Sunday, December 27, 2020

Q3 GDP revision, November's income & outlays, durable goods, new home sales & existing home sales

As is usual in advance of the holidays, some of the reports that are normally released during the last week of the month were accelerated into this past week...that meant that we had the 3rd estimate of 3rd quarter GDP and the November report on Personal Income and Spending, both from the Bureau of Economic Analysis, in addition to the advance report on durable goods for November and the new residential sales report for November, both from the Census Bureau, and the Existing Home Sales Report for November from the National Association of Realtors (NAR)...

This week also saw the release of the Chicago Fed National Activity Index (CFNAI) for November, a weighted composite index of 85 different economic metrics, which indicated that the CFNAI decreased to +0.27 in November from +1.01 in October, which was revised from the +0.83 index reading indicated for October a month ago....after that revision, the 3 month average of the CFNAI index fell to +0.56 in November from from a revised +0.85 in October, which, since it’s a positive number, still indicates that national economic activity has continued at a pace above the historical trend over those recent months.....in addition, this week also saw the release of the Richmond Fed Survey of Manufacturing Activity, covering an area that includes Virginia, Maryland, the Carolinas, the District of Columbia and West Virginia, which reported its broadest composite index fell to +15 in December from +29 in November, still suggesting a moderate expansion of Fifth District manufacturing, albeit not as robust as a month ago...

3rd Quarter GDP Growth Rate Revised to 33.4% in 3rd Estimate

The Third Estimate of our 3rd Quarter GDP from the Bureau of Economic Analysis indicated that our real output of goods and services grew at a 33.4% rate in the quarter, revised from the 33.1% growth rate reported in the second estimate a month ago, as personal consumption, fixed investment and inventories all grew more than was previously estimated, more than offsetting a downward revision to export growth....in current dollars, our third quarter GDP grew at a 38.35% annual rate, increasing from what would work out to be a $19,520.1 billion a year output rate in the 2nd quarter to a $21,170.3 billion annual rate in the 3rd quarter, with the headline 33.4% annualized rate of increase in real output arrived at after annualized inflation adjustments now averaging 3.5%, aka the GDP deflator, was computed for each of the GDP components and then applied to the current dollar change of each component...

Remember that the GDP release reports all quarter over quarter percentage changes at an annual rate, which means that they're expressed as a change typically a bit over 4 times of that what actually occurred over the 3 month period, and that the prefix "real" is used to indicate that each change has been adjusted for inflation using price changes chained from 2012, and then that all percentage changes in this report are calculated from those 2012 dollar figures, which would be better thought of as a quantity indexes than as any reality based dollar amounts....for our purposes, all the data that we'll use in reporting the changes here comes directly from the pdf for the 2nd estimate of 3rd quarter GDP, which we find on the BEA GDP landing page, where we can also find the GDP tables on Excel and other technical notes relating to this report...specifically, we reference table 1, which shows the real percentage change in each of the GDP components annually and quarterly since the 4th quarter of 2016; table 2, which shows the contribution of each of the components to the GDP figures for those quarters and years; table 3, which shows both the current dollar value and inflation adjusted value of each of the GDP components; and table 4, which shows the change in the price indexes for each of the components....the pdf for the 3rd quarter second estimate, which this estimate revises, is here...

Growth of real personal consumption expenditures (PCE), the largest component of GDP, was revised from the 40.6% growth rate reported last month to a 41.0% rate in this 3rd estimate…that growth rate figure was arrived at by deflating the 46.2% growth rate in the dollar amount of consumer spending with the PCE price index, which indicated consumer inflation increased at a 3.7% annual rate in the 3rd quarter, which was unrevised from the PCE inflation rate reported a month ago......real personal consumption of durable goods grew at a 82.7% annual rate, revised from the 82.9% growth rate shown in the 2nd estimate, and added 5.20 percentage points to GDP, as real consumption of durable goods other than autos, furniture and recreational goods and vehicles grew at a 265% annual rate and accounted for nearly 30% of the durable goods increase....real consumption of nondurable goods by individuals grew at a 31.1% annual rate, revised from the 30.6% growth rate reported in the 2nd estimate, and added 4.35 percentage points to the 3rd quarter’s economic growth rate, as real growth in consumption of clothing and footwear at a 182.8% rate accounted for nearly 45% of the growth in non-durables....at the same time, consumption of services rose at a 38.0% annual rate, revised from the 37.6% growth rate reported last month, and added 15.89 percentage points to the final GDP tally, as real health care services grew at a 90.9% rate and accounted for more than half of the quarter’s growth in services...

Meanwhile, seasonally adjusted real gross private domestic investment grew at a 86.3% annual rate in the 3rd quarter, revised from the 84.9% growth estimate reported last month, as real private fixed investment grew at a 31.3% rate, revised from the 30.4% growth rate reported in the second estimate, while the change in inventory growth was a bit greater than previously estimated...however, investment in non-residential structures was revised to show contraction at a 17.4% rate, worse than the 15.8% contraction rate previously reported, while real investment in equipment grew at a 68.2% rate, revised up from the 66.6% rate reported last month, and the quarter's investment in intellectual property products was revised from growth at a 6.0% rate to growth at a 8.4% rate…at the same time, real residential investment was shown to be growing at a 63.0% annual rate, revised from the 62.3% rate shown in the previous report…after those revisions, the decrease in investment in non-residential structures subtracted 0.53 percentage points from the 3rd quarter's growth rate, while the increase in investment in equipment added 3.26 percentage points to the quarter's growth rate, growth in investment in intellectual property added 0.46 percentage points to the growth rate of 3rd quarter GDP and growth in residential investment added 2.19 percentage points to the growth of GDP...

In addition, investment in real private inventories shrunk by an inflation adjusted $3.7 billion in the 3rd quarter, revised from the previously reported $4.3 billion of real inventory shrinkage...that came after inventories had shrunk at an inflation adjusted $287.0 billion rate in the 2nd quarter, and hence the $283.3 billion quarter over quarter improvement in real inventory growth added 6.57 percentage points to GDP, revised from the 6.55 percentage point addition to GDP due to lower inventory growth that was indicated in the second estimate....however, since growth in inventories indicates that more of the goods produced during the quarter were left in warehouses or "sitting on the shelf”, their quarter over quarter increase at a $283.3 billion rate meant that growth of real final sales of GDP was relatively smaller by that much, and hence real final sales of GDP rose at a 25.9% rate in the 3rd quarter, a reversal of the real final sales shrinkage rate of 28.1% in the 2nd quarter, when the quarter's decrease in inventory growth meant that the drop in real final sales was that much less than the real decrease in GDP...

The previously reported increase in real exports was revised a lower with this estimate, but the previously reported larger increase in real imports was unchanged, and as a result the change in our net trade was a greater subtraction from GDP than was previously reported...our real exports grew at a 59.6% rate rather than the 60.5% rate reported in the second estimate, and since exports are added to GDP because they are part of our production that was not consumed or added to investment in our country, that growth added 4.89 percentage points to the 3rd quarter's growth rate, revised from the 4.95 percentage point addition shown in the previous report....meanwhile, the previously reported 93.1% increase in our real imports was revised but remained at 93.1%, and since imports are subtracted from GDP because they represent either consumption or investment that was added to an other GDP component that was not produced domestically, their increase subtracted 8.10 percentage points from 3rd quarter GDP, revised from the 8.12 percentage point subtraction shown in the second estimate....thus, our deteriorating trade balance subtracted a rounded total of 3.21 percentage points from 3rd quarter GDP, rather than the 3.18 percentage point subtraction that had been indicated by the second estimate…

Finally, the entire government sector shrank at a 4.8% rate, revised from the 4.9% shrinkage rate previously reported, as overall federal government consumption and investment was little changed from the second estimate, while real state & local government consumption and investment shrank by less than had been previously indicated....real federal government consumption and investment was seen to have shrunk at a 6.2% rate from the 2nd quarter in this estimate, statistically unchanged from the shrinkage rate shown in the advance estimate, as real federal outlays for defense grew at a 3.2% rate, revised from the 3.1% growth reported last month, and added 0.17 percentage points to 3rd quarter GDP, while all other federal consumption and investment shrank at an 18.3% rate, revised from the 18.1% shrinkage rate indicated by the second estimate, and subtracted 0.55 percentage points from 3rd quarter GDP....meanwhile, real state and local consumption and investment shrank at a 3.9% rate in the quarter, which was revised from the 4.0% shrinkage rate reported in the 1st estimate, and subtracted 0.37 more percentage points from 3rd quarter GDP, as a decrease in real state and local investment contributed 0.09 percentage points to that subtraction...but 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, indicating an increase in the output of those goods or services...

November Personal Income Down 1.1%; Personal Spending Down 0.4%; PCE Price Index Unchanged

Following the release of the 3rd estimate of 3rd quarter GDP, the Bureau of Economic Analysis released the November report on Personal Income and Outlays, which gives us nearly half the data that will go into 4th quarter GDP, since it gives us 2 months of data on our personal consumption expenditures (PCE), which accounts for nearly 70% of GDP, and 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....this report also provides us with the nation's November personal income data, 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 are not the current monthly change; rather, they're seasonally adjusted amounts at an annual rate, ie, they tell us how much income and spending would increase in a year if November’s adjusted income and spending were extrapolated over an entire year...however, the percentage changes are computed monthly, from one month's annualized figure to the next, and in this case of this month's report they give us the percentage change in each annualized metric from October to November....

Hence, when the opening line of the press release for this report tells us "Personal income decreased $221.8 billion (1.1 percent) in November", they mean that the annualized figure for seasonally adjusted personal income in November, $19,493.3 billion, was $221.8 billion lower, or more than 1.1% less than the annualized personal income figure of $19,715.1 billion extrapolated for October; the actual, unadjusted change in national personal income from October to November is not given...at the same time, annualized disposable personal income, which is income after taxes, fell by more than 1.2%, from an annual rate of $17,495.6 billion in October to an annual rate of $17,277.6 billion in November...those decreases were arrived at after personal income for October was revised down from $19,725.9 billion annually and October's disposable personal income was revised down from $17,515.2 billion annually....the monthly contributors to the change in personal income, which can be seen in the Full Release & Tables (PDF) for this release, are also annualized...in November, the reason for the $221.8 billion annual rate of decrease in personal income were a $163.3 billion annual rate of decrease in proprietors' income, and a $126.7 billion annual rate of decrease in personal current transfer receipts from government programs; wages and salaries, on the other hand, saw an increase at a $39.1 billion annual rate..

For the personal consumption expenditures (PCE) that we're interested in, BEA reports that they decreased at a $63.3 billion rate, or at more than a 0.4% rate, as the annual rate of PCE fell from $14,630.1 billion in October to $14,566.8 billion in November....at the same time, October PCE was revised less than 0.1% lower, from $14,640.5 billion annually to $14,630.1 billion....total personal outlays, which includes interest payments and personal transfer payments in addition to PCE, fell by an annualized $66.8 billion to $15,057.2 billion annually in November, which thus left total personal savings, which is disposable personal income less total outlays, at a $2,220.4 billion annual rate in November, down from the revised $2,371.6 billion in annualized personal savings in October... as a result, the national personal saving rate, which is personal savings as a percentage of disposable personal income, fell to 12.9% in November, from the October savings rate of 13.6%...

As you know, before personal consumption expenditures are used in the computation of GDP, they are first adjusted for inflation to give us the real change in consumption, and hence the real change in goods and services that were produced for that consumption....the BEA does that by computing, mostly from CPI source data, a price index for personal consumption expenditures, which is a chained price index based on 2012 prices = 100, and which is included in Table 9 in the pdf for this report...that index rose from 111.688 in October to 111.704 in November, a month over month inflation rate that's statistically +0.014326%, which BEA reports as unchanged, following the unchanged PCE price index they reported for October...applying the actual November inflation adjustment to the nominal change in spending left real PCE down by a rounded 0.4% in November, after October's rounded real PCE growth of 0.3%...notice that when those price indexes are applied to a given month's annualized PCE in current dollars, it yields that month's annualized real PCE in chained 2012 dollars, which are the means that the BEA uses to compare one month's or one quarter's real goods and services produced to another....that result is shown in table 7 of the PDF, where we see that November's chained dollar consumption total works out to 13,040.7 billion annually in 2012 dollars, 0.4466% less than October's 13,099.2 billion, a growth rate that the BEA rounds up and reports as -0.4%...

However, to estimate the impact of the change in PCE on the change in GDP, month over month changes expressed like that don't help us much, since GDP is reported quarterly...thus we have to compare October's and November's real PCE to the the real PCE of the 3 months of the third quarter....while this report shows PCE for all those amounts monthly, 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 3rd quarter was represented by 12,924.7 billion in chained 2012  dollars...(note that's the same as what's shown in table 3 of the pdf for the revised 3rd quarter GDP report)....then, by averaging the annualized chained 2012 dollar figures for October and November, 13,099.2 billion and 13,040.7 billion respectively, we get an equivalent annualized PCE for the two months of the 4th quarter data that we have so far....when we compare that average of 13,069.95 to the 3rd quarter real PCE representation of 12,924.7, we find that 4th quarter real PCE has grown at a 4.57% annual rate for the two months of the 4th quarter that are included in this report...(notice the math we used to get that annual growth rate: [ (((13,040.7 + 13,099.2) / 2) / 12,924.7) ^ 4 = 1.045716 ] ...that's a growth rate that would add 3.17 percentage points to the GDP growth rate of the 4th quarter, in the unlikely event that December PCE doesn’t vary from the October – November average...  

November Durable Goods: New Orders up 0.9%, Shipments Up 0.3%, Inventories Up 0.9%

The Advance Report on Durable Goods Manufacturers’ Shipments, Inventories and Orders for November (pdf) from the Census Bureau reported that the value of the widely watched new orders for manufactured durable goods increased by $2.2 billion or 0.9 percent to $244.2 billion in November, after October's new orders were revised from the 1.3% increase to $240.8 billion reported last month to a 1.8% increase to $242.0 billion...however, year to date new orders are still 8.0% below those of 2019, a modest increase from the -9.1% year over year change we saw in this report last month....

An increase in the volatile monthly new orders for transportation equipment led this month's increase, as new transportation equipment orders rose $1.5 billion or 1.9 percent to $78.8  billion, on a 15.7% increase to $3,266 million in new orders for defense aircraft and a 2.4% increase to $62,051 million in new orders for motor vehicles and parts... excluding orders for transportation equipment, other new orders were up 0.4%, while excluding just new orders for defense equipment, new orders rose 0.7%....at the same time, new orders for nondefense capital goods less aircraft, a proxy for equipment investment, rose by $271 million or by 0.4% to $70,901 million..

Meanwhile, the seasonally adjusted value of November shipments of durable goods, which will ultimately be included as inputs into various components of 4th quarter GDP after adjusting for changes in prices, increased for the sixth time in 7 months, rising by $0.7 billion or 0.3 percent to $250.1 billion, after the value of October shipments was revised from from $248.7 billion to $249.4 billion, now up 1.5% from September, revised from the 1.3% increase reported last month...the value of shipments of primary metals saw the largest November increase, rising $0.3 billion or 1.8 percent to $19.2 billion, while the value of shipments of transportation equipment rose 0.3% to $82.3 billion...the value of shipments of nondefense capital goods less aircraft rose 0.4% to $69,888 million, after September’s capital goods shipments were revised from $69,380 million to $69,577 million, now a 2.6% increase from August....

At the same time, the value of seasonally adjusted inventories of durable goods, also a major GDP contributor, rose for a third consecutive month, increasing by $3.9 billion or 0.9 percent to $426.6 billion, after October inventories were revised from $422.8 billion to $422.7 billion, still up 0.3% from September... increased inventories of transportation equipment led the November increase, rising $2.4 billion or 1.6 percent to $150.7 billion, on a 2.8% increase in inventories of motor vehicles and parts and a 1.9% increase in inventories of commercial aircraft…but even without the increased inventories of transportation equipment, the value of all other durable goods inventories still rose 0.5%…

Finally, unfilled orders for manufactured durable goods, which are probably a better measure of industry conditions than the widely watched but volatile new orders, decreased for the eighth time in nine months, falling by $0.8 billion or 0.1 percent to $1,072.9 billion, after unfilled orders for October were revised from $1,073.2 billion to $1,073.7 billion, now a 0.2% decrease from September...a $3.5 billion or 0.5 percent decrease to $713.3 billion in unfilled orders for transportation equipment was responsible for the November decrease, as unfilled transportation equipment orders other than transportation equipment rose 0.7% to $359,560 million...compared to a year earlier, the unfilled order book for durable goods is 6.3% below its level of last November, with unfilled orders for transportation equipment 10.2% below their year ago level, largely on a 16.1% decrease in the backlog of orders for commercial aircraft...  

November New Home Sales Reported Lower After Sales for Three Prior Months were Revised Lower

The Census report on New Residential Sales for November (pdf) estimated that new single family homes were selling at a seasonally adjusted annual pace of 841,000 homes during the month, which was 11.0 percent (±9.5 percent) below the revised October rate at 945,000 new single family home sales annually, but was 20.8 percent (±19.5 percent) above the estimated annual rate that new homes were selling at in November 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, sales new single family homes in October were revised down from the annual rate of 999,000 reported a month ago to 945,000, while home sales in September, initially reported at an annual rate of 595,000 and revised to a post recession high 1,002,000 annual rate with the last report, were also revised lower, to a 965,000 a year rate with this report, and while August's annualized home sale rate, initially reported at an annual rate of 1,011,000 and revised from the initially revised from a 994,000 a year rate to a 1,001,000 a year rate with the last report, were revised down to a 977,000 rate with this release...those revisions mean the unrevised 979,000 annual rate of new home sales in July now reverts to the post recession high...

The annual rates of sales reported here are seasonally adjusted after extrapolation from the estimates of canvassing Census field reps, which suggested that approximately 59,000 new single family homes sold in November, down from the estimated 76,000 new homes that sold in October and the 77,000 that sold in September.....the raw numbers from Census field agents further estimated that the median sales price of new houses sold in November was $335,300, down from the median sale price of $337,500 in October but up from the median sales price of $328,900 in November a year ago, while the average November new home sales price was $390,100, up from the $383,300 average sales price in October, and up from the average sales price of $384,000 in November a year ago....a seasonally adjusted estimate of 268,000 new single family houses remained for sale at the end of November, which represented a 4.1 month supply at the November sales rate, up from the revised 3.6 months of new home supply in October...for graphs and additional commentary on this report, see the following  two posts by Bill McBride at Calculated Risk: New Home Sales decrease to 841,000 Annual Rate in November and A few Comments on November New Home Sales...

November Existing Home Sales Down 2.5% in November, Still Up 25.8% from a Year Ago

The National Association of Realtors (NAR) reported that their seasonally adjusted extrapolation of existing home sales fell by 2.5% from October to November, projecting that 6.69 million existing homes would sell over an entire year if the November home sales pace were extrapolated over that year, a pace that was still 25.8% above the annual sales rate they projected for November of a year ago...October home sales were at a 6.86 million annual rate, a 14 year high, revised from the 6.85 million annual rate indicated in last month's report...the NAR also reported that the median sales price for all existing-home types was $310,800 in November, up 14.6% from from the $271,300 median sales price reported for November of last year, which they report "marks 105 straight months of year-over-year gains".....the NAR press release, which is titled "Existing-Home Sales Decrease 2.5% in November", 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 that all info 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 check the raw data overview (pdf), which gives us a close approximation of the actual number of homes that sold each month...this unadjusted data indicates that roughly 492,000 homes sold in November, down by 14.1% from the 573,000 homes that sold in October, but up by 21.8% from the 404,000 homes that sold in November of last year, so we can see how the seasonal adjustment reduced the magnitude of the month over month decrease in the annualized published figures....that same pdf indicates that the median home selling price for all housing types fell by 0.7%, from a revised $313,100 in October to $310,100 in November, while the average home sales price was $343,000, down 0.5% from the $344,700 average sales price in October, but up 11.3% from the $308,200 average home sales price of November a year ago...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 6.69 million in November and Comments on November 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 of which are picked from the aforementioned GGO posts, contact me…)  

Sunday, December 20, 2020

November’s retail sales, industrial production, & new home construction; October's business inventories

Major reports released this week included the the Retail Sales report for November and the Business Sales and Inventories report for October, both from the Census Bureau, the November report on Industrial Production and Capacity Utilization from the Fed, and the November report on New Residential Construction from the Census bureau....in addition, the Bureau of Labor Statistics released both the November Import-Export Price Index and the Regional and State Employment and Unemployment Summary for November, a report which breaks down the two employment surveys from the monthly national jobs report by state and region....while the text of that report provides a useful summary of this data, the serious 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...

The week also saw the release of three regional Fed manufacturing surveys for December: the Empire State Manufacturing Survey from the New York Fed, which covers all of New York state, an adjacent county in Connecticut, Puerto Rico and northern New Jersey, reported their headline general business conditions index fell from +6.3 in November to +4.7 in December, suggesting fairly sluggish growth of First District manufacturing; the Philadelphia Fed Manufacturing Survey for December, covering most of Pennsylvania, southern New Jersey, and Delaware, reported its broadest diffusion index of manufacturing conditions decreased from a reading of +23.3 in November to +11.3  in December, indicating that growth of that region's manufacturing was less widespread than a month ago; and the Kansas City Fed manufacturing survey for December, covering western Missouri, Colorado, Kansas, Nebraska, Oklahoma, Wyoming and northern New Mexico, which reported its broadest composite index rose to +14 in December, up from readings of +11 in November and +13 in October, suggesting consistent moderate growth of that region's manufacturing...

Retail Sales Fell 1.1% in November after October Sales were Revised Lower

Seasonally adjusted retail sales decreased 1.1% in November after retail sales for October sales were revised 0.2% lower...the Advance Retail Sales Report for November (pdf) from the Census Bureau estimated that our seasonally adjusted retail and food services sales totaled $546.5 billion during the month, which was 1.1 percent (±0.5 percent) lower than October's revised sales of $552.5 billion but still 4.1 percent (±0.7 percent) above the adjusted sales in November of last year.…October's seasonally adjusted sales were revised down from $553.3 billion to $552.5 billion, while September's sales were revised higher, from $551.9 billion to $552.8 billion; as a result, the September to October change was revised from up 0.3 percent (±0.5%) to down 0.1 percent (±0.2%), while the change in September's sales was revised from an increase of 1.6% to an increase of 1.8%...assuming a similar inflation adjustment to the one used previously, the $0.9 billion upward revision to September’s sales should increase the previous estimate of the personal consumption expenditures contribution to 3rd quarter GDP by about 0.07 percentage points....unadjusted sales, extrapolated from surveys of a small sampling of retailers, were estimated to have fallen 1.3%, from $556,093 million in October to $548,824 million in November, while they were up 2.5% from the $535,352 million of sales in November a year ago...

Included below is the table of the monthly and yearly percentage changes in retail sales by business type taken from the November Census Marts pdf....the first pair of columns below gives us the seasonally adjusted percentage change in sales for each kind of business from the October revised figure to this month's November "advance" report in the first sub-column, and then the year over year percentage sales change since last November in the 2nd column...the second double column pair below gives us the revision of the October advance estimates (now called "preliminary") as of this report, with the new September to October percentage change under "Sep 2020 r" (revised) and the revised October 2019 to October 2020 percentage change in the last column shown...for your reference, the table of last month’s advance estimate of October sales, before this month's revisions, is here.…

November 2020 retail sales table

To compute November's real personal consumption of goods data for national accounts from this November retail sales report, the BEA will use the corresponding price changes from the November 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 this table, we can see that November retail sales excluding the 2.4% decrease in sales at gas station were down by 0.9%....then, subtracting the figures representing the 0.3% increase in grocery & beverage sales and the 0.3% decrease in food services sales from retail sales ex gas stations, we find that core retail sales were down by more than 1.0% for the month...since the CPI report showed that the composite price index for all goods less food and energy goods was 0.1% higher in November, we can thus approximate that real retail sales excluding food and energy will show an decrease of roughly 1.1%...however, the actual adjustment for each of the types of sales shown above will vary by the change in the related price index…for example, while sales at furniture stores were down 1.1%, the price index for household furnishings and supplies increased by 0.9%, which would suggest that real sales at furniture stores fell about 2.0%….similarly, while nominal sales at clothing stores were 6.8% lower in November, the apparel price index was 0.9% higher, which would mean that real sales of clothing fell around 7.6%…on the other hand, while nominal sales at motor vehicle & parts dealers fell 1.7%, the price index for transportation commodities other than fuel was 0.6% lower, so we can figure real sales of motor vehicle & parts were down roughly 1.1%...

In addition to figuring those core retail sales, to make a complete estimate of real November PCE, we'll need to adjust food and energy retail sales for their price changes separately, just as the BEA will do.…the CPI report showed that the food price index was 0.1% lower in November, with the index for food purchased for use at home 0.3% lower, while prices for food bought to eat away from home (excluding food prices at employee sites and schools) were 0.2% higher... hence, with nominal sales at food and beverage stores 1.6% higher, real sales of food and beverages would be roughly 1.9% higher in light of the 0.3% lower prices…on the other hand, the 4.0% decrease in nominal sales at bars and restaurants, once adjusted for 0.2% higher prices, suggests that real sales at bars and restaurants fell about 4.2%...meanwhile, while sales at gas stations were down 2.4%, there was a 0.4% increase in the retail price of gasoline, which would suggest real sales of gasoline were down on the order of 2.0%, with the caveat that gasoline stations do sell more than gasoline, and we haven’t accounted for those other sales.....by averaging those estimated real sales figures with a sales appropriate weighting, and excluding food services, we can thus estimate that the income and outlays report for November will show that real personal consumption of goods fell by nearly 0.9% for the month, after rising by a revised 0.3% in October and rising by a revised 1.3% in September...at the same time, the 4.2% drop in real sales at bars and restaurants would reduce November’s real personal consumption of services by nearly 0.4%...

Industrial Production Up 0.4% in November After Production of Prior Months Revised Higher

The Fed's G17 release on Industrial production and Capacity Utilization reported that industrial production rose 0.4% in November after rising by a revised 0.9% in October, and after falling by a revised 0.1% in September....the total industrial production index, with the benchmark now set for average 2012 production to equal to 100.0, rose to 104.0 in November from 103.6 in October, which was revised up from the 103.2 index reported last month...at the same time, the September index was revised up from 102.1 to 102.6, the August index was revised up from 102.5 to 102.7, the July index was revised up from 101.7 to 101.9, and the June index was revised up from 97.6 to 97.8....however, even after those revisions, industrial production is still 5.5% lower than a year ago, and 5.0% lower than its pre-pandemic high in February...

The manufacturing index, which accounts for more than 77% of the total IP index, rose 0.8%, from 100.3 in October to 101.1 in November, partly on a 5.3% increase in the output of motor vehicles and parts...at the same time, the manufacturing index for October was revised from 99.9 to 100.3, the manufacturing index for September was revised from 98.9 to 99.2, the manufacturing index for August was revised from 98.8 to 99.1, the manufacturing index for July was revised from 97.4 to 97.7 and the manufacturing index for June was revised from 93.5 to 93.8 ... meanwhile, the mining index, which includes oil and gas well drilling, rose from 113.5 in October to 116.0 in November, after the October mining index was revised down from 114.2, which left the mining index 12.5% lower than it was a year earlier...finally, the utility index, which often fluctuates due to above or below normal temperatures, fell 4.3% in November, from a upwardly revised 104.4 in our cold October to 99.9 in our warm November, and is now 8.9% lower than it was a year earlier.. 

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 US industry rose to 73.3% in November from 73.0% in October, which was revised from the 72.8% reported last month ...capacity utilization of NAICS durable goods production facilities rose from 71.1% in October to 72.1% in November as capacity utilization for motor vehicles and parts factories rose from 73.9% to 77.8%, while capacity utilization for non-durables producers remained unchanged at 74.1%...at the same time, capacity utilization for the mining sector rose to 79.4% in November from 77.5% in October, which was originally reported at 77.9%, while utilities were operating at 70.2% of capacity during November, down from their 73.5% of capacity during October, which was revised up from the previously reported 72.7%...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....   

Housing Starts Reported Higher in November; SAAR Building Permits at a 14 Year High

The November 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 1,547,000 units during the month, which was 1.2 percent (±8.6 percent)* above the revised October estimated annual rate of 1,528,000 housing unit starts, and was 12.8 percent (±11.3 percent) above last November's rate of 1,371,000 housing starts a year...the asterisk indicates that the Census does not have sufficient data to determine whether housing starts actually rose or fell over the past month, with the figure in parenthesis the most likely range of the change indicated; in other words, November housing starts could have been down by 7.4% or up by as much as 9.8% from those of October, with even larger revisions possible...in this report, the annual rate for October housing starts was revised from the 1,530,000 units reported last month to 1,528,000, while September starts, which were first reported at a 1,415,000 rannual rate, were revised from last month's initial revised figure of 1,459,000 back to 1,437,000 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 117.500 housing units were started in November, down from the 131,400 units that were started in October...of those housing units started in November, an estimated 87,800 were single family homes and 29,000 were units in structures with more than 5 units, down from last month's revised 100,800 single family starts, but up from the 28,800 units started in structures with more than 5 units in October...

The monthly data on new building permits, with a smaller margin of error, are probably a better monthly indicator of new housing construction trends than the volatile and often revised housing starts data...in November, Census estimated new building permits were being issued at a seasonally adjusted rate of 1,639,000 housing units annually, the highest rate since September 2006, which was also 6.2 percent (±1.5 percent) above the revised October annual rate of 1,544,000 permits, and was 8.5 percent (±1.8 percent) above the rate of building permit issuance in November a year earlier...the annual rate for housing permits issued in October was revised from the 1,545,000 that was originally reported....

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 175,500 housing units were issued in November, down from the revised estimate of 179,800 new permits issued in October...the November permits included 98,100 permits for single family homes, down from 103,300 single family permits issued in October, and 74,400 permits for housing units in apartment buildings with 5 or more units, up from 74,000 such multifamily permits a month earlier... 

For graphs and commentary on this report, see the following two posts by Bill McBride at Calculated Risk: Housing Starts increased to 1.547 Million Annual Rate in November and Comments on November Housing Starts...

October Business Sales Rose 0.9%, Business Inventories Rose 0.7%

After the release of the November retail sales report, the Census Bureau released the composite Manufacturing and Trade, Inventories and Sales report for October (pdf), which incorporates the revised October retail data from that November report and the earlier published October wholesale and factory data to give us a complete picture of the business contribution to the economy for the month....according to the Census Bureau, total manufacturer's and trade sales were estimated to be valued at a seasonally adjusted $1,482.3 billion in October, up 0.9 percent (±0.1%) from September's revised sales, and up 2.2 percent (±0.3 percent) from October sales of a year earlier...note that total September sales were concurrently revised up from the originally reported $1,465.1 billion to $1,468.5 billion....seasonally adjusted manufacturer's sales rose 1.0% to $488,600 million in October; retail trade sales, which exclude restaurant & bar sales from the revised October retail sales reported earlier, were statistically unchanged from September at $497,067 million, while wholesale sales rose 1.8% to $496,585 million...

Meanwhile, total manufacturer's and trade inventories, a major component of GDP, were estimated to be valued at a seasonally adjusted $1,948.7 billion at the end of October, up 0.7 percent (±0.1%) from September, but 4.0 percent (±0.4 percent) lower than in October a year earlier...at the same time, the value of end of September inventories was revised from the $1,932.8 billion reported last month to $1,934.9 billion, now up 0.8% from August...that $2.1 billion upward revision to September inventories should increase the previous estimate of the inventory component to 3rd quarter GDP by more than $8.4 billion annually, which would add around 0.13 percentage points to 3rd quarter GDP...seasonally adjusted inventories of manufacturers were estimated to be valued at $687,258 million at the end of October, an increase of 0.2% from September, and inventories of retailers were valued at $612,468 million, 0.9% greater than September, and inventories of wholesalers were estimated to be valued at $648,998 million at the end of October, 1.1% greater than in September...

For GDP purposes, all inventories, including retail, will be adjusted for inflation with appropriate component price indices of the producer price index for October, which was 0.5% higher for finished goods...two week ago, we looked at real factory inventories with price adjustments for goods at various stages of production, and judged those inventories would have a negative impact on 4th quarter GDP…then last week, we found that real wholesale inventories were higher in October after being down sharply in the 3rd quarter and hence would have a substantial positive impact on 4th quarter GDP growth….since the nominal value of retail inventories for October has now been shown to be 0.9% higher, real retail inventories for the month, after the 0.5% finished goods price adjustment, thus would have thus increased by 0.4% from September, after a third quarter that saw a small real decrease in real retail inventories, before the pending revision we noted above...therefore, any retail inventory increase over the 4th quarter would add the amount of the 3rd quarter decrease, plus the amount of the 4th quarter increase, to the growth of 4th quarter GDP... 

 

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

Sunday, December 13, 2020

November’s consumer and producer prices, October's business inventories and JOLTS

Major reports released this week included the November Consumer Price Index, the November Producer Price Index, and the Job Openings and Labor Turnover Survey (JOLTS) for October, all from from the Bureau of Labor Statistics, and the October report on Wholesale Trade, Sales and Inventories from the Census Bureau...in addition, on Monday the Fed released the Consumer Credit Report for October, which indicated that overall consumer credit, a measure of non-real estate debt, expanded by a seasonally adjusted $7.2 billion, or at a 2.1% annual rate, as non-revolving credit expanded at a 4.8% rate to $3,184.6 billion while revolving credit outstanding contracted at a 6.7% rate to $979.6 billion.... meanwhile, this week's major private report was the Mortgage Monitor for October from Black Knight Financial Services, which indicated that 6.44% of all mortgages were delinquent in October, down from 6.66% in September but up from 3.39% in October of 2019, and that a record low 0.33% of all mortgages were in the foreclosure process, down from the 0.34% that were in foreclosure in September and  down from the 0.48% that were in foreclosure a year ago...

CPI Rose 0.2% in November on Higher Prices for Utilities, Clothing, Appliances, and Transportation Services

The consumer price index rose 0.2% in November, as higher prices for utilities, clothing, household equipment, hotels and transportation services were only partially offset by lower prices for groceries and used vehicles...the Consumer Price Index Summary from the Bureau of Labor Statistics indicated that average seasonally adjusted prices were 0.2% higher in November after being unchanged in October, rising by by 0.2% in September, 0.4% in August, by 0.6% in July and by 0.6% in June, after falling by 0.1% in May, falling by 0.8% in April and by 0.4% in March, but after rising by 0.1% in February, by 0.1% in January, by 0.2% in December, and rising by 0.2% last November....the unadjusted CPI-U index, which was set with prices of the 1982 to 1984 period equal to 100, actually fell from 260.388 in October to 260.229 in November, which left it statistically 1.1745% higher than the 257.208 reading of October of last year, which is reported as a 1.2% year over year increase, same as the year over year increase reported a month ago....with higher prices for utilities offset by lower prices for groceries, seasonally adjusted core prices, which exclude food and energy, were also 0.2% higher for the month, as the unadjusted core price index rose from 269.328 to 269.473, which left the core index 1.6465% ahead of its year ago reading of 265.108, which is reported as a 1.6% year over year increase, also the same as the year over year core price increase that was reported for October...

The volatile seasonally adjusted energy price index rose 0.4% in November, after rising 0.1% in October, 0.8% in September, 0.9% in August, 2.5% in July, 5.1% in June, but falling by 1.8% in May, by 10.1% in April, 5.8% in March, 2.0% in February and by 0.7% in January, but after rising 1.6% in December, 0.8% in November and by 1.7% last October, but is still 9.4% lower than in November a year ago...the price index for energy commodities was 0.2% lower in November, while the index for energy services was 1.1% higher, after rising 0.8% in October....the energy commodity index was down 0.2% on a 0.4% decrease in the price of gasoline, which was partially offset by a 3.6% increase in the index for fuel oil, while prices for other energy commodities, including propane, kerosene, and firewood, were on average 0.2% higher...within energy services, the price index for utility gas service rose 3.1% after falling 0.7% in October and is now 4.4% higher than it was a year ago, while the electricity price index rose 0.5% after rising 1.2% in October....energy commodities are still averaging 19.3% lower than their year ago levels, with gasoline prices averaging 19.8% lower than they were a year ago, while the energy services price index is now up 2.3% from last November, as electricity prices are now 1.6% higher than a year ago…

The seasonally adjusted food price index fell 0.1% in November, after rising 0.2% in October, being unchanged in September, rising 0.1% in August, falling 0.4% in July, rising 0.6% in June, 0.7% in May, 1.5% in April, 0.3% in March, 0.4% February, 0.2% January, 0.2% December, 0.1% in November, 0.2% October, 0.2% September, but after being unchanged last June, July & August, as the price index for food purchased for use at home was 0.3% lower in November, after rising 0.1% in October, while the index for food bought to eat away from home was 0.1% higher, as average prices at fast food outlets rose 0.2% and prices at full service restaurants rose 0.3%, while food prices at employee sites and schools averaged 6.4% lower...

In the food at home categories, the price index for cereals and bakery products was 0.5% lower as average bread prices fell 0.5%, the price index for fresh biscuits, rolls, muffins fell 0.7%, the price index for cookies fell 1.7%, and the price index for frozen and refrigerated bakery products, pies, tarts, turnover fell 2.3%....on the other hand, the price index for the meats, poultry, fish, and eggs food group was 0.1% higher as the price index for beef and veal rose 0.1% and egg prices rose 1.0%, while the price indexes for pork and poultry were unchanged...at the same time, the seasonally adjusted index for dairy products was 0.3% higher, as whole milk prices rose 0.6% and the index for ice cream and related products was 0.9% higher....meanwhile, the fruits and vegetables index was unchanged as the price index for fresh fruits rose 0.6% on a 6.7% increase in prices for oranges while the price index for fresh vegetables fell 0.8% on a 5.1% decrease in tomato prices...at the same time, the beverages price index was 0.9% lower as the price index for carbonated drinks fell 1.7% and the price index for coffee fell 1.8%....lastly, the price index for the ‘other foods at home’ category was 0.6% lower, as the price index for butter and margarine fell 2.2%, the price index for snacks fell 0.9%, and the price index for soups fell 1.2%...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 November, just the price index for uncooked beef roasts, which has risen 11.3%, is the only food line item showing a change greater than 10% over the past year...

Among the seasonally adjusted core components of the CPI, which was 0.2% higher in November after being unchanged in October, after rising by 0.2% in September, 0.4% in August, by 0.6% in July and by 0.2% in June, after falling by 0.1% in May, by 0.4% in April and by 0.1% in March, but after rising by 0.2% in February, 0.2% in January, 0.1% December, and by 0.2% last November, the composite price index of all goods less food and energy goods was 0.1% higher in November, while the more heavily weighted composite for all services less energy services was 0.2% higher....

Among the goods components, which will be used by the Bureau of Economic Analysis to adjust November's retail sales for inflation in national accounts data, the price index for household furnishings and supplies was 0.9% higher as the price index for major appliances rose 3.4% on a 6.1% price increase for laundry equipment, and the price index for furniture and bedding rose 0.8% on a 1.7% increase in the price index for bedroom furniture....at the same time, the apparel price index was also 0.9% higher on a 2.2% increase in the price index for men's suits, sport coats, and outerwear, a 3.7% increase in the price index for men's shirts and sweaters, a 2.7% increase in the price index for girls' apparel, and a 3.5% increase in the price index for infants' and toddlers' apparel....on the other hand, the price index for transportation commodities other than fuel was 0.6% lower, as prices for new cars fell 0.1%, prices for used cars and trucks fell 1.3% and the price index for tires fell 0.4%....meanwhile, the price index for medical care commodities 0.3% lower, as prescription drug prices fell 0.1% and the price index for medical equipment and supplies fell 5.3%...however, the recreational commodities index was 0.3% higher on a 1.1% increase in TV prices, a 1.1% increase in the price index for pets, pet supplies, & accessories, a 1.0% increase in the price index for newspapers and magazines, and a 0.7% increase in the price index for sports equipment...at the same time, the education and communication commodities index was 0.4% higher on a 2.2% increase in the price index for computers, peripherals, and smart home assistants and a 4.6% increase in the price index for computer software and accessories….lastly, a separate price index for alcoholic beverages was 0.4% higher, while the price index for ‘other goods’ was up 0.4% on a 2.8% increase in the price index for stationery, stationery supplies, & gift wrap..

Within core services, the price index for shelter was 0.1% higher as rents and homeowner's equivalent rent were both unchanged, while prices for lodging away from home at hotels and motels rose 4.5%, while at the same time the shelter sub-index for water, sewers and trash collection rose 0.3% and other household operation costs were on average 0.4% lower on a 1.1% decrease in domestic services....meanwhile, the price index for medical care services was 0.1% lower, as the price index for eyeglasses and eye care fell 0.5% and the average price of health insurance fell 1.0%... however, the transportation services price index was 1.8% higher as airline fares rose 3.5%, car and truck rentals rose 4.4%, vehicle insurance costs rose 1.1% and the price index for intercity bus fare rose 18.0%...meanwhile, the recreation services price index rose 0.5% as the index for fees for lessons or instructions rose 1.5% and the index for admissions to movies, concerts and sporting events rose 1.8%....at the same time, the index for education and communication services was unchanged as the price index delivery services rose 0.6% while the price index for wireless telephone services fell 0.2%...lastly, the index for other personal services was down 0.3% as the price index for checking accounts and other bank services fell 8.3% and the price index for apparel services other than laundry and dry cleaning was 0.6% lower...

Among core line items, the price index for telephone hardware, calculators, and other consumer information items, which is down by 15.9% since last November, the price index for computer software and accessories, which is down 13.4% year over year, the price index for men's suits, sport coats, and outerwear, which has fallen 21.4% from a year ago, the price index for women's dresses, which has fallen by 13.5% in the past year, the price index for medical equipment and supplies which is down by 10.5% from a year ago, the price index for lodging away from home including hotels and motels, which has fallen by 12.7% in the past year, and airline fares, which are now down by 17.0% since last November, have all seen prices drop by more than 10% over the past year, while the cost of Intercity bus fare, which is now up by 13.8% over the past year, the price index for used cars and trucks, which has risen 10.9% from a year ago, the price index for infant's equipment, which is up by 17.9% year over year, and the price index for major appliances, which is up 17.2% from last November, are the only line items to have increased by a double digit magnitude over that span.... 

Producer Prices rose 0.1% in November on Higher Wholesale Food & Energy Prices

The seasonally adjusted Producer Price Index (PPI) for final demand rose 0.1% in November, as prices for finished wholesale goods averaged 0.4% higher while margins of final service providers were on average unchanged....that followed an October report wherein the PPI rose 0.3%, as prices for finished wholesale goods averaged 0.5% higher while margins of final service providers averaged 0.2% higher, a September report that showed the PPI rose 0.4%, as prices for both finished wholesale goods and margins of final service providers averaged 0.4% higher, a now revised August report that indicates the PPI was 0.2% higher, as prices for finished wholesale goods averaged 0.3% higher while margins of final service providers averaged 0.2% higher, and a re-revised July report that now has the PPI 0.6% higher, as prices for finished wholesale goods averaged 0.7% higher while margins of final service providers averaged 0.5% higher....on an unadjusted basis, producer prices are now 0.8% higher than a year ago, up from the 0.5% year over year increase indicated by last month's report, while the core producer price index, which excludes food, energy and trade services, also rose by 0.1% for the month, and is now 0.9% higher than in November a year ago, up from the 0.8% year over year increase shown in October ...

As noted, the price index for final demand for goods, aka 'finished goods', was 0.4% higher in November, after being 0.5% higher in October, 0.4% higher in September, 0.3% higher in August, 0.7% higher in July, 0.4% higher in June, 1.5% higher in May, 3.0% lower in April, 1.0% lower in March, 0.9% lower in February, 0.3% higher in January, 0.2% higher in December, and 0.3% higher in November of last year....the finished goods price index rose 0.4% in November because the price index for wholesale energy goods was 1.2% higher, after it had risen by 0.8% in October, fallen by 0.3% in September, risen by a revised 0.7% in August, by 4.6% in July, and by 9.6% in June, and because the price index for wholesale foods rose 0.5%, after rising by 2.4% in October, by 1.2% in September, after being unchanged in August, and rising a revised 0.8% in July, while the index for final demand for core wholesale goods (excluding food and energy) was 0.2% higher, after being unchanged in October, 0.4% higher in September and 0.3% higher in July and August....wholesale energy prices averaged 1.2% higher due to a 8.4% increase in wholesale prices for No.2 diesel fuel, a 6.6% increase in wholesale prices for LP gas, and a 2.7% increase in wholesale prices for residential natural gas, while the wholesale price price of gasoline fell 1.9%...meanwhile, the wholesale food price index rose 0.5% on a 3.0% increase in wholesale prices for dairy products, an 8.8% increase in wholesale prices for pork, a 7.0% increase in wholesale prices for processed young chickens, and a 6.7% increase in the wholesale price index for grains....among wholesale core goods, the wholesale price index for passenger cars rose 0.8%, the wholesale price index for women's, girls', and infants' apparel rose 0.7%, and the wholesale price index for cigarettes rose 1.9% while the wholesale price index for metal forming machine tools fell 3.2% ..

At the same time, the index for final demand for services was unchanged in November, after rising 0.2% in October, 0.4% in September, a revised 0.2% in August, and a revised 0.5% in July, as the index for final demand for trade services fell 0.3% and the index for final demand for transportation and warehousing services fell 0.9%, while the core index for final demand for services less trade, transportation, and warehousing services was 0.2% higher... among trade services, seasonally adjusted margins for TV, video, and photographic equipment and supplies retailers fell 25.5%, margins for RVs, trailers, and campers retailers fell 15.4%, margins for hardware, building materials, and supplies retailers fell 6.7%, and margins for fuels and lubricants retailers fell 8.2%... among transportation and warehousing services, average margins for airline passenger services fell 7.1% while average margins for truck transportation of freight rose 1.6%...among the components of the core final demand for services index, the index for arrangement of flights (partial) rose 6.7%, the index for advertising space sales in periodicals, newspapers, directories, and mailing lists rose 1.3%, margins for hospital outpatient care rose 1.0%, while margins for arrangement of cruises and tours fell 9.6%…

This report also showed the price index for intermediate processed goods rose 1.4% in November, after rising 0.3% in October, 1.0% in September, 0.6% in August, 1.4% in July, and 1.3% in June, but after being unchanged in May and falling the prior 5 months....the price index for intermediate energy goods rose 6.0%, as producer prices for natural gas sold to electric utilities rose 61.8% and producer prices for natural gas sold to industry rose 10.5%, while refinery prices for gasoline fell 1.9%... meanwhile, the price index for intermediate processed foods and feeds rose 2.8%, as the producer price index for processed poultry rose 4.6%, the producer price index for meats rose 3.4% and the producer price index for prepared animal feeds rose 4.1%...at the same time, the core price index for intermediate processed goods less food and energy rose 0.1% as the producer price index for secondary nonferrous metals rose 7.8%, the producer price index for phosphates rose 4.4%, and the producer price index for hardwood lumber rose 4.5%, while the producer price index for softwood lumber fell 17.8%...however, prices for intermediate processed goods are still 0.3% lower than in November a year ago, the 19th 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 prices for intermediate goods fell every month from July 2015 through March 2016....

Meanwhile, the price index for intermediate unprocessed goods rose 7.3% in November, after rising 2.6% in October, 3.9% in September, rising a revised 4.0% in August and a revised 1.0% in July, and rising 5.1% in June and 8.6% in May, but after falling 12.6% in April and 8.5% in March....that was as the November price index for crude energy goods rose 16.5% as crude oil prices rose 0.5% while unprocessed natural gas prices rose 48.9%, and as the price index for unprocessed foodstuffs and feedstuffs rose 3.9% on an 18.5% jump in the price of raw milk, an 11.2% increase in the price of alfalfa hay, and a 7.0% increase in the price of unprocessed corn...at the same time, the index for core raw materials other than food and energy materials rose 2.3%, as producer prices for hides and skins rose 26.0%, the producer price index for nonferrous metal ores rose 8.7%, and raw cotton prices rose 4.4%... this raw materials index is now 0.6% higher than a year ago, the first annual increase in almost 2 years, as the year over year change on this index had been negative since the beginning of 2019...

Lastly, the price index for services for intermediate demand fell 0.1% in November, after rising 0.8% in October, 1.0% in September, 0.7% in August, a revised 0.4% in July, and 0.3% in June, after falling revised 0.3% in May, and falling 1.7% in April...the price index for intermediate trade services was 0.4% higher, as margins for intermediate chemicals and allied products wholesalers rose 2.3% and margins for intermediate machinery and equipment parts and supplies wholesalers rose 4.4%...meanwhile, the index for transportation and warehousing services for intermediate demand was 0.5% lower, as the intermediate price index for arrangement of freight and cargo fell 7.9% and the intermediate price index for transportation of passengers (partial) fell 6.9%...at the same time, the core price index for intermediate services less trade, transportation, and warehousing was unchanged, as the intermediate price index for investment banking rose 4.1% and the intermediate price index for truck, utility trailer, and RV rental and leasing rose 2.9% while the intermediate price index for securities brokerage, dealing, investment advice, and related services fell 2.3% and the intermediate price index for permanent job placement services fell 1.6%...over the 12 months ended in November, the year over year price index for services for intermediate demand is still 1.6% higher than it was a year ago, the third positive annual change since it turned negative year over year in April for the first time in the history of this index...

Job Openings and Firing Increase in October, Hiring Decreases, Job Quitting Little Changed

The Job Openings and Labor Turnover Survey (JOLTS) report for October from the Bureau of Labor Statistics estimated that seasonally adjusted job openings increased by 158,000, from 6,494,000 openings in September to  6,652,000 in October, after September job openings were revised 58,000 higher, from 6,436,000 to 6,494,000....however, October's jobs openings were still 9.0% lower than the 7,309,000 job openings reported in October a year ago, as the job opening ratio expressed as a percentage of the employed rose to 4.5% in October from 4.4% September, while it was down from 4.6% in October a year ago...among the largest gains, job openings in health care and social assistance increased from 1,110,000 to  1,232,000, while job openings in the finance and insurance sector fell from 240,000 to 211,000 (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 tables 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 October, seasonally adjusted new hires totaled 5,812,000, down by 64,000 from the revised 5,886,000 who were hired or rehired in September, as the hiring rate as a percentage of all employed fell to 4.1% from 4.2% in September, but was up from from 3.8% hiring rate in October a year earlier (details of hiring by sector since March are in table 2)....meanwhile, total separations rose by 263,000, from 4,844,000 in September to 5,107,000 in October, while the separations rate as a percentage of the employed rose to 3.6%, up from 3.4% in September but down from 3.7% in October a year ago (see table 3)...subtracting the 5,107,000 total separations from the total hires of 5,812,000 would imply an increase of 705,000 jobs in October, more than the revised payroll job increase of 610,000 for October reported in the November establishment survey of last week, but still within the expected +/-115,000 margin of error for these reports....

Breaking down the seasonally adjusted job separations, the BLS finds that 3,092,000 of us voluntarily quit our jobs in October, up by 18,000 from the 3,074,000 who quit their jobs in September, while the quits rate, widely watched as an indicator of worker confidence, remained at 2.2% of total employment, which was down from the 2.3% quits rate of a year earlier (see details in table 4)....in addition to those who quit, another 1,680,000 were either laid off, fired or otherwise discharged in October, up by 243,000 from the revised 1,437,000 who were discharged in September, as the discharges rate rose from 1.0% to 1.2% of all those who were employed during the month, same as the discharges rate of 1.2% a year earlier....meanwhile, other separations, which includes retirements and deaths, were at 336,000 in October, up from 333,000 in September, for an 'other separations rate’ of 0.2%, which was unchanged from September and from October 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 by using the links to tables at the bottom of the press release...

October Wholesale Sales Up 1.8%, Wholesale Inventories Up 1.1%

The October report on Wholesale Trade, Sales and Inventories (pdf) from the Census Bureau estimated that the seasonally adjusted value of wholesale sales was at "$496.6 billion, up 1.8 percent (±0.4 percent) from the revised September level and up 0.9 percent (±0.7 percent) from the revised October 2019 level.  September's sales were revised from the $486.0 billion reported last month to $487.7 billion and hence The August 2020 to September 2020 percent change was revised from the preliminary estimate of up 0.1 percent (±0.4 percent)* to up 0.4 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 left in a warehouse represent goods that were produced but not sold, and this October report estimated that wholesale inventories were valued at a seasonally adjusted "$649.0 billion at the end of October, up 1.1 percent (±0.4 percent) from the revised September level. Total inventories were down 2.2 percent (±0.9 percent) from the revised October 2019 level.”   they also report that "The September 2020 to October 2020 percent change was revised from the advance estimate of up 0.9 percent (±0.4 percent) to up 1.1 percent (±0.4 percent). to up 0.1 percent (±0.4 percent)*.” in reference to the sketchy Advance Report on Wholesale and Retail Inventories, which was released before the release of 3rd quarter GDP revisions...September inventories are now shown to be at $641,649 million, revised from the wholesale inventory figure of $638.5 billion reported a month ago...

To estimate the effect of October wholesale inventories on 4th quarter GDP, we must first adjust them for changes in price with appropriate components of the producer price index...although details are not broken out, we've previously estimated that more than 2/3rd of wholesale inventories are finished goods, with notable exceptions such as crude oil and farm product inventories...meanwhile, the producer price index for October indicated that prices for finished goods rose an average of 0.5%, that prices for intermediate processed goods were on average 2.2% higher, and that prices for unprocessed goods were 2.6% higher....hence the 1.1% increase in the nominal value of wholesale inventories suggests an increase of around 0.4% or 0.5% in real terms...since real wholesale inventories in the 3rd quarter were down sharply, any increase in real wholesale inventories in the 4th quarter would thus add to the growth of 4th quarter GDP by first reversing the 3rd quarter decline, and then by incrementing that with the magnitude of the 4th quarter increase...

 

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

Sunday, December 6, 2020

November’s jobs report; October’s trade deficit, construction spending, and factory inventories

In addition to the Employment Situation Summary for November from the Bureau of Labor Statistics, this week's economic releases included three reports that will feed into 4th quarter GDP: the Commerce Department report on our International Trade for October, the October report on Construction Spending (pdf), and the Full Report on Manufacturers' Shipments, Inventories and Orders for October, both from the Census Bureau..In addition, the week brought us the last regional Fed manufacturing survey for November; the Dallas Fed Texas Manufacturing Outlook Survey, which covers Texas and adjacent counties in Louisiana and New Mexico, reported its general business activity index fell to +12.0 in November from +19.8 in October, indicative of a moderation of the ongoing recovery of the Texas area economy... 

The week’s major privately issued reports included the ADP Employment Report for November; the light vehicle sales report for November from Wards Automotive, which estimated that such vehicles sold at a 15.55 million annual rate in November, down from the 16.21 million annual rate in October, and down from the 17.40 million annual rate in November a year ago; and both of the widely followed purchasing manager's surveys from the Institute for Supply Management (ISM): the November Manufacturing Report On Business® indicated that the manufacturing PMI (Purchasing Managers Index) fell to 57.5% in November, down from 59.3% in October, indicating a more moderate growth rate of US manufacturing, and the November Services Report On Business; which saw the Services index slip to 55.9% in November, down from 56.6% in October, meaning a slightly smaller plurality of service industry purchasing managers reported expansion in various facets of their business in November than in October...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 245,000 Jobs in November: Unemployment Rate and Labor Force Participation Rate Both 0.2% Lower

The Employment Situation Summary for November from the Bureau of Labor Statistics indicated that the rebound in payroll jobs after the March and April collapse continued for a 7th consecutive month, and that the unemployment rate fell by 0.2% to 6.7%, but that was because the labor force participation rate also fell 0.2% to 61.5%…estimates extrapolated from the seasonally adjusted establishment survey data projected that employers added 245,000 jobs in November, after the previously estimated payroll job increase for September was revised up from up from 672,000 to 711,000, while the payroll jobs increase for October was revised down from 638,000 to 610,000… however, despite 7 months of job gains, November's non-farm payrolls still remained 9,807,000 jobs below the 152,436,000 seasonally adjusted jobs that were reported in February...the unadjusted data, meanwhile, shows that there were actually 517,000 more payroll jobs extent than in October, 302,100 of which were seasonal jobs additions in the retail sector that were eliminated from the reported figure by the seasonal adjustments...

Seasonally adjusted job increases in November were seen throughout the private goods producing and service sectors, while the retail sector showed a seasonally adjusted 34,700 reduction in jobs as less were hired than was expected, and the government sector showed 99,000 fewer jobs, reflecting the loss of 93,000 temporary workers who had been hired for the 2020 Census....the largest job increase was the addition of 145,000 jobs in transportation and warehousing, with 81,900 of those hired as couriers or messengers and 36,800 in warehousing and storage....the broad professional and business services sector added 60,000 more jobs, with 32,200 of those working for temporary help services and 14,200 employed performing services to buildings and dwellings....the health care and social assistance sector added 58,600 jobs, with the addition of 20,900 jobs in doctor's offices and 13,000 jobs in home health care services.…the leisure and hospitality sector added 31,000 jobs, as a loss of 17,400 jobs in bars and restaurants was more than offset by the addition of 21,400 jobs in performing arts and spectator sports and 18,700 additional jobs in amusements, gambling, and recreation....another 27,000 jobs were added in manufacturing, with 17,800 of those employed in the manufacture of transportation equipment, while construction employment also rose by 27,000, including 14,100 jobs with residential specialty trade contractors and 9,500 more employed by heavy and civil engineering construction contractors...another 15,000 jobs were added in the financial activities, led by 10,100 jobs in real estate....meanwhile, employment in other major sectors, including resource extraction, wholesale trade, utilities, private educational services, the information sector, and other services all saw little change in November...

The establishment survey also showed that average hourly pay for all employees rose by 9 cents an hour to $29.58 an hour in November, after it had increased by a revised 3 cents an hour in October; at the same time, the average hourly earnings of production and non-supervisory employees increased by 7 cents to $24.87 an hour...employers also reported that the average workweek for all private payroll employees was unchanged at 34.8 hours in November, while weekly hours for production and non-supervisory personnel was unchanged at 34.2 hours...at the same time, the manufacturing workweek decreased by 0.2 hours to 40.3 hours, while average overtime decreased by 0.1 hour to 3.1 hours...

Meanwhile, the November household survey indicated that the seasonally adjusted extrapolation of those who reported being employed fell by an estimated 74,000 to 149,732,000, while the estimated number of those unemployed and looking for work fell by 326,000 to 10,735,000, and as a result the total labor force decreased by a total of 400,000....since the working age population had grown by 160,000 over the same period, that meant the number of employment aged individuals who were not in the labor force rose by 560,000 to 100,618,000, which was enough to lower the labor force participation rate from 61.7% in October to 61.5% in November....meanwhile, the decrease in number employed as a percentage of the population was enough to lower the employment to population ratio, which we could think of as an employment rate, from 57.4% in October to 57.3% in November...at the same time, the decrease in the number unemployed was enough to lower the unemployment rate by 0.2% to 6.7%....meanwhile, the number of those who reported they were forced to accept just part time work fell by 23,000, from 6,683,000 in October to 6,660,000 in November, which was enough to lower the alternative measure of unemployment, U-6, which includes those "employed part time for economic reasons", from 12.1% of the labor force in October to 12.0% in November, the lowest since March...

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.. 

October Trade Deficit Rose 1.7% After September Deficit Was Revised 2.8% Lower

Our trade deficit rose 1.7%% in October as the value of both our exports and our imports increased, but our imports increased by more....the Commerce Dept report on our international trade in goods and services for October indicated that our seasonally adjusted goods and services trade deficit rose by $1.0 billion to $63.1 billion in October from a revised September deficit of $62.1 billion, which had previously been reported as a deficit of $63.9 billion; in addition, trade figures for the months going back to April were also revised...the value of our October exports rose by $4.0 billion to $182.0 billion on a $3.7 billion increase to $126.3 billion in our exports of goods and a $0.3 billion increase to $55.7 billion in our exports of services, while our imports rose by $5.0 billion to $245.1 billion on a $4.3 billion increase to $207.8 billion in our imports of goods and a $0.7 billion increase to $37.4 billion in our imports of services...export prices were on average 0.2% higher in October, which means the relative real increase in exports for the month was smaller than the nominal increase by that percentage, while import prices averaged 0.1% lower, meaning the increase in real imports was larger than the nominal dollar change reported here by that percentage...

The increase in our October exports of goods was led by higher exports of industrial supplies and materials and an increase in our exports of capital goods...referencing the Full Release and Tables for October (pdf), in Exhibit 7 we find that our exports of industrial supplies and materials rose by $1621 million to $40,964 million on a $469 million increase in our exports of natural gas, a $405 million increase in our exports of organic chemicals, and a $340 million increase in our exports of natural gas liquids, and that our exports of capital goods rose by $1471 million to $39,142 million on a $744 million increase in our exports of engines for civilian aircraft, and a $383 million increase in our exports of semiconductors...in addition, our exports of consumer goods rose by $904 million to $16,196 million on a $540 million increase in our exports of gem diamonds, and our exports of automotive vehicles, parts, and engines rose by $158 million to $12,674 million on a $235 million increase in our exports of passenger cars...partially offsetting the increases in those export categories, our exports of foods, feeds and beverages fell by $499 million to $12,368 million on a $724 million decrease in our exports of soybeans, and our exports of other goods not categorized by end use fell by $25 million to $4,822 million....

Exhibit 8 in the Full Release and Tables gives us seasonally adjusted details on our goods imports and shows that higher imports of consumer goods, capital goods, industrial supplies and materials, and of automotive goods were all major contributors to the $4.3 billion increase in our goods imports....our imports of consumer goods rose by $1411 million to $57,186 million on a $1,058 million increase in our imports of cellphones, a $598 million increase in our imports of toys, games and sporting goods, and a $318 million increase in our imports of cotton apparel and household goods, and our imports of capital goods rose by $1375 million to $56,884 million on a $554 million increase in our imports of computer accessories, a $266 million increase in our imports of industrial machines other than those itemized separately, and increased imports in most other types of capital goods, which were partially offset by a $492 million decrease in our exports of computers...in addition, our imports of automotive vehicles, parts and engines rose by $1,012 million to $32,203 million on a $484 million increase in our imports of vehicle parts and accessories other than bodies and chassis, engines and tires and a $308 million increase in our imports of of new and used passenger cars, and our imports of industrial supplies and materials rose by $1327 million to $38,214 million on a $493 million increase in our exports of non-monetary gold and a $378 million increase in our imports of crude oil, which were partially offset by a $432 million decrease in our imports of precious metals other than those itemized separately....slightly offsetting the increases in those import categories, our imports of foods, feeds, and beverages fell by $180 million to $13,350 million and our imports of other goods not categorized by end use fell by $260 million to $8,746 million..

The press release for this month's report summarizes Exhibit 19 in the Full Release and Tables pdf, giving us surplus and deficit details on our goods trade with selected  countries:

The October figures show surpluses, in billions of dollars, with South and Central America ($2.2), OPEC ($2.1), Hong Kong ($1.9), United Kingdom ($1.3), Saudi Arabia ($0.7), and Brazil ($0.5). Deficits were recorded, in billions of dollars, with China ($26.5), European Union ($15.7), Mexico ($11.8), Japan ($5.7), Germany ($5.2), South Korea, ($3.0), Taiwan ($3.0), India ($2.6), Italy ($2.5), Canada ($1.3), France ($0.9), and Singapore (less than $0.1).

  • The deficit with China increased $2.2 billion to $26.5 billion in October. Exports increased $1.1 billion to $13.1 billion and imports increased $3.3 billion to $39.7 billion.
  • The deficit with Mexico increased $1.1 billion to $11.8 billion in October. Exports increased $0.7 billion to $19.2 billion and imports increased $1.8 billion to $31.0 billion.
  • The deficit with the European Union decreased $1.6 billion to $15.7 billion in October. Exports decreased $0.2 billion to $19.4 billion and imports decreased $1.8 billion to $35.2 billion.

The $1.8 billion downward revision to the September trade deficit would normally have the effect of decreasing the annualized 3rd quarter trade deficit by about $7.2 billion before inflation adjustment, but since trade figures going back to April were also revised with this report, the trade deficit for the 2nd quarter would need to be recomputed before one could get an accurate read of the impact of the 3rd quarter revisions on the change in GDP...however, the BEA will not revise the 2nd quarter trade figures in the National Income and Product Accounts until the annual revision to GDP next summer, while the downward revisions to 3rd quarter trade will be applied to the 3rd estimate of GDP that will be out at the end of this month...hence, that estimate will more than likely incorrectly overstate the positive impact of the downward revisions to the 3rd quarter trade deficit that accompany this report..

Meanwhile, to estimate the impact of October trade in goods on 4th quarter GDP growth figures, we'll use exhibit 10 in the pdf for this report, which gives us monthly goods trade figures by end use category and in total, already adjusted in chained 2012 dollars, the same inflation adjustment used by the BEA to compute trade figures for GDP, with the exception that they are not annualized here....from that table, we can figure that 3rd quarter real exports of goods averaged 136,611 million monthly in 2012 dollars, while inflation adjusted October exports were at 143,728 million in that same 2012 dollar quantity index representation... annualizing the change between those two figures, we find that October's real exports of goods are running at a 22.52% annual rate above those of the 3rd quarter, or at a pace that would add about 1.05 percentage points to 4th quarter GDP if continued through November and December.....in a similar manner, we find that our 3rd quarter real imports of goods averaged 227,055.3 million monthly in chained 2012 dollars, while inflation adjusted October goods imports were at 233,667 million in that same 2012 dollar representation...that would indicate that so far in the 4th quarter, we have seen our real imports increase at annual rate of 12.17% from those of the 3rd 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 12.17% rate would subtract about 0.85 percentage points from 4th quarter GDP....hence, if the October trade deficit is maintained at the same level throughout the 4th quarter, our improving balance of trade in goods could add a net of roughly 0.20 percentage points to the growth of 4th quarter GDP.....however, note that we have not included the impact of the less volatile change in services in our figures here because the BEA does not provide inflation adjusted data on those, but that our services imports increased by more than twice that of our services export increase, and hence trade in services will have a negative impact on 4th quarter GDP... 

Construction Spending Rose 1.3% in October after Prior Months Were Revised Higher

The Census Bureau's report on construction spending for October (pdf) estimated that the month's seasonally adjusted construction spending would work out to $1,438.5 billion annually if extrapolated over an entire year, which was 1.3 percent (±1.0 percent) above the revised September estimated annual rate of $1,420.4 billion and 3.7 percent (±1.3 percent) above the estimated annual rate of construction spending in October of last year. The annualized September construction spending estimate was revised almost 0.5% higher, from $1,414.0 billion to $1,420.4 billion, while the annual rate of construction spending for August was revised nearly 1.2% higher, from $1,410.4 billion to $1,426.884 billion.  The combined upward revisions of $22.9 billion to annualized August and September construction spending figures would be averaged over the 3 months of the quarter and increase the annualized 3rd quarter construction figures by around $7.6 billion before any inflation adjustment, which would thus suggest a upward revision of about 0.20 percentage points to the relevant components of third quarter GDP when the third estimate is released on December 22nd...

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

  • Private Construction: Spending on private construction was at a seasonally adjusted annual rate of $1,093.7 billion, 1.4 percent (±0.7 percent) above the revised September estimate of $1,078.9 billion. Residential construction was at a seasonally adjusted annual rate of $637.1 billion in October, 2.9 percent (±1.3 percent) above the revised September estimate of $619.1 billion. Nonresidential construction was at a seasonally adjusted annual rate of $456.6 billion in October, 0.7 percent (±0.7 percent)* below the revised September estimate of $459.9 billion.
  • Public Construction: In October, the estimated seasonally adjusted annual rate of public construction spending was $344.8 billion, 1.0 percent (±1.6 percent)* above the revised September estimate of $341.4 billion. Educational construction was at a seasonally adjusted annual rate of $86.4 billion, 1.1 percent (±2.5 percent)* above the revised September estimate of $85.4 billion. Highway construction was at a seasonally adjusted annual rate of $92.6 billion, 1.6 percent (±4.3 percent)* above the revised September estimate of $91.2 billion.

As you can tell from the above, the construction spending reported here would be included in 3 subcomponents of GDP; investment in private non-residential structures, investment in residential structures, and into government investment outlays, for both state and local and Federal governments...however, getting an accurate read on the impact of October spending reported in this release on 4th quarter GDP is difficult because all figures given here are in nominal dollars and as you know, data used to compute the change in GDP must be adjusted for changes in price.  There are multiple prices indexes for different types of construction listed in the National Income and Product Accounts Handbook, Chapter 6 (pdf), so in lieu of trying to adjust for all of those types of construction separately, we've opted to use the producer price index for final demand construction as an inexact shortcut to make the needed price adjustment on the total. That index showed that aggregate construction costs were unchanged month over month in October, after decreasing 0.2% in August and 0.2% in September... 

On that basis, we can estimate that October construction costs were roughly 0.4% less than those of July, 0.2% less than those of August, and obviously unchanged from September. We'll then use those percentages to deflate higher cost spending figures for those months, which is arithmetically the same as inflating lower cost October construction spending, for purposes of comparison.  Annualized construction spending in millions of dollars for the third quarter months is given as $1,420,355 in September, $1,426,884 in August, and $1,398,952 in July.   Thus to adjust October's nominal construction spending of $1,438,515 million for inflation and compare it to that of the third quarter, our arithmetic formula would be: 1,438,515  / (((1,420,355 * 1) + ( 1,426,884 *.998) + (1,398,952 * .996)) / 3) = 1.01836, meaning real construction in October averaged 1.8% higher than that of the 3rd quarter, or rose at a 7.55% annual rate.   To figure the effect of that change on GDP,  we figure the difference between the third quarter inflation adjusted average and that of October and take the annualized result of that as a fraction of the inflation adjusted 3rd quarter GDP figure, and find that October construction spending is rising at a rate that would add ~0.76 percentage points to 4th quarter GDP, assuming hypothetically that there would be no change in real construction over the next two months....

Factory Shipments Rose 1.0% in October, Factory Inventories Rose 0.2% on Higher Prices

The Full Report on Manufacturers' Shipments, Inventories, & Orders (pdf) for October from the Census Bureau reported that the seasonally adjusted value of new orders for manufactured goods rose by $4.9 billion or 1.0 percent to $480.8 billion in October, following an increase of 1.3% to $475.9 billion in September, which was revised from the 1.1% increase to $475.0 billion that was reported for September 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 October advance report on durable goods we reported on last week...on those durable goods revisions, the Census Bureau's own summary, which precedes their detailed spreadsheet of the metrics included in this report, is quite clear and complete, so we'll just quote directly from that summary here:

  • Summary: New orders for manufactured goods in October, up six consecutive months, increased $4.9 billion or 1.0 percent to $480.8 billion, the U.S. Census Bureau reported today. This followed a 1.3 percent September increase. Shipments, also up six consecutive months, increased $4.9 billion or 1.0 percent to $488.6 billion. This followed a 0.5 percent September increase. Unfilled orders, down seven of the last eight months, decreased $2.6 billion or 0.2 percent to $1,073.3 billion. This followed a 0.2 percent September decrease. The unfilled orders-to-shipments ratio was 6.38, down from 6.57 in September. Inventories, up two of the last three months, increased $1.2 billion or 0.2 percent to $687.3 billion. This followed a 0.1 percent September decrease. The inventories-to-shipments ratio was 1.41, down from 1.42 in September.
  • New orders for manufactured durable goods in October, up six consecutive months, increased $3.2 billion or 1.3 percent to $241.0 billion, unchanged from the previously published increase. This followed a 2.1 percent September increase. Transportation equipment, up five of the last six months, led the increase, $1.1 billion or 1.4 percent to $77.3 billion. New orders for manufactured nondurable goods increased $1.7 billion or 0.7 percent to $239.8 billion.
  • Shipments of manufactured durable goods in October, up five of the last six months, increased $3.2 billion or 1.3 percent to $248.8 billion, unchanged from the previously published increase. This followed a 0.5 percent September increase. Fabricated metal products, also up five of the last six months, led the increase, $0.7 billion or 2.4 percent to $30.9 billion. Shipments of manufactured nondurable goods, up six consecutive months, increased $1.7 billion or 0.7 percent to $239.8 billion. This followed a 0.5 percent September increase. Chemical products, up seven of the last eight months, led the increase, $0.8 billion or 1.1 percent to $69.4 billion.
  • Unfilled orders for manufactured durable goods in October, down seven of the last eight months, decreased $2.6 billion or 0.2 percent to $1,073.3 billion, up from the previously published 0.3 percent decrease. This followed a 0.2 percent September decrease. Transportation equipment, down eight consecutive months, drove the decrease, $4.5 billion or 0.6 percent to $717.1 billion.
  • Inventories of manufactured durable goods in October, up two consecutive months, increased $1.0 billion or 0.2 percent to $422.5 billion, down from the previously published 0.3 percent increase. This followed a 0.3 percent September increase. Transportation equipment, up twenty-five of the last twenty-six months, led the increase, $0.6 billion or 0.4 percent to $148.1 billion. Inventories of manufactured nondurable goods, up two of the last three months, increased $0.1 billion or 0.1 percent to $264.8 billion. This followed a 0.5 percent September decrease. Chemical products, up four of the last five months, drove the increase, $0.6 billion or 0.6 percent to $98.4 billion.

To estimate the effect of those October factory inventories on 4th quarter GDP, they must first be adjusted for changes in price with appropriate components of the producer price index...by stage of fabrication, the value of finished goods inventories was 0.6% higher at $244,645 million; the value of work in process inventories fell 0.4% to $207,532 million, and materials and supplies inventories were valued 0.3% higher at $235,081 million...the October producer price index reported that prices for finished goods were on average 0.5% higher, that prices for intermediate processed goods were on average 2.2% higher, and that prices for unprocessed goods were 2.6% higher....assuming similar valuations for like types of inventories, those price increases would suggest that October's real finished goods inventories were about 0.1% lower, that real inventories of intermediate processed goods were about 2.6% lower, and that real raw material inventory inventories were about 2.3% lower...since real NIPA factory inventories were only slightly lower in the 3rd quarter, the fact that this report indicates a larger drop in aggregate real October factory inventories will therefore have a negative impact on the growth rate of 4th quarter GDP equal to the difference in the quarterly decreases...  

 

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