U.S. Postal Service, was 1.5% higher...on the other hand, the core price index for intermediate services other than trade, transportation, and warehousing services was 0.3% lower, as the intermediate price index for radio advertising time sales fell 2.2%, the intermediate price index for residential real estate rents fell 3.6%, and the intermediate price index for traveler accommodation services fell 3.3%...over the 12 months ended in October, the year over year price index for services for intermediate demand is still 3.5% higher than it was a year ago, the thirty-seventh consecutive annual increase in this index change after it briefly turned negative year over year at the onset of the pandemic, from April to August of 2020, while it is still lower than the record 9.5% year over year increase indicated for July 2021...

Business Sales Up 1.1% in September, Business Inventories Up 0.4%

After the release of the October retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for September (pdf), which incorporates the revised September retail data from that October report and the earlier published September wholesale and factory data to give us a complete picture of businesses’ impact on 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 $1,879.3 billion in September, up 1.1 percent (±0.2 percent) from August's revised sales, and up 1.6 percent (±0.2 percent) from September sales of a year earlier...note that total August sales were concurrently revised up from the originally reported $1,857.2 billion to $1,858.1 billion, and are now up 1.4% from July, vs the 1.3% increase originally reported....

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,559.2 billion at the end of September, up 0.4 percent (±0.1 percent) from August, and 1.3 percent (±0.4 percent) higher than in September a year earlier...the value of end of August inventories were revised from the $2,548.7 billion reported last month to $2,548.8 billion, but are still up 0.4% from July...seasonally adjusted inventories of manufacturers were estimated to be valued at $857,320 million, 0.2% higher than in August, inventories of retailers were valued at $800,082 million, 0.9% more than in August, while inventories of wholesalers were estimated to be valued at $901,806 million at the end of September, 0.2% higher than in August...

We had previously estimated that 3rd quarter GDP was underestimated by around 0.06 percentage points based on what the wholesale inventory report showed, but that the factory inventories report indicated a negligible impact on 3rd quarter GDP revisions....in the advance report on 3rd quarter GDP of three weeks ago, retail inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories which was released the day before the GDP release...that report estimated that our seasonally adjusted retail inventories were valued at $800,680 million at the end of September, up 0.9% from a revised $793,812 million valuation in August....that's $1.154 billion more than the $800,082 million and $793,256 million for those two months that this report shows, which would mean that the quarterly change in 3rd quarter retail inventories was overestimated at roughly a $4.6 billion annual rate, meaning 3rd quarter GDP would be revised 0.09 or 0.10 percentage points lower based on the revision to retail inventories...combined with our previous estimates on factory and wholesale inventories, then, this report would suggest that the growth rate of 3rd quarter GDP should be revised downwards by around 0.03 or 0.04 percentage points when the 2nd estimate is released on the 29th of November...

Housing Starts and Building Permits Issued Both Reported Higher in October

The October report on New Residential Construction(pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,372,000 units during the month, which was 1.9 percent (±13.5 percent)* above the revised September estimated annual rate of 1,346,000 housing unit starts, but was 4.2 percent (±10.0 percent)* below last October's pace of 1,432,000 housing starts a year....note that the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell from September, or even from October of a year ago, with the figures in parenthesis the most likely range of the change indicated; in other words, in other words, October's housing starts could have been down by 11.6% or up by as much as 15.4% from those of September, with even larger revisions possible after a number of months...with this report, the annual rate for September housing starts was revised from the 1,358,000 reported last month up to 1,346,000, while the annual rate for August’s housing starts, which was initially reported at 1,283,000 and revised to 1,269,000 last month, was revised up to a 1,302,000 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 115,400 housing units were started in October, down from the 116,300 units that were started in September...of those housing units started in October, an estimated 81,400 were single family homes and 32,400 were units in structures with more than 5 units, down from the revised 83,300 single family starts in September, but up from the 31,800 units started in structures with more than 5 units in September...

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, which can also be impacted by the weather....in October, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,487,000 housing units, which was 1.1 percent above the September rate of 1,471,000 permits, but was 4.4 percent below the rate of building permit issuance in October a year earlier.…the annual rate for housing permits issued in September was revised from the 1,473,000 indicated by last month's report....

Again, these annualized estimates for new permits reported here were extrapolated from the unadjusted estimates provided monthly by canvassing census agents, which indicated that permits for 124,000 housing units were issued in October, up from the revised estimate of 116,700 new permits issued in September...the October permits included 79,700 permits for single family homes, up from 76,500 single family permits issued in September, and 39,600 permits for housing units in apartment buildings with 5 or more units, up from 36,200 such multifamily permits a month earlier..

For graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts Increased to 1.372 Million Annual Rate in October and October Housing Starts: Near Record Number of Multi-Family Housing Units Under Construction which links to his free housing newsletter article with the same title..

 

 

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

September's trade deficit and wholesale sales & inventories

There were just two major reports released this past week:the Commerce Department report on our International Trade for September, and the September report on Wholesale Trade, Sales and Inventories from the Census Bureau...

September Trade Deficit Rose 4.9% on Higher Imports of Cars, Cellphones & Oil

Our trade deficit rose by 4.9% in September as both the value of our exports and the value of our imports increased, but our imports increased by more...the Commerce Dept report on our international trade in goods and services for September indicated that our seasonally adjusted goods and services trade deficit rose by a rounded $2.9 billion to $61.5 billion in September, from a revised August trade deficit of $58.7 billion, which had previously been reported at a 34 month low of $58.3 billion...the value of our exports rose by a rounded $5.7 billion to $261.1 billion in September, on a $5.3 billion increase to $176.7 billion in our exports of goods, and a $0.3 billion increase to $84.4 billion in our exports of services, while our imports rose by a rounded $8.6 billion to $322.7 billion, on a $7.0 billion increase to $263.0 billion in our imports of goods and a $1.5 billion increase to $59.6 billion in our imports of services... prices for our exports averaged 0.7% higher in September, so part of the increase in the value of this month's exports was due to higher prices, and real exports likely only rose by about 1.5%, while import prices were just 0.1% higher, meaning that our real imports were less than the nominal change reported here by that small percentage, or that real imports probably rose about 2.6%...

The increase in our September exports of goods was led by higher exports of industrial supplies and materials and of foods and feeds, even as our exports of all end use categories increased.... referencing the Full Release and Tables for September (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1,447 million to $61,891 million on a $589 million increase in our exports of petroleum products other than fuel oil, a $423 million increase in our exports of crude oil, and a $300 million increase in our exports of fuel oil, partly offset by a $334 million decrease in our exports of non-monetary gold, and that our exports of foods, feeds and beverages rose by $1,352 million to $13,710 million on a $595 million increase in our exports of soybeans and a $362 million increase in our exports of corn....in addition, our exports of consumer goods rose by $590 million to $22,859 million on a $836 million increase in our exports of gem diamonds and on a $400 million increase in our exports of jewelry, and despite a $605 million decrease in our exports of pharmaceuticals, and our exports of automotive vehicles, parts, and engines rose by $530 million to $16,013 million on a $334 million increase in our exports of passenger cars....at the same time, our exports of capital goods rose by $87 million to $51,061 million as a $1020 million increase in our exports of civilian aircraft, a $380 million increase in our exports of semiconductors, and a $307 million increase in our exports of industrial machinery not otherwise listed were partly offset by $349 million decrease in our exports of computer accessories and a $320 million decrease in our exports of civilian aircraft engines…moreover, our exports of other goods not categorized by end use rose by $839 million to $8,234 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods, automotive products, capital goods, and industrial supplies and materials were all major contributors to September's $7.0 billion increase in our imports of goods....our imports of consumer goods rose by $2,039 million to $64,629 million, as a $1,820 million increase in our imports of cell phones was partly offset by a $402 million decrease in our imports of artwork and collectibles, while our imports of automotive vehicles, parts and engines rose by $1,865 million to $40,526 million on a $1,665 million increase in our imports of passenger cars...in addition, our imports of capital goods rose by $1,553 million to $71,458 million on a $429 million increase in our imports of computer accessories, a $336 million increase in our imports of civilian aircraft parts, and a $319 million increase in our imports of industrial machinery not otherwise listed, and our imports of industrial supplies and materials rose by $1,168 million to $56,365 million on a $1,357 million increase in our imports of crude oil, and a $557 million increase in our imports of organic chemicals, which were partly offset by a $471 million decrease in our imports of finished metal shapes, and our imports of other goods not categorized by end use rose by $407 million to $10,939 million....slightly offsetting the increases in those end-use categories, our imports of our imports of foods, feeds, and beverages fell by $86 million to $16,697 million...

The News Release for this month's report also summarizes Exhibit 19 in the full release, which gives us surplus and deficit details on our goods trade with selected countries:

The September figures show surpluses, in billions of dollars, with South and Central America ($4.8), Netherlands ($3.2), Hong Kong ($2.7), Australia ($1.6), Belgium ($1.2), Singapore ($0.7), United Kingdom ($0.5), and Saudi Arabia ($0.2). Deficits were recorded, in billions of dollars, with China ($24.1), European Union ($16.8), Mexico ($12.2), Vietnam ($9.4), Japan ($6.9), Germany ($6.3), Ireland ($6.2), Canada ($5.9), Taiwan ($5.0), South Korea ($4.5), India ($3.9), Italy ($2.9), Switzerland ($2.1), Malaysia ($1.9), France ($0.9), Israel ($0.6), and Brazil ($0.3).

• The deficit with Japan increased $1.9 billion to $6.9 billion in September. Exports increased $0.2 billion to $6.7 billion and imports increased $2.1 billion to $13.6 billion.
• The deficit with Vietnam increased $1.5 billion to $9.4 billion in September. Exports increased $0.1 billion to $0.8 billion and imports increased $1.6 billion to $10.3 billion.
• The balance with Singapore shifted from a deficit of $1.0 billion in August to a surplus of $0.7 billion in September. Exports increased $0.2 billion to $4.0 billion and imports decreased $1.5 billion to $3.2 billion.

In the recent advance report on 3rd quarter GDP, the contribution of September’s trade in goods was estimated based on the sketchy Advance Report on our International Trade in Goods which was released just before the GDP release...that report estimated that our seasonal adjusted September goods trade deficit was at $85,783 million on a Census basis, up from the $84,642 million goods deficit in August, on goods exports valued at $173,984 million and goods imports valued at $259,767 million...this report revises that estimate and shows that our actual goods trade deficit in September was $86,301 billion on a balance of payments basis, and $86,844 million on a Census basis, on Census adjusted goods exports of $173,768 million and Census adjusted goods imports of $260,613 million...in addition, the Census basis August goods trade deficit was revised from $84,642 million to $84,744 million...together, those revisions from the previously published data mean that the 3rd quarter trade deficit in goods was on the order of $1,163 million more than was included in last week's GDP report, or roughly $4.7 billion on an annualized basis, which would mean that the 3rd quarter's GDP should be revised about about 0.08 percentage points lower when the 2nd estimate of GDP is released at the end of November...

For our trade in services, the BEA's Key source data and assumptions (xls) for the advance estimate of third quarter GDP provides aggregate exports and imports of services at annual rates on an international-transactions-accounts basis, indicating that the BEA assumed a $9.5 billion decrease in exports of services and a $17.0 billion increase in imports of services on an annual basis in September when computing 3rd quarter GDP...while there is no comparable annualized metric or adjusted data in this trade report that we could directly compare that to, this release does show that exports of services rose $0.3 billion in September after August's exports of services were revised $0.5 billion lower, and that imports of services rose $1.5 billion in September after August's imports of services were revised $0.3 billion lower...after multiplying those monthly figures by 12 to crudely approximate an annualized change, that suggests that the annual rate for September exports of services used in the GDP report was on the order of $7.1 billion too low, while the annual rate for September imports of services used in the GDP report was about $2.6 billion too high...applying those annualized differences, and also crudely annualizing the services trade revisions for August vis a vis those reported in the GDP report in the same manner, the annual rate for 3rd quarter services exports would be revised about $1.1 billion higher, while the annual rate for 3rd quarter services imports would be revised about $1.0 billion higher...a resulting upward revision of $0.1 billion to our total services surplus in NIPA terms would have a negligible impact on 3rd quarter GDP....however, since our goods deficit was underestimated, it appears that this report will still subtract about 0.8 percentage points from 3rd quarter GDP when the 2nd estimate revisions are released on November 29th...

September Wholesale Sales Up 2.2%, Wholesale Inventories Up 0.2%; Underestimated by GDP Report

The September report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales during the month was $678.1 billion, up 2.2 percent (±0.5 percent) from the revised August level, and 0.9 percent (±0.5 percent) higher than the wholesale sales of September 2022... the August preliminary sales estimate was revised up to $663.7 billion from the $662.3 billion in wholesale sales reported last month, which thus revised the July to August change in sales from up 1.8% (±0.4 percent) to up 2.0%...as an intermediate economic 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, since additional goods left in a warehouse represent goods that were produced but not sold, and this September report estimated that wholesale inventories were valued at a seasonally adjusted $918.5 billion at month end, up 0.2 percent (±0.2 percent)* from the revised August level but 1.2 percent (±1.1 percent) lower than in September a year ago....August's inventory value was revised from the $900.2 billion reported last month to $900.3 billion, which was still down 0.1% from July...

In the advance report on 3rd quarter GDP of two weeks ago, wholesale inventories were estimated based on the sketchy Advance Report on Wholesale and Retail Inventories, which was released the day before the GDP release...that report estimated that our seasonally adjusted wholesale inventories were valued at $900,573 million at the end of September, down slightly from a revised $900,810 million in August....that's $690 million less than the wholesale inventories values of $901,806 million and $900,267 million for those two months than this report shows, which would imply that the quarterly change in 3rd quarter wholesale inventories was underestimated at roughly a $2.8 billion annual rate....assuming there's no significant imbalance in the inflation adjustments on the component inventories that were revised, that would mean that the growth rate of 3rd quarter GDP was underestimated by around 0.06 percentage points, just based on what this report shows...

 

 

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

October's jobs report; September's construction spending, factory inventories, and JOLTS

Major economic reports that were released during the past week included the Employment Situation Summary for October and the Job Openings and Labor Turnover Survey (JOLTS) for September, both from the Bureau of Labor Statistics, and two September reports that included metrics which were estimated in last week's release of 3rd quarter GDP: the September report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for September, both from the Census Bureau...the week also saw the release of the last regional Fed manufacturing survey for October: the Dallas Fed Texas Manufacturing Outlook Survey, which covers Texas and adjacent western Louisiana and southeastern New Mexico, reported its general business activity index fell from -18.1 in September to -19.2 in October, an eighteenth consecutive negative reading, indicating that the majority of Texas area manufacturers continued to see deteriorating business conditions in October..

Privately issued reports included the ADP Employment Report for October, which indicated an increase of 113,000 private sector jobs, the light vehicle sales report for October from Wards Automotive, which estimated that vehicles sold at a 15.50 million annual rate in October, down from the 15.67 million annual sales rate reported for September, but up from the 14.90 million annual sales rate of a year ago, and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the October Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 46.7% in October, down from 49.0% in September, which indicates that a larger plurality of manufacturing purchasing managers reported worse conditions in various facets of their business in October than a month earlier, and the October 2021 Services Report On Business, which saw their Services PMI fall to 51.5%, down from 53.6% in September, indicating a smaller plurality of service industry purchasing managers reported improvement in various facets of their business in October than the month before...

Employers Added 150,000 Jobs in October, Unemployment Rate Rose to 3.9%

The Employment Situation Summary for October indicated the second smallest increase in payroll jobs of the post pandemic era, that the unemployment rate rose by 0.1% to 3.9%, and the labor force participation rate was 0.1% lower…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 150,000 jobs in October, after the previously estimated payroll job change for September was revised from an increase of 336,000 jobs to one of 297,000, and the payroll jobs increase for August was revised from 227,000 to 165,000, revisions which mean that this report only shows 49,000 more payroll jobs than were reported last month....meanwhile, the unadjusted data shows that there were actually 1,066,000 more payroll jobs extent in October than in September, as the normal seasonal job increases in the education and retail-related sectors were washed out of the headline number by the seasonal adjustment...

Seasonally adjusted job increases in October were seen throughout the construction, service providing, and the government sectors, while payroll job decreases of 33,200 in the manufacturing of motor vehicles and parts and 5.400 in the motion picture and sound recording industries were strike related....since the BLS summary of the job gains by sector is clear and more detailed than our usual synopsis, we'll again just quote from that summary here:

• Total nonfarm payroll employment increased by 150,000 in October, below the average monthly gain of 258,000 over the prior 12 months. In October, job gains occurred in health care, government, and social assistance. Employment in manufacturing declined due to strike activity. (See table B-1.)
• Health care added 58,000 jobs in October, in line with the average monthly gain of 53,000 over the prior 12 months. Over the month, employment continued to trend up in ambulatory health care services (+32,000), hospitals (+18,000), and nursing and residential care facilities (+8,000).
• Employment in government increased by 51,000 in October and has returned to its pre-pandemic February 2020 level. Monthly job growth in government had averaged 50,000 in the prior 12 months. In October, employment continued to trend up in local government (+38,000).
• Social assistance added 19,000 jobs in October, compared with the average monthly gain of 23,000 over the prior 12 months. Over the month, employment continued to trend up in individual and family services (+14,000).
• In October, construction employment continued to trend up (+23,000), about in line with the average monthly gain of 18,000 over the prior 12 months. Employment continued to trend up over the month in specialty trade contractors (+14,000) and construction of buildings (+6,000).
• Employment in manufacturing decreased by 35,000 in October, reflecting a decline of 33,000 in motor vehicles and parts that was largely due to strike activity.
• In October, employment in leisure and hospitality changed little (+19,000). The industry had added an average of 52,000 jobs per month over the prior 12 months.
• Employment in professional and business services was little changed in October (+15,000) and has shown little net change since May. Employment in temporary help services changed little over the month (+7,000) but is 229,000 below its peak in March 2022.
• In October, employment in transportation and warehousing was little changed (-12,000) and has shown little net change over the year. Over the month, warehousing and storage lost 11,000 jobs, while air transportation added 4,000 jobs.
• Information employment changed little in October (-9,000). Employment in motion picture and sound recording continued to trend down (-5,000); the industry has lost 44,000 jobs since May, at least partially reflecting the impact of an ongoing labor dispute.
• Over the month, employment showed little change in other major industries, including mining, quarrying, and oil and gas extraction; wholesale trade; retail trade; financial activities; and other services

We would note that the government sector employment rose by 51,000 due to a 38,000 job increase at the local level, with 26,400 of those employed by school districts and the rest employed by local governments in other functions...

The establishment survey also showed that average hourly pay for all employees rose by 7 cents an hour to $34.00 an hour in October, after increasing by a revised 11 cents an hour in September, and is now up 4.1% over the past year; meanwhile, the average hourly earnings of production and nonsupervisory employees increased by 10 cents an hour to $29.19 an hour...employers also reported that the average workweek for all private payroll employees was down by a tenth of an hour to 34.3 hours, while hours for production and non-supervisory personnel was down by a tenth of an hour at 33.7 hours...at the same time, the manufacturing workweek held steady at 40.0 hours, while average factory overtime fell by 0.1 hour to 2.8 hours...

Meanwhile, the October household survey indicated that the seasonally adjusted extrapolation of those who would report being employed fell by an estimated 348,000 to 161,222,000, while the estimated number of those unemployed and looking for work increased by 146,000 to 6,506,000; and hence the labor force decreased by a rounded total of 201,000....since the working age population had grown by 214,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by a rounded 416,000 to 99,914,000....the decrease in the labor force was enough to lower the labor force participation from 62.8% to 62.7%, still up from 62.2% in October a year ago...in addition, the decrease in number employed was enough to lower the employment to population ratio, which we could think of as an employment rate, from 60.4% in September to 60.2% in October...similarly, the corresponding increase in the number unemployed was enough to cause the unemployment rate as a percentage of the labor force to increase from 3.8% to 3.9%...meanwhile, the number of those who reported they were forced to accept just part time work rose by 218,000, from 4,065,000 in September to 4,283,000 in October, which was enough to increase in the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", by 0.2%, from 7.0% in September to 7.2% of the labor force in October...

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..

Job Openings Rose in September, Layoffs Fell, Hiring and Job Quitting were Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for September from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 56,000, from 9,497,000 in August to 9,553,000 openings in September, after August's job openings were revised 113,000 lower, from 9,610,000 to 9,497,000...September jobs openings were still 12.9% lower than the 10,854,000 job openings reported for September a year ago, as the job opening ratio expressed as a percentage of the employed was unchanged at 5.7% in September, while it was down from 6.6% in September a year ago...the largest percentage job opening changes included a 69,000 job opening increase to 479,000 openings in finance and insurance, a 141,000 job opening increase to 1,209,000 openings in accommodation and food services and a 124,000 decrease to 296,000 job openings in "other services" (see table 1 for more 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 then linked to 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 September, seasonally adjusted new hires totaled 5,871,000, up by 21,000 from the revised 5,850,000 who were hired or rehired in August, as the hiring rate as a percentage of all employed remained at 3.7% in September, while it was down from the 4.1% hiring rate of September a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 157,000, from 5,687,000 in August to 5,530,000 in September, while the separations rate as a percentage of the employed fell from 3.6% in August to 3.5% in September, and it was also down from 3.8% in September a year ago (see table 3)...subtracting the 5,530,000 total separations from the total hires of 5,871,000 would imply an increase of 341,000 jobs in September, somewhat more than the revised payroll job increase of 297,000 jobs for September reported in the October establishment survey, but still within the expected +/-110,000 margin of error in these incomplete survey extrapolations...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,661,000 of us voluntarily quit our jobs in September, down by 2,000 from the revised 3,663,000 who quit their jobs in August, 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 quits rate of 2.6% a year earlier (see details in table 4)....in addition to those who quit, another 1,517,000 were either laid off, fired or otherwise discharged in September, down by 165,000 from the revised 1,682,000 who were discharged in August, as the discharges rate fell from 1.1% to 1.0% of all those who were employed during the month, which was still up from the discharges rate of 0.9% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 352,000 in September, up from 342,000 in August, for an 'other separations rate’ of 0.2%, which was the same as in August and in September 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...

Construction Spending Rose 0.4% in September, Revisions Boost Q3 GDP by 4 Basis Points

The Census Bureau's report on construction spending for September(pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,996.5 billion annually if extrapolated over an entire year, which was 0.4 percent (±1.2 percent)* above the revised annualized August estimate of $1,988.3 billion, and 8.7 percent (±1.8 percent) above the estimated annualized level of construction spending in September of last year...the annualized August construction spending estimate was revised 0.2% higher, from $1,983.5 billion to $1,988.3 billion, while the annual rate of construction spending for July was revised 0.2% lower, from $1,973.7 billion to $1,969.0 billion....for the first nine months of this year, construction spending amounted to $1,463.5 billion, which was 4.6 percent (±1.2 percent) above the $1,398.9 billion spent on construction over the same period in 2021…

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 $1,555.9 billion, 0.4 percent (±0.7 percent)* above the revised August estimate of $1,549.6 billion. Residential construction was at a seasonally adjusted annual rate of $872.0 billion in September, 0.6 percent (±1.3 percent)* above the revised August estimate of $866.6 billion. Nonresidential construction was at a seasonally adjusted annual rate of $683.9 billion in September, 0.1 percent (±0.7 percent)* above the revised August estimate of $683.0 billion.
• Public Construction: In September, the estimated seasonally adjusted annual rate of public construction spending was $440.6 billion, 0.4 percent (±2.1 percent)* above the revised August estimate of $438.7 billion. Educational construction was at a seasonally adjusted annual rate of $94.4 billion, 1.9 percent (±2.5 percent)* above the revised August estimate of $92.7 billion. Highway construction was at a seasonally adjusted annual rate of $131.1 billion, 0.2 percent (±5.3 percent)* below the revised August estimate of $131.4 billion.

The BEA's key source data and assumptions that accompanied the 3rd quarter GDP report indicates that they had estimated that September's residential construction would increase by an annualized $0.6 billion from the previously published figures, that nonresidential construction would increase by an annualized $3.2 billion from last month's report, and that September's public construction would be unchanged from last month's report....hence, the total of the figures used by the BEA for total September construction in the 3rd quarter GDP report were a net $3.8 billion higher than the previously published August figure...since this report indicates that September construction was up by $8.2 billion from an August figure that was revised $4.8 billion higher, that means that the net September construction figures used in the GDP report were a total of $9.2 billion too low...averaging that underestimation with the $4.8 billion upward revision to August construction spending and the $4.7 billion downward revision to July's construction spending means the aggregate annualized nominal construction figures used in the 3rd quarter GDP report were roughly $3.1 billion too low, suggesting there will be an upward revision of about 0.04 percentage points to 3rd quarter GDP to account for what this report shows...

Factory Shipments Up 0.2% in September, Factory Inventories Up 0.2%

The Full Report on Manufacturers' Shipments, Inventories, & Orders(pdf) for September from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $16.1 billion or 2.8 percent to $601.5 billion in September, following an increase of 1.0% to $585.4 billion in August, which was revised from the increase 1.2% to $586.1 billion that was reported for August last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as revised updates to the September advance report on durable goods we reported on 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 September, up six of the last seven months, increased $16.1 billion or 2.8 percent to $601.5 billion, the U.S. Census Bureau reported today. This followed a 1.0 percent August increase. Shipments, up five consecutive months, increased $2.1 billion or 0.4 percent to $588.1 billion. This followed a 1.3 percent August increase. Unfilled orders, up nine of the last ten months, increased $18.4 billion or 1.4 percent to $1,353.6 billion. This followed a 0.3 percent August increase. The unfilled orders-to-shipments ratio was 6.88, up from 6.78 in August. Inventories, up three consecutive months, increased $2.0 billion or 0.2 percent to $857.3 billion. This followed a 0.3 percent August increase. The inventories-to-shipments ratio was 1.46, unchanged from August.
• New orders for manufactured durable goods in September, up following two consecutive monthly decreases, increased $13.1 billion or 4.6 percent to $297.0 billion, down from the previously published 4.7 percent increase. This followed a 0.1 percent August decrease. Transportation equipment, also up following two consecutive monthly decreases, led the increase, $12.3 billion or 12.7 percent to $109.2 billion. New orders for manufactured nondurable goods increased $3.0 billion or 1.0 percent to $304.5 billion.
• Shipments of manufactured durable goods in September, down two of the last three months, decreased $0.9 billion or 0.3 percent to $283.6 billion, unchanged from the previously published decrease. This followed a 0.5 percent August increase. Transportation equipment, down three of the last four months, drove the decrease, $1.1 billion or 1.2 percent to $91.3 billion. Shipments of manufactured nondurable goods, up four consecutive months, increased $3.0 billion or 1.0 percent to $304.5 billion. This followed a 2.2 percent August increase. Petroleum and coal products, also up four consecutive months, led the increase, $2.2 billion or 3.1 percent to $73.6 billion.
• Unfilled orders for manufactured durable goods in September, up nine of the last ten months, increased $18.4 billion or 1.4 percent to $1,353.6 billion, unchanged from the previously published increase. This followed a 0.3 percent August increase. Transportation equipment, also up nine of the last ten months, led the increase, $17.9 billion or 2.1 percent to $855.7 billion.
• Inventories of manufactured durable goods in September, up two consecutive months, increased $0.5 billion or 0.1 percent to $523.6 billion, unchanged from the previously published increase. This followed a 0.1 percent August increase. Machinery, up thirty-four of the last thirty-five months, led the increase, $0.3 billion or 0.3 percent to $95.1 billion. Inventories of manufactured nondurable goods, up three consecutive months, increased $1.5 billion or 0.4 percent to $333.7 billion. This followed a 0.6 percent August increase. Petroleum and coal products, also up three consecutive months, drove the increase, $1.7 billion or 3.5 percent to $50.3 billion. By stage of fabrication, September materials and supplies increased 0.1 percent in durable goods and 0.5 percent in nondurable goods. Work in process increased 0.3 percent in durable goods and decreased 0.6 percent in nondurable goods. Finished goods decreased 0.1 percent in durable goods and increased 0.9 percent in nondurable goods.

The BEA's key source data and assumptions (xls) for 3rd quarter GDP indicates that they had estimated that the value of non-durable goods inventories would increase by $1.5 billion on a Census basis in September before they estimated the 3rd quarter’s output, so the actual $1.5 billion increase reported here shouldn't impact the 3rd quarter GDP revisions when they're released on November 23rd...

 

 

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

3rd quarter GDP, September's income and outlays, durable goods, & new home sales

The key economic reports that were released this week were the 1st estimate of 3rd quarter GDP and the September report on Personal Income and Spending, both from the Bureau of Economic Analysis ....the week also saw the release of the Advance report on durable goods for September and the September report on new home sales, both from the Census bureau, and the release of the Chicago Fed National Activity Index (CFNAI) for September, a weighted composite index of 85 different economic metrics, which increased to +0.02 in September from -0.22 in August, after the August index was revised down from the -0.16 reported for August last month...that left the 3 month average of the CFNAI at +0.00 in September, up from -0.14 in August, which, as neither a positive or negative number, would indicate that national economic activity has averaged right at the historical trend over the summer months..

In addition, the week also saw two more regional Fed manufacturing surveys for October: the Kansas City Fed manufacturing survey, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index remained at -8 in October, unchanged from September, and down from 0 in August, indicating that a modest plurality of that region's manufacturers continued to report deteriorating conditions this month; and the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index fell from +5 in September to +3 in October, indicating that a smaller plurality of that region's manufacturers reported improving conditions this month..

3rd Quarter GDP Grew at a 4.9% Rate on Greater Consumer Spending, Inventories, and Exports

Our economy grew at a 4.9% rate in the 3rd quarter, more than the combined growth of the first two quarters, as increasing consumer outlays for goods and services, greater inventory growth, increased exports, and an expansion of government were only partly offset by increased imports, which subtracts from what was added to other GDP components....the Advance Estimate of 3rd Quarter GDP from the Bureau of Economic Analysis estimated that the real output of goods and services produced in the US grew at a 4.9% annual rate over the output of the 2nd quarter, when our real output grew at a 2.1% rate....in current dollars, our third quarter GDP grew at a 8.55% annual rate, increasing from what would work out to be a $27,063.0 billion a year output rate in the 2nd quarter to a $27,623.5 billion annual rate in the 3rd quarter, with the headline 4.9% annualized rate of increase in real output arrived at after annualized GDP inflation adjustments averaging 3.5% were computed from the price changes of the components and applied to their current dollar change....

As is usual with an advance estimate, the BEA cautions that the source data is incomplete and also subject to revisions, which have averaged +/-0.6% in either direction before the third estimate for the quarter is released, which will be two months from now...also note that September construction, September trade in services, and non-durables factory inventory data have yet to be reported or formally estimated, and that the BEA assumed a $9.5 billion annualized decrease in exports of services, a $17.0 billion annualized increase in imports of services, a $0.6 billion increase in residential construction, a $3.2 billion increase in non-residential construction, that public construction was unchanged, and a $1.5 billion increase in nondurable manufacturing inventories for September before they estimated the 3rd quarter’s output (see Key source data and assumptions (xls) for more details)

While we review the details for the 3rd quarter below, remember that the news release for GDP reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change that's a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price indexes chained from 2017 prices, and then that all percentage changes in this report are calculated from those '2017 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 1st estimate of 3rd quarter GDP, which we find linked on the BEA GDP landing page, which also provides links to just the tables on Excel and other technical notes on this report...specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2019, 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 GDP components...

Personal consumption expenditures (PCE), which accounts for roughly 69% of GDP, grew at a 7.03% rate in current dollars in the 3rd quarter, which worked out to a rounded 4.0% real growth rate of consumed goods and services after the 3rd quarter’s annualized 2.9% PCE price index increase was computed from price changes of the PCE components and used to adjust that nominal personal spending for inflation....consumer outlays for durable goods grew at a 2.9% rate, but average prices of those durable goods fell at a 4.4% rate, and from that, the BEA figured that the real growth of the output of consumer durables grew at a 7.6% rate, as an increase in real consumption of recreational goods and vehicles at a 15.8% rate accounted for more than three-fourths of the growth in durable goods output...at the same time, consumer spending for non-durable goods grew at a 7.2% rate, which was adjusted for prices that rose at an average 3.9% rate, and hence the real output of consumer non-durable goods increased at a 3.3% rate, as greater real consumption of groceries, clothing, and "other" nondurable goods more than offset lower consumption of gasoline.... meanwhile, the quarter's 7.7% nominal growth rate in consumer outlays for services was deflated by a 4.0% increase in prices for personal services to show that the real output of consumer services grew at a rounded 3.6% annual rate, as the housing and utilities services component grew at a 3.6% rate and accounted for a quarter of the quarter’s broad based growth in services...as a result of those changes in growth from the 2nd to the 3rd quarter, the increase in real consumption of durable goods added 1.08 percentage points to the GDP growth rate, the increase in consumption of non-durable goods added 0.48 percentage points, and increased consumption of services added 1.62 percentage points to the growth rate of GDP in the 3rd quarter…

The change in other components of the change in GDP are computed by the BEA in the same manner as we have just illustrated for computing the PCE components; ie, in each case, the annualized percentage increase in current dollar spending for the quarter is adjusted with the annualized inflation factor for that component, yielding the percentage change in real units of goods or services produced during the quarter, at an annual rate.....thus, after inflation adjustments, real gross private domestic investment, which had grown at a 5.2% annual rate in the 2nd quarter, grew at a 8.4% annual rate from those levels in the 3rd quarter, as real growth in fixed investments grew at an 0.8% annual rate in the 3rd quarter, after growing at a 5.2% rate in the 2nd quarter, while the increase in growth of private inventories was greater in the 3rd quarter than in the 2nd quarter....among the fixed investment categories, real nonresidential fixed investment shrunk at a 0.1% rate, even though real investment in non-residential structures grew at a 1.6% rate and added 0.05 percentage points to 3rd quarter GDP, and real investment in intellectual property grew at a 2.6% rate and added 0.14 percentage points to GDP, because real investment in equipment shrunk at 3.8% rate and subtracted 0.19 percentage points from GDP....however, real residential investment grew at a 3.9% rate in the 3rd quarter, after shrinking at a 2.2% rate in the 2nd quarter, and added 0.15 percentage points to 3rd quarter GDP, and thus turned the overall fixed investment component positive....for an easy to read table as to what's included in each of those GDP investment categories, see the NIPA Handbook, Chapter 6, page 3.

Meanwhile, real private inventories grew at an inflation adjusted $80.6 billion rate over the 3rd quarter, after growing at an inflation adjusted $14.9 billion rate in the 2nd quarter, and as a result the $65.6 billion positive change in real inventory growth added 1.32 percentage points to the 3rd quarter's growth rate, after a $12.2 billion negative change in real inventory growth in the 2nd quarter had subtracted from that quarter's GDP. However, since growth in inventories indicates that more of the goods produced during the quarter were left in storage or sitting on a shelf, the $65.6 billion increase in their growth in turn means real final sales of GDP were smaller by that amount, and hence real final sales of GDP only grew at a 3.5% rate in the 3rd quarter, albeit still up from the real final sales growth rate of 2.1% in the 2nd quarter, when slightly lower inventory growth had little impact on the quarter's GDP growth...

Both real exports and real imports increased during the third quarter, but our imports increased by a bit more, and hence the net of our international trade was a small subtraction from GDP…Our real exports of goods and services rose at a 6.2% rate in the third quarter, after falling at a 9.3% rate in the 2nd quarter, while our real imports rose at a 5.7% rate in the third quarter, after falling at a 7.6% rate in the 2nd quarter. As you'll recall, increases in exports are added to GDP because they are part of our production that was not consumed or added to investment in our country (& hence not counted in the GDP computation elsewhere), while increases in imports subtract from GDP because they represent either consumption or investment that was added to another GDP component that shouldn't have been, because ​that portion was not produced here. Thus the 3rd quarter increase in real exports added 0.68 percentage points to 3rd quarter GDP, after the 2nd quarter decrease in exports had subtracted 1.09 percentage points from second quarter GDP. On the other hand, since imports subtract from GDP, their increase at a 5.7% rate subtracted 0.75 percentage points from 3rd quarter GDP, after the second quarter import decrease had conversely added 1.13 percentage points to that quarter's growth....As a result, our worsening trade balance subtracted a rounded net of 0.08 percentage points from the 3rd quarter's GDP growth, after our second quarter trade had added 0.04 percentage points to GDP growth in that quarter..

Finally, real consumption and investment by the government sector increased at a 4.6% annual rate in the 3rd quarter, after growing at a 3.3% rate in the 2nd quarter, as real federal government consumption and investment grew at a 6.1% rate while real state and local consumption and investment grew at a 3.7% rate. Inflation adjusted federal spending for defense grew at a 8.0% rate, and that added 0.28 percentage points to 3rd quarter GDP growth, while real non-defense federal consumption and investment grew at a 3.9% rate and added 0.11 more percentage points to GDP. Note that federal government outlays for social insurance are not included in this GDP component; rather, they are included within personal consumption expenditures only when such funds are spent on goods or services, indicating an increase in the output of those goods or services. Meanwhile, real state and local government investment and consumption expenditures, which grew at a 3.7% annual rate, added 0.40 percentage points to the quarter's growth rate, as an increase in real state and local investment at a 8.5% rate accounted for 0.16 percentage points of the state and local increase...

September Personal Income Rose 0.3%, Spending Rose 0.7%, PCE Price Index Rose 0.4%; Savings Rate Fell to 3.4%

Friday's release of the September Income and Outlays report was concurrent with the GDP release on Thursday, and all the PCE data in the 3rd quarter GDP report we just covered actually originated with this report...and like that GDP report, all the dollar values reported here are seasonally adjusted and at an annual rate, ie, they tell us what income, spending and saving would be for a year if September's adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from August to September....

Thus, as they now explain in the opening line of the news release for this report "Personal income increased $77.8 billion (0.3 percent at a monthly rate) in September...", which means that the annualized figure for all types of personal income in September, $23,166.1 billion, was$77.8 billion, or more than 0.3% more than the annualized personal income figure of $23,088.3 billion for August; the actual increase in personal income from August to September, which is about one-twelfth that amount, is not given....similarly, disposable personal income, which is income after taxes, rose by less than 0.3%, from an annual rate of $20,271.1 billion in August to an annual rate of $20,327.3 billion in September...the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are thus also annualized...in September, the main contributors to the $78.9 billion annual rate of increase in personal income were a annualized $44.0 billion increase in wages and salaries, a $19.3 billion annualized increase in interest and dividend income, and a $8.9 billion annualized increase in supplements to wages and salaries, such as employer contributions to pension funds...

Meanwhile, seasonally adjusted personal consumption expenditures (PCE) for September, which were included in the change in real PCE in the 3rd quarter GDP report, rose at a $138.7 billion annual rate to a $18,853.4 billion pace of consumer spending annually, more than 0.7% above that of August, after August‘s PCE was revised down from the previously reported annual rate of $18,726.9 billion to $18,714.7 billion....the current dollar increase in September personal spending included a $96.7 billion annualized increase to an annualized $12,580.5 billion in spending for services, and a $42.5 billion increase to $6,272.9 billion in annualized spending for goods....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $125.5 billion to $19,639.5 billion in September, which left personal savings, which is disposable personal income less total outlays, at a $687.7 billion annual rate in September, down from the revised $806.7 billion in annualized personal savings in August...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 3.4% in September, down from 4.0% in August, and the lowest personal savings rate since last year...

While our personal consumption expenditures accounted for 68.9% of our third quarter GDP, before they could be included in that measurement of the change in our output, they first needed to be adjusted for inflation, to give us the real change in consumption, and hence the real change in the goods and services that were produced for that consumption.....that adjustment was made using the price index for personal consumption expenditures, also included in this report, which is a chained price index based on 2017 prices = 100....from Table 5 in the pdf for this report, we find that the PCE price index rose from 120.917 in August to 121.348 in September, giving us a month over month PCE inflation rate of +0.35644%, which the BEA reports as a 0.4% increase....also in this report, Table 7 gives us a year over year PCE price index increase of 3.4%, and a core price increase, excluding food and energy, of 3.7% for the past year, both still well above the Fed's 2% inflation target....applying the September inflation adjustment to the change in September PCE shows that real PCE was up 0.3061%, which BEA reports as a 0.3% increase in their summary table.. .note that when those PCE price indexes are applied to a given month's annualized current dollar PCE, it yields that month's annualized real PCE in chained 2017 dollars, which aren't really dollar amounts at all, but merely the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....those monthly figures are shown in table 4 of the report PDF, and are ultimately used to compute the contribution of real personal consumption of goods and services to GDP...

September Durable Goods: New Orders Rose 4.7%, Shipments Fell 0.3%, Inventories Rose 0.1%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods rose by $13.2 billion or 4.7 percent to $297.2 billion in September, the first increase in three months, after August's new orders were revised from the $284.7 billion reported last month to $284.0 billion, now an 0.1% decrease from July's orders, rather than the 0.2% increase previously reported ...year to date new orders are now running 4.4% above those of 2022, up from the 4.2% year to date increase we saw in this report last month....

The volatile monthly change in new orders for transportation equipment led the September new orders increase, as the value of new transportation equipment orders rose $12.3 billion or 12.7 percent to $109.2 billion, on a 92.5% increase to $32,348 million in new orders for commercial aircraft....excluding orders for transportation equipment, other new orders rose 0.5%, but excluding just new orders for defense equipment, new orders increased 5.8%...meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment intentions, rose $417 million or 0.6% to $74,462 million, after rising 1.1% in August, led by a 5.2% increase in new orders for communications equipment:...

The seasonally adjusted value of September shipments of durable goods, which were included as inputs into various components of 3rd quarter GDP after adjusting for changes in prices, fell for the second time in three months, decreasing by $0.8 billion or 0.3 percent to $283.7 billion, after the value of August shipments w​a​s revised from from $284.6 billion to $284.5 billion, still up 0.5% from July...a decrease in the value of shipments of transportation equipment was the reason for the September decrease,​ as they fell $1.0 billion or 1.1 percent to $91.4 billion​ on a 1.1% decrease in the value of shipments of motor vehicles, while the value of shipments excluding transportation equipment rose 0.1% to $183,668 million....meanwhile, shipments of nondefense capital goods less aircraft were down less than 0.1% at $74,381 million, after rising 0.8% in August...

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the second consecutive month, increasing by $0.5 billion or 0.1 percent to $523.7 billion, after the value of August inventories was revised from $523.6 billion to $523.164.billion, now 0.2% higher than the prior month...an increase in the value of inventories of machinery led the September inventory increase, rising $0.3 billion or 0.3 percent to $95.1 billion, while the value of inventories of transportation equipment roe 0.1%, as a 0.7% increase in inventories of motor vehicles and parts was mostly offset by lower inventories of defense and commercial aircraft...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose in September for the ninth time in ten months, increasing $18.5 billion or 1.4 percent to $1,353.8 billion, after August's unfilled orders were revised from $1,335.9 billion to $1,131.9 billion, still a 0.3% increase from July...an increase of $17.8 billion or 2.1 percent to $855.7 billion in unfilled orders for transportation equipment was responsible for much of the increase, while unfilled orders excluding transportation equipment orders rose by $663 million or by 0.1% to $498,033 million at the same time....compared to a year earlier, the unfilled order book for durable goods is now 7.6% above the level of last September, as unfilled orders for transportation equipment are 13.0% above their year ago level, largely due to a 17.2% increase in the backlog of orders for commercial aircraft...

New Home Sales Higher in September On Lower Prices

The Census report on New Residential Sales for September (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 759,000 annually, which was 12.3 percent (+/- 16.6%)* above the revised annual pace of 676,000 that new single family homes were selling at in August and 33.9 percent (±22.9 percent) a above the estimated annual rate that new homes were selling at in September of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether September new home sales rose or fell from those of August, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, the estimates provided in these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales of new single family homes in August were revised from the annual rate of 675,000 reported last month down to a 676,000 a year rate, while home sales in July, initially reported at an annual rate of 714,000 and revised to a 739,000 a year rate last month, were revised down to a 736,000 a year rate with this report, while June's annualized home sale rate, initially reported at an annual rate of 697,000 and revised to a 684,000 a year rate for the July and August reports, were revised to a 683,000 a year 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 60,000 new single family homes sold in September, up from the estimated 54,000 new homes that sold in August, but down from the estimated 61,000 that sold in July....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in September was at $418,800, down from the median sale price of $433,100 in August, and down 12.3% from the median sales price of $477,700 in September a year ago, while the average September new home sales price was at $503,900, down from the $522,700 average sales price in August, and down from the average sales price of $530,100 in September a year ago....a seasonally adjusted estimate of 435,000 new single family houses remained for sale at the end of September, which represents a 6.9 month supply of homes at the September sales rate, down from the revised 7.7 months supply of new homes now indicated for August...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales Increase to 759,000 Annual Rate in September and New Home Sales increase to 759,000 Annual Rate in September; Median New Home Price is Down 16% from the Peak...

 

 

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