Sunday, September 19, 2021

August’s consumer prices, retail sales, and industrial production; July's business inventories

Major reports released this past week included the August Consumer Price Index from the Bureau of Labor Statistics, the Retail Sales Report for August and the Business Sales and Inventories report for July, both from the Census bureau, and the August Industrial Production and Capacity Utilization report from the Fed....in addition, the BLS released the Regional and State Employment and Unemployment report for August, a report which breaks down the two employment surveys from the monthly national jobs report by state and by region....while the text of this 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 two regional Fed manufacturing surveys for September: the Empire State Manufacturing Surveyfrom the New York Fed, which covers New York, northern New Jersey, a county in Connecticut, and Puerto Rico, reported their headline general business conditions index rose from +18.3 in August to +34.3 in September, suggesting considerably broader growth among First District manufacturers, while the Philadelphia Fed Manufacturing Survey for September, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions rose from +19.4 in August to +30.7 in September, likewise suggesting a much larger majority of that region's manufacturers saw growth in various facets of their business this month than last..

CPI Rose 0.3% in August on Higher Prices for Food, Energy, New Vehicles, Furniture and Appliances

The consumer price index rose 0.3% in August, as higher prices for food, energy, new vehicles, hospital services, furniture and appliances were partly offset by lower prices for used cars and trucks, car and truck rentals, airline fares, and vehicle insurance...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 0.3% higher in August, after rising by 0.5% in July, 0.9% in June, by 0.6% in May, by 0.8% in April. by 0.6% in March, 0.4% in February, 0.3% in January, 0.2% in December, 0.2% in November, 0.1% in October, 0.2% in September, and by 0.4% last August...the unadjusted CPI-U index, which was originally set with prices of the 1982 to 1984 period equal to 100, rose from 273.003 in July to 273.567 in August, which left it statistically 5.2513% higher than the 259.918 index reading of August of last year, which is reported as a 5.3% year over year increase, down from the 5.4% year over year increase reported a month ago...with food and energy prices leading the rise the overall index increase, seasonally adjusted core prices, which exclude food and energy, were up by just 0.1% for the month, as the unadjusted core price index rose from 279.146 to 279.507, which left the core index 4.0003% ahead of its year ago reading of 267.703, which is reported as a 4.0% year over year increase, down from the 4.3% year over year core price increase that was reported for July...

The volatile seasonally adjusted energy price index rose 2.0% in August, after rising by 1.6% in July, by 1.5% in June, being unchanged in May, falling by 0.1% in April, rising by 5.0% in March, by 3.9% in February, by 3.5% in January, by 2.6% in December, 0.7% in November, 0.6% in October, 1.4% in September, 0.9% in August, and by 2.1% last July, and is now 25.0% higher than in August a year ago....the price index for energy commodities was 2.7% higher in August, while the price index for energy services was 1.1% higher, after rising 0.8% in July....the energy commodity index was up 2.7% on a 2.8% increase in the price of gasoline, even as the price of fuel oil fell 2.1%, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 1.4% higher...within energy services, the price index for utility gas service rose 1.6% after rising 2.2% in July and is now 21.1% higher than it was a year ago, while the electricity price index rose 1.0% in August after rising 0.4% in July.....energy commodities are now averaging 41.9% higher than their year ago levels, with gasoline prices averaging 42.7% higher than they were a year ago, while the energy services price index is now up 8.6% from last August, as electricity prices are now 5.2% higher than a year ago…

The seasonally adjusted food price index rose 0.4% in August, after rising by 0.7% in July, by 0.8% in June, by 0.4% in May, by 0.4% in April, by 0.1% in March, by 0.2% in February, by 0.1% in January and by 0.3% in December, after being unchanged in November, rising 0.2% in October, and rising by 0.1% last August and last September, as the price index for food purchased for use at home was 0.4% higher in August, after rising 0.7% in July, while the index for food bought to eat away from home was also 0.4% higher, as average prices at fast food outlets rose 0.8% and prices at full service restaurants rose 0.6%, while food prices at employee sites and schools averaged 17.0% lower...

In the food at home categories, the price index for cereals and bakery products was unchanged, as average bread prices fell 0.1%, the price index for crackers and bread and cracker products fell 1.3%, and the price index for fresh biscuits, rolls, muffins fell 1.8%, while the price index for flour and prepared flour mixes rose 2.0% and rice prices were 0.3% 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 1.7%, the price index for poultry rose 1.4%, and the price of eggs rose 2.6%....on the other hand, the seasonally adjusted price index for dairy products was 1.0% lower, as milk prices fell 1.4% and the price index for ice cream and related products was 1.3% lower...meanwhile, the fruits and vegetables price index was 0.2% higher, as the price index for fresh vegetables rose 1.0% and the price index for frozen fruits and vegetables rose 0.9%...in addition, the beverages price index was 1.0% higher, as the price index for carbonated drinks rose 1.1% and the price index for coffee rose 1.4%....lastly, the price index for the ‘other foods at home’ category rose 0.6%, as the price index for salad dressing rose 4.0%, the price index for margarine rose 2.7%, the price index for soups rose 1.9%, the price index for olives, pickles, relishes rose 0.8%, and the price index for snack foods was 0.6% higher...the itemized list for price changes of over 100 separate food itemsis included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last July, the price index for uncooked beef steaks is up 16.6%, the price index for uncooked beef roasts is up 13.1%, and the price index for "other pork including roasts, steaks, and ribs is up 11.3%, while the price of food at employee sites and schools has fallen 42.5% over the past year...

Among the seasonally adjusted core components of the CPI, which rose 0.1% in August after rising by 0.3% in July, by 0.9% in June, by 0.7% in May, 0.9% in April, 0.3% in March, 0.1% in February, being unchanged in January and December, after rising by 0.2% in November, by 0.1% in October, by 0.2% in September, and by 0.3% in August of last year, the composite price index of all goods less food and energy goods was 0.3% higher in August, while the more heavily weighted composite for all services less energy services was unchanged....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust August retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 1.2% higher, as the price index for window coverings rose 17.2%, the price index for living room, kitchen, and dining room furniture rose 3.8%, the price index for appliances rose 1.5%, and the price index for tools, hardware and supplies rose 2.0%, while the price index for dishes and flatware fell 4.6%....;at the same time, the apparel price index was 0.4% higher on a 7.9% increase in the price index for men's suits, sport coats, and outerwear, a 4.3% increase in the price index for men's shirts and sweaters, a 2.5% increase in the price index for men's underwear, nightwear, swimwear, and accessories, and a 1.7% increase in the price index for women's underwear, nightwear, swimwear, and accessories, even as the price index for women's dresses fell 3.1%....meanwhile, the price index for transportation commodities other than fuel was unchanged, after rising 1.0% in July, 5.6% in June, 4.0% in May and 4.3% in April, as prices for new cars were 1.4% higher, prices for new trucks rose 1.2%, tire prices were 2.1% higher, and the price index for motor oil, coolant, and fluids rose 3.8%, while the price index for used cars and trucks fell 1.5% ... at the same time, the price index for medical care commodities was 0.2% lower as prescription drug prices fell 0.4% and nonprescription drug prices fell 0.7% while the price index for medical equipment and supplies rose 0.9%...at the same time, the recreational commodities index was 1.0% higher on a 2.8% increase in TV prices, a 2.8% increase in the price index for musical instruments and accessories, a 2.3% increase in the price index for sporting goods, and a 0.9% increase in the price index for newspapers and magazines...on the other hand, the education and communication commodities index was 0.1% lower on a 1.1% decrease in the price index for educational books and supplies, even as the price index for computers, peripherals, and smart home assistants was 0.1% higher….lastly, a separate price index for alcoholic beverages was 0.3% higher, while the price index for ‘other goods’ was 0.4% higher on a 1.0% increase in the price index for cosmetics, perfume, bath, nail preparations and implements and a 1.3% increase in the price index for stationery, stationery supplies, and gift wrap...

Within core services, the price index for shelter was 0.3% higher as rents rose 0.3% and homeowner's equivalent rent was 0.3% higher, while prices for lodging away from home at hotels and motels fell 3.3%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.3%, and other household operation costs were on average 0.7% higher, on a 1.7% increase in the price 0index for moving, storage, freight expense....at the same time, the price index for medical care services was 0.3% higher as dental services rose 1.3% and the price index for inpatient hospital services rose 1.1% while the price index for health insurance fell 0.6%....on the other hand, the transportation services price index was 2.3% lower, as the price index for car and truck rentals fell 8.5%, the price index for vehicle insurance fell 2.8%, airline fares fell 9.1% and the price index for intracity transportation fell 1.4%...meanwhile, the recreation services price index rose 0.2% as the price index fo rental of video discs and other media rose 1.5% and the price index for admission to sporting events rose 1.3%.... at the same time, the index for education and communication services was also 0.2% higher as the price index for land-line telephone services rose 1.3%, the price index for technical and business school tuition and fees rose 0.4%, and the price index for delivery services rose 1.4%...lastly, the index for other personal services was 0.4% higher as the price index for haircuts and other personal care services was 0.6% higher and the price index for laundry and dry cleaning services was 2.0% higher...

Among core line items, the price index for car and truck rental, which is still 52.6% hihger than a year ago, the price index for used car and trucks, which is still up 31.9% from a year ago, the price index for ship fares, which is up 12.6% since last August, the price index for intracity transportation, which is up 10.9% over the same span, the price index for living room, kitchen, and dining room furniture, which is now up 12.0% from a year ago, the price index for televisions, which has risen 13.3% since last August, the price index for women's dresses, which has risen by 11.6% over the past year, the price index for jewelry, which is up by 12.9% since last August, the price index for lodging away from home including at hotels and motels, which has still risen 17.4% from a year ago, the price index for domestic services, which has risen 11.5% year over year, the price index for moving, storage, freight expense, which is up by 12.4% over the last 12 months, the price index for laundry equipment, which is up 11.0% from last August, have all seen prices rise by more than 10% over the past year, while the price index for telephone hardware, calculators, and other consumer information items, which is now down by 15.0% since last August, and the price index for sewing machines, fabric and supplies, which has fallen 10.8% from a year ago, are the only core line items to have decreased in price by a double digit magnitude over that one year span....

Retail Sales Rose 0.7% in August after July's Sales Were Revised 0.6% Lower; Portends Big Hit to Q3 GDP

Seasonally adjusted retail sales rose 0.7% in August after retail sales for July were revised 0.6% lower...the Advance Retail Sales Report for August (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $618.7 billion during the month, which was up 0.7 percent (±0.5%)* from July's revised sales of $614.3 billion and 15.1 percent (± 0.7 percent) above the adjusted sales in August of last year...July's seasonally adjusted sales were revised down from the $617.7 billion reported last month to $614.3 billion, while June sales were revised 0.1% higher, from $624.7 billion to $625.4 billion, and hence the June to July decrease was revised from down 1.1 percent (±0.5 percent) to down 1.8 percent (±0.2 percent) with this release....estimated unadjusted sales, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 0.7%, from $633,682 million in July to $629,145 million in August, while they were up 15.4% from the $545,307 million of sales in August a year ago...the revision to June’s sales means that 2nd quarter sales were roughly $3.0 billion higher at an annual rate than was previously reported, which would be enough to add 0.05 percentage points to 2nd quarter GDP when the 3rd estimate is published at the end of the month…

Included below is a copy of the table of the monthly and yearly percentage changes in retail sales by business type taken from the August Census Marts pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from July to August in the first sub-column, and then the year over year percentage change for those businesses since last August in the 2nd column; the second pair of columns gives us the revision of last month’s July advance monthly estimates (now called "preliminary") as revised in this report, likewise for each business type, with the June to July change under "Jun 2021 (r)evised", and the revised July 2020 to July 2021 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance July sale estimates, before this month's revision, is here....

August 2021 retail sales table

To compute August's real personal consumption of goods data for national accounts from this August retail sales report, the BEA will use the corresponding price changes from the August consumer price index, which we reviewed above….to estimate what they will find, we’ll 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 August retail sales excluding the 0.2% increase in sales at gas stations were up by 0.8%....then, subtracting the figures representing the 1.8% increase in grocery & beverage store sales and the virtually flat food services sales from that total, we find that core retail sales were up almost 0.7% month over month...since the August CPI report showed that the the composite price index of all goods less food and energy goods was 0.3% higher in August, we can thus figure that real retail sales excluding food and energy, or real core PCE, will show an increase of about 0.4% for the month...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at clothing stores were 0.1% higher in August, the apparel price index was 0.4% higher, which means that real sales of clothing likely fell by about 0.3%…similarly, while sales at furniture stores were 3.7% higher in August, the price index for household furnishings and supplies was 1.2% higher, which suggests that real sales of furniture only rose by about 2.5%….on the other hand, while we see that sales at drug stores were up 0.2%, prices for medical care commodities were 0.2% lower, which would mean that real sales at drug stores rose 0.4%…

In addition to figuring those core retail sales, to make a complete estimate of real August PCE, we should also adjust food and energy retail sales for their price changes separately, just as the BEA will do…the August CPI report showed that the food price index rose 0.4% in August, as the price index for food purchased for use at home rose 0.4% while average restaurant prices were 0.7% higher...thus, while nominal sales at food and beverage stores were 1.8% higher in August, 0.4% of that was due to higher prices, which means that real sales of food and beverages would be roughly 1.4% higher…on the other hand the unchanged sales at bars and restaurants, once adjusted for 0.7% higher prices, suggests real sales at bars and restaurants fell by 0.7% for the month...meanwhile, while sales at gas stations were up 0.2%, there was a 2.8% increase in the retail price of gasoline, which would suggest real sales of gasoline were on the order of 2.6% lower, with a caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales…by reweighing and averaging the real sales changes that we have thus estimated back together, and excluding food services, we can then estimate that the income and outlays report for August will show that real personal consumption of goods rose 0.3% in August, after falling by a revised 2.3% in July and rising by a revised 0.4% in June, but after falling by 2.6% in May, and after falling by 0.4% in April, but after rising by 10.0% in March, falling by 3.3% in February and rising by 7.2% in January...at the same time, the 0.7% decrease in real sales at bars and restaurants would have a negative impact of less than 0.1% on July's real personal consumption of services...

With those estimates for the relative change in real PCE goods between the months of the 2nd and 3rd quarter, we should be able to also estimate the change in PCE goods between those two quarters....setting August's real PCE goods as an index equal to 100, we can then say that July's PCE goods equals 99.7 (100-0.3%); from that, we get a index value of 102.0 for June, 101.6 for May, and 104.2 for April...we then compute the quarter over quarter change in those index values at a quarterly rate to determine the probable change that would be applied to 3rd quarter GDP... (((100 + 99.7)/2) / ((102.0 + 101.6 + 104.2)/3)) ^4 = 0..897, which means that real PCE goods are falling at a 10.3% annual rate over the 2 months of the third quarter we have estimates for...since 2 months of PCE goods is roughly 16% of GDP, that suggests that PCE goods over those two months will subtract roughly 1.65 percentage points from 3rd quarter GDP...

Industrial Production Rose 0.4% on August Heat after June & July Revised 0.1% Higher

The Fed's August report on Industrial production and Capacity Utilization indicated that industrial production rose by 0.4% in August, after rising by a revised 0.8% in July and a revised 0.5% in June...after those increases, industrial production now 5.9% higher than a year ago, and 0.3% above its pre-pandemic level....the industrial production index, with the benchmark now set for average 2017 production to equal to 100.0, rose to 101.6 in August from 101.2 in July, which was revised up from the 101.1 that was reported for July a month ago...at the same time, the June reading for the index was revised from 100.2 to 100.3, the May index was revised from 100.0 to 99.9, the April index was unrevised at 99.2, and the March index was revised from 99.1 to 99.2...

The manufacturing index, which accounts for more than 75% of the total IP index, rose by 0.2%, from 99.5 in July to 99.7 in August, despite hurricane forced plant closures for petrochemicals, plastic resins, and petroleum refining...meanwhile, July's manufacturing index was revised but unchanged at 99.5, June's manufacturing index was revised from 98.2 to 98.0, May's manufacturing index was revised from 98.5 to 98.3, April's manufacturing index was revised from 97.4 to 97.5, and the March manufacturing index was revised from 97.7 to 97.8....with the August increase, the manufacturing index is also up by 5.9% from a year ago....meanwhile, the mining index, which includes oil and gas well drilling, was hit by hurricane-induced disruptions to oil and gas extraction in the Gulf of Mexico and fell from 108.0 in July to 107.3 in August, after the July index was revised down from 108.4, as the year over year increase in the mining index declined to 10.3% from the 12.1% increase reported a month ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, surged by 3.3%, from 102.2 in July to 105.5 in August, after the July utility index was revised up from 101.1, and after the June utility index was revised from 103.3 to 106.4...since this August was warmer than last year, the utility index was 2.1% above its year ago reading of 103.4..

This report also provides capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry rose from 76.2% in July to 76.4% in August...that came as capacity utilization of NAICS durable goods production facilities rose from 76.3% in July to 76.4% in August, after July's figure was revised up from 76.1%, while capacity utilization for non-durables producers was unchanged at 77.8% after July's non-durables utilization was revised down from 78.0%...capacity utilization for the mining sector fell to 76.1% in August from 76.5% in July, which was originally reported as 76.9%, while utilities were operating at 75.6% of capacity during August, up from their 73.3% of capacity during July, which was revised up from 72.6%...for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

July Business Sales Up 0.5%, July Business Inventories Up 0.5%

After the release of the August retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for July(pdf), which incorporates the revised July retail data from that August report and the earlier published July factory data and last week’s July wholesale trade report to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,652.2 billion in July, up 0.5 percent (±0.1%) from June’s revised sales, and up 16.3 percent (±0.6 percent) from July's sales of a year earlier...note that total June’s sales were concurrently revised up from the originally reported $1,640.8 billion to $1,644.7 billion with this report, which is now an 1.6% increase from May, revised from the 1.4% reported last month....manufacturer's sales were up by 1.6% to $508,451 million in July, while retail trade sales, which exclude restaurant & bar sales from the revised July retail sales reported earlier, fell 2.2% to $542,351 million, while wholesale sales rose 2.0% to $601,348 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,069.5 billion at the end of July, also up 0.5% (±0.1%) from June, and 7.2 percent (±0.5 percent) higher than in July a year earlier...the value of end of June inventories was revised up from the $2,057.4 billion reported last month to $2,059.2 billion, which is now up 0.9% from June...seasonally adjusted inventories of manufacturers were estimated to be valued at $744,399 million, 0.5% higher than in June, inventories of retailers were valued at $602,673 million, 0.4% more than in June, while inventories of wholesalers were estimated to be valued at $722,380 million at the end of July, up 0.6% from June...

With the original release of the factory inventory data two weeks ago, we judged that the real change in July factory inventories would have a modest positive impact on the growth rate of 3rd quarter GDP; then, with the release of the wholesale inventory last week, we felt that real wholesale inventories would provide a small boost to 3rd quarter GDP...since the producer price index for July showed that prices for finished goods were on average 0.6% higher, that means that real retail inventories were around 0.2% lower for the month…however, since real retail inventories, especially those of automobile dealers, saw a substantial decrease in the second quarter, the small decrease in July retail inventories would still have a large positive impact on 3rd quarter GDP, by reversing that 2nd quarter drop, even after subtracting from that the amount of the much smaller July decrease...

 

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

Sunday, September 12, 2021

August’s producer prices; July’s wholesale trade and job openings survey

Major reports released this past week included the August Producer Price Index and the Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics, and the Wholesale Trade, Sales and Inventories report for July from the Census Bureau...this week also saw the Consumer Credit Report for July from the Fed, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $17.0 billion in July, or at a 4.7% annual rate, as non-revolving credit expanded at a 4.1% rate to $3,332.7 billion while revolving credit outstanding grew at a 6.7% rate to $998.4 billion...

July Job Openings at Record High after June Record Revised Higher; Hiring Down, Job Quitting and Layoffs Higher

The Job Openings and Labor Turnover Survey (JOLTS) report for July from the Bureau of Labor Statistics estimated that seasonally adjusted job openings rose by 749,000, from 10,185,000 in June to a record high of 10,934,000 in July, after June's record job openings were revised 112,000 higher, from the 10,073,000 reported a month ago to 10,185,000 with this report...July's jobs openings were also 62.8% higher than the 6,717,000 job openings reported for July a year ago, as the job opening ratio expressed as a percentage of the employed rose from 6.5% in June to 6.9% in July, and was up from 4.6% in July a year ago....a 202,000 job opening increase to 548,000 job openings in the financial sector appears to be the largest percentage increase for this month, while a decrease from 1.195,000 to 1,100,000 retail job openings looks to be the largest percentage decrease... (see table 1 for more details)...like most BLS releases, the press release for report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in July, seasonally adjusted new hires totaled 6,667,000, down by 160,000 from the revised 6,827,000 who were hired or rehired in June, as the hiring rate as a percentage of all employed fell from 4.7% in June to 4.5% in July, which was the same hiring rate as in July a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 174,000, from 5,612,000 in June to 5,786,000 in July, while the separations rate as a percentage of the employed rose from 3.8% to 3.9%, which was the same as the separations rate in July a year ago (see table 3)...subtracting the 5,786,000 total separations from the total hires of 6,667,000 would imply an increase of 881,000 jobs in July, somewhat less than the revised payroll job increase of 1,053,000 for July reported by the August establishment survey last week, with at least some of that difference likely due to the difference in the date of the surveys, which is at month end for this report, but is during the week of the 12th for the employment situation report...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,977,000 of us voluntarily quit our jobs in July, up by 107,000 from the revised 3,870,000 who quit their jobs in June, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.7% of total employment, while still up from 2.3% in July a year earlier (see details in table 4)....in addition to those who quit, another 1,459,000 were either laid off, fired or otherwise discharged in July, up by 105,000 from the revised 1,354,000 who were discharged in June, as the discharges rate rose from a record low of 0.9% in June to 1.0% of all those who were employed during the month, which still left it down from the 1.3% discharges rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 350,000 in July, down from the revised record 389,000 in June, for an 'other separations’ rate of 0.2%, which was down from the 0.3% rate in June and in July 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...

August Producer Price Index Sets New YoY Record Increases for Final Demand Goods, Final Demand Services, and a 46 year High for Prices of Intermediate Goods

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.7% in August, as prices for finished wholesale goods rose 1.0% while margins of final services providers rose 0.7%...that increase followed a July report that indicated the PPI was 1.0% higher, as prices for finished wholesale goods rose 0.6% while margins of final services providers rose 1.1%, a June report that also had the PPI 1.0% higher, but with prices for finished wholesale goods 1.2% higher while margins of final services providers rose 0.8%, a now revised May report that the PPI had risen 0.5%, as prices for finished wholesale goods rose 1.3% while margins of final services providers rose 0.1%, and a rerevised April report that the PPI was 1.0% higher, as prices for finished wholesale goods rose 0.7% while margins of final services providers rose by 1.2%....on an unadjusted basis, producer prices are now a record 8.3% higher than a year ago, up from the 7.8% year over year increase reported for July's producer prices, while the core producer price index, which excludes food, energy and trade services, rose by 0.3% for the month, and is now 6.3% higher than in August a year ago, up from the 6.1% year over year increase that was shown in July...

As noted, the price index for final demand for goods, aka 'finished goods', was 1.0% higher in August, after being 0.6% higher in July. 1.2% higher in June, 1.3% higher in May, 0.7% higher in April, 1.5% higher in March, 1.6% higher in February, 1.6% higher in January, 0.9% higher in December, 0.4% higher in November, 0.5% higher in October, 0.4% higher in September, and 0.4% higher in August of last year, and hence is now up by a record 12.6% from a year ago....the finished goods price index rose 1.0% in August as the price index for wholesale foods rose 2.9%, after falling 2.1% in July, rising by 0.8% in June, rising 2.8% in May, by 1.8% in April, by 0.6% in March, by 1.4% in February, and by 1.6% in January, and as the price index for wholesale energy goods was 0.4% higher, after it had risen by 2.6% in July, by 2.1% in June, and by 1.4% in May, after falling 1.2% in April and rising 5.0% in March, by 6.2% in February, and by 5.1% in January....meanwhile, the index for final demand for core wholesale goods (excluding food and energy) was 0.6% higher in August, after it had risen by 1.0% in each of the prior four months....wholesale energy prices averaged 0.4% higher despite a 0.3% decrease in wholesale prices for gasoline, due to a 5.6% increase in wholesale prices for residential natural gas and a 4.4% increase in wholesale prices for LP gas, while the wholesale food price index rose 2.6% on a 14.7% increase in the wholesale price index for beef and veal, a 6.0% increase in the wholesale price index for processed chickens, and a 16.0% increase in wholesale price index for fresh and dry vegetables...among core wholesale goods, the wholesale price index for industrial chemicals rose 4.9%, the wholesale price index for truck trailers rose 2.6%, the wholesale price index for printing machinery and equipment rose 2.5%, the wholesale price index for home electronic equipment rose 3.1%, and the wholesale price index for toys, games, and children's vehicles rose 2.0%...

At the same time, the index for final demand for services rose 0.7% in August, after rising 1.1% in July, 0.6% in June, a revised 0.1% in May, a revised 1.2% in April, and 0.3% in March, 0.3% in February and 1.0% in January, and is now up by a record 6.4% from a year ago, as the index for final demand for trade services rose 1.5%, the index for final demand for transportation and warehousing services rose 2.8%, 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 health, beauty, and optical goods retailers rose 7.8%, margins for TV, video, and photographic equipment and supplies retailers rose 3.9%, margins for furnishings wholesalers rose 5.2%, and margins for sporting goods and boat retailers rose 9.0%, while margins for hardware, building materials, and supplies retailers fell 11.6%...among transportation and warehousing services, average margins for air transportation of freight rose 1.1% and margins for airline passenger services rose 8.9%...among the components of the core final demand for services index, the price index for bundled wired telecommunications access services rose 4.7%, the price index for tax preparation and planning rose 2.1%, the price index for food and beverages for immediate consumption rose 1.6%, and the price index for traveler accommodation services rose 2.6%, while index for securities brokerage, dealing, investment advice, and related services fell 3.1% and the price index for hospital outpatient care fell 1.5 % …

This report also showed the price index for intermediate processed goods rose 1.0% in August, after rising 1.7% in July, 1.9% in June, a revised 2.5% in May, a revised 1.9% in April, 3.5% in March, 2.9% in February, and 1.8% in January, 1.4% in December, 0.9% in November, 0.9% in October, 0.6% in September, and 0.9% in August of last year....the price index for intermediate energy goods rose fell 0.6% in August, as refinery prices for jet fuel fell 2.0%, refinery prices for fuel oil fell 1.6%, refinery prices for gasoline fell 0.3%, and producer prices for natural gas to electric utilities fell 3.1%, while producer prices for industrial natural gas rose 7.2%... meanwhile, the price index for intermediate processed foods and feeds rose 2.1%, as the producer price index for meats rose 8.5%, the producer price index for processed poultry rose 3.7%, and the producer price index for fats and oils rose 2.7%...at the same time, the core price index for intermediate processed goods less food and energy goods rose 1.3%, as the producer price index for synthetic rubber rose 5.9%, the producer price index for steel mill products rose 5.1%, the producer price index for aluminum mill shape rose 3.7%, the producer price index for plastic construction products rose 3.0%, the producer price index for basic organic chemicals rose 5.3%, the producer price index for nitrogenates rose 4.1%, and the producer price index for fabricated structural metal products rose 3.3%, while the producer price for softwood lumber fell 27.7%...average prices for intermediate processed goods are now 23.0% higher than in August a year ago, the largest year over year price increase since the year ended February 1975, but just the ninth increase after 19 consecutive year over year decreases, which had followed 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as prices for intermediate goods fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods rose rose 1.0% in August, after rising 1.4% in July, 2.6% in June, a revised 7.3% in May, and a revised 2.0% in April, after falling by 4.2% in March, rising 11.9% in February, and rising by 5.3% in January, 2.1% in December, by 6.3% in November, 1.3% in October, 5.2% in September, and by 4.0% last August....that was as the August price index for crude energy goods fell 0.2% as crude oil prices fell 10.1%, unprocessed natural gas prices rose 13.4%, and coal prices fell 0.3%, while the price index for unprocessed foodstuffs and feedstuffs rose 3.8% on a 14.3% increase in producer prices for wheat, a 12.6% increase in producer prices for alfalfa hay, a 12,9% increase in producer prices for slaughter chickens, and a 4.9% increase in producer prices for corn...at the same time, the index for core raw materials other than food and energy materials was unchanged, as the price index for iron ore rose 1.5% and the price index for recyclable paper rose 3.7%, while the price index for copper base scrap fell 4.8% and the price index for iron and steel scrap fell 3.7%....this raw materials index is still 50.1% higher than a year ago, which is actually down from the 57.9% year over year increase recorded in May, but just the tenth year over year increase after the annual change on this index had been negative from the beginning of 2019 through October of last year...

Lastly, the price index for services for intermediate demand rose 0.3% in August, after rising 1.0% in July, 1.1% in June, a revised 0.2% in May, a revised 1.3% in April, and rising 0.6% in March, 0.3% in February, 1.1% in January, and 0.7% in December 2020, after being unchanged in November, rising 0.7% in October, rising 1.1% in September, and 0.8% last August….the price index for intermediate trade services was 1.1% higher, as margins for intermediate machinery and equipment parts and supplies wholesalers rose 2.8%, margins for intermediate metals, minerals, and ores wholesalers rose 6.8%, as margins for intermediate chemicals and chemical products wholesalers rose 3.4%, and margins for intermediate building materials, paint, and hardware wholesalers rose 5.7%...meanwhile, the index for transportation and warehousing services for intermediate demand was also 1.1% higher, as the intermediate price index for transportation of passengers rose 8.7%, the intermediate price index for water transportation of freight rose 1.3%, the intermediate price index for truck transportation of freight rose 0.9%, and the intermediate price index for air transportation of freight rose 1.1%...on the other hand, the core price index for intermediate services other than trade, transportation, and warehousing services fell 0.2%, as the intermediate price index for television advertising time sales fell 9.0%, the intermediate price index for securities brokerage, dealing, investment advice, and related services fell 3.1%, the intermediate price index for passenger car rental fell 3.1%, and the intermediate price index for cable and satellite subscriber services fell 2.5%, while the intermediate price index for bundled wired telecommunication access services rose 4.8%...over the 12 months ended in June, the year over year price index for services for intermediate demand is still 8.6% higher than it was a year ago, the eleventh consecutive positive annual change since it briefly turned negative year over year from April to August of last year, but down from the record 9.2% year over year increase recorded in July....

July’s Wholesale Sales Were Up 2.0%; Wholesale Inventories Were Up 0.6%

The July report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $601.3 billion in July, up 2.0 percent (±0.4 percent) from the revised June level, and up 23.7 percent (±1.6 percent) from wholesale sales of July 2020... the June preliminary sales estimate was revised to $589.7 billion from the $588.1 billion in sales reported last month, which is now 2.3% more than May's sales, revised from the 2.0% increase reported last month...as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this July report estimated that wholesale inventories were valued at a seasonally adjusted $722.4 billion at month end, up 0.6 percent (+/-0.4%) from the revised June level and 11.5 percent (±1.4%) higher than in June a year ago, with the June preliminary estimate statistically unrevised from the $718.3 billion reported a month ago, which was a 1.2% increase from May....

July's wholesale inventories, after an adjustment for price changes for each category of wholesale goods as indicated by the components of the July producer price index, appears to indicate that real wholesale inventories were close to unchanged in chained 2012 dollars during the first month the 3rd quarter....since the key source data and assumptions (xls) for the second estimate of 2nd quarter GDP indicated a real decrease of $3.3 billion in wholesale inventories on a NIPA basis, July's nearly unchanged real inventories would reverse that 2nd quarter decrease in a small boost to 3rd quarter GDP...

 

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

Sunday, September 5, 2021

August’s jobs report; July’s trade deficit, construction spending & factory inventories

In addition to the Employment Situation Summary for August from the Bureau of Labor Statistics, this week also saw the release of three July reports that provide us with initial input data to 3rd quarter GDP, and also suggest revisions to 2nd quarter GDP: the July report on our International Trade from the Bureau of Economic Analysis, and the July report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for July, both from the Census Bureau...In addition, this week saw the release of the last regional Fed manufacturing survey for August: the Dallas Fed's Texas Manufacturing Outlook Survey, which also covers adjacent western Louisiana and southeastern New Mexico, reported its general business activity index fell to +9.0 in August, down from + 27.3 in July, indicating that growth continued at a considerably more modest pace in the Texas area economy...

The week’s major privately issued reports included the ADP Employment Report for August; the light vehicle sales report for August from Wards Automotive, which estimated that vehicles sold at a 13.05 million annual rate in August, down from the 14.75 million annual sales rate reported in July, and down from the 15.19 million annual rate in August a year ago; and the Case-Shiller house price indexes for June from S&P Case-Shiller, who reported that their national home price index, based on relative April, May and June home sales prices, was 18.6% higher than their price index based on home sales during the same three months of a year ago...

The week also saw the release of both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): theAugust Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 59.9% in August, up from 59.5% in July, indicating a broad based expansion of manufacturing nationally, and the August Services Report On Business; which saw the NMI (non-manufacturing index) fall to 61.7% in August, down from the record 64.1% in July, indicating a smaller majority of service industry purchasing managers reported improvement in various facets of their business in August than in July...

Employers Added 235,000 Jobs in August; Unemployment Rate Fell to 5.2% as 509,000 Found Work

The Employment Situation Summary for August indicated that the rebound in payroll jobs that we've seen most of this year faded, but that the unemployment rate continued to fall and the employment rate continued to rise….estimates extrapolated from the establishment survey dataindicated that employers added a seasonally adjusted 235,000 jobs in August, after the payroll job increase for July was revised up from 943,000 to 1,053,000, and the payroll jobs increase for June was revised up from 938,000 to 962,000, revisions which mean that the combined number of jobs created over those two months was 134,000 more than was previously reported...despite this year's job gains, however, seasonally adjusted non-farm payrolls are still 5,333,000 below their pre-pandemic level ...the unadjusted data shows that there were actually 312,000 more payroll jobs in August, after a below normal furlough of teachers in July resulted in a seasonal adjustment increase of 1,122,800 education jobs in that month, so the impact of this month's seasonal adjustments was insignificant by comparison ...

Seasonally adjusted job increases were spread throughout the private goods producing and service sectors, offset by what were apparently pandemic related losses of 41.500 jobs in bars and restaurants and 28,500 jobs in retail.....the broad professional and business services category added 74,000 jobs in August, as 18,700 found positions with architectural and engineering services and 9,800 more were hired by computer systems design and related services...the transportation and warehousing sector added 53,200 jobs, including 20,000 couriers and messengers and 20,200 in warehousing and storage facilities...private educational services added 40,200 employees, but because state education job increases were lower than would be expected, they were logged as a 20,700 job decrease, thus resulting in a seasonally adjusted loss of 8,000 jobs in the government sector...meanwhile, employment in manufacturing increased by 37,000, with 24,100 of those working in motor vehicle and parts supply plants and another 6,600 working in fabricated metal products factories..at the same time, the catch-all "other services" category also saw 37,000 jobs added in August, including 19,200 with personal and laundry services and 8,700 with repair and maintenance services...employment in the information sector increased by 17,000, including a gain of 11,900 jobs in data processing, hosting, and related services, while financial sector employment increased by 16,000, including 10,600 in real estate....other August job additions included 6,000 jobs in resource extraction and 1,400 in wholesale trade, while jobs in health care and social assistance fell by 4,600 due to the loss of 11,600 working in home health care services, and construction jobs fell by 3,000...

The establishment survey also showed that average hourly pay for all employees rose by 17 cents an hour to $30.73 an hour, after it had increased by a revised 13 cents an hour in July; at the same time, the average hourly earnings of production and non-supervisory employees increased by 14 cents to $25.99 an hour, after July's pay figure was also revised two cents higher....employers also reported that the average workweek for all private payroll employees was at 34.7 hours for the third consecutive month in August, while hours for production and non-supervisory personnel was unchanged at 34.2 hours...meanwhile, the manufacturing workweek decreased by 0.2 hours to 40.3 hours, while average factory overtime remained at 3.2 hours...

At the same time, the seasonally adjusted extrapolation from the August household survey indicated that the number of those who would self-report being employed rose by an estimated 509,000 to 153,154,000, while the similarly estimated number of those who would be counted as unemployed fell by 318,000 to 8,384,000; which together meant that August saw a rounded increase of 190,000 to 161,537,000 in the total labor force.…since the working age population had grown by 142,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by 49,000 to 100,074,000...however, those changes were not enough to change the labor force participation rate, which held steady at 61.7%, same as in July and as in August of last year....on the other hand, the jump in number employed vis-a-vis the population was great enough to increase the employment to population ratio, which we could think of as an employment rate, by 0.1% to 58.5%...at the same time, the decrease in the number counted as unemployed was enough to lower the unemployment rate as a percentage of the labor force from 5.4% to 5.2%....meanwhile, the number who reported they were involuntarily working part time fell by 14,000 to 4,469,000 in August, while the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", fell from 9.2% in July to 8,8% in August, the lowest since March of last year....

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 alongside the press release to avoid the need to scroll up and down the page to access the tables..

Trade Deficit Fell 4.3% in July After 2nd Quarter Deficits Were Revised Lower

Our trade deficit fell 4.3% in July as the value of our exports increased while the value of our imports decreased slightly....the Commerce Dept report on our international trade in goods and services for July indicated that our seasonally adjusted goods and services trade deficit decreased by $3.2 billion to a rounded $70.1 billion in July, down from a revised June deficit of $73.2 billion, which had previously been reported at $75.7 billion...trade figures going back to January were revised with this report, which on net left the 2nd quarter trade deficit ~$4.3 billion lower than was previously reported, suggesting a substantial upward revision to 2nd quarter GDP, the magnitude of which should depend on the 1st quarter revisions, but which won’t be included in GDP reports until next July’s annual revision…after rounding, the value of our July exports rose by $2.8 billion, or 1.3 percent, to $212.8 billion on a $2.7 billion increase to $148.6 billion in our exports of goods, and an increase of $0.1 billion to $64.2 billion in our exports of services, while our imports fell by $0.4 billion, or 0.2 percent, to $282.9 billion on a $2.9 billion decrease to $236.3 billion in our imports of goods, which was mostly offset by a $2.4 billion increase to $46.6 billion in our imports of services...export prices were on average 1.3% higher in July, so nearly half of this month's increase in exports was price related, while import prices were 0.3% higher, meaning that our real imports were also smaller than their nominal value by that percentage..

The increase in our July exports was led by greater exports of capital goods, consumer goods, and automotives and parts...referencing the Full Release and Tables for July (pdf), in Exhibit 7 we find that our exports of capital goods rose by $976 million to $44,676 million on a $786 million increase in our exports of industrial machines other than those itemized separately and a $279 million increase in our exports of engines for civilian aircraft, that our exports of consumer goods rose by $810 million to $18,816 million on a $565 million increase in our exports of gem diamonds and a $285 million increase in our exports of artwork, antiques, and other collectibles, and that our exports of automotive vehicles, parts, and engines rose by $613 million to $12,185 million on a $388 million increase in our exports of trucks, buses, and special purpose vehicles and a $305 million increase in our exports of parts and accessories of vehicles other than engines, chassis, and tires...in addition, our exports of industrial supplies and materials rose by $179 million to $53,686 million as a $356 million increase in our exports of natural gas liquids, a $346 million increase in our exports of non monetary gold, and a $310 million increase in our exports of organic chemicals were offset by a $1,111 million decrease in our exports of crude oil, while our exports of foods, feeds and beverages rose by $53 million to $12,812 million and our exports of other goods not categorized by end use rose by $43 million to $5,768 million...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that lower imports of consumer goods and industrial supplies and materials were partly offset by increased imports of automotive products and parts...our imports of consumer goods fell by $2,128 million to $60,261 million on a $1,125 million decrease in our imports of toys, games, and sporting goods, a $523 million decrease in our imports of cell phones and similar household goods, and a $315 million decrease in our imports of apparel and cloth household goods other than those of wool or cotton, while our imports of industrial supplies and materials fell by $1,662 million to $55,191 million as a $824 million decrease in our imports of nonmonetary gold, a $747 million decrease in our imports of lumber, a $458 million decrease in our imports of finished metal shapes, a $457 million decrease in our imports of precious metals other than gold, and a $381 million decrease of in our imports of organic chemicals were partly offset by a $630 million increase in our imports of crude oil...in addition, our imports of foods, feeds, and beverages fell by $80 million to $15,930 million, and our imports of capital goods fell by $67 million to $63,354 million as a $333 million decrease in our imports of civilian aircraft, and sizable decreases in several other capital goods categories were mostly offset by a a $1,353 million increase in our imports of computers...partly offsetting the decreases in those end-use categories, our imports of automotive vehicles, parts and engines rose by $1,073 million to $29,558 million on a $995 million increase in our imports of new and used passenger cars and a $436 million increase in our imports of parts and accessories of vehicles other than engines, chassis, and tires, while our imports of other goods not categorized by end use rose by $350 million to $10,467 million...

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

The July figures show surpluses, in billions of dollars, with South and Central America ($5.2), Hong Kong ($2.3), Brazil ($1.4), Singapore ($1.3), and United Kingdom ($0.3). Deficits were recorded, in billions of dollars, with China ($25.0), European Union ($18.1), Mexico ($8.5), Japan ($6.0), Germany ($5.6), Canada ($3.6), Italy ($3.5), Taiwan ($3.4), India ($2.8), South Korea ($2.1), France ($2.1), and Saudi Arabia ($0.3).

  • The deficit with China decreased $2.0 billion to $25.0 billion in July. Exports increased $0.1 billion to $13.0 billion and imports decreased $2.0 billion to $38.0 billion.
  • The deficit with Canada decreased $1.9 billion to $3.6 billion in July. Exports increased $2.0 billion to $26.9 billion and imports increased $0.1 billion to $30.5 billion.
  • The deficit with Mexico increased $1.3 billion to $8.5 billion in July. Exports decreased $0.5 billion to $23.2 billion and imports increased $0.8 billion to $31.7 billion.

To gauge the impact of July trade in goods on 3rd quarter GDP growth figures, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, except they are not annualized here....from that table, we can compute that 2nd quarter real exports of goods averaged 145,669.3 million monthly in 2012 dollars, while July’s inflation adjusted exports came in at 145,487 million in that same 2012 dollar quantity index representation....figuring the annualized change between the two figures, we find that July's real exports of goods are running at a 0.5% annual rate below those of the 2nd quarter, or at a pace that would subtract about 0.04 percentage points from 3rd quarter's GDP if they were continued through August and September.....in a similar manner, we find that our 2nd quarter real imports of goods averaged 247,414 million monthly in chained 2012 dollars, while the similarly inflation adjusted July goods imports were at 245,620 million...that would indicate that so far in the 3rd quarter, our real imports of goods have fallen at a 2.87% annual rate from those of the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their decrease at a 2.78% rate would conversely add about 0.22 percentage points to 3rd quarter GDP....hence, if the July trade deficit is maintained throughout the 3rd quarter, our improving balance of trade in goods over that of the 2nd quarter would add about 0.18 percentage points to the growth of 3rd quarter GDP....

However, you'll note that we have not even computed the impact of the usually less volatile change in services here, because the BEA does not provide inflation adjusted data on those, and we don't have a straightforward way to adjust the various services for all their price changes, but that our exports in services grew $0.1 billion in July, whereas our imports in services grew $2.4 billion, which would suggest a substantial hit to GDP on the services side of the trade ledger...

Construction Spending Rose 0.3% in July after 2nd Quarter Spending was Revised Higher

The Census Bureau report on construction spending for July (pdf) estimated that the month's seasonally adjusted construction spending would work out to 1 $1,568.8 billion annually if extrapolated over an entire year, which was 0.3 percent (±1.2 percent)* above the revised annualized estimate of $1,563.4 billion of construction spending in June and 9.0 percent (±1.5 percent)* above the estimated annualized level of construction spending in July of last year....the June construction spending estimate was revised more than 0.7% higher, from $1,552.2 billion to $1,563.4 billion, while the annual rate of construction spending for May was revised more than 0.8% higher, from $1,551.2 billion to $1,564.153 billion....on net, those revisions mean that construction during the 2nd quarter was more than 0.5% higher than the figures used in last week's GDP estimate, which would generate an increase at greater than a 2.0% annual rate, and which would suggest an upward revision of about 0.23 percentage points to 2nd quarter GDP when the third estimate is released at the end of September, assuming the net impacts from the inflation adjustments on the revisions are similar to those we saw in the 2nd GDP estimate...

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 $1,231.0 billion, 0.3 percent (±0.7 percent)* above the revised June estimate of $1,227.8 billion. Residential construction was at a seasonally adjusted annual rate of $773.0 billion in July, 0.5 percent (±1.3 percent)* above the revised June estimate of $768.9 billion. Nonresidential construction was at a seasonally adjusted annual rate of $458.0 billion in July, 0.2 percent (±0.7 percent)* below the revised June estimate of $458.9 billion.
  • Public Construction; In July, the estimated seasonally adjusted annual rate of public construction spending was $337.8 billion, 0.7 percent (±2.1 percent)* above the revised June estimate of $335.6 billion. Educational construction was at a seasonally adjusted annual rate of $79.7 billion, 0.5 percent (±2.3 percent)* below the revised June estimate of $80.1 billion. Highway construction was at a seasonally adjusted annual rate of $94.5 billion, 1.9 percent (±6.4 percent)* above the revised June estimate of $92.7 billion.

Construction spending inputs into 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of July spending reported in this release on 3rd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price…the National Income and Product Accounts Handbook, Chapter 6(pdf), lists a multitude of privately published deflators that are used by the BEA for each of the various components of non-residential investment, so in lieu of trying to adjust for all of those different price indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed for an approximate estimate...

That price index showed that aggregate construction costs were up 1.5% in July, after rising 0.7% in June and rising 0.6% from April to May...on that basis, we can estimate that July construction costs were roughly 2.2% more than those of May and more than 2.8% more than those of April, and obviously 1.5% more than those of June...we then use those percentages to inflate the lower priced spending figures for each of those months, which is arithmetically the same as deflating higher priced July construction spending, for comparison purposes...annualized construction spending in millions of dollars for the second quarter is given as 1,563,463 for June, 1,564,153 for May, and 1,553,547 for April, while it was at 1,568,834 million in July ...thus to compare July's inflation adjusted construction spending to that of the first quarter, our arithmetic formula becomes: 1,568,834 / (((1,563,463 * 1.015) + (1,564,153 *1.022) + 1,553,547 * 1.028) / 3) = 0.98410, meaning real construction spending in July was down 1.59% vis a vis the 2nd quarter, or down at a 6.4% annual rate...to figure the effect of that change on GDP, we take the difference between the inflation adjusted second quarter spending average and that of July and take that result as a fraction of 2nd quarter GDP, and find that aggregate July construction spending is falling at a rate that would subtract approximately 0.62 percentage points from 3rd quarter GDP should we see no improvement from July's adjusted figures in August or September…

Factory Shipments Up 1.6% in July, Factory Inventories Up 0.5%

The July Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $1.9 billion or 0.4 percent to $508.1 billion in July, following an increase of 1.5% to $506.1 billion in June, which was revised from the 1.5% increase to $506.0 billion reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the July advance report on durable goods we reported on last week...on those revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite complete, so we'll just quote directly from that here:

  • Summary: New orders for manufactured goods in July, up fourteen of the last fifteen months, increased $1.9 billion or 0.4 percent to $508.1 billion, the U.S. Census Bureau reported today. This followed a 1.5 percent June increase. Shipments, also up fourteen of the last fifteen months, increased $7.8 billion or 1.6 percent to $508.5 billion. This followed a 1.9 percent June increase. Unfilled orders, up six consecutive months, increased $4.1 billion or 0.3 percent to $1,225.6 billion. This followed a 0.8 percent June increase. The unfilled orders-to-shipments ratio was 6.79, down from 6.90 in June. Inventories, up thirteen of the last fourteen months, increased $3.7 billion or 0.5 percent to $744.4 billion. This followed a 1.0 percent June increase. The inventories-to-shipments ratio was 1.46, down from 1.48 in June.
  • New orders for manufactured durable goods in July, down following two consecutive monthly increases, decreased $0.3 billion or 0.1 percent to $257.4 billion, unchanged from the previously published decrease. This followed a 0.8 percent June increase. Transportation equipment, also down following two consecutive monthly increases, drove the decrease, $1.7 billion or 2.1 percent to $75.3 billion. New orders for manufactured nondurable goods increased $2.2 billion or 0.9 percent to $250.7 billion.
  • Shipments of manufactured durable goods in July, up four of the last five months, increased $5.6 billion or 2.2 percent to $257.8 billion, unchanged from the previously published increase. This followed a 1.6 percent June increase. Transportation equipment, up two consecutive months, led the increase, $3.4 billion or 4.6 percent to $75.9 billion. Shipments of manufactured nondurable goods, up fourteen of the last fifteen months, increased $2.2 billion or 0.9 percent to $250.7 billion. This followed a 2.2 percent June increase. Chemical products, also up fourteen of the last fifteen months, led the increase, $0.9 billion or 1.3 percent to $65.6 billion.
  • Unfilled orders for manufactured durable goods in July, up six consecutive months, increased $4.1 billion or 0.3 percent to $1,225.6 billion, unchanged from the previously published increase. This followed a 0.8 percent June increase. Machinery, up sixteen consecutive months, led the increase, $2.4 billion or 2.2 percent to $109.3 billion.
  • Inventories of manufactured durable goods in July, up six consecutive months, increased $2.8 billion or 0.6 percent to $453.7 billion, unchanged from the previously published increase. This followed a 0.9 percent June increase. Primary metals, up twelve consecutive months, led the increase, $0.8 billion or 2.0 percent to $40.1 billion. Inventories of manufactured nondurable goods, up eleven of the last twelve months, increased $1.0 billion or 0.3 percent to $290.7 billion. This followed a 1.1 percent June increase. Petroleum and coal products, up eight of the last nine months, led the increase, $0.6 billion or 1.4 percent to $42.5 billion. By stage of fabrication, July materials and supplies increased 1.6 percent in durable goods and 0.9 percent in nondurable goods. Work in process increased 0.1 percent in durable goods and decreased 0.4 percent in nondurable goods. Finished goods increased 0.1 percent in durable goods and 0.2 percent in nondurable goods.

To estimate the effect of those July factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories increased by 0.1% to $262,776 million; the value of work in process inventories fell by less than 0.05% to $219,375 million, and materials and supplies inventories were valued 1.3% higher at $262,248 million.…meanwhile, the July producer price index reported that prices for finished goods were on average 0.6% higher, that prices for intermediate processed goods were on average 1.7% higher, while prices for unprocessed goods were 1.4% higher....assuming similar valuations for like types of inventories, that would suggest that July's real finished goods inventories were about 0.5% lower, that real inventories of intermediate processed goods were about 1.7% lower, and real raw material inventory inventories were about 0.1% lower...however, since real NIPA factory inventories were substantially lower in the 2nd quarter, accounting for more that 90% of the quarter's inventory drop, the fact that this report appears to indicate just a modest real decrease in aggregate July factory inventories should therefore have a corresponding positive impact on the growth rate of 3rd quarter GDP, by an amount equal to the difference between the two real inventory decreases....

 

 

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

Sunday, August 29, 2021

2nd estimate of 2nd quarter GDP; July’s income and outlays, durable goods, new home sales and existing home sales

The key economic reports that were released this week were the 2nd estimate of 2nd quarter GDP and the July report on Personal Income and Spending, both from the Bureau of Economic Analysis ...the week also saw the release of the July advance report on durable goods and the July report on new home sales, both from the Census Bureau, the Existing Home Sales Report for July from the National Association of Realtors (NAR), and the Chicago Fed National Activity Index (CFNAI) for July, a weighted composite index of 85 different economic metrics, which increased to +0.53 in July from a revised –0.01 in June, which had previously been reported at +0.09 ...as a result, the 3 month average of the CFNAI rose to +0.23 in July, up from +0.01 in June, which, as a positive number, would indicate national economic activity has been slightly above the historical trend over those recent months...

In addition, this week saw the release of two more regional Fed manufacturing surveys for August: 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 +27 in July to +9 in August, suggesting a somewhat slower expansion of that region's manufacturing, and the Kansas City Fed manufacturing survey for August, which covers western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico; who reported their broadest composite index slipped to +29 in August, down from a reading of +30 in July, but up from +27 in June, indicating an ongoing broad based expansion among that region's manufacturers...

2nd Quarter GDP Revised to Indicate Economy Grew at a 6.6% Rate

The Second Estimate of our 2nd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 6.6% rate during the quarter, revised from the 6.5% growth rate reported in the advance estimate last month, as growth in fixed investment and exports was greater than previously estimated, while imports increased less than originally estimated, the impact of which more than offset a larger contraction of private inventories than was shown in the advance report....In current dollars, our second quarter GDP grew at a 13.19% annual rate, increasing from what would work out to be a $22,038.2 billion a year rate in the 1st quarter to a $22,731.4 billion annual rate in the 2nd quarter, with the headline 6.6% annualized rate of increase in real output arrived at after annualized GDP inflation adjustments averaging 6.1% was computed from the price changes of the GDP components and applied to their current dollar change...

As we review this month's revisions, remember that the GDP news release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change a bit over 4 times of that what actually occurred from one 3 month period to the next, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts. For our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 2nd estimate of 2nd quarter GDP, which we find linked to on the BEA's GDP page, which also links to the GDP tables and source data on Excel and other technical notes. Specifically, we refer to table 1, which shows the real percentage change in each of the GDP components annually since 2018 and quarterly since Q3 of 2017, 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...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 11.8% growth rate reported last month to a 11.9% growth rate in this 2nd estimate…that growth rate figure was arrived at by deflating the 19.1% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated dollar weighted consumer inflation grew at a 6.5% annual rate in the 2nd quarter, which was revised from the 6.4% PCE inflation rate reported a month ago...real consumption of durable goods grew at a 11.3% annual rate, which was revised from the 9.9% growth rate shown in the advance report, and added 0.99 percentage points to GDP, as real consumption of motor vehicles, recreational goods and vehicles and durables other than furniture and appliances all contributed significantly to the durable goods increase....real consumption of nondurable goods by individuals rose at a 13.7% annual rate, revised from the 12.6% increase rate reported in the 1st estimate, and added 1.96 percentage points to 2nd quarter economic growth, as growth in real clothing and footwear consumption at a 38.0% annual rate accounted for more than a third of the non-durables growth….at the same time, consumption of services grew at a 11.3% annual rate, revised from the 12.0% growth rate reported last month, and added 4.85 percentage points to the final GDP tally, with 68.5% growth in real consumption of food services and accommodations accounting for nearly half the growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment shrunk at a 4.0% annual rate in the 2nd quarter, revised from the 3.5% investment contraction reported last month, as real private fixed investment grew at a 3.4% rate, rather than at the 3.0% rate reported in the advance estimate, while the previously reported steep contraction in inventory growth was revised even lower....real investment in non-residential structures was revised from contraction at a 7.0% rate to contraction at a 5.4% rate, while real investment in equipment was revised to show growth at a 11.6% rate, down from the 13.0% growth rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from growth at a 10.7% rate to growth at a 14.6% rate, while the contraction rate of residential investment was revised from -9.8% to -11.5% annually…after those revisions, the decrease in investment in non-residential structures subtracted 0.14 percentage points from the 2nd quarter's growth rate, the increase in investment in equipment added 0.63 percentage points to the quarter's growth, greater investment in intellectual property added 0.72 percentage points, while the decrease in investment in residential structures subtracted 0.58 percentage points from the 2nd quarter's GDP growth...

At the same time, investment in real private inventories contracted at an inflation adjusted $169.4 billion rate in the 2nd quarter, revised from the originally reported inventory shrinkage at a $165.9 billion rate...this came after inventories had shrunk at an inflation adjusted $88.3 billion rate in the 1st quarter, and hence the $81.1 billion reduction in real inventory growth subtracted 1.30 percentage points from the 2nd quarter's growth rate, revised from the 1.13 percentage point subtraction due to inventory contraction that was shown in the advance estimate....however, since shrinkage of inventories indicates that less of the goods produced during the quarter were left ‘sitting on the shelf’ or in a warehouse, the quarter over quarter decrease in their growth by $81.1 billion meant that real final sales of GDP were relatively greater by that much, or enough to boost 2nd quarter growth in real final sales of GDP to a 7.9% rate, revised from the 7.7% real final sales growth rate shown in the advance estimate, but a decrease from the real final sales growth at a 9.1% rate in 1st quarter, when that quarter's larger decrease in inventory growth meant that a greater part of the increase in domestic output had been sold..

The previously reported increase in real exports was revised higher with this estimate, and at the same time the previously reported increase in real imports was revised lower, and as a result our foreign trade was a smaller subtraction from GDP than was reported in the advance estimate....our real exports grew at a 6.6% rate rather than the 6.0% rate reported in the first estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, their growth added 0.70 percentage points to the 2nd quarter's growth rate, up from the 0.64 percentage point addition shown in the advance report....meanwhile, the previously reported 7.8% increase in our real imports was revised to a 6.7% increase, and since imports subtract from GDP because they represent either consumption or investment that was not produced here, their increase subtracted 0.94 percentage points from 2nd quarter GDP, revised from the advance report subtraction of 1.09 percentage points.....thus, our deteriorating trade balance subtracted a net 0.24 percentage points from 2nd quarter GDP, revised from the rounded 0.44 percentage point subtraction that had been indicated in the advance estimate…

Finally, there were negative revisions to real government consumption and investment in this 2nd estimate, as the entire government sector shrunk at a 1.9% rate, revised from the 1.5% contraction rate previously reported...real federal government consumption and investment was seen to have shrunk at a 5.2% rate from the 1st quarter in this estimate, which was revised from the 5.0% contraction rate reported in the 1st estimate...real federal outlays for defense were revised to show contraction at a 0.9% rate, rather than the 0.8% contraction rate previously reported, and subtracted 0.04 percentage points from 2nd quarter GDP, while all other federal consumption and investment shrunk at a 10.6% rate, more than the 10.4% contraction rate previously reported, and subtracted 0.33 percentage points from 2nd quarter GDP....meanwhile, real state and local consumption and investment grew at a 0.3% rate in the quarter, which was revised from the 0.8% growth rate reported in the 1st estimate, and added 0.04% percentage points to 2nd quarter GDP....note that 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, thus indicating there was an increase in the output of those goods or services...

July Personal Income Up 1.1%, Personal Spending Up 0.3%, PCE Price Index Up 0.4%

Other than the employment report and the GDP report itself, the monthly report on Personal Income and Outlays from the Bureau of Economic Analysis is probably the most important regular economic release we see each month, since each monthly report on personal consumption expenditures (PCE) accounts for roughly 23% of its quarter's GDP by itself...in addition, this report also includes the PCE price index, the inflation gauge the Fed targets, and which is used to adjust that personal spending data for inflation to give us the relative change in the output of goods and services that our spending indicated, our monthly personal income data and disposable personal income, which is income after taxes, and our monthly savings rate...however, because this report feeds in to GDP and other national accounts data, the change reported for each of those metrics is not the current monthly change; rather, they're seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much income and spending would change over a year if July's change in seasonally adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from June to July..

Thus, when the opening line of the news release for the July report tell us "Personal income increased $225.9 billion (1.1 percent) in July", they mean that the annualized figure for seasonally adjusted personal income in July, $20,667.7 billion, was $225.9 billion, or roughly 1.1% greater than the annualized personal income figure of $20,441.8 billion extrapolated for June; the actual, unadjusted change in national personal income from June to July, which is an order of magnitude lower, is not yet given...at the same time, annualized disposable personal income, which is income after taxes, rose by a bit more than 1.1%, from an annual rate of $17,850.0 billion in June to an annual rate of $18,048.1 billion in July....the monthly contributors to the increase in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized figures...in July, the main reasons for the $225.9 billion annual rate of increase in personal income were an annualized $98.5 billion increase in wages and salaries and an annualized $136.6 billion increase in government social benefits to individuals…

For the personal consumption expenditures (PCE) that will be included in 3rd quarter GDP, BEA reports that they increased at a $42.2 billion annual rate, or by somewhat less than 0.3% from June, as the annual rate of PCE rose from $15,790.0 billion in June to $15,832.3 billion in July....June PCE was revised from $15,771.6 billion annually to $15,790.0 billion, while PCE for the months going back to April were also revised as well, all of which were already included in the revised 2nd estimate of 2nd quarter GDP which we reviewed earlier (data in this report, although released a business day later than the GDP release, is concurrent with GDP data)....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $45.4 billion to $16,323.7 billion annually in July, which left total personal savings, which is disposable personal income minus total outlays, at a $1,724.4 billion annual rate in July, up from the revised $1,571.8 billion in annualized personal savings in June...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, rose to 9.6% in July from the June savings rate of 8.8%...

As you know, before personal consumption expenditures are used in the GDP computation, they must first be adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....the BEA does that by computing a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, and which is included in Table 9 in the pdf for this report...that index rose from 115.385 in June to 115.860 in July, a month over month inflation rate that's statistically 0.4117%, which BEA reports as a PCE price index increase of 0.4 percent, following an increase of 0.5 percent in the PCE price index reported for June...note that when the PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in chained 2012 dollars, which are the means that the BEA uses to compare the real goods and services produced in one month or one quarter to the real goods and services produced in another....that result is shown in table 7 of the PDF, where we see that July's chained dollar consumption total works out to 13,666.9 billion annually, 0.1447% less than June's 13,686.7 billion, a difference in real PCE that the BEA reports as -0.1%...

However, to estimate the impact of the change in PCE on the change in GDP, the month over month change doesn't help us much, since GDP is reported quarterly....thus we have to compare July's real PCE to the the real PCE of the 3 months of the second quarter....while this report shows real PCE for those three months at an annual rate monthly, the BEA also provides the quarterly annualized chained dollar PCE for those three months in table 8 in the pdf for this report, where we find that the annualized real PCE for the 2nd quarter was represented by 13,660.2 billion in chained 2012 dollars..(note, that's the same figure that's shown in table 3 of the pdf for the 2nd quarter GDP report)....when we compare July's adjusted PCE of 13,666.9 billion to the 2nd quarter real PCE of 13,660.2 billion, we find that July real PCE has grown at a 0.196% annual rate compared to the 2nd quarter....that means that even if July’s real PCE growth does not improve during August and September, that modest growth in PCE would still add 0.14 percentage points to the growth rate of 3rd quarter GDP...

July Durable Goods: New Orders Down 0.1%, Shipments Up 2.2%, Inventories Up 0.6%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for July (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $0.4 billion or by 0.1 percent to $246.9 billion in July, following a revised increase of 0.8% to $257.6 billion in June's new orders, statistically unchanged from the increase reported a month ago....with that modest July decrease, year to date new orders are now running 25.3% above those of 2020, a decrease from the 26.8% year-to date change we saw in this report last month...

As is usually the case, the volatile monthly change in new orders for transportation equipment drove this month's headline change, as those transportation equipment orders fell $1.7 billion or 2.2 percent to $75.3 billion, on a 48.9% decrease to $7,374 million in new orders for commercial aircraft....excluding new orders for ‘transportation’ equipment, other new orders were up 0.7% in July, even though new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment, remained statistically unchanged at $76,534 million...

The seasonally adjusted value of July's shipments of durable goods, which will be inputs into various components of 3rd quarter GDP after adjusting for changes in prices, rose by $5.6 billion or 2.2 percent to $257.8 billion, after the value of June shipments was revised from $250.7 billion to $252.2 billion, now a 1.6% increase from those of May....a 4.6% jump in shipments of transportation equipment led the July shipments increase, as they rose $3.4 billion to $75.9 billion on a 5.9% increase in shipments of motor vehicles.…excluding shipments of transportation equipment, shipments of other durable goods rose 1.2%, while shipments of nondefense capital goods excluding aircraft were up 1.0% to $74,484 million, an increase that will be reflected in 3rd quarter GDP equipment investment figures...

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the sixth consecutive month, increasing by $2.7 billion or 0.6 percent to $453.6 billion, after end of June durable goods inventories were revised from $450.5 billion to $451.0 billion, still a 0.9% increase from May...an increase of $0.8 billion or 1.9 percent to $40.05 billion in inventories of primary metals was major factor in the inventory increase, while inventories of transportation equipment rose less than $0.3 billion or 0.2 percent to $151.8 billion...excluding inventories of transportation equipment, all other durable goods inventories increased 0.8% to $301,873 million...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but obviously volatile new orders, also rose for the sixth consecutive month, increasing by $3.9 billion or 0.3 percent to $1,225.4 billion...that followed a June increase of 0.8% to $1,221.5 billion that was was revised from the previously reported 0.9% increase to $1,223.0 billion.....a $2.3 billion or 2.1 percent increase to $109.2 billion in unfilled orders for machinery led the July increase, while a $0.65 billion or 0.1 percent decrease to $811,846 million in unfilled orders for transportation equipment limited the overall increase, as unfilled orders excluding transportation equipment were up 1.1% to $413,523 million....compared to a year earlier, the unfilled order book for durable goods is now 2.3% above the level of last July, even as unfilled orders for transportation equipment are still 3.3% below their year ago level, despite a 16.2% increase in the backlog of orders for motor vehicles and parts...

New Home Sales Flat in July on Record High Prices

The Census report on New Residential Sales for July (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 708,,000 new homes a year, which was 1.0 percent (±11.3 percent)* above the revised June rate of 701,000 new single family home sales a year, but was 27.2 percent (±7.3 percent) below the estimated annual rate that new homes were selling at in July of last year....the asterisk indicates that based on their small sampling, Census could not be certain whether July new home sales rose or fell from those of June, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales new single family homes in June were revised from the annual rate of 676,000 reported last month to a 701,000 a year rate, and home sales in May, initially reported at an annual rate of 769,000 and revised down to a 724,000 a year rate last month, were revised further down to a 720,000 annual rate with this report, while April's annualized home sales rate, initially reported at 863,000 and revised from 817,000 down to 785,000 last month, were revised a bit higher, to a 796,000 rate, with this release..

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which showed that approximately 63,000 new single family homes sold in July, the same number of new homes that sold in June, and down from the 64,000 that sold in May and the 74,000 that sold in April....the raw numbers from Census field agents’ reports further estimated that the median sales price of new houses sold in July was at a record $390,500, up from the median sale price of $370,200 in June and up from the median price of $329,800 in July a year ago, while the average July new home sales price was also at a record $446,000, up from $429,600 average sales price in June, and up from the average sales price of $379,100 in July a year ago....a seasonally adjusted estimate of 367,000 new single family houses remained for sale at the end of July, which represents a 6.2 month supply at the July sales rate, up from the revised 6.0 month supply of unsold homes in June....for more details and graphics on this report, see Bill McBride's two posts, New Home Sales Increase to 708,000 Annual Rate in July and A few Comments on June New Home Sales...

Existing Home Sales Rise 2.0% in July as Prices Slip

The National Association of Realtors (NAR) reported that their seasonally adjusted count of existing home sales rose 2.0% from June to July, projecting that 5.99 million homes would sell over an entire year if the July home sales pace were extrapolated over that year, a pace that was also 1.5% above the annual sales rate projected in July of a year ago….June home sales, now shown at a 5.87 million annual rate, were revised from the 5.86 million annual rate shown in last month's report...the NAR also reported that the median sales price for all existing-home types was $359,900 in July, 17.8% higher than in July a year earlier, which they report "marks 113 straight months of year-over-year gains.".....the NAR press release, which is titled "Existing-Home Sales Climb 2.0% in July", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release....since sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation of the actual number of homes that sold each month...this unadjusted data indicates that roughly 584,000 homes sold in July, down by 5.0% from the 615,000 homes that sold in June, and down by 1.8% from the estimated 597,000 homes that sold in July of last year, so we can see there was a modest seasonal adjustment just to bring the annualized published figures up to the level reported...that same pdf indicates that the median home selling price for all housing types fell 0.8%, from a revised $362,800 in June to $359,900 in July, while the average home sales price was $378,700, down 0.7% from the $381,200 average selling price in June, but up 12.0% from the $338,000 average home sales price of July a year ago, with regional average home sales prices ranging from a low of $302,300 in the Midwest to a high of $500,700 for average homes in the West...for additional commentary with long term graphs on this report, see "NAR: Existing-Home Sales Increased to 5.99 million in July" and "Comments on June Existing Home Sales" from Bill McBride at Calculated Risk...

 

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