Sunday, October 27, 2019

September’s durable goods, new home sales and existing home sales

Widely watched reports released this past week included the advance report on durable goods for September and the September report on new home sales, both from the Census bureau, and the Existing Home Sales Report for September from the National Association of Realtors (NAR)....in addition, this week also saw the release of two more regional Fed manufacturing surveys for October: the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, reported its broadest composite index rose to +8 in October from -9 in September, suggesting a return to modest growth in that region's manufacturing, and the Kansas City Fed manufacturing survey for October, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index fell to -3 in October, down from -2 in September but up from -6 in August, all readings which are indicative of contraction among that region's manufacturers...

September Durable Goods: New Orders Down 1.1%, Shipments Down 0.4%, Inventories Up 0.5%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for September (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods fell by $2.8 billion or 1.1 percent to $248.2 billion in September, after August's new orders were revised from the $250.7 billion reported last month to $251.0 billion, now 0.3% greater than July's orders, revised from last month's reported 0.2% increase...however, year to date new orders are now 0.8% below those of 2018, down from the 0.4% year to date decrease we saw in this report last month....the volatile monthly change in new orders for transportation equipment led the September orders increase, as new transportation equipment orders fell $2.3 billion or 2.7 percent to $84.5 billion, on a 11.8% decrease to $7,987 million in new orders for commercial aircraft....however, excluding orders for transportation equipment, other new orders still fell 0.3%, and excluding just new orders for defense equipment, new orders decreased 1.2%....meanwhile, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, fell $345 million or 0.5% to $68,642 million...

The seasonally adjusted value of September shipments of durable goods, which will ultimately be included as inputs into various components of 3rd quarter GDP after adjusting for changes in prices, fell for the 3rd month in a row, decreasing by $1.0 billion or 0.4 percent to $252.5 billion, after August shipments were revised from from $254.2 billion to $253.5 billion, now down 0.1% from July....a $1.0 billion or 1.2 percent decrease to $84.6 billion in shipments of transportation equipment was responsible for the decrease, without which all other shipments rose by a statistically insignificant $11 million...meanwhile, shipments of nondefense capital goods less aircraft were down 0.7% at $68,928 million, their fourth monthly decrease in a row ..

Meanwhile, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for the 14th time in 15 months, increasing by $2.1 billion or 0.5 percent to $430.3 billion, after August inventories were revised from $428.6 billion to $428.2 billion, now just 0.2% higher than the prior month...an increase in inventories of transportation equipment were also responsible for the September inventory increase, as they rose $2.1 billion or 1.4 percent to $145.3 billion...

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, were down in September following two monthly increases, but they fell by less than $0.1 billion to $1,163.5 billion, after August unfilled orders were revised from $1,176.5 billion to $1,176.66 billion, still a 0.9% increase from July...a decrease of less than $0.1 billion to $794.5 billion in unfilled orders for transportation equipment was responsible for most of the decrease, as unfilled orders excluding transportation equipment orders rose by a statistically insignificant $70 million.... compared to a year earlier, the unfilled order book for durable goods is now 1.8% below the level of last September, with unfilled orders for transportation equipment 2.7% below their year ago level, on a 4.0% decrease in the backlog of orders for defense aircraft and a 3.3% decrease in the backlog of orders for motor vehicles...  

September New Home Sales Little Changed; Median Sales Price at a 31 Month Low

The Census report on New Residential Sales for September (pdf) estimated that new single family homes were selling at a seasonally adjusted pace of 701,000 annually, which was 0.7 percent (±16.1 percent)* below the revised annual pace of 706,000 that new single family homes were selling at in August but 15.5 percent (±20.2 percent)* above the estimated annual rate that new homes were selling at in September of last year....the asterisks indicate that based on their small sampling, Census could not be certain whether September new home sales rose or fell from those of August, or even from those of 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, the estimates provided in these initial new home sales reports are not very reliable and often see significant revisions...with this report; sales of new single family homes in August were revised from the annual rate of 713,000 reported last month down to a 706,000 a year rate, while home sales in July, initially reported at an annual rate of 635,000 and revised to a 666,000 a year rate last month, were revised to a 665,000 a year rate with this report, while June's annualized home sale rate, initially reported at an annual rate of 646,000 and revised from the first revision at a 728,000 a year rate to a 729,000 a year rate last month, were revised but still at a 729,000 a year rate with this release...

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which indicated that approximately 54,000 new single family homes sold in September, down from the estimated 57,000 new homes that sold in August and the estimated 56,000 that sold in July....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in September was $299,400, down from the median sale price of $325,200 in August, down 8.8% from the median sales price of $328,300 in September a year ago and the lowest since February 2017, while the average September new home sales price was $362,700, down from the $394,800 average sales price in August, and down from the average sales price of $386,400 in September a year ago....a seasonally adjusted estimate of 321,000 new single family houses remained for sale at the end of September, which represents a 5.5 month supply of homes at the September sales rate, down from the 5.7 months supply of new homes originally reported for August...for graphs and additional commentary on this report, see the following two posts by Bill McBride at Calculated Risk: New Home Sales decreased to 701,000 Annual Rate in September and A few Comments on September New Home Sales...

September Existing Home Sales Down 2.2%

The National Association of Realtors (NAR) reported that their seasonally adjusted tally of existing home sales fell by 2.2% from August to September, the first decrease in three months, projecting that 5.38 million homes would sell over an entire year if the September home sales pace were extrapolated over that year, a pace that was still 3.9% above the annual sales rate projected in September of a year ago...August sales, now at a 5.50 million annual rate, were revised from the 5.49 million rate reported a month ago ...the NAR also reported that the median sales price for all existing-home types was $272,100 in September, down from $278,900 in August but 5.9% higher than in September a year earlier, which they say "marks 91 straight months of year-over-year gains"...the NAR press release, which is titled "Existing-Home Sales Decrease 2.2% in September", is in easy to read plain English, so if you're interested in the details on housing inventories, cash sales, distressed sales, first time home buyers, etc., you can easily find them in that press release...as sales of existing properties do not add to our national output, neither these home sales nor the prices for which these homes sell are included in GDP, except insofar as real estate, local government and banking services are rendered during the selling process…

Since this report is entirely seasonally adjusted and at a not very informative annual rate, we like to look at the raw data overview (pdf), which gives us a close approximation to the actual number of homes that sold each month...this unadjusted data indicates that roughly 452,000 homes sold in September, down by 15.0% from the 532,000 homes that sold in August, but 7.4% more than the 421,000 homes that sold in September of last year, so we can see that the seasonal adjustment gave a considerable boost to the monthly change published in the press release...that same pdf indicates that the median home selling price for all housing types fell 2.4%, from a revised $278,900 in August to $272,100 in September, while the average home sales price was $308,500, down 2.1% from the $315,000 average sales price in August, but up 4.2% from the $296,000 average home sales price of September a year ago, with regional average home sales prices ranging from a low of $240,700 in the Midwest to a high of $418,600 in the West... for both seasonally adjusted and unadjusted graphs and additional commentary on this report, see the following two posts from Bill McBride at Calculated Risk: NAR: Existing-Home Sales Decreased to 5.38 million in September and Comments on September Existing Home Sales....

 

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

Sunday, October 20, 2019

September's retail sales, industrial production, & new housing construction; August's business inventories

Major reports released this past week included Retail Sales for September and the corresponding Business Sales and Inventories report for August from the Census Bureau, Industrial production and Capacity Utilization for September from the Fed, the September report on New Residential Construction from the Census Bureau, and the Regional and State Employment and Unemployment report for September from the Bureau of Labor Statistics, which breaks down the two surveys of the monthly employment report by state and region....this week also saw the release of the first two regional Fed manufacturing surveys for October: the Empire State Manufacturing Survey for October from the New York Fed, which covers New York and northern New Jersey, reported their headline general business conditions index rose from +2.0 in September to +4.0 in October, suggesting that First District manufacturing has been growing at a snail's pace, while the Philadelphia Fed Manufacturing Survey for October, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions fell from +12.0 in September to +5.6 in October, also suggesting pretty slow growth in that region's manufacturing... 

Retail Sales Decreased by 0.3% in September after August Sales were Revised Higher

Seasonally adjusted retail sales fell 0.3% in September after retail sales for August were revised 0.2% higher after retail sales for July were revised 0.1% lower...the Advance Retail Sales Report for September (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $525.6 billion during the month, which was 0.3 percent (±0.5%) lower than August's revised sales of $526.9 billion, but 4.1 percent (±0.7 percent) above the adjusted sales in September of last year...August's seasonally adjusted sales were revised from $526.1 billion to $526.9 billion, while July sales were revised lower, from $524.2 billion to $523.9 billion, with this release....unadjusted sales estimates, extrapolated from surveys of a small sampling of retailers, indicated sales actually fell 8.8%, from $547,674 million in August to $499,369 million in September, while they were up 3.8% from the $481,094 million of sales in September a year ago...

Since it's the end of the quarter for retail sales, we'll include the entire table from this report showing retail sales by business type, including the quarter over quarter data...again, to explain what it shows, the first double column below shows us the seasonally adjusted percentage change in sales for each kind of business from the August revised figure to this month's September "advance" report figure in the first sub-column, and then the year over year percentage sales change since last September in the 2nd column; the second double column pair below gives us the revision of the August advance estimates (now called "preliminary") as of this report, with the new July to August percentage change under "Jul 2019 (r)" (revised) and the August 2018 to August 2019 percentage change as revised in the 2nd column of the pair; for your reference, the table of last month’s advance estimate of August sales, before this month's revisions, is here.... then, the third pair of columns shows the percentage change of the most recent 3 months of this year's sales (July, August and September) from the preceding three months of the 2nd quarter (April, May and June) and then from the same three months (July, August and September) of a year ago....that first column of that pair gives us a snapshot comparison of 2nd quarter sales to third quarter sales which, after adjustment for price changes, can be useful in estimating the impact of this report on 3rd quarter GDP:

September 2019 retail sales table

To compute September's real personal consumption of goods data for national accounts from this September retail sales report, the BEA will use the corresponding price changes from the September consumer price index, which we reviewed last week...to estimate what they will find, we’ll start by pulling out the usually volatile sales of gasoline from the other totals...from the third line on the above table, we can see that September retail sales excluding the 0.7% drop in sales at gas stations were down by 0.2%....then, subtracting the figures representing the 0.1% decrease in grocery & beverage sales and the 0.2% increase in food services sales from that total, we find that core retail sales were down by a bit more than 0.3% for the month....since the CPI report showed that the composite price index for all goods less food and energy goods was down 0.3% in September, that means the core sales decline was essentially price related, and we can thus figure that real retail sales excluding food and energy were on average little changed over the month...however, the adjustment for each of the types of sales shown above will vary by the change in the related price index…for instance, while nominal sales at motor vehicle & parts dealers were down by 0.9%, the price index for transportation commodities other than fuel was down 0.7%, as prices for used cars and trucks fell 1.6% while new car prices fell 0.3%; that would suggest that real unit sales at auto & parts dealers would only be on the order of 0.2% lower...similarly, while sales at clothing stores were 1.3% higher in September, the apparel price index was 0.4% lower, which means that real sales of clothing actually rose around 1.7%....on the other hand, since sales at furniture stores were up 0.6% while the price index for household furnishings and supplies increased by 0.3%, that would suggest that real sales at furniture stores only rose 0.3%…meanwhile, while nominal sales at sporting goods, hobby, music and book stores fell 0.1%, the price index for recreational commodities rose 0.2%, so real sales of recreational goods were down roughly 0.3%...

In addition to figuring those core retail sales, to make a complete estimate of real July PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do….the September CPI report showed that the food price index was 0.1% higher in September, with the price index for food purchased for use at home unchanged, while prices for food bought for eating away from home were 0.3% higher... hence, with nominal sales at food and beverage stores 0.1 lower, real sales of food at groceries would also be roughly 0.1% lower.…on the other hand, the 0.2% decrease in nominal sales at bars and restaurants, once adjusted for 0.3% higher prices, suggests that real sales at bars and restaurants fell by 0.5%...meanwhile, while sales at gas stations were down 0.7%, there was a 2.4% decrease in the retail price of gasoline, which would suggest real sales of gasoline were up on the order of 1.6%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales...by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we’d estimate that the income and outlays report for September will show that real personal consumption of goods rose 0.1% in September, after rising by a revised 0.6% in August and by a revised 0.6% in July...that would follow 2nd quarter figures which showed real personal consumption of goods rose 0.4% in June, after rising by 0.6% in May and by 0.6% in April, which would thus result in a quarter over quarter increase at a 5.8% annual rate, which would be enough to add 1.18 percentage points to 3rd quarter GDP....at the same time, the 0.5% decrease in real sales at bars and restaurants will have a small negative impact on September's real personal consumption of services..

Industrial Production Fell 0.4% in September

The Fed's G17 release on Industrial production and Capacity Utilization indicated that industrial production decreased by 0.4% in September after rising by 0.8% in August, revised from the 0.6% increase reported a month ago; at the same time, the percentage change from June to July was revised from down 0.1% to down 0.2%...the industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, fell from an unrevised 109.9 in August to 109.5 in September; at the same time, the index for July was revised from the previously reported 109.2 to 109.1, the index for June was revised from the previously reported 109.4 to 109.3, while the May index was revised from 109.2 to 109.3, while leaving the percentage increases for May and June unchanged from the previous report....for the 3rd quarter as compared to the 2nd quarter, industrial production rose at a 1.2% annual rate, while total industrial production was still 0.1% lower than in September a year earlier, due to production decreases in the first and second quarter of this year....

The manufacturing index, which was impacted by the GM strike, decreased by 0.5% in September, from 105.2 in August to 104.8 in September, after increasing by 0.6% in August, decreasing by 0.4% in July and increasing by 0.6% in June, and is now 0.9% lower than a year ago...meanwhile, the mining index, which includes oil and gas well drilling, fell from 133.5 in August to 131.8 in September, after the August index was revised down from 133.6, and is now just 2.6% higher than it was a year ago....finally, the utility index, which often fluctuates due to above or below normal temperatures, rose 1.4% to 106.8 in September, after the August index was revised 105.2 to 105.1, and is now 1.2% higher than in September of a year ago...

This report also includes capacity utilization data, which is expressed as the percentage of our plant and equipment that was in use during the month, and which indicated that seasonally adjusted capacity utilization for total industry fell from 77.9% in August to 77.5% in September, after rising from 77.4% in July....capacity utilization of NAICS durable goods production facilities fell from 76.1% in August to 75.4% in September, while capacity utilization for non-durables producers fell from 76.3% to 76.0%...capacity utilization for the mining sector fell to 88.9% in September from 90.5% in August, which was the same as was originally reported, while utilities were operating at 77.7% of capacity during September, up from their 76.8% of capacity during August, which was revised up from 76.7%...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....

Business Sales Rose 0.2% in August; Business Inventories were Unchanged

After the release of the September retail sales report, the Census Bureau released the composite Manufacturing and Trade Inventories and Sales report for August (pdf), which incorporates the revised August retail data from that September report and the earlier published August wholesale and factory data to give us a complete picture of the business contribution to the economy for that month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,463.9 billion in August, up 0.2 percent (±0.1%) from July’s revised sales, and up 1.1 percent (±0.4 percent) from August sales of a year earlier....note that total July sales were concurrently revised down from the originally reported $1,462.9 billion to $1,461.641 billion, now a 0.2% increase from June....manufacturer's sales were 0.1% lower at $502,957 million in August, while retail trade sales, which exclude restaurant & bar sales from the revised August retail sales we reported earlier, were were 0.6% higher at $461,874 million, and wholesale sales were statistically unchanged at $499,053 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $2,042.1 billion at the end of August, statistically unchanged (±0.1%) from July, but 4.2 percent (±0.4%) higher than in August a year earlier...the value of end of July inventories were revised to $2,041.782 billion from the $2,042.6 billion reported last month and is now a 0.3% increase from June...seasonally adjusted inventories of manufacturers were estimated to be valued at $695,881 million, statistically unchanged from July, while inventories of retailers were valued at $665,549 million, 0.1% less than in July, and inventories of wholesalers were estimated to be valued at $680,702 million at the end of August, 0.2% higher than in July...

For GDP purposes, all inventories, including retail, are adjusted for inflation with appropriate component price indices of the producer price index...while we reviewed the September index last week, the producer price index for August indicated that aggregate prices for finished goods were down 0.5% in August, that prices for intermediate processed goods were down 0.4%, and that prices for unprocessed goods were 1.4% lower....retail inventories are all finished goods, as are the majority of wholesale inventories, while factory inventories, which we looked at two weeks ago, are roughly evenly split between the three stages of production...hence, although the nominal value of August inventories was unchanged, real inventories increased by something on the order of 0.5%...however, that increase followed an increase in July inventories that was entirely price related, meaning real July inventories were marginally lower...since the recent GDP report showed that real private inventories grew at an inflation adjusted $69.0 billion annual rate in the 2nd quarter, any real inventory increase in the 3rd quarter would have to top that increase in order to avoid subtracting from 3rd quarter GDP...

Housing Starts and Building Permits were Both Lower in September

The September report on New Residential Construction (pdf) from the Census Bureau reported that their widely watched estimate of new housing units that were started during the month was at a seasonally adjusted annual rate of 1,256,000, which was 9.4 percent (±9.4 percent)* below the revised August estimated annual rate of 1,386,000 housing unit starts, but was 1.6 percent (±11.6 percent)* above last September's pace of 1,236,000 housing starts a year...the asterisks indicate that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, or even over the past year, with the figure in parenthesis the most likely range of the change indicated; in other words, September's housing starts could have been unchanged month over month, or down by as much as 18.8% from those of August, with a 10% chance that the actual change could have even been outside of that wide range....in this report, the annual rate for August housing starts was revised from the 1,364,000 reported last month to a post recession record 1,386,000, while July starts, which were first reported at a 1,191,000 annual rate, were revised down from last month's initial revised figure of 1,215,000 annually to a 1,204,000 annual rate with this report....

Those annual rates of starts reported here were extrapolated from a survey of a small percentage of US building permit offices visited by canvassing Census field agents, which estimated that 112,900 housing units were started in September, down from the 122,200 units started in August...of those housing units started in September, an estimated 80,700 were single family homes and 31,100 were units in structures with more than 5 units, down from the revised 81,800 single family starts in August, and down from the 39,100 units started in structures with more than 5 units in August...

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data, which is also impacted by the weather...in September, Census estimated new building permits were being issued at a seasonally adjusted annual rate of 1,387,000 housing units, which was 2.7 percent (±1.3 percent) below the revised August rate of 1,425,000 permits, but was 7.7 percent (±2.4 percent) above the rate of building permit issuance in September a year earlier...the annual rate for housing permits issued in August was revised from an annual rate of 1,419,000 to 1,425,000 annually....again, these annual estimates for new permits reported here were extrapolated from the unadjusted estimates collected monthly by canvassing census agents, which showed permits for 114,300 housing units were issued in September, down from the revised estimate of 127,800 new permits issued in August...the September permits included 70,600 permits for single family homes, down from 79,100 single family permits in August, and 40,600 permits for housing units in apartment buildings with 5 or more units, down from 44,800 such multifamily permits a month earlier...

For more graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts decreased to 1.256 Million Annual Rate in September and Comments on September Housing Starts...

 

 

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

Sunday, October 13, 2019

September's consumer price and producer price indexes; August's wholesale inventories and JOLTS

Major reports released this past week included the September Consumer Price Index, the September Producer Price Index, and the September Import-Export Price Index from the Bureau of Labor Statistics, which together give us most of the metrics needed to adjust other September data for inflation in order to determine the real level of economic activity for the month....in addition to those reports, the BLS released the Job Openings and Labor Turnover Survey (JOLTS) for August, the Census Bureau released the August report on Wholesale Trade, Sales and Inventories, and the Fed released the Consumer Credit Report for August...that Fed report indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $17.9 billion in August, or at a 5.2% annual rate, as non-revolving credit expanded at a 7.8% rate to $3,061.9 billion while revolving credit outstanding contracted at a 2.2% rate to $1,078.6 billion, the largest drop since March...

Consumer Prices Unchanged in September as Lower Energy Prices Offset Higher Rents

The consumer price index was was unchanged in September, as higher prices for shelter and other services were offset by lower prices for energy, clothing, & used cars and trucks ...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that seasonally adjusted prices rose by 0.1% in August after rising 0.1% in August, 0.3% in July, 0.1% in June, 0.1% in May, 0.3% in April, 0.4% in March, 0.2% in February, and after they had been unchanged in January, in December and in November, and had risen 0.3% in October, and 0.1% last September...the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, rose from 256.558 in August to 256.759 in September, which left it statistically 1.7113% higher than the 252.439 index reading of September of last year, which is reported as a 1.7% year over year increase....with prices for most forms of energy being somewhat lower, seasonally adjusted core prices, which exclude food and energy, rose by 0.1% for the month, as the unadjusted core price index rose from 264.169 to 264.522, which left the core index 2.3577% ahead of its year ago reading of 258.429, which is reported as a 2.4% year over year increase, same as the year over year increase reported for August...

The volatile seasonally adjusted energy price index fell 1.4% in September, after falling 1.9% in August.rising 1.3% in July, falling 2.3% in June, falling 0.6% in May, rising 2.9% in April, rising 3.5% in March, rising 0.4% in February, falling 3.1% in January, falling 2.6% in December, falling 2.8% in November, rising by 2.1% in October, and falling by 1.0% last September, and hence is now 4.8% lower than in September a year ago...the price index for energy commodities was 2.3% lower in September, while the index for energy services was 0.1% lower, after falling 0.2% in August....the energy commodity index was down 2.3% due to a 2.4% decrease in the price of gasoline, the largest component, and a 0.8% decrease in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 1.9% lower...within energy services, the price index for utility gas service fell 0.7% after rising 0.1% in August and is now 2.7% lower than it was a year ago, while the electricity price index was unchanged after falling 0.3% in August....energy commodities are now averaging 8.2% lower than their year ago levels, with gasoline prices also averaging 8.2% lower than they were a year ago, while the energy services price index is 0.1% lower than last September, as electricity prices are still 0.7% higher than a year ago…

The seasonally adjusted food price index rose 0.1% September, after being unchanged in June, July & August, rising 0.3% in May, falling 0.1% in April, but after rising 0.3% in March, 0.4% in February, 0.2% in January, 0.3% in December, 0.2% in November, being unchanged in October, and rising 0.1% last September, as the price index for food purchased for use at home was unchanged in September, while the index for food bought to eat away from home was 0.3% higher, as prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.3% while food prices at elementary and secondary schools were on average 1.2% higher...

In the food at home categories, the price index for cereals and bakery products was 0.5% higher as average bread prices rose 1.6% and the price index for frozen and refrigerated bakery products, pies, tarts and turnovers rose 0.9%...at the same time, the price index for the meats, poultry, fish, and eggs group was 0.3% higher, as the beef and veal price index rose 0.6%, average pork prices rose 0.5%, and egg prices were 6.5% higher...in addition, the seasonally adjusted index for dairy products was 0.2% higher, as average prices for milk rose 0.1% and ice cream prices rose 1.1%...on the other hand, the fruits and vegetables index was 1.0% lower on a 1.2% decrease in the price index for fresh fruits and a 1.5% decrease in the price index for fresh vegetables, led by a 3.1% drop in the price of lettuce...meanwhile , the beverages index was 0.1% higher,, as prices for beverage materials including tea rose 0.8% and carbonated drink prices were 0.5% higher, while coffee prices fell 0.9%....lastly, the index for the ‘other foods at home’ category was 0.3% higher, as the price index for sugar and sweets rose 1.6% and the "other condiments" index, which excludes salt and other seasonings and spices, olives, pickles, & relishes, rose 4.4%....the itemized list for price changes of over 100 separate food items is included at the beginning of Table 2 for this release, which also gives us a line item breakdown for prices of more than 200 CPI items overall...since last September, none of the food line items have seen a price change of more than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which rose by 0.1% September after rising by 0.3% in August, 0.3% in July, 0.3% in June, 0.1% in May, 0.1% in April, 0.1% in March, 0.1% in February, and by 0.2% for each of  the five months prior to that, the composite price index of all goods less food and energy goods was 0.3% lower, while the more heavily weighted composite for all services less energy services was 0.3% higher....among the goods components, which will be used by the Bureau of Economic Analysis to adjust June retail sales for inflation in national accounts data, the price index for household furnishings and supplies was up 0.3%, as the price index for living room, kitchen, and dining room furniture rose 1.4%, the index for appliances rose 1.3%, and the price index for outdoor equipment and supplies rose 0.8%....on the other hand, the apparel price index was 0.4% lower on a 4.2% drop in the price index women's outerwear, a 2.2% decrease in the index for girls' apparel, and a 1.9% decrease in the price index for boys & girls footwear... in addition, the price index for transportation commodities other than fuel was 0.1% lower as prices for new cars fell 0.3% and prices for used cars and trucks fell 1.6%, while the price index for motor oil, coolant, and fluids rose 1.3%... meanwhile, prices for medical care commodities averaged 0.6% lower as nonprescription drugs prices fell 0.8%....at the same time, the recreational commodities index was 0.2% higher despite a 0.7% decrease in TV prices because the price index for sporting goods rose 1.7% and the price index for photographic equipment rose 1.6%....however, the education and communication commodities index was 1.2% lower on a 2.3% decrease in prices for college textbooks and a 1.8% decrease in the price index for telephone hardware, calculators, and other consumer information items...lastly, a separate price index for alcoholic beverages was 0.3% lower, while the price index for ‘other goods’ was unchanged as a 0.6% increase in the index for tobacco products was offset by a 1.1% decrease in the price index for miscellaneous personal goods...

Within core services, the price index for shelter rose 0.3% on a 0.4% increase in rents, a 0.3% increase in homeowner's equivalent rent and a 2.1% increase in prices for lodging away from home at hotels and motels, while the shelter sub-index for water, sewers and trash collection rose 0.2%, and household operation costs were on average 0.2% lower....at the same time, the price index for medical care services was 0.4% higher, as nursing homes and adult day services rose 0.6% and health insurance rose 1.4%...in addition, the transportation services price index was 0.3% higher as the price index for parking fees and tolls rose 0.8%, airline fares rose 0.8%, and intercity bus fares rose 1.2%....on the other hand, the recreation services price index was unchanged as cable and satellite television service rose 0.5% and video rentals rose 0.8% while admission to sporting events fell 1.6%....meanwhile, the index for education and communication services was 0.1% higher as the index for technical and business school tuition and fees rose 0.9% and land-line telephone services rose 1.2%....lastly, the index for other personal services was up 0.1% as the price index for laundry and dry cleaning services was 0.5% higher...

Among core line items, prices for televisions, which now average 19.4% cheaper than a year ago, the price index for telephone hardware, calculators, and other consumer information items, which is down by 13.9% since last September, and the price index for women's dresses, which is down 12.8% year over year, have all seen prices drop by more than 10% over the past year, while the cost of health insurance, which is now up by 18.8% over the past year, the price index for infants' furniture, which has increased 12.7% year over year, and intercity bus-fare, which has increased by 20.6% since last September, are the only line items to have increased by a double digit magnitude over that span....

Producer Price Index Fell 0.3% in September On Lower Priced Energy, Trade & Transportation Services

The seasonally adjusted Producer Price Index (PPI) for final demand fell 0.3% in September, as prices for finished wholesale goods fell by 0.4% and margins of final services providers decreased by 0.2%...that followed an August report that showed the PPI rose 0.1%, even prices for finished wholesale goods fell by 0.5%, because the more heavily weighted margins of final services providers increased by 0.3%, a July report that indicated the PPI rose 0.2%, as prices for finished wholesale goods increased 0.4%, while margins of final services providers decreased by 0.1%, a revised June report that now shows the PPI fell 0.2%, as prices for finished wholesale goods decreased 0.5%, while margins of final services providers increased by 0.2%, and a revised May report that now shows the PPI was 0.2% higher, as prices for finished wholesale goods averaged 0.2% lower while average margins of final services providers were increased 0.3%....on an unadjusted basis, producer prices are now only 1.4% higher than a year ago, down from the 1.8% year over year change indicated by last month's report...meanwhile, the core producer price index, which excludes food, energy and trade services, was unchanged for the month, and is now 1.7% higher than in September a year ago, down from the 1.9% YoY increase shown in August...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.4% lower in September, after being 0.5% lower in August, 0.4% higher in July, 0.5% lower in June, 0.2% lower in May, 0.4% higher in April, 1.0% higher in March, 0.3% higher in February, 0.6% lower in January, 0.6% lower in December, 0.5% lower in November, 0.8% higher in October, and 0.1% lower in September of 2018....the finished goods index fell in September because the wholesale price index for energy was 2.5% lower, after falling by 2.5% in August, rising by 2.3% in July, but after falling by a revised 3.9% in June and by a revised 0.4% in May, while the price index for wholesale foods rose 0.3% in September after falling 0.6% in August, rising 0.2% in July and 0.6% in June, and while the index for final demand for core wholesale goods (excluding food and energy) was 0.1% lower after being unchanged in August....wholesale energy prices were lower despite a 21.7% jump in wholesale prices for liquefied petroleum gas due to a 7.2% decrease in wholesale prices for gasoline and 1.8% lower wholesale prices for residential electric power, while the wholesale food price index rose on a 1.9% increase in the wholesale price index for meats and a 18.4% increase in the wholesale price index for fresh eggs....among wholesale core goods, wholesale prices for industrial chemicals fell 3.1% and wholesale prices for iron and steel scrap fell 11.7%, while wholesale prices for both travel trailers and campers and for women's, girls', and infants' apparel rose 1.5%..

At the same time, the index for final demand for services fell 0.2% in September, after rising 0.3% in August, falling 0.1% in July, rising a revised 0.2% in June, and rising a revised 0.3% in May, as the index for final demand for trade services and the index for final demand for transportation and warehousing services both fell 1.0% in September while the core index for final demand for services less trade, transportation, and warehousing services was 0.3% higher....among trade services, seasonally adjusted margins for fuels and lubricants retailers fell 10.8%, margins for automobile retailers fell 2.7%, margins for apparel, footwear, and accessories retailers fell 4.5%, and margins for for machinery and vehicle wholesalers fell 2.7%, while margins for lawn, garden, and farm equipment and supplies retailers rose 5.6%... among transportation and warehousing services, margins for truck transportation of freight fell 0.6% and margins for airline passenger services fell 2.6%...among the components of the core final demand for services index, margins for bundled wired telecommunications access services rose 3.9%, margins for mining services rose 1.3%, and margins for hospital outpatient care rose 1.1%..

This report also showed the price index for intermediate processed goods fell 0.4% in September, after falling 0.7% in August, rising 0.2% in July, and falling a revised 1.0% in June and a revised 0.4% in May....the price index for intermediate energy goods fell 0.7%, as refinery prices for gasoline fell 7.2%, refinery prices for residual fuels fell 7.3%, and prices for commercial electric power fell 1.1%...however, prices for intermediate processed foods and feeds rose 0.7%, as the producer price index for prepared animal feeds rose 0.9% and producer prices for meats rose 1.9%... meanwhile, the core price index for intermediate processed goods less food and energy fell 0.3% as producer prices for prices for basic organic chemicals fell 3.8% and producer prices for building paper and board decreased 2.1%... prices for intermediate processed goods are now 3.4% lower than in September a year ago, the fifth consecutive year over year decrease following 29 months of year over year increases, which had been preceded by 16 months of negative year over year comparisons, as intermediate goods prices fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods fell 1.4% in September, after falling 1.0% in August, rising 1.6% in July, falling revised 4.0% in June, and falling a revised 3.1% in May...that was as the September price index for crude energy goods fell 0.8% as crude oil prices fell 1.1% and unprocessed natural gas prices fell 1.2%, while the price index for unprocessed foodstuffs and feedstuffs fell 1.9% on a 10.3% decrease in producer prices for slaughter hogs, a 5.1% decrease in producer prices for slaughter chickens, and a 3.7% decrease in producer prices for slaughter cattle....at the same time, the index for core raw materials other than food and energy materials fell 1.6%, as prices for copper base scrap fell 1.6% and prices for unprocessed iron and steel scrap fell 11.7%...this raw materials index is now 10.1% lower than a year ago, as the year over year change on this index has been negative all year...

Lastly, the price index for services for intermediate demand rose 0.1% in September, after rising 0.5% in August, falling 0.2% in July, being unchanged in June (revised), and rising a revised 0.1% in May, rising 0.4% in April, and 0.5% in March...the price index for intermediate trade services was 1.2% higher, as as margins for intermediate paper and plastic product wholesalers rose 5.2%, margins for intermediate machinery and equipment parts and supplies wholesalers rose 1.7% and margins for intermediate building materials, paint, and hardware wholesalers rose 1.6%…at the same time the index for transportation and warehousing services for intermediate demand was unchanged, as the price index for intermediate arrangement of freight and cargo transportation rose 3.4% while the price index for transportation of passengers (partial) fell 2.5%...meanwhile, the core price index for intermediate services less trade, transportation, and warehousing fell 0.2%, as the price index for television advertising time sales fell 4.1%, nonresidential real estate rents fell 1.8% and the index for business loans (partial) fell 2.8%, while the intermediate price index for bundled wired telecommunication access services rose 3.9%....over the 12 months ended in September, the year over year price index for services for intermediate demand, which has never turned negative on an annual basis, is now 2.4% higher than it was a year ago...

August Wholesale Sales Flat, Wholesale Inventories Up 0.2%

The August report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at $499.1 billion, virtually unchanged (+/-0.4%) from the revised July level, but down 0.7 percent (±0.9 percent)* from wholesale sales of August 2018... the July preliminary estimate was revised down to $499,050 million from the $499.6 billion in wholesale sales reported last month, which meant that the June to July change was revised from the preliminary estimate of up 0.3 percent (±0.4 percent)* to up 0.2 percent (±0.4 percent)*....as an intermediate activity, wholesale sales are not included in GDP except insofar as they are a trade service, since the traded goods themselves do not represent an increase in the output of the goods produced or finally sold....

On the other hand, the monthly change in private inventories is a major factor in GDP, as additional goods on the shelf represent goods that were produced but not sold, and this August report estimated that wholesale inventories were valued at a seasonally adjusted $680.7 billion at month end, up 0.2 percent (+/-0.2%)* from the revised July level, and 6.2 percent (±0.9 percent) higher than in August a year ago...July's inventory value was revised from $679,084 million to $679,131 million, while this report says "the June to July inventory change was revised from the preliminary estimate of up 0.4 percent (±0.2 percent) to up 0.2 percent (±0.2 percent)*"....however, the archived July report shows that the preliminary June to July inventory change was originally published as “up 0.2 percent (±0.2 percent)*” from June, so the change is statistically unchanged from what was published last month...

August wholesale inventories would be adjusted for inflation with the appropriate sub-indices of the August producer price index, which showed that aggregate prices for finished goods were down 0.5% in August, that prices for intermediate processed goods were down 0.7%, while prices for unprocessed goods were 1.0% lower....hence, the real August wholesale inventories were at least 0.5% higher than in July, which themselves were little changed from the end of the second quarter...since real wholesale inventories grew at an inflation adjusted $32.4 billion annual rate (in 2012 dollars) in the 2nd quarter, or by about 0.7%, the real inventory increase by the end of the 3rd quarter will have to top that increase in order to avoid subtracting from 3rd quarter GDP...

Job Openings, Hiring and Job Quitting Lower in August, Layoffs Unchanged

The Job Openings and Labor Turnover Survey (JOLTS) report for August from the Bureau of Labor Statistics estimated that seasonally adjusted job openings decreased by 123,000, from 7,174,000 in July to 7,051,000 openings in August, after July job openings were revised 43,000 lower, from 7,217,000 to 7,174,000...August jobs openings were also 4.0% lower than the 7,342 ,000 job openings reported in August a year ago, as the job opening ratio expressed as a percentage of the employed fell from 4.5% in July to 4.4% in August, which was also down from 4.7% a year ago...the largest percentage decrease appears to have been the 47,000 job opening decrease to 130,000 openings in the information sector, while openings in the transportation, warehousing, and utilities sector increased by 21,000 to 315,000 (see table 1 for more details)...like most BLS releases, the press release for this report is easy to understand and also refers us to the associated table for the data cited, which are linked at the end of the release...

The JOLTS release also reports on labor turnover, which consists of hires and job separations, which in turn is further divided into layoffs and discharges, those who quit, and 'other separations', which includes retirements and deaths....in August, seasonally adjusted new hires totaled 5,779,000, down by 199,000 from the revised 5,978,000 who were hired or rehired in July, as the hiring rate as a percentage of all employed fell from 3.9% to 3.8%, which was also down from 3.9% hiring rate in August a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations fell by 172,000, from 5,810,000 in July to 5,636,000 in August, while the separations rate as a percentage of the employed fell from 3.8% to 3.7%, which was the same as in August a year ago (see table 3)...subtracting the 5,638,000 total separations from the total hires of 5,779,000 would imply an increase of 141,000 jobs in August, somewhat less than  the revised payroll job increase of 168,000 for August reported by the September establishment survey last week, but still within the expected +/-115,000 margin of error in these incomplete samplings...

Breaking down the seasonally adjusted job separations, the BLS finds that 3,526,000 of us voluntarily quit our jobs in August, down by 142,000 from the revised 3,668,000 who quit their jobs in July, while the quits rate, widely watched as an indicator of worker confidence, fell from 2.4% to 2.3% of total employment, the same quits rate as a year earlier (see details in table 4)....in addition to those who quit, another 1,787,000 were either laid off, fired or otherwise discharged in August, down by 1,000 from the revised 1,788,000 who were discharged in July, as the discharges rate remained at 1.2% of all those who were employed during the month, same as the discharges rate of a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 325,000 in August, down from 353,000 in July, for an 'other separations rate’ of 0.2%, the same as in July and as in August of last year....both seasonally adjusted and unadjusted details by industry and by region on hires and job separations, and on job quits and discharges can be accessed using the links to tables at the bottom of the press release

 

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

Sunday, October 6, 2019

September’s jobs report; August’s trade deficit, new construction, and factory inventories

In addition to the Employment Situation Summary for September from the Bureau of Labor Statistics, this week saw the release of three August reports from the Census Bureau that incorporate major contributions to 3rd quarter GDP: the August report on our International Trade, the August report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for August....in addition, this week also saw the release of the last regional Fed manufacturing survey for September: the Dallas Fed Texas Manufacturing Outlook Survey reported its general business activity index fell from +2.7 in August to +1.5 in September, suggesting an even more sluggish expansion of the Texas region manufacturing economy, after 3 prior months of contraction...

This week’s major privately issued reports included the ADP Employment Report for September and the September report on light vehicle sales from Wards Automotive, (the source of the BEA's data) which estimated that vehicles sold at a 17.19 million annual rate in September, up from the 16.99 million annual pace in August, but down from the 17.36 million annual rate in September of last year...both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM) were also released this week: the September Manufacturing Report On Business indicated that the manufacturing PMI (Purchasing Managers Index) fell to 47.8% in September, down from 49.1% in August, suggesting a deeper contraction of manufacturing nationally, while the September Non-Manufacturing Report On Business saw the NMI (non-manufacturing index) fall to 52.6% in September, down from 56.4% in August, indicating a considerably smaller plurality of service industry purchasing managers reported expansion in various facets of their business in September...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 136,000 Jobs in September; Unemployment Rate Falls to 3.5%, a 50 Year Low

The Employment Situation Summary for September indicated relatively weak job creation, even as the unemployment rate fell 0.2% to 3.5%, a 50 year low...estimates extrapolated from the establishment survey data projected that employers added a seasonally adjusted 136,000 jobs in September, after the previously estimated payroll job increase for July was revised up from 159,000 to 166,000 and the payroll jobs increase for August was revised up from 130,000 to 168,000….thus, with revisions, that this report represents a total of 181,000 more seasonally adjusted payroll jobs than were reported last month, pretty close to the monthly average increase over the past year...the unadjusted data, meanwhile, shows that there were actually 362,000 more payroll jobs in September, largely due to job increases relating to the beginning of the school year, so the seasonal adjustment brought the headline jobs number down to a level where that normal September increase was negated...

Seasonally adjusted job increases in September were seen throughout the private goods producing and service sectors and in government, with only jobs in retail sales and durable goods manufacturing seeing employment decreases of 11,400 and 4,100 jobs respectively...the health care sector saw 38,800 jobs added in September, with the addition of 9,500 jobs in offices of health practitioners other than doctors and dentists, and 8,100 jobs in hospitals...the broad professional and business services sector saw the addition of 34,000 jobs, with 11,600 more employed by employment services and 5,600 more positions in management and technical consulting services...in addition, the government sector saw a 22,000 seasonally adjusted increase, with 7,600 more employed by local governments outside of school districts, and 6,400 more than seasonal in school districts...in addition, the leisure and hospitality sector added 21,000 more jobs, including 13,400 in amusements, gambling, and recreation, while there were 15,700 more jobs in the transportation and warehousing sector, as 10,500 more were employed in ground transportation of passengers....meanwhile, the other major sectors, including construction, nondurable goods manufacturing, wholesale trade, information, financial activities, and utilities all saw increases of less than 10,000 in payroll employment over the month, while there was no net change in the resource exploitation sector...

The establishment survey also showed that average hourly pay for all employees fell by one cent an hour to $28.09 an hour, after it had increased by a revised 11 cents an hour in August; at the same time, the average hourly earnings of production and non-supervisory employees increased by 4 cents to $23.65 an hour...employers also reported that the average workweek for all private payroll employees remained unchanged at 34.4 hours in September, while hours for production and non-supervisory personnel were unchanged at 33.6 hours, after their August workweek increased by a tenth of an hour...at the same time, the manufacturing workweek was unchanged at 40.5 hours after a downward August revision from the originally reported 40.6 hours, while average factory overtime was unchanged at 3.2 hours without any August revision...

Meanwhile, the seasonally adjusted extrapolation from the September household survey indicated that the number of those who would self-report being employed rose by an estimated 391,000 to 158,269,000, while the similarly estimated number of those who would qualify as being unemployed fell by 275,000 to 5,964,000; and hence the labor force increased by a net of 117,000...however, since the working age population had grown by 206,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 89,000 to 95,599,000, which was still not enough to change the labor force participation rate, which remained at 63.2%...however, the relatively large increase in number employed was enough to boost the employment to population ratio, which we could think of as an employment rate, as it rose from 60.9% to 61.0%...at the same time, the relatively large drop in the number unemployed was also enough to decrease the unemployment rate from 3.7% to 3.5%, which was the lowest unemployment rate since December 1969...meanwhile, the number of the employed who reported they were forced to accept just part time work fell by 31,000, from 4,381,000 in August to 4,350,000 in September, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 7.2% in August to 6.9% of the labor force in September, the lowest since December 2000....

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

August Trade Deficit Rose 1.6% on Lower Exports of Civilian Aircraft & Higher Imports of Cellphones

Our trade deficit rose by 1.6% in August as the value of both our exports and our imports increased, but the value of our imports increased by more....the Commerce Dept report on our international trade in goods and services for August indicated that our seasonally adjusted goods and services trade deficit rose by $0.9 billion to $54.9 billion in August from a revised July deficit of $54.0 billion, statistically the same as had been reported last month...after rounding, the value of our August exports rose by $0.5 billion to $207.9 billion on a $0.4 billion increase to $138.6 billion in our exports of goods and a $0.1 billion increase to $69.3  billion in our exports of services, while the value of our imports rose by $1.3 billion to $262.8 billion on a 1.2 billion increase to $213.0 billion in our imports of goods and a $0.1 billion increase to $49.8 billion in our imports of services...prices for our exports were on average 0.6% lower in August, which means the relative real change in exports for the month was greater than the nominal change by that percentage, while import prices were 0.5% lower, meaning that relative real change in imports was similarly greater than the nominal dollar values reported here by that percentage...

The increase in our August exports of goods resulted from greater exports of industrial supplies and farm products, which were partially offset by lower exports of capital goods and consumer goods...referencing the Full Release and Tables for August (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1,456 million to $44,283 million on an $841 million increase in our exports of fuel oil, a $361 million increase in our exports of non-monetary gold, and a $311 million increase in our exports of petroleum products other than fuel oil, and that our exports of foods, feeds and beverages rose by $481 million to $12,290 million on a $261 million increase in our exports of soybeans...in addition, our exports of automotive vehicles, parts, and engines rose by $378 million to $14,281 million on a $369 million increase in our exports of trucks, buses, and special purpose vehicles, while our exports of other goods not categorized by end use rose by $383 million to $6,102 million...partially offsetting the increases in those categories, our exports of capital goods fell by $1,433 million to $44,258 million on a $1,291 million decrease of in our exports of civilian aircraft and a $516 million decrease of in our exports of drilling & oilfield equipment, while our exports of consumer goods fell by $854 million to $16,877 million on an $804 million decrease in our exports of pharmaceuticals and a $289 million decrease in our exports of artwork, antiques, and other collectibles...

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our imports and shows that higher imports of consumer goods and capital goods were responsible for the $1.2 billion increase in our imports of goods, as our imports in all other categories decreased...our imports of consumer goods rose by $1,890 million to $57,225 million on a $1,149 increase in our imports of cellphones, a $319 increase in our imports of pharmaceuticals, a $288 increase in our imports of artwork, antiques, and other collectibles and a $230 increase in our imports of jewelry, while our imports of capital goods rose by $1,861 million to $57,271 million on a $800 million increase in our imports of semiconductors and a $370 million increase in our imports of industrial machines other than those itemized separately....partially offsetting the increases in those two categories, our imports of industrial supplies and materials fell by $1,461 million to $42,536 million on a $740 million decrease in our imports of petroleum products other than fuel oil, a $554 million decrease in our imports of crude oil, a $311 million decrease in our imports of iron and steel mill products, and a $201 million decrease in our imports of organic chemicals, which were partially offset a $385 million increase in our imports of nonmonetary gold....in addition, our imports of automotive vehicles, parts and engines fell by fell by $790 million to $31,953 million on a $776 million decrease in our imports of new & used passenger cars, our imports of foods, feeds, and beverages fell by $157 million to $31,953 million on a $151 million decrease in our imports of fruits and fruit juices, and our imports of other goods not categorized by end use fell by $249 million to $9,549 million...

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

The August figures show surpluses, in billions of dollars, with South and Central America ($5.0), Hong Kong ($2.2), Brazil ($1.4), OPEC ($0.8), Singapore ($0.7), United Kingdom ($0.6), and Saudi Arabia ($0.3). Deficits were recorded, in billions of dollars, with China ($28.9), European Union ($15.6), Mexico ($8.4), Germany ($6.9), Japan ($6.1), Italy ($2.6), India ($2.4), Taiwan ($2.3), South Korea ($2.1), Canada ($1.6), and France ($1.5).

  • • The deficit with Germany increased $0.7 billion to $6.9 billion in August. Exports increased $0.2 billion to $4.9 billion and imports increased $0.8 billion to $11.8 billion.
  • • The deficit with South Korea increased $0.5 billion to $2.1 billion in August. Exports increased $0.1 billion to $4.8 billion and imports increased $0.7 billion to $6.9 billion.
  • • The deficit with Canada decreased $1.4 billion to $1.6 billion in August. Exports increased $0.6 billion to $24.8 billion and imports decreased $0.8 billion to $26.4 billion.

To gauge the impact of July and August goods trade on 3rd quarter GDP growth figures, we use exhibit 10 in the full pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, except they are not annualized here....from that table, we can compute that 2nd quarter real exports of goods averaged 148,369.7 million monthly in 2012 dollars, while the similarly inflation adjusted July and August goods exports were at 148,776 million and 150,403 million respectively, in that same 2012 dollar quantity index representation...computing the annual rate of change between the second and third quarter inflation adjusted averages, we find that the 3rd quarter's real exports of goods are running at a 3.33% annual rate above those of the 2nd quarter, or at a pace that would add about 0.27  percentage points to 3rd quarter GDP if it were continued through September...in a similar manner, we find that our 2nd quarter real imports averaged 233,235 million monthly in chained 2012 dollars, while inflation adjusted July and August imports were at 234,132 million and 236,064 million in 2012 dollars respectively...that would mean that so far in the 3rd quarter, our real imports have grown at 3.23% annual rate from those of  the 2nd quarter...since imports subtract from GDP because they represent the portion of consumption or investment that occurred during the quarter that was not produced domestically, their increase at a 3.23% rate would thus subtract 0.30 percentage points from 3rd quarter GDP...(note that imports are larger than exports and hence the smaller percentage here has a larger impact)....hence, if our July and August trade deficit in goods remains at these same levels throughout September, our deteriorating balance of trade in goods would subtract a net of about 0.03 percentage points from the growth of 3rd quarter GDP....note that we have not computed the impact of the less volatile change in services here because the Census does not provide inflation adjusted data on those, and we don't have an easy way to estimate the relevant price changes, but that services exports decreased during the quarter, while services imports have increased, suggesting trade in services will also have a negative impact on 3rd quarter GDP...

Real Construction Contraction on Track to Subtract 47 Basis Points from Q3 GDP

The August report on construction spending (pdf) from the Census Bureau estimated that our seasonally adjusted construction spending construction spending for the month was at an annual rate of $1,287.3 billion, which was 0.1 percent (±1.2  percent)* above the revised annualized estimate of $1,285.6 billion in construction spending in July, but was 1.9 percent (±1.8 percent) below the estimated annualized level of construction spending of August of last year....July construction spending was originally reported at a $1,288.8 billion annual rate, and it has thus been revised down to a $1,285.6 billion annual rate, while June construction spending was revised from the $1,288.1 billion annual rate reported last month to a $1,285.3 billion rate, which would mean that 2nd quarter GDP was overestimated by 0.03 percentage points...however, 2nd quarter's GDP will not be revised to reflect that overestimation until the annual revision of next summer...

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $955.0 billion, nearly the same as (±0.8 percent)* the revised July estimate of $954.8 billion. Residential construction was at a seasonally adjusted annual rate of $507.2 billion in August, 0.9 percent (±1.3 percent)* above the revised July estimate of $502.5 billion. Nonresidential construction was at a seasonally adjusted annual rate of $447.9 billion in August, 1.0 percent (±0.8 percent) below the revised July estimate of $452.3 billion.
  • Public Construction: In August, the estimated seasonally adjusted annual rate of public construction spending was $332.3 billion, 0.4 percent (±2.0 percent)* above the revised July estimate of $330.8 billion. Educational construction was at a seasonally adjusted annual rate of $77.0 billion, 1.4 percent (±2.6 percent)* above the revised July estimate of $75.9 billion. Highway construction was at a seasonally adjusted annual rate of $98.9 billion, 0.6 percent (±4.8 percent)* above the revised July estimate of $98.3 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 government investment outlays, for both state and local and Federal governments.... however, gauging the impact of revised July and August construction spending as reported here on 3rd quarter GDP is difficult because all figures given in this report are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price...accurately adjusting construction for price changes is no easy matter, either, because the National Income and Product Accounts Handbook, Chapter 6 (pdf), lists a multitude of privately published deflators that are used by the BEA for the various components of non-residential investment, such as the Engineering News Record construction cost index for utilities construction spending....in lieu of trying to find and adjust for all of those obscure price indices, we've opted to just use the producer price index for final demand construction as an inexact shortcut to make the price adjustment needed in order to make a ballpark estimate.

That producer price index showed that aggregate construction costs rose 0.1% in August after rising 0.6% in July, 0.2% in June and being unchanged from April to May...on that basis, we can estimate that construction costs for August were roughly 0.7% more than June, roughly 0.9% more than those of May and also roughly 0.9% more than those of April, while obviously 0.1% more than those of July...we then use those percentages to inflate lower priced spending figures for each of those previous months, which is arithmetically the same as adjusting higher priced July and August construction spending downward, for comparison purposes... annualized construction spending in millions of dollars for the second quarter months is shown at 1,285,299 for June, 1,297,464 for May, and 1,307,136 for April in this report, while it was at $1,285,572 million for July and $1,287,306 million for August...thus to compare July and August’s inflation adjusted construction spending to that of the second quarter, our formula becomes: ((1,287,306 + 1,285,572 * 1.001) / 2 ) / ((1,285,299 * 1.007 + 1,297,464 * 1.009 + 1,307,136 *1.009) / 3) =  0.98442, meaning real construction over July and August was 1.5575% lower than that of the 2nd quarter...that means that after adjusting for inflation, real construction for the 3rd quarter fell at a 6.09% annual rate from that of the 2nd quarter...that's a contraction at a $20.364 billion annual rate, which means that if September shows no improvement, the contraction in construction would subtract a net of about 0.47 percentage points from 3rd quarter GDP across those components that it influences...

Factory Shipments Down 0.1% in August, Factory Inventories Statistically Unchanged

The August Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods fell by $0.4 billion or 0.1 percent to $499.8 billion in August, following an increase of 1.4% to $500.2 billion in July, which was revised from the $500.3 billion in new orders reported last month....however, since the Census Bureau does not even collect data on new orders for non durable goods for this widely watched "factory orders report", both the "new orders" and "unfilled orders" sections of this report are really only accurate as revised updates to the August advance report on durable goods we reported on last week...on those revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary:  New orders for manufactured goods in August, down following two consecutive monthly increases,  decreased $0.4 billion or 0.1 percent to $499.8 billion, the U.S. Census Bureau reported today.  This  followed a 1.4 percent July increase.  Shipments, down two consecutive months, decreased $0.7 billion or  0.1 percent to $503.0 billion.  This followed a 0.3 percent July decrease.  Unfilled orders, up two  consecutive months, increased $1.1 billion or 0.1 percent to $1,162.9 billion.  This followed a 0.1 percent  July increase.  The unfilled orders‐to‐shipments ratio was 6.66, down from 6.67 in July.  Inventories, down following eight consecutive monthly increases, decreased $0.3 billion or virtually unchanged to $695.9  billion.  This followed a 0.1 percent July increase.  The inventories‐to‐shipments ratio was 1.38, unchanged  from July. 
  • New orders for manufactured durable goods in August, up three consecutive months, increased $0.4  billion or 0.2 percent to $250.7 billion, unchanged from the previously published increase.  This followed a 2.1 percent July increase.  Fabricated metal products, up four of the last five months, drove the increase,  $0.4 billion or 1.2 percent to $34.3 billion.  New orders for manufactured nondurable goods decreased  $0.8 billion or 0.3 percent to $249.0 billion. 
  • Shipments of manufactured durable goods in August, up three of the last four months, increased $0.1  billion or 0.1 percent to $253.9 billion, unchanged from the previously published increase.  This followed a 1.2 percent July decrease.  Machinery, up four of the last five months, drove the increase, $0.5 billion or  1.6 percent to $33.4 billion.   Shipments of manufactured nondurable goods, down three of the last four  months, decreased $0.8 billion or 0.3 percent to $249.0 billion.  This followed a 0.7 percent July increase.   Petroleum and coal products, also down three of the last four months, drove the decrease, $1.9 billion or  3.6 percent to $51.0 billion. 
  • Unfilled orders for manufactured durable goods in August, up two consecutive months, increased $1.1  billion or 0.1 percent to $1,162.9 billion, unchanged from the previously published increase.  This followed  a 0.1 percent July increase.  Fabricated metal products, up three consecutive months, led the increase,  $0.6 billion or 0.7 percent to $87.2 billion. 
  • Inventories of manufactured durable goods in August, up thirteen of the last fourteen months, increased  $1.1 billion or 0.2 percent to $428.3 billion, down from the previously published 0.3 percent increase.  This  followed a 0.4 percent July increase.  Transportation equipment, also up thirteen of the last fourteen  months, drove the increase, $1.7 billion or 1.2 percent to $143.2 billion.  Inventories of manufactured  nondurable goods, down five consecutive months, decreased $1.4 billion or 0.5 percent to $267.6 billion.   This followed a 0.2 percent July decrease.  Petroleum and coal products, down four consecutive months,  led the decrease, $0.9 billion or 2.3 percent to $39.1 billion. 

To gauge the effect of August factory inventories on 3rd quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was 0.1% lower at $243,147 million; the value of work in process inventories was statistically unchanged at $215,028 million, and the value of materials and supplies inventories was also statistically unchanged at $237,706 million...the producer price index for August indicated that prices for finished goods were on average 0.5% lower, that prices for intermediate processed goods were 0.7% lower, while prices for unprocessed goods were 1.0% lower....assuming similar valuations for like inventories, we could thus estimate that August's real finished goods inventories increased by 0.4%, that real inventories of intermediate processed goods were 0.7% greater, and that real raw material inventory inventories were roughly 1.0% greater...those real inventory increases would appear to more than offset July’s inventory change, when real factory inventories were somewhat lower…but since real NIPA factory inventories were somewhat higher in the 2nd quarter, the fact that this report barely covers the decrease in real July factory inventories seems to suggest that the 3rd quarter change in factory inventories will have a small negative impact on the growth rate of 3rd quarter GDP...

 

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