Sunday, June 26, 2022

May's reports on new and existing home sales

The only widely watched economic releases of the past week were the May report on new home sales from the Census bureau and the May report on existing home sales from the National Association of Realtors (NAR)....the week also saw the release of the Chicago Fed National Activity Index (CFNAI) for May, a weighted composite index of 85 different economic metrics, which fell from a downwardly revised +0.40 in April to +0.01 in May, in an index where any positive reading indicates economic activity has been above the historical trend...that May decrease left the 3 month average of the index at +0.20 in May, down from +0.40 in April, still indicating national economic activity has averaged slightly above the historical trend over those recent months....In addition, another regional Fed manufacturing survey was released this week: the Kansas City Fed manufacturing survey for June, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to +12 in June, down from +23 in May and from +25 in April, indicating a less broad based expansion among that region's manufacturers than in recent months...

New Homes Sales Reported Higher in May on Lower Prices After April Sales Revised Higher

The Census report on New Residential Sales for May (pdf) estimated that new single family homes were selling at a seasonally adjusted annual rate of 696,000 during the month, which was 10.7 percent (±18.9 percent)* above the revised April rate of 629,000 new single family home sales a year but 5.9 percent (±22.0 percent)* below the estimated annual rate that new homes were selling at in May of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether May new home sales rose or fell from April or even from those of May a year ago, with the figures in parenthesis representing the 90% confidence range for reported data in this report, which has the largest margin of error and is subject to the largest revisions of any census construction series....hence, these initial new home sales reports are not very reliable and often see significant revisions...with this report, sales of new single family homes in April were revised from the annual rate of 591,000 reported last month to a 629,000 annual rate, and March's annualized home sale rate, initially reported at 763,000 annual rate, was revised from last months downwardly revised figure of 709,000 to a 715,000 rate, while the annual rate of February's sales, initially reported at an annual rate of 772,000 and revised from a revised annual rate of 835,000 to an annual rate of 792,000 last month, were revised to an annual rate of 790,000 with this report...

The annual rates of sales reported here are extrapolated from the estimates of canvassing Census field reps, which indicated that approximately 63,000 new single family homes sold in May, up from the 57,000 new homes that sold in April, but down from the estimated 69,000 new homes that sold in March....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in May was at $449,000, down from the record median sales price of $454,700 in April, but up 15.0% from the median sales price of $390,400 in May of last year, while the average May new home sales price was at $511,400, down from the record $569,500 average price in April, but up 14.8% from the average new home sales price of $445,300 in May a year ago....a seasonally adjusted estimate of 444,000 new single family houses remained for sale at the end of May, which represents a 7.7 month supply at the May sales rate, down from the revised 8.3 month supply in April....for more details and graphics on this report, see Bill McBride's posts on this month's report, “New Home Sales Increase to 696,000 Annual Rate in May". and “May New Home Sales Increase, Over 5 Months of Inventory Under Construction”....

Existing Home Sales Fell 3.4% in May; Median Sale Price at a Record High

The National Association of Realtors (NAR) reported that seasonally adjusted existing home sales fell 3.4% from April to May, the 4th consecutive decrease, projecting that 5.41 million homes would sell over an entire year if the May home sales pace were extrapolated over that year, a pace that was also 8.6% lower than the annual sales rate projected in May of a year ago....that came after homes sold at an annual sales rate of 5.60 million in April, which was revised from the 5.61 million annual rate last month's report, and after the annual home sales rate had hit an interim high of 6.49 million in January...the NAR also reported that the median sales price for all existing-home types was a record high $407,600 in May, which was 14.8% higher than in May a year earlier, which they report "marks 123 consecutive months of year-over-year increases, the longest-running streak on record"....the NAR press release, which is titled Existing-Home Sales Fell 3.4% in May; Median Sales Price Surpasses $400,000 for the First Time, 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 those details in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we usually look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this data indicates that roughly 498,000 homes sold in May, up by 7.6% from the 463,000 homes that sold in April, but down by 5.8% from the the 528,000 homes that sold in May of last year, so we can see the effect of the seasonal adjustment to reduce the springtime increase typical for May home sales...that same pdf indicates that the median home selling price for all housing types rose 2.8%, from a revised $395,500 in April to $407,600 in May, with the regional median home sales prices ranging from a low of $294,500 in the Midwest to a high of $633,800 in the West...for additional details, analysis, and long term graphs on this report, see "NAR: Existing-Home Sales Decreased to 5.41 million in May: and " More Analysis on May Existing Home Sales" from Bill McBride, which in turn links to his free Calculated Risk Real Estate Newsletter post titled NAR: Existing-Home Sales Decreased to 5.41 million SAAR in May..

 

 

(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…)  

Monday, June 20, 2022

May's reports on retail sales, industrial production, producer prices and new home construction; April’s business inventories

Major economic reports released the past week included the Retail Sales report for May and its companion the Business Sales and Inventories report for April, as well as the May report on New Residential Construction, all from the Census Bureau; the report on Industrial Production and Capacity Utilization for May from the Fed, and the May Producer Price Index and the May Import-Export Price Index, both from the Bureau of Labor Statistics...the Bureau of Labor Statistics also released the Regional and State Employment and Unemployment Summary for May on Friday this week, which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of that report provides a useful summary of this data, the serious statistical 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 Fed regional manufacturing reports for June: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, one county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index rose to -1.2 June, from -11.6 in May, indicating a leveling off of the contraction among First District manufacturing firms that began in May... meanwhile, the Philadelphia Fed Manufacturing Survey, covering most of Pennsylvania, southern New Jersey, and Delaware, reported their broadest diffusion index of manufacturing conditions fell from +2.6 in May to -3.3, in June, indicating that a plurality of that district's manufacturers are also experiencing a slowdown..

Retail Sales Fell 0.3% in May After March and April Sales Were Revised Lower

Seasonally adjusted retail sales fell 0.3% in May after retail sales for April were revised 0.4% lower....the Advance Retail Sales Report for May (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $672.9 billion for the month, which was a decrease of 0.3 percent (±0.5%) from April's revised sales of $674.7 billion, but 8.1 percent (±0.7 percent) above the adjusted sales of May of last year...April's seasonally adjusted sales were revised from the record high $677.7 billion reported last month to $674.7 billion, while March sales were revised from $671.6 billion to $669,958 million, which meant that March to April percent change was revised from an increase of 0.9 percent (± 0.5 percent) to an increase of 0.7 percent (± 0.2 percent)...the $1.64 billion downward revision to March sales should reduce nominal first quarter PCE at around a $6.6 billion annual rate and subtract about 0.11 percentage points, give or take, from 1st quarter GDP when the 3rd estimate is released at the end of the month....estimated sales before seasonal adjustments, which were extrapolated from surveys of a small sampling of retailers, indicated sales actually rose 2.4% before the adjustment, from $681,635 million in April to $697,715 million in May, while they were up 8.2% from the $644,652 million in actual sales of May a year ago...

Included below is the table of the monthly and yearly percentage changes in sales by business type taken from the Census pdf....the first double column below gives us the seasonally adjusted percentage change in sales for each type of retail business from April to May in the first sub-column, and then the year over year percentage change for those businesses since last May in the 2nd column; the second pair of columns gives us the revision of last month’s April advance monthly estimates (now called "preliminary") as revised with this report, likewise for each business type, with the March to April change under "Mar 2022 r" (revised) and the revised April 2021 to April 2022 percentage change in the last column shown...for your reference, our copy of the table of last month’s advance April estimates, before this month's revision, is here....

To compute May's real personal consumption of goods data for national accounts from this May retail sales report, the BEA will use the corresponding price changes from the May consumer price index, which we reviewed last week...to estimate what they will find, we’ll first separate out the volatile sales of gasoline from the other totals...from the third line on the above table, we can see that May retail sales excluding the 4.0% increase in sales at gas stations were down by 0.7%...then, by subtracting the actual dollar amounts representing the 1.2% increase in grocery & beverage sales and the 0.7% increase in food services sales from that total, we find that core retail sales were down by 1.3% for the month....since the May CPI report showed that the composite price index of all goods less food and energy goods was 0.7% higher in May, we can thus figure that the change in real retail sales excluding food and energy sales will amount to a decrease of nearly 2.0%...however, the actual adjustment in national accounts for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were down 3.5% in May, the May price index for transportation commodities other than fuel was 1.4% higher, which would suggest that real unit sales at auto & parts dealers were probably on the order of 4.8% lower once price increases are taken into account... similarly, while nominal sales at clothing stores were 0.1% higher in May, the apparel price index was 0.7% higher, which suggests that real sales of clothing actually fell around 0.6%...

In addition to figuring those core retail sales, to make an estimate of the month's change in real sales, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the May CPI report showed that the food price index was 1.2% higher, as the price index for food purchased for use at home rose 1.4% while the index for food bought away from home was 0.1% higher...thus, while nominal sales at food and beverage stores were 1.2% higher, real sales of food and beverages would have been around 0.2% lower in light of the 1.4% higher prices…meanwhile, the 0.7% increase in nominal sales at bars and restaurants, once adjusted for 0.7% higher prices, suggests that real sales at bars and restaurants were roughly unchanged during the month...on the other hand, while sales at gas stations were up 4.0%, there was also a 4.1% increase in the price of gasoline during the month, which would suggest that real sales of gasoline were up on the order of 0.1% lower, with a caveat that gasoline stations do sell more than gasoline, products which should not be adjusted with gasoline prices…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 May will show that real personal consumption of goods fell by nearly 1.6% in May% in May, after rising by a revised 0.7% in April and being virtually unchanged in March, but after falling by 1.0% in February and rising by 3.6% in January...at the same time, since real sales at bars and restaurants were unchanged, they will add nothing to the growth rate of May's real personal consumption of services....

Industrial Production Rose 0.2% in May After March Output Revised 0.4% Lower

Industrial production increased in May after production for March and April was revised lower...the Fed'sG17 release on Industrial production and Capacity Utilization for May reported that industrial production increased 0.2% in May after rising by a revised 1.4% in April and by a revised 0.5% in March, which left total output 5.8% higher than a year ago, down from last month's +6.4% year over year figure...the industrial production index, which is benchmarked for average 2017 production to be equal to 100.0, rose from a revised 105.5 in April to 105.7 in May, after the April reading for the index was revised down from 105.6 to 105.5, the March index was revised down from 104.5 to 104.1, the February index was revised but remained at 103.6, and the January index was revised from 102.6 to 102.5....

The manufacturing index, which accounts for more than 77% of the total IP index, slipped 0.1% from an unrevised 103.2 in April to 103.1 in May, after the March manufacturing index was revised from 102.5 to 102.4, leaving manufacturing output 4.8% higher than it was a year ago... meanwhile, the mining index, which includes oil and gas well drilling, rose 1.3% or from 114.8 in April to 116.3 in May, after the April index was revised up from the originally reported 114.0, boosting the mining index to 9.0% higher than it was a year earlier....finally, the seasonally adjusted utility index, which often fluctuates due to above or below normal temperatures, rose 1.0% to 108.7 in May, after the April index was revised from an increase of 2.6% to 109.3 to an increase of 5.5% to 107.6, and after the March utility index was revised from a 0.3% decrease to 106.7, to a 4.7% decrease to 102.0, leaving the utility index 8.4% above it's year earlier level...

This report also includes capacity utilization figures, which are expressed as the percentage of our plant and equipment that was in use during the month…seasonally adjusted capacity utilization for total industry rose to 79.0% in May from 78.9% in April, after capacity utilization for April was revised down from the 79.0% reported a month ago....capacity utilization for all manufacturing industries slipped from a revised 79.2% in April to 79.1% in May, as utilization of NAICS durable goods production facilities fell from a downwardly revised 79.0% in April to 78.7% in May, while capacity utilization for non-durables manufacturers rose from 79.9% to 80.0%...at the same time, capacity utilization for the mining sector rose to 81.5% in May, from 80.7% in April, which was originally reported as 80.1%, while utilities were operating at 76.4% of capacity during May, up from 75.9% of capacity during April, which was was originally reported at 77.0%....for more details on capacity utilization by type of manufacturer, see Table 7: Capacity Utilization: Manufacturing, Mining, and Utilities, which shows the historical capacity utilization figures for a dozen types of durable goods manufacturers, 8 classifications of non-durable manufacturers, mining, utilities, and capacity utilization for a handful of other special categories....

Producer Prices Rose 0.8% in May; Record Annual Increase of 16.6% for Final Demand Goods

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.8% in May, as average prices for finished wholesale goods rose by 1.4% while final demand for services was 0.4% higher....that increase followed a revised 0.4% increase in April, when average prices for finished wholesale goods rose by 1.3% while final demand for services was 0.2% lower, a revised 1.6% increase in March, when average prices for finished wholesale goods rose by 2.4% and final demand for services rose 1.2%, a revised 1.1% increase in February, when average prices for finished wholesale goods rose by 2.2% while margins of final services providers rose 0.5%, and a revised 1.2% increase in January, when wholesale goods prices rose 1.6% and the price index for final demand for services rose 0.9%...on an unadjusted basis, producer prices are now 10.8% higher than a year ago, down from the revised 10.9 year over year increase now shown for April's producer prices, while the core producer price index, which excludes food, energy and trade services, rose by 0.5% for the month, and is now 6.8% higher than in a year ago, same as the revised year over year core PPI increase that is now indicated for April...note that the BLS is now revising the PPI going back five months, so the figures we cite for those months were revised, whether we note it or not..

As we noted, the producer price index for final demand for goods, which was previously aggregated as 'finished goods', was 1.4% higher in May, after being 1.3% higher in April, 2.4% higher in March, to 2.2% higher in February, to 1.6% higher in January, and after being 0.1% lower in December, 0.9% higher in November, 1.3% higher in October. 1.2% higher in September, 1.0% higher in August, 0.8% higher in July, 1.3% higher in June, 1.4% higher in May, and 1.0% higher in April of last year, and hence is now up by a record 16.56% from a year ago, topping April's 16.32% record annual increase....the finished goods price index rose 1.4%, as the price index for wholesale energy goods was 5.0% higher in May, after it had risen by a revised 1.6% in April, by a revised 6.5% in March, and by a revised 7.2% in February, while the price index for wholesale foods was unchanged, after rising by1.4%% in April and 2.4% in March, and while the index for final demand for core wholesale goods (excluding food and energy) rose 0.7% in May, after rising a revised by 1.1% in both March and April...wholesale energy prices averaged 5.0% higher on a 8.0% increase in wholesale prices for gasoline, a 10.6% increase in wholesale prices for home heating oil, and a 6.2% increase in wholesale prices for residential natural gas, while the final demand food price index was unchanged as a 6.0% increase in the wholesale price index for processed turkeys, a 4.6% increase in the wholesale price index for processed chickens, and a 3.5% increase in the wholesale price index for fresh and dry vegetables was offset by a 9.5% decrease in the wholesale price index for beef and veal, and a 7.6% decrease in the wholesale price index for pork....among core wholesale goods, the final demand price index for industrial chemicals rose 2.9%, the final demand price index for metal forming machine tools rose 2.6%, the final demand price index for transformers and power regulators rose 2.1%. the final demand price index for wholesale sporting and athletic goods rose 2.5%, the final demand price index for pumps, compressors, and related equipment rose 2.3%, and the wholesale price index for cigarettes rose 2.6%....

Meanwhile, the price index for final demand for services was 0.4% higher in May, after falling by a revised 0.2% in April, and rising by 1.2% in March, and is now up by 7.6% from a year ago, down quite a bit from the record 9.2% year over year increase that was reported for March....the price index for final demand for trade services rose 0.4%, the price index for final demand for transportation and warehousing services rose 2.9%, while 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 lawn, garden, and farm equipment and supplies retailers rose 5.5%, margins for automobile retailers rose 3.3%, margins for furniture retailers rose 3.6%, and margins for apparel, jewelry, footwear, and accessories retailers rose 2.7%, while margins for fuel and lubricants retailers fell 21.7%....among transportation and warehousing services, average margins for airline passenger services rose 2.9%, margins for truck transportation of freight also rose 2.9%, and margins for rail transportation of freight and mail rose 2.7%...among the components of the core final demand for services index, the price index for arrangement of cruises and tours rose 5.1%, the price index for securities brokerage, dealing, investment advice, and related services rose 5.5%, and the price index for mining services rose 2.8%, while the price index for portfolio management fell 1.9%, the price index for traveler accommodation services fell 3.3%, and the price index for passenger car rental fell 5.6% …

This report also showed the price index for intermediate processed goods rose 2.3% in May, after rising a revised 2.0% in April, 2.3% in March, and by a 1.5% in February....the price index for intermediate energy goods rose 4.6% in April, as producer prices for natural gas to electric utilities rose 23.7%, producer prices for industrial natural gas rose 16.2%, refinery prices for jet fuel rose 12.0%, and refinery prices for gasoline rose 8.4%... at the same time, the price index for intermediate processed foods and feeds rose 0.9%, as the producer price index for processed poultry rose 5.1%, the producer price index for fats & oils rose 4.0% and the producer price index for prepared animal feeds rose 1.8%...meanwhile, the core price index for intermediate processed goods less food and energy goods rose 1.7% as the producer price index for paint materials rose 3.9%, the producer price index for nitrogenates rose 11.8%, the producer price index for steel mill products rose 10.7%, the producer price index for hardwood lumber rose 2.9%, the producer price index for paving mixtures and blocks rose 2.8%, and the producer price index for metal valves, except those for fluid power, rose 3.2%, while the producer price index for primary nonferrous metals fell 12.0%...average prices for intermediate processed goods are still 21.6% higher than in May a year ago, down from the 21.9% year over year increase shown for April, and down from.their 26.6% year over year increase in November, which had been a 46 year high....

At the same time, the price index for intermediate unprocessed goods rose 6.3% in May, after rising a revised 6.1% in April, by 2.7% in March, and by 10.0% in February....that was as the May price index for crude energy goods rose 16.3%, as unprocessed natural gas prices rose 39.7% and coal prices rose 3.9%, while crude oil prices fell 1.6% ...at the same time, the price index for unprocessed foodstuffs and feedstuffs was 0.9% higher on a 1.6% increase in producer prices for slaughter cattle, a 1.1% increase in producer prices for wheat, a 5.9% increase in producer prices for raw milk, a 10.1% increase in producer prices for alfalfa hay, and a 1.5% increase in producer prices for slaughter turkeys....meanwhile, the index for core raw materials other than food and energy materials was 4.2% lower, on a 11.8% decrease in the price index for iron and steel scrap, an 8.2% decrease in the price index for aluminum scrap, a 7.0% decrease in the price index for copper base scrap, and a 6.0% decrease in the price index for recyclable paper.....this raw materials index is now 48.5% higher than a year ago, down from the 50.8% year over year increase in April, and down from the record 59.2% annual increase in April 2021, and now the nineteenth consecutive year over year increase for this index, after the annual change on this index had been negative from the beginning of 2019 through October of 2020...

Lastly, the price index for services for intermediate demand was 0.6% higher in May, after being a revised 0.7% higher in April, 1.2% higher in March, and 0.2% higher in February, after rising 0.8% in January, by 0.8% in December, and by 0.6% in November….the price index for intermediate trade services rose 0.6%, as margins for machinery and equipment parts and supplies wholesalers rose 1.4%, margins for intermediate chemicals and allied products wholesalers rose 3.7%, and margins for intermediate metals, minerals, and ores wholesalers rose 3.1%...at the same time, the index for transportation and warehousing services for intermediate demand was 1.0% higher, as the intermediate price index for water transportation of freight rose 12.5%, the intermediate price index for truck transportation of freight rose 2.9%, the intermediate price index for air mail and package delivery services (not by USPS) rose 3.7%, the intermediate price index for transportation of passengers rose 2.8%, while the intermediate price index for arrangement of freight and cargo was 5.8% lower .... at the same time, the core price index for intermediate services other than trade, transportation, and warehousing services rose 0.6%, as the intermediate price index for radio advertising time sales rose 7.5%, the intermediate price index for securities brokerage, dealing, investment advice, and related services rose 5.5%, the intermediate price index for business loans rose 3.9%, and the intermediate price index for executive search services rose 3.3%....over the 12 months ended in May, the year over year price index for services for intermediate demand is now 7.7% higher than it was a year ago, the twentieth consecutive positive annual increase in this index change since it briefly turned negative year over year from April to August of 2020, while it is still down from the record 9.5% year over year increase indicated for July....

April Business Sales Up 0.4%, Business Inventories Up 1.2%

Following the release of the May retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for April(pdf), which incorporates the revised April retail data from that May report and earlier published wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....note that revised historical data from the Manufacturers’ Shipments, Inventories, and Orders Survey were released on May 13, 2022 and are reflected in this month's report, which thereby revised the figures that were reported a month ago, even before the usual revisions to the prior month’s data that accompany this report...

According to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,813.9 billion in April, up 0.4 percent (±0.2 percent) from March revised sales,and up 13.7 percent (±0.4 percent) from April sales of a year earlier...after the revisions to the historical data,, total March sales were revised from the originally reported $1,832.1 billion to $1,805,838 million, and the March increase from February was revised from 1.8% to 1.6%....manufacturer's sales were up 0.2% from March at $532,061 million in April, and retail trade sales, which exclude restaurant & bar sales from the revised April retail sales reported earlier, rose 0.5% to $590,259 million, while wholesale sales rose 0.7% to $691,605 million..

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,345.1 billion at the end of April, up 1.2 percent (±0.1%) from March, and 16.6 percent (±0.5 percent) higher than in April a year earlier...the value of end of March inventories was revised from the $2,324.2 billion reported last month to $2,317.4 billion with this release, and is now a 2.4% increase from February...seasonally adjusted inventories of manufacturers were estimated to be valued at $786,052 million, 0.6% higher than in March, inventories of retailers were valued at $697,209 million, 0.7% more than in March, while inventories of wholesalers were estimated to be valued at $861,809 million at the end of April, up 2.2% from March.

With the release of the factory inventory data two weeks ago, we judged that the real change in April's factory inventories would have a major negative impact on the growth rate of 2nd quarter GDP, by falling after the first quarter increase; meanwhile, with the release of the wholesale inventory data last week, we felt the change in 2nd quarter real wholesale inventories was seriously negative and would subtract substantially from the growth rate of 2nd quarter GDP......since the April producer price index reported that prices for finished goods were on average 1.3% higher, that means that there was real decrease in retail inventories of around 0.6% for the month…since the key source data and assumptions (xls) for the second estimate of 1st quarter GDP indicated that 1st quarter real retail inventories had added $89 billion in 2012 dollars to the 1st quarter, the decrease so far in the 2nd quarter's real retail inventories would thus subtract that increase and also have a substantial negative impact on 2nd quarter GDP...

May's New Housing Starts Reported 14.4% Lower After April Starts Revised to 15 Year High

The May report on New Residential Construction (pdf) from the Census Bureau estimated that new housing units were being started at a seasonally adjusted annual rate of 1,549,000 in May, which was 14.4 percent (±8.9 percent) below the revised April estimated annual rate of 1,810,000 housing unit starts, and was 3.5 percent (±10.7 percent)* below last May's rate of 1,605,000 housing starts a year...the asterisk indicates that Census does not have sufficient data to determine whether housing starts actually rose or fell from a year ago, with the figure in parenthesis the most likely range of the change indicated; in other words, May’s housing starts could have just as easily been up by 7.2% or down by as much as 14.2% from those of last May, with even larger revisions to this month's data possible...in this report, the annual rate for April's housing starts was revised from the 1,724,000 estimated last month to 1,810,000, while March housing starts, which were first reported at a 1,793,000 annual rate, were revised from last month's initial revised annual figure of 1,728,000 down to 1,725,000 annually with this report....

The annual rates of housing starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 138,300 housing units were started in May, down from the 163,400 units started in April and down from the 142,600 units started in March...of those housing units started in May, an estimated 93,600 were single family homes and 42,000 were units in structures with more than 5 units, down from the revised 107.400 single family starts in April, and down from the 55,000 units started in structures with more than 5 units at the same time...

As Bill McBride has noted, we've had a rising record number of houses under construction for months now, largely because builders have been unable to complete homes, with construction delays mostly due to supply chain problems, with many builders reporting delays as long as a year or more for components to be delivered...for May, the Census Bureau estimated that new housing units were being completed at a seasonally adjusted annual rate of 1,465,000, which was s 9.1 percent (±22.6 percent)* above the revised April estimated annual rate of 1,343,000 housing unit starts, and was 9.3 percent (±19.0 percent)* above the May 2021 rate of 1,340,000 housing completions a year...up until this month’s report, housing completions had been at average annual rates of around 1,300,000 monthly, while housing starts have been at an annual rate well over 1,700,000 over the past several months…since we can’t keep starting homes and not completing them indefinitely, it was obvious something had to give…...

The monthly data on new building permits, with a smaller margin of error and hence usually smaller revisions, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in May, Census estimated new building permits were being issued for a seasonally adjusted annual rate of 1,695,000 housing units, which was 7.0 percent below the revised April permit rate of 1,823,000 units, but 0.2 percent above the rate of permit issuance in May a year earlier….the annual rate for housing permits issued in April was revised from the 1,819,000 reported a month ago to 1,823,000...quoting the report for the annualized figures on the types of permits being issued: “Single‐family authorizations in May were at a rate of 1,048,000; this is 5.5 percent below the revised April figure of 1,109,000. Authorizations of units in buildings with five units or more were at a rate of 592,000 in May.”

Again, the annualized estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed that permits for roughly 148,900 housing units were issued in May, down from the revised estimate of 156,600 new permits issued in April, and down from the 169,000 housing units permitted in March....the May figure included permits for an estimated 95,000 single family units, down from 98,200 in April, and permits for 49,300 units in structures with more than 5 units, down from 53,600 in April….for graphs and commentary on this report, see the following posts by Bill McBride at Calculated Risk: Housing Starts Decreased to 1.549 Million Annual Rate in May and May Housing Starts: All-Time Record Housing Units Under Construction which links to his in depth free newsletter article on the same subject...

 

 

(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…)  

Monday, June 13, 2022

May’s consumer prices; April’s trade deficit and wholesale sales

Major reports released during the past week included the May Consumer Price Index from the Bureau of Labor Statistics, the Commerce Dept’s report on our International Trade in Goods and Services for April, and the April report on Wholesale Trade, Sales and Inventories from the Census Bureau... this week also saw the Consumer Credit Report for April from the Fed, which showed that overall consumer credit, a measure of non-real estate personal debt, expanded by a seasonally adjusted $38.0 billion, or at a 10.1% annual rate, as non-revolving credit expanded at a 7.1% rate to $3,463.6 billion while revolving credit outstanding grew at a 19.6% rate to $1,103.2 billion...meanwhile, the major privately issued report released this week was the Mortgage Monitor for April (pdf) from Black Knight Financial Services, which indicated that 2.80% of mortgages were delinquent in April, down from the 2.84% that were delinquent in March, and down from the 4.66% delinquency rate of April 2021, and that 0.32% of mortgages remained in the foreclosure process in April, same as in March and up from the 0.29% of mortgages that were in foreclosure a year ago...the Mortgage Monitor for April is a graphics dense 23 page pdf, should you want to know more about the condition of US mortgages...

CPI Annual Increase at 40 Year High in May on Higher Prices for Food, Energy, Housing, Vehicles & Airfare

The consumer price index rose 1.0% in May, as higher prices for food, fuel, rent, utilities, airfares, health insurance, new and used cars, and clothing were only slightly offset by lower prices for TVs, appliances, and information technology commodities....the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices averaged 1.0% higher in May, after rising by 0.3% in April, by 1.2% in March, by 0.8% in February, by 0.6% in January. by 0.6% in December, by 0.7% in November, by 0.9% in October, by 0.4% in September, by 0.3% in August, by 0.5% in July, by 0.9% in June, and by 0.7% last May....the unadjusted CPI-U index, which was originally set with prices of the 1982 to 1984 period equal to 100, rose from 289.109 in April to 292.296 in May, which left it statistically 8.5815% higher than the index reading of 269.195 in May of last year, which is reported as a 8.6% year over year increase, up from the 8.3% year over year increase reported for April, and the greatest one year price increase since December 1981....with higher food and energy prices boosting the overall index increase, seasonally adjusted core prices, which exclude food and energy, were up by 0.6% for the month, as the unadjusted core price index rose from 290.846 to 292.506, which left the core index 6.0215% ahead of its year ago reading of 275.893, which is reported as a 6.0% year over year increase, down from the 6.2% year over year core price increase that was reported in April, and down from the 6.5% price increase that was reported in March, which had been the greatest year over year core price increase since August 1982...

The volatile seasonally adjusted energy price index rose 3.9% in May, after falling by 2.7% in April, rising by 11.0% in March, by 3.5% in February, by 0.9% in January, by 0.9% in December, by 2.4% in November, by 3.7% in October, by 1.2% in September, and by 1.9% in August, and hence is now 30.3% higher than in May of a year ago....the price index for energy commodities was 4.5% higher in May, while the price index for energy services was 3.0% higher, after it had risen by 1.3% in April....the energy commodity index was up 4.5% on a 4.1% increase in the price of gasoline. and a 16.9% increase in the price of fuel oil, while the price index for other energy commodities, including propane, kerosene, and firewood, was 1.5% higher...within energy services, the price index for utility gas service rose 8.0% after rising 3.1% in April and is now 30.2% higher than it was a year ago, while the electricity price index rose 1.3% in May after rising 0.7% in April.... energy commodities are now averaging 50.3% higher than their year ago levels, with gasoline prices averaging 48.7% higher than they were a year ago, while the energy services price index is up 16.2% from last May, as electricity prices are also 12.0% higher than a year ago…

Meanwhile, the seasonally adjusted food price index rose 1.2% in May, after rising by 0.9% in April, by 1.0% in March, by 1.0% in February, by 0.9% in January, by 0.5% in December, by 0.8% in November, by 0.9% in October, by 0.9% in September, by 0.4% in August, and by 0.7% last July, as the price index for food purchased for use at home was 1.4% higher in May, after rising by 1.0% in April, 1.5% in March, by 1.4% in February, by 0.4% in January, by 0.4% in December, by 0.9% in November, and by 0.9% in October, while the index for food bought to eat away from home was 0.7% higher, as average prices at fast food outlets rose 0.7%, prices at full service restaurants rose 0.8%, and food prices at employee sites and schools averaged 0.4% higher...

In the food at home categories, the price index for cereals and bakery products was 1.5% higher, even as average bread prices only rose 0.5%, as the price index for cookies rose 4.0%, the price index for rice, pasta, & cornmeal rose 2.1%, the price index for frozen and refrigerated bakery products, pies, tarts, and turnovers rose 1.7%, and the price index for fresh cakes and cupcakes rose 1.8%....in addition, the price index for the meats, poultry, fish, and eggs food group was 1.1% higher even though the price index for beef and veal fell 0.7%, as the price index for poultry rose 3.0%, the price index for fresh fish and seafood rose 2.2%, and the price index for eggs rose 5.0%....at the same time, the seasonally adjusted price index for dairy products was 2.9% higher, as milk prices rose 2.8%, the price index for cheese and related products rose 2.0%, the price index for ice cream and related products rose 4.3%. and the price index for dairy products other than cheese and ice cream rose 3.4%...meanwhile, the fruits and vegetables price index was 0.6% higher, as the price index for fresh vegetables rose 0.6%, the price index for canned fruits vegetables rose 1.9%, and the price index for frozen vegetables rose 1.8%...in addition, the beverages price index was 1.7% higher, as the price index for carbonated drinks rose 2.5%, the price index for frozen noncarbonated juices and drinks rose 1.5%, and the price index for coffee was 2.1% higher....lastly, the price index for the ‘other foods at home’ category rose 1.6%, as the price index for fats and oils rose 2.2%, the price index for snacks rose 1.7%, the price index for prepared salads rose 3.6%, and the price index for spices, seasonings, condiments, sauces was 1.6% higher....

Among the seasonally adjusted core components of the CPI, which rose by 0.6% in April, after rising by 0.6% in April, by 0.3% in March, by 0.5% in February, by 0.6% in January, by 0.6% in December, by 0.5% in November, by 0.6% in October, by 0.3% in September, by 0.2% in August, and by 0.3% last July, the composite price index of all goods less food and energy goods was 0.7% higher in May, while the more heavily weighted composite for all services less energy services rose 0.6%....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust January’s retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.1% higher despite a 2.0% drop in the price index for major appliances, as the price index for living room, kitchen, and dining room furniture rose 0.7%, the price index for floor coverings rose 2.2%, the price index for tools, hardware and supplies rose 1.1%, and the price index for housekeeping supplies rose 1.0%.....at the same time, the apparel price index was 0.7% higher on a 1.8% increase in the price index for men's shirts, a 1.5% increase in the price index for men's suits, sport coats, and outerwear, a 2.2% increase in the price index for women's dresses, a 2.0% increase in the price index for women's outerwear, a 3.2% increase in the price index for boys' and girls' footwear, and a 2.0% increase in the price index for infants' and toddlers' apparel... meanwhile, the price index for transportation commodities other than fuel was 1.4% higher, as prices for new cars were 1.1% higher, prices for used cars and trucks were 1.8% higher, tire prices were 1.1% higher, the price index for parts and equipment other than tires rose 2.6% and the price index for motor oil, coolant, and fluids rose 1.3%....at the same time, the price index for medical care commodities was 0.3% higher, as nonprescription drug prices rose 0.9% and the price index for medical equipment and supplies was 2.0% higher....in addition, the recreational commodities index was 0.1% higher despite a 3.0% decrease in TV prices, on a 0.4% increase in the price index for other video equipment, a 2.7% increase in the price index for photographic equipment and supplies, a 1.6% increase in the price index for pet food, and a 1.6% increase in the price index for sewing machines, fabric and supplies...however, the education and communication commodities index was 1.7% lower on a 5.0% decrease in the price index for smartphones, a 1.4% decrease in the price index for computers, peripherals, and smart home assistants, and a 3.2% decrease in the price index for telephone hardware, calculators, and other consumer information items….lastly, a separate price index for alcoholic beverages was 0.5% higher, while the price index for ‘other goods’ was 0.8% higher on a 0.9% increase in the price index for tobacco and smoking products, and a 2.4% increase in the price index for miscellaneous personal goods....

Within core services, the price index for shelter was 0.6% higher as rents rose 0.6% and homeowner's equivalent rent was also 0.6% higher, and prices for lodging away from home at hotels and motels rose 0.9%, while at the same time the shelter sub-index for water, sewers and trash collection was 0.3% higher, and the price index for moving, storage, freight expense was 2.4% higher....meanwhile, the price index for medical care services was 0.4% higher, as the price index for hospital and related services was 0.4% higher, the price index for dental care rose 0.6%, and price index for health insurance rose 2.0%....at the same time, the transportation services price index was 1.3% higher, as the price index for airline fares rose 12.6% after rising 18.6% in April, while the price index for motor vehicle body work rose 1.0%, and the price index for car and truck rental rose 1.7%....in addition, the recreation services price index rose 0.5%, as the price index for cable and satellite television service rose 1.3%, the price index for video discs and other media, including rental of video rose 2.3%, the price index for video discs and other media rose 6.5%, and the price index for pet services rose 0.5%....meanwhile, the index for education and communication services was 0.2% higher as the price index for elementary and high school tuition and fees rose 1.2%, the price index for internet services and electronic information providers rose 0.5%, and the price index for delivery services rose 2.6%...lastly, the index for other personal services was 0.1% higher, as the price index for legal services rose 1.0%, and the price index for haircuts and other personal care services was 0.5% higher..

April Trade Deficit Decreased by a record 19.1%, Led by Lower Imports of Consumer Goods and Industrial Supplies and Materials

Our trade deficit was 19.1% lower in April, as our exports increased while our imports decreased....the Commerce Dept report on our international trade in goods and services for April, incorporating an annual revision, indicated that our seasonally adjusted goods and services trade deficit fell by a record $20.6 billion to $87.1 billion in April, from a March deficit that was revised from the originally reported $109.8 billion to $107.7 billion, a revision which should result in an upward revision of about 0.14 percentage points to 1st quarter GDP when the third estimate is released at the end of June...however, since this month’s report also reflects revised statistics on trade in goods on both a Census basis and a balance of payments (BOP) basis going back to 2017, and revised statistics on trade in services beginning with 2015, the 4th quarter basis for the 1st quarter's growth in trade will also need to be revised to determine the ultimate impact on 1st quarter GDP, and the BEA will not make that revision until the annual revision to GDP is released at the end of July...

In rounded figures, the value of our April exports rose by $8.5 billion, or 3.5%, to $252.6 billion, on a $6.1 billion increase to $176.1 billion in our exports of goods and a $2.4 billion increase to $76.5 billion in our exports of services, while our imports fell by $12.1 billion, or 3.4% to $339.7 billion on a $13.0 billion decrease to $283.8 billion in our imports of goods, which was partly offset a $0.9 billion increase to $55.9 billion in our imports of services...export prices averaged 0.6% higher in April, which means the relative real increase in exports for the month was less than the nominal increase by that percentage, while import prices were unchanged, which suggests the decrease in real imports was close to the nominal dollar decrease for the month....

The increase in our April exports of goods came about largely as a result of higher exports of industrial supplies and materials, soybeans, and capital goods...referencing the Full Release and Tables for April(pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $2,302 million to $69,585 million on a $885 million increase in our exports of natural gas, a $667 million increase in our exports of petroleum products other than fuel oil, a $360 million increase in our exports of coal and other fuels, a $352 million increase in our exports of fuel oil, and a $351 million increase in our exports of metallurgical grade coal, which were partly offset by a $369 million decrease in our exports of natural gas liquids and a $701 million decrease in our exports of precious metals other than gold, while our exports of foods, feeds and beverages rose by $2,185 million to $17,513 million on a $2,111 million increase in our exports of soybeans...in addition, our exports of capital goods rose by $1,238 million to $47,481 million on a $1,273 million increase in our exports of civilian aircraft, our exports of consumer goods rose by $401 million to $20,715 million on a $574 million increase in our exports of artwork and other collectibles, a $405 million increase in our exports of jewelry and a $309 million increase in our exports of gem diamonds, which were partly offset by a $869 million decrease in our exports of pharmaceutical preparations, and that our exports of automotive vehicles, parts, and engines rose by $92 million to $13,024 million...slightly offsetting the increases in those export categories, our exports of other goods not categorized by end use fell by $221 million to $6,266 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports of goods and indicates that lower imports of consumer goods, industrial supplies and materials, and capital goods were largely responsible for the April decrease in our imports, while those decreases were partly offset by an increase in our imports of automotive goods...our imports of consumer goods fell by $6,331 million to $76,393 million on a a $1,344 million decrease in our imports of apparel and textiles other than those of wool or cotton, a $1,102 million decrease in our imports of toys, games, and sporting goods, a $958 million decrease in our imports of pharmaceutical preparations, a $625 million decrease in our imports of furniture and related household goods, a $595 million decrease in our imports of household appliances, a $473 million decrease in our imports of footwear, and a $323 million decrease in our imports of cookware, cutlery, and kitchen tools, while our imports of industrial supplies and materials fell by $5,337 million to $70,690 million on a $5,609 million decrease in our imports of finished metal shapes, a $712 million decrease in our imports of nonmonetary gold, and a $669 million decrease in our imports of inorganic chemicals not itemized separately, which were partly offset by a $788 million increase in our imports of crude oil, a $732 million increase in our imports of organic chemicals, and a $402 million increase in our imports of natural gas....at the same time, our imports of capital goods fell by $2,581 million to $71,682 million on a $1,932 million decrease in our imports of computers, a $573 million decrease in our imports of computer accessories, and a $544 million decrease in our imports of drilling & oilfield equipment, partly offset by a $321 million increase in our imports of semiconductors, and our imports of other goods not categorized by end use fell by $539 million to $10,508 million....partly offsetting the decreases in those end use categories, our imports of automotive vehicles, parts and engines rose by $1,375 million to $33,727 million on a $1,174 million increase in our imports of trucks, buses, and special purpose vehicles, and our imports of foods, feeds, and beverages rose by $473 million to $14,546 million on increased imports in several food categories...

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

The April figures show surpluses, in billions of dollars, with South and Central America ($7.7), Netherlands ($3.0), Brazil ($2.4), Hong Kong ($2.2), Australia ($1.4), United Kingdom ($1.0), Belgium ($0.6), and Singapore ($0.6). Deficits were recorded, in billions of dollars, with China ($34.9), European Union ($17.0), Mexico ($11.5), Vietnam ($11.1), Canada ($8.7), Ireland ($6.0), Japan ($5.6), Germany ($5.2), South Korea ($3.9), Taiwan ($3.9), India ($3.8), Italy ($3.3), Malaysia ($3.1), Switzerland ($2.9), France ($1.7), Saudi Arabia ($0.9), and Israel ($0.6).

  • The deficit with China decreased $8.5 billion to $34.9 billion in April. Exports decreased $1.6 billion to $12.0 billion and imports decreased $10.1 billion to $46.9 billion.
  • The deficit with Switzerland decreased $4.7 billion to $2.9 billion in April. Exports increased $0.7 billion to $2.2 billion and imports decreased $4.1 billion to $5.1 billion.
  • The deficit with Mexico increased $1.7 billion to $11.5 billion in April. Exports increased $0.3 billion to $27.8 billion and imports increased $2.0 billion to $39.3 billion.

To gauge the impact of April’s trade on 2nd quarter growth, we use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted for inflation in chained 2012 dollars, the same inflation adjustment that’s used by the BEA to compute trade figures for GDP, with the only difference being that they are not annualized in the table here...from that table, we can figure that 1st quarter real exports of goods averaged 148,629.7 million monthly in 2012 dollars, while April’s inflation adjusted exports were at 155,006 million in that same 2012 dollar quantity index representation... figuring the annualized change between those two figures, we find that April's real exports of goods were rising at a 18.30% annual rate from those of the 1st quarter, or at a pace that would add about 1.28 percentage points to 2nd quarter GDP if it were continued through May and June.....from that same table, we can figure that our 1st quarter real imports averaged 270,993.7 million monthly in chained 2012 dollars, while inflation adjusted April imports were at 271,207 million in that same 2012 dollar representation...that would indicate that so far in the 2nd quarter, our real imports have increased at a 0.32% annual rate from those of the 1st quarter...since imports are subtracted from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 0.32% rate would subtract about 0.03 percentage points from 2nd quarter GDP....hence, if the April trade deficit is maintained at the same level throughout the 2nd quarter, our improving balance of trade in goods would add about 1.25 percentage points to the growth of 2nd quarter GDP....however, note that we have not estimated the impact of the change in services here, largely because the Census does not provide handy inflation adjusted data on those, but that with our nominal exports of services up by $2.4 billion while our nominal imports of services were up by $0.9 billion in April, we can figure that the change in our balance of trade in services would also likely have a positive impact on 2nd quarter GDP...

April Wholesale Sales Up 0.7%, Wholesale Inventories Up 2.2%

The April report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $691.6 billion, up 0.7 percent (±0.4 percent) from the revised March sales level, and up 20.9 percent (±1.1 percent) from wholesale sales of April 2021... the March preliminary sales estimate was revised from the $686.2 billion reported last month to $687.1 billion, which meant the February to March percent change was revised from the preliminary estimate of an increase of 1.7 percent (±0.5 percent) to an increase of 1.8 percent (±0.5 percent)....as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, since any goods on the shelf or in intermediate storage represent goods that were produced but not sold, and this April report estimated that wholesale inventories were valued at a seasonally adjusted $861.8 billion at month end, an increase of 2.2 percent (±0.2 percent) from the revised March level and 24.0 percent (±1.4 percent) higher than in April a year ago, with the March preliminary estimate revised from the $840.3 billion reported a month ago to $843.6 billion at the same time, now up 2.7% from February....

That $3.3 billion upward revision to March's wholesale inventories should increase 1st quarter GDP by about 0.08 percentage points from what was reported in the 2nd estimate....meanwhile, April wholesale inventories, after an adjustment for price changes for each category of wholesale goods as indicated by the components of the April producer price index, appears to indicate a real wholesale inventory increase of between 0.0% and 0.5% at the beginning of the 2nd quarter, compared to a 1st quarter's real wholesale inventory increase that was more half the magnitude of the 1st quarter's real inventory increase as indicated by the key source data and assumptions (xls) for the second estimate of 1st quarter GDP....if that small April real inventory increase holds through May & June, the change in 2nd quarter real wholesale inventories would be seriously negative and subtract substantially from the growth rate of 2nd 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…)  

Monday, June 6, 2022

May's jobs report, April's JOLTS, construction spending, & factory inventories, et al

There were two major employment reports released this past week: Employment Situation Summary for May andthe Job Openings and Labor Turnover Survey (JOLTS) for April, both from the Bureau of Labor Statistics; other major monthly government agency issued reports released during the week included the April report on Construction Spending (pdf) and the Full Report on Manufacturers' Shipments, Inventories and Orders for April, both from the Census Bureau...in addition, this week also saw the last regional Fed manufacturing survey for May; the Dallas Fed Texas Manufacturing Outlook Survey, covering Texas, western Louisiana and eastern New Mexico, reported their general business activity composite index fell to -7.3 in May from +1.1 in April and from +8.7 in March, indicating that a modest plurality of Texas businesses reported a slowdown during the month..

Privately issued reports released this week included the ADP Employment Report for May and the light vehicle sales report for May from Wards Automotive, which estimated that vehicles sold at a 12.68 million annual rate in May, down from the 14.29 million annual rate of sales in April, and down from the 16.99 million annual sales rate of May a year ago, and the March Case-Shiller Home Price Index from S&P Case-Shiller, an index which represents the relative average of January, February & March home sales prices compared to home sales prices of previous 3 month periods; the Case Shiller index indicated that home prices nationally for those 3 months averaged a record 20.6% higher than prices for the same homes that sold during the same 3 month period a year earlier, up from the revised 20.0% year over year increase now indicated for the February index.....

In addition, this week saw the release of both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the May Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) rose to 56.1% in May, up from 55.4% in April, which suggests a modest expansion among manufacturing activity nationally, and the May Services Report On Business; which saw the ISM Services index fall to 55.9%, down from 57.1% percent in April, indicating a smaller plurality of service industry purchasing managers reported expansion in various facets of their business in May...both of those ISM reports are easy to read and include anecdotal comments from purchasing managers from the 34 business types who participate in those surveys nationally.

Employers Add 390,000 Jobs in May; Unemployment Rate Remains at 3.6%

The Employment Situation Summary for May indicated an increase in payroll jobs that was a bit above expectations, but in line with that of recent months, and that the labor force participation rate increased while the unemployment rate remained unchanged…seasonally adjusted estimates extrapolated from the establishment survey data projected that employers added 390,000 jobs in May, after the previously estimated payroll job increase for March was revised down from 428,000 to 398,000, while the payroll jobs increase for April was revised up from 428,000 to 436,000 jobs…with those revisions, that means that this report indicates an increase of 368,000 more jobs than were reported last month, but also means that seasonally adjusted non-farm payrolls are still 822,000 below the record 152,504,000 jobs reported for February of 2020, before the first pandemic related layoffs kicked in...the unadjusted data shows that there were actually 809,000 more payroll jobs extant in May than in April, as typical seasonal job increases in sectors such as construction, services to buildings and dwellings, and leisure and hospitality were reduced to what is considered a normal level by the seasonal adjustment algorithm…

Seasonally adjusted job increases in May were spread through the private goods and services sectors and government, with the notable exception of retail trade, which lost 60,700 on a seasonally adjusted basis, led by a loss of 32,700 jobs in general merchandise stores and 8,800 jobs in clothing stores....since the BLS summary of the job gains by sector is clear and more detailed than our usual synopsis, we'll just quote from that summary here:

  • Employment in leisure and hospitality increased by 84,000 in May, as job growth continued in food services and drinking places (+46,000) and accommodation (+21,000). Employment in leisure and hospitality is down by 1.3 million, or 7.9 percent, compared with February 2020.
  • Employment in professional and business services rose by 75,000 in May. Within the industry, job gains occurred in accounting and bookkeeping services (+16,000), computer systems design and related services (+13,000), and scientific research and development services (+6,000). Employment in professional and business services is 821,000 higher than in February 2020.
  • In May, transportation and warehousing added 47,000 jobs. Employment rose in warehousing and storage (+18,000), truck transportation (+13,000), and air transportation (+6,000). Employment in transportation and warehousing is 709,000 above its February 2020 level.
  • Employment in construction increased by 36,000 in May, following no change in April. In May, job gains occurred in specialty trade contractors (+17,000) and heavy and civil engineering construction (+11,000). Construction employment is 40,000 higher than in February 2020.
  • In May, employment increased by 36,000 in state government education and by 33,000 in private education. Employment changed little in local government education (+14,000). Compared with February 2020, employment in state government education is up by 27,000, while employment in private education has essentially recovered. Employment in local government education is down by 308,000, or 3.8 percent, compared with February 2020.
  • Employment in health care rose by 28,000 in May, including a gain in hospitals (+16,000). Employment in health care overall is 223,000, or 1.3 percent, lower than in February 2020.
  • Manufacturing employment continued to trend up in May (+18,000). Job gains occurred in fabricated metal products (+7,000), wood products (+4,000), and electronic instruments (+3,000). Employment in manufacturing overall is slightly below (-17,000 or -0.1 percent) its February 2020 level.
  • Wholesale trade added 14,000 jobs in May, including gains in durable goods (+10,000) and electronic markets and agents and brokers (+6,000). Employment in wholesale trade is down by 41,000, or 0.7 percent, compared with February 2020. Mining employment increased by 6,000 in May and is 80,000 higher than a recent low in February 2021.
  • Employment in retail trade declined by 61,000 in May but is 159,000 above its February 2020 level. Over the month, job losses occurred in general merchandise stores (-33,000), clothing and clothing accessories stores (-9,000), food and beverage stores (-8,000), building material and garden supply stores (-7,000), and health and personal care stores (-5,000).
  • In May, employment showed little change in other major industries, including information, financial activities, and other services.

The establishment survey also showed that average hourly pay for all employees rose by 10 cents an hour to $31.95 an hour in May, after it had increased by 10 cents an hour in April; at the same time, the average hourly earnings of production and non-supervisory employees increased by 15 cents to $27.33 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.6 hours in May, while hours for production and non-supervisory personnel remained at 34.1 hours...however, the manufacturing workweek fell by 0.1 hour to 40.4 hours, and average factory overtime fell by 0.1 hour to 3.2 hours...

Meanwhile, the seasonally adjusted extrapolation from the May household survey estimated indicated that the number of those who were employed rose by an estimated 321,000 to 158,426,000, while the similarly estimated number of those who were unemployed rose by 9,000 to 5,950,000; which thus meant there was an increase of 330,000 in the total labor force...since the working age population had grown by 120,000 over the same period, that meant the number of employment aged individuals who were not in the labor force fell by a rounded 221,000 to 99,302,000....meanwhile, the increase of those in the labor force as a percentage of the increasing working age population was enough to raise the labor force participation rate from 62.2% to 62.3%...likewise, increase in number employed vis a vis the increasing population was enough to raise the employment to population ratio, which we could think of as an employment rate, from 60.0% to 60.1%...however, the small increase in those counted as unemployed vis a vis the total labor force wasn't enough to budge the unemployment rate, which remained at 3.6%...on the other hand, the number who reported they were involuntarily working part time jumped by 295,000 to 4,328,000 in May, which meant the the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", rose by 0.1%, from 7.0% in April to 7.1% in May...

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..

Job Openings and Hiring Lower in April, Record Low Layoff Rate; Job Quitting Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for April from the Bureau of Labor Statistics estimated that seasonally adjusted job openings fell by 455,000, from 11,855,000 in March to 11,400,000 job openings in April, after March's record job openings were revised 306,000 higher, from the originally reported 11,549,000 to a record 11,855,000...April’s jobs openings were still up by 23.0% from the 9,265,000 job openings reported for April a year ago, as the job opening ratio expressed as a percentage of the employed fell from 7.3% in March to 7.0% in April, while it was up from 6.0% a year ago...the greatest percentage decrease in April job openings was in the retail trade sector, where openings fell by 162,000 to 1,101,000, while job openings in manufacturing rose by 119,000 to 996,000... (details on job openings by industry and region can be viewed in Table 1)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked to at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in April, seasonally adjusted new hires totaled 6,586,000, down by 69,000 from the revised 6,645,000 who were hired or rehired in March, as the hiring rate as a percentage of all those employed remained at 4.4%, but was up from the 4.2% hiring rate of April a year earlier (details of hiring by industry since December are in table 2)....meanwhile, total separations were also lower, falling by 215,000, from 6,248,000 in March to 6,033,000 in April, as the separations rate as a percentage of the employed fell from 4.1% in March to 4.0% in April, which was the same as the separations in April a year ago (see table 3)...subtracting the 6,033,000 total separations from the total hires of 6,586,000 would imply an increase of 553,000 jobs in April, quite a few more than the revised payroll job increase of 436,000 for April reported by the May establishment survey above, and just outside of the expected +/-110,000 margin of error in these incomplete extrapolations...

Breaking down the seasonally adjusted job separations, the BLS found that 4,424,000 of us voluntarily quit our jobs in April, down by 25,000 from the revised 4,449,000 who quit their jobs in March, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.9% in April, which was up from the quits rate of 2.8% a year earlier (see details in table 4)....in addition to those who quit, a record low1,246,000 were either laid off, fired or otherwise discharged in April, down by 170,000 from the revised 1,416,000 who were discharged in March, as the discharges rate fell from 0.9% to a record low of 0.8% of all those who were employed during the month, which was down from the 1.0% rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 363,000 in April, down from 384,000 in March, for an 'other separations' rate of 0.2%, down from 0.3% in March but the same rate as in April a year ago....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and layoffs..

Construction Spending Up 0.2% on Higher Prices in April, after March Spending was Revised 0.6% Higher

The Census Bureau's report on construction spending for April (pdf) estimated that the month's seasonally adjusted construction spending was at a $1,744.8 billion annual rate during the month, up 0.2 percent (±0.8 percent)* from the revised March annual spending rate of $1,740.6 billion, and 12.3 percent (±1.3 percent) above the estimated annualized level of construction spending in April of last year...the annualized March construction spending estimate was revised 0.5% higher, from $1,730.5 billion to $1,740.6 billion, while the annual rate of construction spending for February was revised 0.4% higher, from $1,728.6 billion to $1,736.. billion...taken together, those $17.7 upward revisions would suggest an upward revision of $5.9 billion to first quarter construction spending on a annualized basis, which would in turn add around 0.10 percentage points to 1st quarter GDP when the third estimate is released at the end of June...

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,394.7 billion, 0.5 percent (±0.7 percent)* above the revised March estimate of $1,387.9 billion. Residential construction was at a seasonally adjusted annual rate of $891.5 billion in April, 0.9 percent (±1.3 percent)* above the revised March estimate of $883.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $503.2 billion in April, 0.2 percent (±0.7 percent)* below the revised March estimate of $504.4 billion.
  • Public Construction In April, the estimated seasonally adjusted annual rate of public construction spending was $350.1 billion, 0.7 percent (±1.6 percent)* below the revised March estimate of $352.7 billion. Educational construction was at a seasonally adjusted annual rate of $79.6 billion, 0.7 percent (±2.1 percent)* below the revised March estimate of $80.1 billion. Highway construction was at a seasonally adjusted annual rate of $103.4 billion, 0.1 percent (±5.3 percent)* below the revised March estimate of $103.5 billion.

This construction spending report is used as source data for 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and as government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of April's construction spending reported in this release on 2nd quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...there are many different price indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf) that are used by the BEA to make those inflation adjustments, so in lieu of trying to adjust for price changes for all of those types of construction separately the way the BEA will do, 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 estimate...that index showed that aggregate construction costs were up 4.0% from March to April, up 0.6% from February to March and up 0.5% from January to February....

On that basis, we can estimate that April construction costs were roughly 4.6% greater than those of February and at least 5.1% greater than those of January, and obviously 4.0% greater than those of March....we then use those percentage differences to inflate spending for each of those three months, which is arithmetically the same as deflating April construction spending against the first quarter, for comparison purposes....annualized construction spending in millions of dollars for the first quarter months is given as 1,740,614 for March, 1,736,213 for February, and 1,719,129 for January....thus to compare April's annualized construction spending of $1,744,801 million to our 'inflation adjusted' figures of the first quarter, our calculation is: 1,744,801 / (( 1,740,614 * 1.040 + 1,736,213 * 1.046 + 1,719,129 * 1.051) / 3) = 0.9634, meaning real construction spending in April was down roughly 3.66% vis a vis the 1st quarter, or down at a 13.85% annual rate....to estimate the potential effect of that change on 2nd quarter GDP, we take the annualized difference between the first quarter average inflation adjusted construction spending and April's spending as a fraction of the annualized 1st quarter GDP figure, and from that estimate that real April construction spending was falling at a rate that would subtract about 0.59 percentage points from the growth rate of 2nd quarter GDP, in the unlikely event that May and June's inflation adjusted construction is little changed from that of April…

Factory Shipments Rose 0.2% in April, Factory Inventories Rose 0.6%, Both on Higher Prices

The April Full Report on Manufacturers’ Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods increased by $1.8 billion or 0.3 percent to $533.2 billion in April, the eleventh increase in twelve months, following an increase of 1.4% to $531.4 billion in March, which was revised from the 2.2% increase to $557.3 billion reported for March last month....note that other than the usual monthly revisions to the underlying data, this month's report also reflects the May 13th re-benchmarking of shipments and inventories data to the 2020 and 2019 Annual Survey of Manufactures data, revised back to January 2012, and then the adjusting of the new orders data to be consistent with the re-benchmarked benchmarked shipments and unfilled orders data...

However, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", and uses non-durables shipments data in its place instead, we believe that this month's "new orders" and "unfilled orders" sections of this report are really only useful as a revised update to the April advance report on durable goods we reported on last week... for those durable goods orders revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in April, up eleven of the last twelve months, increased $1.8 billion or 0.3 percent to $533.2 billion, the U.S. Census Bureau reported today. This followed a 1.8 percent March increase. Shipments, up twenty-three of the last twenty-four months, increased $0.9 billion or 0.2 percent to $532.1 billion. This followed a 2.2 percent March increase. Unfilled orders, up twenty consecutive months, increased $6.0 billion or 0.5 percent to $1,106.8 billion. This followed a 0.5 percent March increase. The unfilled orders-to-shipments ratio was 6.07, up from 6.06 in March. Inventories, up twenty of the last twenty-one months, increased $4.4 billion or 0.6 percent to $786.1 billion. This followed a 1.4 percent March increase. The inventories-to-shipments ratio was 1.48, up from 1.47 in March.
  • New orders for manufactured durable goods in April, up six of the last seven months, increased $1.3 billion or 0.5 percent to $265.5 billion, up from the previously published 0.4 percent increase. This followed a 0.7 percent March increase. Transportation equipment, up following two consecutive monthly decreases, led the increase, $0.6 billion or 0.7 percent to $86.8 billion. New orders for manufactured nondurable goods increased $0.5 billion or 0.2 percent to $267.7 billion.
  • Shipments of manufactured durable goods in April, up eleven of the last twelve months, increased $0.4 billion or 0.1 percent to $264.4 billion, unchanged from the previously published increase. This followed a 1.4 percent March increase. Primary metals, up four of the last five months, led the increase, $0.2 billion or 1.0 percent to $20.9 billion. Shipments of manufactured nondurable goods, up twenty-three of the last twenty-four months, increased $0.5 billion or 0.2 percent to $267.7 billion. This followed a 2.9 percent March increase. Food products, up eight of the last nine months, drove the increase, $0.8 billion or 1.0 percent to $76.1 billion.
  • Unfilled orders for manufactured durable goods in April, up twenty consecutive months, increased $6.0 billion or 0.5 percent to $1,106.8 billion, unchanged from the previously published increase. This followed a 0.5 percent March increase. Transportation equipment, up fourteen of the last fifteen months, led the increase, $4.3 billion or 0.7 percent to $637.3 billion.
  • Inventories of manufactured durable goods in April, up fifteen consecutive months, increased $3.9 billion or 0.8 percent to $479.7 billion, unchanged from the previously published increase. This followed a 0.9 percent March increase. Transportation equipment, up five of the last six months, led the increase, $1.1 billion or 0.7 percent to $156.9 billion. Inventories of manufactured nondurable goods, up eighteen of the last nineteen months, increased $0.4 billion or 0.1 percent to $306.4 billion. This followed a 2.1 percent March increase. Chemical products, up twelve of the last thirteen months, drove the increase, $0.5 billion or 0.5 percent to $102.8 billion..

To estimate the effect of those April factory inventories on 2nd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the total value of finished goods inventories rose 0.4% to $275,311 million; the value of work in process inventories inched up by 0.1% to $223,620 million, and the value of materials and supplies inventories rose 1.1% to $287,121 million...the April producer price index reported that prices for finished good were on average 1.3% higher, that prices for intermediate processed goods were on average 2.2% higher, and that prices for unprocessed goods were 5.3% higher....assuming similar valuations for like types of inventories, those prices would suggest that April's real finished goods inventories were about 0.9% smaller than those of March, that real inventories of intermediate processed goods were roughly 2.1% smaller, and that real raw material inventory inventories were about 4.2% smaller...since real NIPA factory inventories were slightly greater in the 1st quarter, and this report seems to indicate a large decrease in April’s real inventories, it appears that the real change in April factory inventories could have a major negative impact on the growth rate of 2nd 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…)  

Monday, May 30, 2022

1st quarter GDP revision; April’s personal income and outlays, durable goods, and new home sales

The key economic releases of the past week were the second estimate of 1st quarter GDP from the Bureau of Economic Analysis and the April report on Personal Income and Spending, also from the BEA, a report which provides 23% of 2nd quarter GDP....other reports that were released this week included theApril advance report on durable goods and the April report on new home sales, both from the Census bureau, and the Chicago Fed National Activity Index (CFNAI) for April, a weighted composite index of 85 different economic metrics, which rose to +0.47 in April, up from +0.36 in March, in an index where any positive reading indicates economic activity has been above the historical trend ...despite the April increase, the widely watched 3 month average of the CFNAI ticked down to +0.48 in April from +0.49 in March, which still indicates that national economic activity has been above the historical average over the most recent months...

In addition to that index, two more regional Fed manufacturing surveys for May were also released this week: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported that its broadest composite index fell to -9 in May from +14 in April, indicating that a plurality of Fifth District manufacturing firms reported declines in activity in May,; while the Kansas City Fed manufacturing survey for May, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, reported its broadest composite index fell to +23 in May, down from +25 in April, and +37 in March, indicating a smaller but still substantial majority of the region's manufacturing firms reported an increase in their activity this month than in March or April...

1st Quarter GDP Revised to Show Our Economy Shrunk at a 1.5% Rate

The Second Estimate of our 1st Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services shrunk at a 1.5% annual rate in the 1st quarter, revised from the 1.4% contraction rate reported in the advance estimate last month, as growth of inventories and of fixed investment were revised lower, more than offsetting an upward revision to the quarter's growth of personal consumption expenditures....in current dollars, our first quarter GDP grew at a 6.51% annual rate, increasing from what would work out to be a $24,002.8 billion a year output rate in the 4th quarter of last year to a $24,384.3 billion annual rate in the 1st quarter of this year, with the headline 1.5% annualized rate of decrease in real output arrived at after an annualized inflation adjustment averaging inflation adjustment averaging 8.1%, aka the GDP deflator, was computed from the price changes of the GDP components and applied to their current dollar change...since that inflation adjustment was revised from the 8.0% adjustment indicated in the advance estimate, it thus accounts for the revision to GDP by itself...

As we review this month's revisions, remember that this 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 Full Release & Tables for the second estimate of 1st quarter GDP, which is linked to on the BEA's main GDP page...specifically, we’ll be citing data from table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 2nd quarter of 2018; table 2, which shows the contribution of each of the components to the GDP figures for those months and years; table 3, which shows both the current dollar value and the inflation adjusted value in 2012 dollars of each of those components; and table 4, which shows the change in the price indexes for each of the GDP components...the full pdf for the 1st quarter advance estimate, which this estimate revises, is here....

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 2.7% growth rate reported last month to indicate real PCE growth a 3.1% rate with this estimate…that growth figure was arrived at by deflating the 10.3% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation grew at a 7.0% annual rate in the 1st quarter, which was unrevised from the PCE inflation rate published a month ago....real consumption of durable goods grew at a 6.8% annual rate, which was revised from the 4.1% growth rate shown in the advance report, and added 0.57 percentage points to GDP, as growth in real consumption of motor vehicles and parts at a 16.5% rate accounted for more than 60% of the quarter's growth in durable goods....on the other hand, real consumption of nondurable goods by individuals shrunk at a 3.7% annual rate, revised from the 2.5% decrease rate reported in the 1st estimate, and subtracted 0.57 percentage points from 1st quarter economic growth, as lower real consumption of gasoline and other energy goods accounted for more than half of the quarter's nondurable goods pullback….meanwhile, consumption of services rose at a 4.8% annual rate, revised from the 4.3% growth rate reported last month, and added 2.09 percentage points to the final GDP tally, as growth of the output of nonprofit institutions serving households accounted for more than 20% of the quarter's growth in services....

At the same time, seasonally adjusted real gross private domestic investment grew at a 0.5% annual rate in the 1st quarter, revised from the 2.2% growth rate estimate reported last month, as real private fixed investment grew at a 6.8% rate, rather than at the 7.3% rate reported in the advance estimate, while inventory growth was also somewhat less than had been previously estimated....real investment in non-residential structures was revised from shrinking at a 0.9% rate to shrinking at a 3.6% rate, while real investment in equipment was revised to show it grew at a 13.2% rate, revised from the 15.3% growth rate previously reported...at the same time, the quarter's investment in intellectual property products was revised from real growth at a 8.1% rate to real growth at a 11.6% rate, while growth in real residential investment was revised from a 2.1% annual rate down to growth at a 0.4% rate…after those revisions, the contraction in investment in non-residential structures subtracted 0.09 percentage points from the increase in 1st quarter GDP, while the increase in investment in equipment added 0.68 percentage points to the quarter's growth, the increase in investment in intellectual property added 0.57 percentage points, and the increase in residential investment added 0.02 percentage points to the 1st quarter's growth rate..

Meanwhile, the quarter's growth of real private inventories was revised from the originally reported $158.7 billion in inflation adjusted dollars to show inventories grew at an inflation adjusted $149.6 billion rate...this came after inventories had grown at an inflation adjusted $193.2 billion in the 4th quarter, and hence the $43.6 billion negative change in real inventories from those of the 4th quarter subtracted 1.09 percentage points from the 1st quarter's growth rate, revised from the 0.84 percentage point subtraction due to lower inventory growth shown in the advance estimate....however, since growth in inventories indicates that more of the goods produced during the quarter would have been left in storage or "sitting on the shelf”, the $43.65 billion reduction in their growth conversely means real final sales of GDP were actually greater by that amount, and therefore the BEA found that real final sales of GDP only fell at a 0.4% rate in the 1st quarter, revised from the 0.6% rate of decrease in real final sales shown in the advance estimate...

The previously reported decrease in real exports was revised lower with this estimate, but the previously reported increase in real imports was revised higher by more, and as a result our net trade was a bit larger subtraction from GDP than was previously reported...our real exports of goods and services shrunk at a 5.4% rate in the 1st quarter, revised from the 5.9% contraction shown in first estimate, and since exports are an addition to GDP because they are that part of our production that was not consumed or added to investment in our country, their decrease conversely subtracted 0.62 percentage points from the 1st quarter's growth rate, less than the 0.68 percentage point export subtraction due to lower exports shown last month...on the other hand, the previously reported 17.7% increase in our real imports was revised to a 18.3% increase, and since imports subtract from GDP because they represent either consumption or investment that is added to GDP with those figures but was not produced in the US, their increase subtracted 2.61 percentage points from 1st quarter GDP, revised from the 2.53 percentage point subtraction shown a month ago....thus, the deteriorating trade balance that has accompanied the increase in consumer spending subtracted a rounded 3.23 percentage points from 1st quarter GDP, up from the 3.20 percentage point subtraction resulting from a worsening foreign trade balance that was indicated by the advance estimate..

Finally, there was also a tiny net upward revision to real government consumption and investment in this 2nd estimate, as the entire government sector is still shown to be shrinking at a 2.7% rate, the same contraction rate for government indicated by the 1st estimate....real federal government consumption and investment was seen to have shrunk at a 6.1% rate from that of the 4th quarter in this estimate, which was revised from the 5.9% contraction rate shown in the 1st estimate, as real federal outlays for defense shrunk at a 8.5% rate, same as was previously reported, and subtracted 0.33 percentage points from 1st quarter GDP, while real non-defense federal consumption and investment shrunk at a 2.6% rate, revised from the 2.2 rate previously reported, and subtracted 0.07 percentage points from GDP....meanwhile, real state and local consumption and investment shrunk at a 0.6% rate in the quarter, revised from the 0.8% contraction shown in the 1st estimate, and subtracted 0.07 percentage points from 1st quarter GDP, which was revised from the 0.08 percentage points subtraction shown in the advance estimate...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, thereby indicating an increase in the output of those goods or services...

April Personal Income Up 0.4%, Personal Spending Up 0.9%, PCE Prices Up 0.2%, Savings Rate at a 13 Year Low

Friday's release of the April report on Personal Income and Outlays from the Bureau of Economic Analysis included the month's data for our personal consumption expenditures (PCE), which accounts almost 70% of the month's GDP, and with it 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...in addition, this release reported our NATIONAL personal income totals, 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 reporting seasonally adjusted amounts expressed at an annual rate, ie, they tell us how much income and spending would change over a year if April's change in seasonally adjusted income and spending were extrapolated over an entire year.....

Hence, when the opening line of the news release for this report tell us "Personal income increased $89.3 billion (0.4 percent) in April", that means that the annualized figure for seasonally adjusted national personal income in April, $21,469.8 billion, was $89.3 trillion, or 0.4% more than the annualized personal income figure of $21,380.4 billion extrapolated for March; the actual, unadjusted change in personal income from March to April is not given...at the same time, annualized disposable personal income, which is income after taxes, rose by less than 0.3%, from an annual rate of $18,332.4 billion in March to an annual rate of $18,380.7 billion in April....the reasons for the annualized $89.3 trillion increase in personal income can be viewed in the Full Release & Tables (PDF) for this release, also as annualized amounts, and primarily reflected a $66.8 billion annual rate of increase in income from wages and salaries and an $22.9 billion annualized increase in interest and dividend income…...

For the April personal consumption expenditures (PCE) that will be included in 2nd quarter GDP, BEA reports that they rose at a $152.3 billion annual rate, or by almost 0.9%, as the annual rate of national PCE increased from $16,907.0 billion in March to $17,059.3 in April....March PCE was revised from $16,862.7 billion annually to $16,907.0 billion, while February PCE was revised from $16,677.7 billion annually to $16,676.7 billion, revisions that were already included in this week’s GDP report....total personal outlays for April, which includes interest payments and personal transfer payments in addition to PCE, rose by an annualized $155.3 billion to $17,565.5 billion annually, which left total personal savings, which is disposable personal income less total outlays, at a $815.3 billion annual rate in April, down by $107.0 billion from the revised $922.3 billion in annualized personal savings in March...as a result, the personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 4.4% in April, down from a revised 5.0% savings rate in March, and the lowest personal savings rate since September 2008....

As you know, before those personal consumption expenditures can be 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....that's done with the price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, which is computed from the components by the BEA and included in Table 9 in the pdf for this report....that index rose from 121.024 in March to 121.323 in April, a month over month inflation rate that's statistically 0.24706%, which BEA reports as an increase of 0.2 percent, following the rounded 0.9% increase in the PCE price index reported for March...applying that 0.247% April inflation adjustment to the ~0.9% nominal change in PCEleft real PCE up by 0.65214% in April, which the BEA reports as a 0.7% increase in their press release and in the tables, following the 0.5% increase in March....note that when those PCE price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in those familiar chained 2012 dollars, which are the means that the BEA uses to compare the 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 April's chained dollar consumption total works out to 14,063.8 billion annually, 0.652% more than March's 13,972.7 billion, again an increase that the BEA reports as +0.7%...

However, to estimate the impact of the change in PCE on the change in GDP, that month over month PCE change doesn't help us much, since GDP is computed & reported quarterly... thus we have to compare April's real PCE to the real PCE of all 3 months of the first quarter....while this release reports PCE for all those amounts on a monthly basis, the BEA also provides the 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 1st quarter was represented by 13,924.8 billion in chained 2012 dollars..(note that's the same as is shown in table 3 of the pdf for the 1st quarter GDP report)....when we compare April's chained dollar PCE of 14,063.8 billion to the 1st quarter real PCE of 13,924.8 billion on an annual basis, we find that April's real PCE has risen at a 4.05% annual rate from that of the 1st quarter....that would mean that even if real PCE does not appreciate during May and June from the April level, growth in real PCE would still add 2.86 percentage points to the growth rate of 2nd quarter GDP... ..

April Durable Goods: New Orders Up 0.4%, Shipments Up 0.1%, Inventories Up 0.8% after Downward Benchmark Revisions

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for April (pdf) from the Census Bureau reported that the widely watched new orders for manufactured durable goods rose by $1.2 billion or 0.4 percent to $265.3 billion in April, the sixth increase in seven months, after durable goods orders for March were revised to show a 0.6% increase to $264.153 billion, revised from the 0.8% increase to $275.0 billion that was reported a month ago...note that over and above the usual monthly revisions to the underlying data, this month's report also reflects the May 13th re-benchmarking of shipments and inventories data to the 2020 and 2019 Annual Survey of Manufactures data, revised back to 2012, and then the adjustment of the orders data to be consistent with the re-benchmarked data...while this resulted in significant downwards revisions over the span of the data, we will only document the revisions to March....

As is usually the case, the volatile monthly change in April's new orders for transportation equipment led this month's headline change, as April transportation equipment orders rose $0.6 billion or 0.6 percent to $86.7 billion, on a 4.3% increase to $14,536 million in new orders for commercial aircraft and a 1.0% increase to $4,854 million in new orders for defense aircraft ....excluding new orders for transportation equipment, other new orders were up 0.3% in April, while new orders for nondefense capital goods excluding aircraft, a proxy for equipment investment orders, were up 0.3% to $73,070 million...

The seasonally adjusted value of April's shipments of durable goods, which will ultimately be inputs into various components of 2nd quarter GDP after adjusting for changes in prices, rose for the eleventh time in twelve months, increasing by $0.3 billion or 0.1 percent to $264.3 billion, after March shipments were revised from an increase of 1.2% to $274.2 billion to an increase of 1.4% to $263.951 billion, obviously after re-benchmarking...lower shipments of transportation equipment limited the April increase, as shipments of transportation equipment were virtually unchanged at $82.5 billion because the value of shipments of motor vehicles fell 0.1% to $57,381 million and the value of shipments of defense aircraft fell 0.9% to $5,315 million…excluding that, the value of other shipments of durable goods rose 0.2%, led by a $0.2 billion or 0.9 percent to $20.9 billion in the value of shipments of primary metals, and are now 10.6% higher year to date than a year ago....meanwhile, shipments of nondefense capital goods excluding aircraft, important in figuring equipment investment, rose 0.8% to $72,076 million in April after rising a revised 0.2% in March...

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for a 3rd month in a row, increasing by $3.6 billion or 0.8 percent to $479.4 billion, after the value of end of March inventories was revised from $482.9 billion to $475.7 billion, now shown as a 0.9% increase from February, after re-benchmarking....a $1.1 billion or 0.7% increase to $157.0 billion in the value of inventories of transportation equipment led the April inventory increase, while excluding inventories of transportation equipment, other inventories were also up 0.8%..

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, rose for the twentieth consecutive month, increasing by $5.9 billion or 0.5 percent to $1,106.7 billion, following a March increase which was revised from the 0.4% increase to $1,294.6 billion reported last month to a 0.5% increase to $1,100.764 billion...a $4.2 billion or 0.7% increase to $637.2 billion in unfilled orders for transportation equipment led the April increase, as unfilled orders for motor vehicles and parts rose 1.2% to $28,511 million and unfilled orders for commercial aircraft and parts rose 1.0% to $426,358 million....compared to a year ago, the unfilled order book for durable goods is now 7.7% higher than the level of last April, with unfilled orders for transportation equipment 6.6% above their year ago level, on a 13.1% increase in the backlog of orders for motor vehicles and parts and a 11.3% increase in the order book for commercial aircraft...

New Home Sales Much Lower in April on Record High Prices After March Sales were Revised Much Lower

The Census report on New Residential Sales for April (pdf) estimated that new single family homes were selling at a seasonally adjusted annual pace of 591,000 homes during the month, which was 16.6 percent (±10.4 percent) below the revised March annual rate of 709,000 new home sales, and 26.9 percent (±13.7 percent) below the estimated annual rate that new homes were selling at in April of last year... the figures in parenthesis represent 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....with this report; seasonally adjusted estimates of housing units sold, housing units for sale, and the months' supply of new housing have been revised back to January 2017; and with that, sales of new single family homes in March were revised from the annual rate of 763,000 reported last month to an annual rate of 709,000, and sales in February, initially reported at an annual rate of 772,000 and revised to a 835,000 rate last month, were revised back to an annual rate of 792,000, while new home sales in January, initially reported at an annual rate of 800,000 and revised from a 811,000 rate to a 845,000 rate last month, were revised to a 831,000 a year rate with this release...March 2021 sales were originally reported at a 1,021,000 annual rate, a 15 year high, and have since been revised down to an 881,000 annual rate...

The annual rates of sales reported here are seasonally adjusted and extrapolated from the rough estimates of canvassing Census field reps, which indicated that approximately 53,000 new single family homes sold in April, down from the estimated 68,000 new homes that sold in March and down from the 72,000 new homes that sold in February....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in April was at a record high of $450,600, up from the median sales price of $435,000 in March and up from the median sales price of $376,600 in April a year ago, while the average new home sales price was at a record high $570,300, up from the $522,500 average sales price in March, and up from the average sales price of $434,800 in April a year ago....a seasonally adjusted estimate of 444,000 new single family houses remained for sale at the end of April, which represents a 9.0 month supply at the April sales rate, up from the revised 6.9 months of new home supply now being reported for March...

For graphs and commentary on this report, see the following posts by Bill McBride at Calculated Risk: New Home Sales Decrease Sharply to 591,000 Annual Rate in April and April New Home Sales Decline Sharply, almost 6 Months of Inventory Under Construction, which links to his detailed Real Estate Newsletter post on the same subject....

 

(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…)